It is a common knowledge among Intellectual Property(IP) professionals that the vast majority of patents have no value. Optimists think that the share of such useless patents is about 95 per cent; pessimists contend that it is at least 99%. That is, out of a portfolio of 100 patents only 1 or 2 will be worth something over their 20-year lifespan. But even the useful patents bring most of their value during the second part of the term. This is due to the fact that it takes a decade or so for the mainstream to adopt a technology. By licensing a portfolio for royalties or preventing a competitor from entering a mature mainstream market, the portfolio owner can extract higher profits because, compared to the earlier stages, the market is much bigger and it is more difficult for competitors to implement and diffuse workarounds.
9 out of 10 startups don't live 20 years to collect on the value of their patents. Most investors(VCs) want to sell the company (liquidity event) by the end of a 5-year term. By that time, the startup doesn't have a strong patent portfolio because the majority of its patents are still in the application phase. Therefore, at the time of sale the value of the startup's patents and applications is largely discounted by the buyer. As the result, we've got what I call a "Patent Value Chasm" - a situation when a patent portfolio owner doesn't have the time to wait until his or her portfolio matures to the point when it starts bringing its real value. Essentially, the owner has to give the porfolio away.
As we can see, the incentives in the IP market work against startups with time horizon of less than 10 years.
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