Entrepreneur Magazine on Shark Tank Patents
Entrepreneur Discusses Shark Tank’s Emphasis on Patents
Entrepreneur Magazine recently published an article called 3 Lies You Heard on ‘Shark Tank’. In that article, Entrepreneur noted that “The sharks always say, ‘You need a patent.'” This is a fair point, the Sharks almost always ask about a startup’s patent portfolio. See Shark Tank and Patents. However, the author (Steven Key) contends that this overemphasizes the importance of patents for startup companies. Mr. Kay opines:
Naturally, it’s in [the Sharks] best interest to keep competition at bay. But in reality, the majority of products and services on the market today don’t have patent protection. Most of the time, if you have a good idea, I’d argue that speed to market and great customer service are much more important than patent protection.
Patents Provide the Entrepreneur with a Competitive Advantage.
Here, Mr. Key recognizes that a patent “keep[s] competition at bay.” Clearly, having a federally recognized exclusive right to sell your product provides a tremendous market advantage. With a patent you have a monopoly. Competing with another company over MSRP does not enter your business experience. For an entrepreneur or startup company, having the ability to fend off competition seems like a good thing.
Mr. Key seems to discount the value of a monopoly because “the majority of products… don’t have patent protection.” This logic suggests that a patent monopoly isn’t valuable simply because most companies do not have patents. This seems completely wrong. Scarce resources are more valuable—having a scarce resource would be an advantage. If a company’s competitors do not have a patent portfolio, having patents would provide a competitive advantage to the patent holder. Score one for patents.
An Entrepreneur Should Patent the Inventive Technology.
A careful reading of Mr. Key’s argument suggests that an entrepreneur should file patent applications protecting their technology. As discussed above, the patent holder receives a scarce and very powerful asset—the exclusive right to make, use, and sell the technology defined in the patent claims. The only disadvantage stated in the article appears to be a significant advantage—most companies don’t have a patent. Score another for patents.
Lastly, Mr. Key suggests that patents are overvalued for the following reason:
“If someone wants to try to rip your idea off, they will. But if you’ve established a powerful brand and supported it with outstanding customer service, they’re going to have a much more difficult time succeeding.”
Again, this point supports the conclusion that entrepreneurs should protect their ideas by filing a patent application. Mr. Key states that “if someone wants to try to rip your idea off, they will.” When “ripped off,” the patent holder has recourse. The patent holder can seek royalties from the “someone” who rips them off. Without a patent, the ripped off company has no recourse. Having a powerful brand or outstanding customer service would not provide a legal right to shut down your competitor’s business. Only the patent system provides this exclusive right. Score another for patents.
The Sharks like patents because patents are valuable.
As Mr. Key points out, “The sharks always say, ‘You need a patent.'” The Sharks most likely pay so much attention to patents because those patents are very important. Having a patent changes the company’s entire business by providing the right to exclude competitors from selling the product falling within the patent’s claims. The Sharks recognize how important patents are… so they ask about patents.