Patents provide the funding and information development necessary to get new medical devices on the market

As an example, consider the experiences described by a founder of a medical device startup. The founder had discovered a pain-free way to measure glucose levels in blood, a vast improvement over existing medical devices. After obtaining an exclusive license of the patents, he built a simple prototype and sought investment funding. He knew that venture capital investors would expect reassurance about the viability of the technology and the startup’s ability to protect against competition—the consider the likelihood of commercialization even in the early stages, given the costly and extensive process required to obtain regulatory approval. Before meeting with investors, he had filed a dozen patent applications to provide a “defensible moat,” which would make it difficult for competitors to make “gainful progress”. Patents allowed the startup to “fence off a green pasture” that the company could highlight to prospective investors, enabling communication of information both about the invention and apart from it, while at the same time providing an objective assessment of the idea’s value by the U.S. Patent and Trademark Office (USPTO). Having patent protection not only makes it difficult for competitors to make “gainful progress,” it can also facilitate external communication about the invention to unrelated parties. For example, several companies in related markets have contacted the founder to express interest in licensing the technology. And later in the commercialization process, patents can enable greater flexibility in organizational structuring—they not only provide protection for the startup, but also provide “cover” to manufacturing partners against the risks of expropriation.