Small companies need every protection they can get in today’s business landscape to defend themselves from predatory Big Tech
As the pace of innovation increases, so too has the pace of intellectual theft and infringement. Supported by AI, which can significantly increase the pace of innovation, larger tech companies have never been more capable of stealing – and that’s the right word – the ideas of others. As Big Tech acquires ever more resources that enable them to copy and recreate the innovations of others, the need for patent protection has never been greater.
When added to traditional market advantages, like larger technical platforms and distribution channels, tech giants have even more ability to flood the market with infringing products, making it even harder for smaller companies to compete with them.
In the past, when product development cycles were longer and innovation slower, even small companies could derive some implicit protection from the “first mover advantage,” the ability to build a loyal customer base before a big player could swoop in. Now, as software copying becomes easier with AI, the lead time afforded to first movers is rapidly approaching zero.
More than ever, small businesses need to view patents as integral to their business strategy.
Just look at the recent case between Apple and biotech firm Masimo. Apple was forced to remove the blood oxygen monitoring feature available on some of their newer Apple Watch models after the US International Trade Commission found that it was in violation of a patent owned by Masimo.
Masimo, a publicly traded business whose market cap is about 1/500th the size of Apple’s, holds the patent on a groundbreaking pulse oximetry monitoring solution that their founder helped invent — the same technology, they allege, that Apple integrated without license or authorization into their Apple Watches.
Though the legal battle is likely to continue, Masimo’s victory is a critical reminder: intellectual property — especially patents — are one of the most powerful tools that small companies have to protect themselves.
In the era of Big Tech, the David versus Goliath-type showdown between Masimo and Apple has rarely been seen. And it’s been even more rare for the smaller company to triumph.
American corporate history is filled with failed businesses that didn’t do the work to protect their innovations — especially in the tech era, where the major players have largely succeeded because of their ability to build and integrate others’ products into their own systems. Companies have been put out of business almost overnight as tech giants use their infrastructure to corner the market.
There are notable cases from the advent of personal computing: Netscape famously failed after Microsoft integrated Internet Explorer into its Windows operating system. A similar fate befell WordPerfect and Lotus 1-2-3, who had to be acquired after Microsoft launched their Office bundling in the late 90s, making it difficult for either company to compete.
More recently, the advent of OpenAI’s ChatGPT spurred the creation of literally thousands of startups who based their apps on integrations with the AI platform. But only a year later, when OpenAI released a series of updates to the system, these founders found their technologies assimilated
It’s hardly hyperbole to say that small companies put their entire business at risk if they fail to ensure strong patent protection. A company can be put out of business easily by a larger competitor who can readily throw a few million dollars towards development to recreate a startups’ entire premise. Investing in strong, broad, and defensible patents upfront and early on can be the difference between life and death.
Over the years, there has been increased acknowledgement of the vitality of patents. In the late 90s, despite winning a patent dispute with Microsoft, Stac Electronics still went under, as they struggled to recuperate financially from the battle. Today, though companies like Apple do their best to make it prohibitively expensive to put up a legal fight (Masimo is estimated to have spent $60 million in their patent dispute), there are third party financing options widely available to help protect small companies.
With their patents, Masimo has a fighting chance to emerge victorious. Small businesses need to be thinking about patents now, creating filings that are broad enough to stand up over time. Patent filings are not the time for humility.
Also key for any small tech companies: document any and all interactions that you have with tech giants. Trade secrets are your company’s lifeblood, and need to be protected as such. Employees should be signing airtight confidentiality and noncompetition agreements to prevent some of Masimo’s issues.
David can defeat Goliath — but only with patents in place that serve as their slingshots and their smooth stones. They can bring down giants.
