Sunday, April 09, 2006

Are patents a key factor for venture capitalist investment?

"Small and developing businesses often times rely solely on patent protection to attract venture capital, making processing of patent applications critical to their success," wrote Jon W. Dudas, Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office (USPTO) in testimony before Congress on the performance of the Office in granting patents.

BUT, typically venture capitalists are looking for things OTHER THAN patents when they make investments. Recall the IPBiz post on March 2, 2006> quoting Chris Sugden: Patents are not why we are investing.

As the Newark Star-Ledger noted:

Venture capitalists aren't looking for garden-variety new businesses, such as restaurants or retail shops, that might provide a comfortable living for an entrepreneur. Venture firms pool the capital of wealthy individuals and institutions who are trying to double or triple their money by putting it to work in fast-growth technology firms that are likely to go public or be acquired in five to seven years.

The Ledger suggests VC investment is more about networking than technological understanding:

"These venture groups have a diverse audience of investors, and I've learned I have to translate the science into layman's language," said Maghsoud Dariani (Semorex), who will start with the New Jersey Technology Council's venture conference Wednesday be fore trekking to similar events in Connecticut and Delaware in May. "I have to make sure I don't lose the essence of what Semorex is all about, and that I don't lose my audience, either."

[Parenthetically, Dariani is an inventor, although not necessarily in the area he was pitching in the Star-Ledger article. For example, US pub. app. 20060030587, Method of treating attention deficit disorders with d-threo methylphenidate, assigned to Celgene. Also, US 5,837,284.]

The BizJournal article also noted:

In addition, the House is considering "The Patent Reform Act of 2005," H.R. 2795, to address critical areas for patent system reform - namely, expediting the application process while assuring patent quality, curbing excessive litigation and promoting international harmonization.

One notes that HR 2795 has nothing to do with "expediting" the patent applicaiton process.


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