Patent problems threaten to stifle tech start-ups

One start-up founder said patents were a 'big consideration' for the industry, adding they could be 'very damaging if you stray into an incumbent's turf'

Venture capitalists are warning that the increasing number of patent battles is damaging technology start-ups, with legal cases dragging on innovation and threatening to drive smaller companies out of businesses.

Patents were in focus this week as Google agreed a $12.5bn (£7.6bn) deal to buy Motorola's mobile phone business. Analysts pointed to the strength of Motorola's intellectual property as crucial to the acquisition.

Yet while major corporations are investing in protecting themselves as the patent wars heat up, at the other end of the market technology start-ups and their backers fear for the future of companies who cannot fight back in the courts.

Nic Brisbourne, a partner at the venture capital company DFJ Esprit, said litigious patent owners were "holding the industry back. While it is more of a problem in the US, many British start-ups will be affected as they see it as a key market."

"It is really hard for small companies to figure out which patents exist in their field," Mr Brisbourne said. "And many are really broad. It has become a cost of doing business." He added for some of the smaller start-ups that "if you don't have a lot of money, you can't play at all".

One start-up founder in the UK said patents were "a big consideration" for the industry, adding they could be "very damaging if you stray into an incumbent's turf". In an attempt to limit the potential damage, Mr Brisbourne said the patent offices in the US and the UK "should be more restrictive in granting patents".

Mark Kenrick, a partner at the intellectual property lawyers Marks & Clerk, said patents "do become a risk for start-ups". Yet he added that small companies could use patents as a tool themselves: "While getting their own patents aren't cheap, they can prove an effective insurance policy to protect themselves against other companies."

Google's chief executive, Larry Page, said on Monday that Motorola's patents would "enable us to better protect Android from anti-competitive threats".

Jonathan Imlah, an analyst at Collins Stewart, said yesterday: "It is clear that the huge patent portfolio and mobile handset business are the principal motivations behind Google's proposed acquisition of Motorola Mobility."

Royal Bank of Scotland's analyst Didier Scemama agreed that the patents were "the underlying reason" behind the deal: "Patents are emerging as an increasingly important asset in the smartphone business." He added: "The growing rivalry between Apple and Google has led both companies to use legal avenues. Apple is also currently suing HTC and Samsung for patent infringements, for instance. Samsung and HTC are also suing Apple back."

The patent war ratcheted up further yesterday. It emerged that HTC, which has been locked in legal battles with Apple, had filed another three lawsuits over patent infringement.

Apple's injunction granted against Samsung was also lifted yesterday after doubts were raised over the court's power to impose a sales ban on companies based outside the EU.