- Shark Tank: A Case Study in Patent Protection for Startups - August 28, 2018
Many startups struggle to determine when to obtain a patent, or whether to obtain one at all. Here, we’ll examine the show, “Shark Tank,” to demonstrate that it is important to first determine the marketability of a product and sustainability of the corresponding business before applying for patent protection.
“Shark Tank” features a panel of successful investors (“the Sharks”) vying to partner with fledgling companies. The “Shark Tank” audience is exposed to the Sharks’ entertaining and informative banter, which usually focuses on the value of a product, the quality of a pitch, or the trustworthiness of a potential partner. Meanwhile, a bevy of business ideas (which range from ingenious to ludicrous) pass the Sharks’ judgment.
From time to time, the Sharks will witness an inspiring pitch, presented by an energetic and qualified business owner, covering a unique product, yet turn the hopeful partner down.
In this scenario, the Sharks are usually concerned about the market for the product, or whether the product is proprietary. In other words, the Sharks are often interested in finding out whether the product is protected by a patent.
Shark Tank patent statistics
It is generally accepted that obtaining patent protection for an invention is a useful step in creating a successful startup. However, the Sharks sometimes explicitly downplay the importance of patents, shying away from pure licensing business models and focusing more on sales figures.
Therefore, we have reviewed hundreds of products pitched on “Shark Tank” to determine whether there is a statistically significant difference between patented products that are presented to the Sharks and products without patents.
Specifically, we reviewed device-based products, such as automotive, electronic, furniture, health and wellness, home improvement, and novelty products. These are types of inventions featured on “Shark Tank” that would traditionally be covered by a utility patent, which prevents others from making, using, selling, offering to sell, or importing the patented product, and which also requires a detailed description of how the product is made and used.
Overall, the device-based products that we reviewed were covered by a pending or issued utility patent about 77 percent of the time.
Of these, products that received a deal were covered by a patent or had a “patent pending” idea (meaning an application had been filed, but that the patent had not been abandoned or issued) about 81 percent of the time. By contrast, products that did not receive a deal were patent protected only 61 percent of the time.
Analysis of statistics
The overall percentage of device-based patent protection is relatively high compared to other types of products featured on “Shark Tank.”
For instance, none of the food products pitched on “Shark Tank” that we reviewed are covered by a utility patent, and only a few of the apparel items are patented. This is because such products are often unpatentable due to a plethora of similar products, and because patenting these products might be strategically unsound. Patenting a food product, for example, would likely require disclosure of the recipe for that product, and thus prevent the company from maintaining its competitive advantage in keeping the recipe a trade secret.
Also of note is the relatively high percentage of device-based products that did not receive a deal despite having a patent or pending patent associated with the product. As detailed above, this can be explained by the Sharks preferring to value sales and other metrics over patent protection. Also relevant is the large number of guests who only have a pending patent associated with the product. Where that is the case, there is no guarantee that a patent will actually issue.
Finally, the Sharks have shown that they are knowledgeable enough about patents to downplay the significance of a provisional patent application (which serves as a placeholder, and is not examined), and to express doubt as to the likelihood that a patent will be granted or whether it will be enforceable. These factors serve to show that simply having a patent or applying for one is not enough to ensure a successful business. And the Sharks appear to recognize that.
The disparity between patented products that result in a deal with the Sharks and non-patented deal-getters shows that the presence of a patent likely has at least some impact on their decision making. This is also evidenced by the Sharks’ periodic inquiries about patents when a device or technological invention is presented.
However, we note that this statistical disparity might be a symptom and not a cause. The truth is that having a patent or patent application may simply correlate to well-prepared, savvy and competitive business owners.
A brief statistical analysis of device-based products presented on “Shark Tank” shows us that having a patent that covers your product might influence investors, and at the very least is indicative of a well-prepared and outcome-conscious business owner.
However, applying for a utility patent might waste significant time, effort and money in some cases (hiring a law firm to draft and prosecute a patent application will often cost over $15,000).
Moreover, as described above, a utility patent might not be appropriate for all types of business ventures. For example, where the allure of a product is more ornamental than functional, design patent, copyright and trademark protection might be more worthwhile than a utility patent.
At a high level, the Sharks care about making money. They do not make deals simply because they like a potential partner or if they think a strong market for an idea might exist in the distant future. The product or service has to be profitable and sustainable now. And an unenforceable patent or abandoned patent application does not add value to a business. For these reasons, entrepreneurs (whether they hope to attract investors or not) should first make sure that their idea has a market, that the business has potential for profit, and that a patent is the proper form of intellectual property protection before applying for a patent.