Patent litigation undermines any benefit --- trades-off with funding necessary

(Amy, Professor of Law, Drexel University Thomas R. Kline School of Law, “The Antipatent: A Proposal for Startup Immunity,” pg online @ https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=2808&context=nlr //pa-ef)

Certainly, the upward trajectory of patent litigation over the past several years has introduced funding challenges. One study of venture capital investment in these areas concluded that high levels of patent litigation in those fields have a significant negative impact on venture capital investment.382 Extrapolating from this data, and building in certain assumptions, this research stated, “VC investment in new innovations and startups over the past five years would likely have been $109 million higher than it would have been but-for excess patent litigation.”383 It bears emphasis that the antipatent’s proposal is voluntary—only startups that perceive that their opportunities are greater without the patent system will elect to participate. To some venture capitalists, the prospect of backing a firm that can engage in permissionless innovation and distinguishing its products on nonpatent differentiators might be the wiser course.384

***Footnote Begins***

Startups commonly rely on nonpatent differentiators to establish market leadership, including first-mover advantages, trade secrecy, copyrights, branding strategies, trademarks, mechanisms that inhibit reverse engineering, and a variety of

superior production, implementation, and marketing capabilities.

***Footnote Ends***

As a practical matter, many new technology companies cannot afford the high price of patent litigation against a large incumbent.385