What Good Are Patents?

Patents are relatively weak incentives for innovation, especially when it comes to software and Internet startups, yet they may be usual in securing funding from venture capitalists. “Investors’ belief in the power of patents is warranted mainly as a self-fulfilling prophecy. Patents actually played a relatively small part in establishing some of the greatest information technology companies,” says Edward Tenner at The Atlantic who notes that through 1998 Bill Gates had only one patent to his name. “And many companies big and small prefer trade secrets, which don’t expire, to patents. Ask the people at Coca-Cola—or Thomas’ English Muffins.”