By Gary Lauder
Managing Partner, Lauder Partners LLC
All technology companies are working toward the same goal - to translate brilliant ideas into commercially viable products. Ideas on a blackboard are useless; ideas only mean something when an investor and an entrepreneur join together to take the risk to turn ideas into product. For products that require high fixed-cost startup investments, that blackboard-to-commercialization translation only happens when some barrier to entry against competitors exists, so that profits can last long enough to recover the up-front investments. Our founding fathers recognized this and put it in our constitution: Article I, Section 8 reads "Congress shall have power... to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Thus, the patent system.
In 2008, venture capital-backed companies employed more than 12 million people and generated nearly $3 trillion in revenue. Respectively, these figures accounted for 11% of private sector employment and represented the equivalent of 21% of U.S. GDP during that same year. Venture-backed companies outperformed the overall economy in terms of creating jobs and increasing revenue, and the venture capital industry continues to grow entire new industries nearly from scratch. The VC community is the primary source of funding for emerging life sciences, technology, and alternative energy companies. In 2007 alone, VCs committed $25.9 billion toward innovative companies in these areas.
Because small companies do not have "legislative affairs" staffs, the vast majority are completely unaware of the existence of Patent Reform - let alone its provisions. They lack the financial wherewithal to lobby their views on Capitol Hill. The members of Congress and staffers who would enact this legislation have barely sought the perspectives of inventors, entrepreneurs or venture capitalists in the past few years, so it is not surprising that the current "compromise" bills are compromises among big companies that fail to reflect effects on small ones.
Their interests - and therefore mine - are about to be buried. Tomorrow's companies - the companies that don't exist yet, who would depend on the patent system to come into existence - by definition have no representation or lobbying voice at all. That fact was my strongest motivation to take on this issue.
Download the full text to learn more about patent reform's impact on venture capital and small business