Latest / Hardware Startups with Fexingo: Devices, Robotics, and Manufacturing Tech Companies / Why Hardware Startups Dont Need a Patent
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- Lucas: If these conversations are useful for what you're building or running, we'd love to keep them coming ad-free — a couple of dollars a month is genuinely what keeps these going, buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, it's a small thing that adds up. Alright, back to the hardware trenches. Lucas: So, let's talk about something a lot of hardware founders lose sleep over: patents. Should you file one? When? And — the question nobody asks until it's too late — should you even bother? Luna: Right, because the conventional wisdom is 'patent everything.' But there's a strong counter-argument that says it's a waste of money and time. Lucas: Exactly. And I want to anchor this in a specific case — Pebble, the smartwatch company. They were one of the most successful Kickstarter campaigns ever, raised over 10 million dollars in 2012. And they had a portfolio of patents around smartwatch notifications, battery management, the way the watch connected to a phone. Luna: Which sounds smart, right? Protect your IP. Lucas: It does. But here's what happened: when Apple launched the Apple Watch in 2015, Pebble's legal team looked at potential infringement. And they realized that suing Apple would cost them — conservatively — 5 to 10 million dollars in legal fees, plus years of depositions. And Pebble had maybe 30 million in total funding at that point. They literally could not afford to enforce their own patents. Luna: So the patents were just paper. Defensive paper, maybe, but not offensive assets. Lucas: Exactly. And that's the core tension: a patent is only valuable if you have the capital and stomach to enforce it. For most hardware startups, that's not reality. So the question becomes, what's the alternative? Luna: Trade secrets, speed, and supply chain moats — is that the triad? Lucas: That's exactly it. Take Dyson. They don't patent their cyclonic separation technology — well, they do, but they also rely heavily on manufacturing complexity. The tooling for their digital motor is incredibly precise and expensive to replicate. A competitor could reverse-engineer the patent, but building the production line would take 18 months and 50 million dollars. By then, Dyson has moved to the next generation. Luna: So the real moat is the factory, not the filing. That's a different kind of IP strategy. Lucas: Right. And there's a growing movement among hardware investors to actually discourage early patent filings. Some VCs now say, 'Don't file a patent until you have a clear enforcement path.' Because a patent application becomes public 18 months after filing — and if you're a small hardware startup, you've just handed your entire manufacturing process to competitors in China who can copy it before you even get to market. Luna: That's the flip side people don't talk about. Disclosure is a cost. You're trading secrecy for a legal right you may never use. Lucas: Yeah. And the stats bear it out: according to a 2020 study by the Harvard Business School, only about 2 percent of patents are ever litigated, and even fewer are actually enforced to judgment. For startups, the numbers are even lower. Most hardware patents are never even cited by competitors — they just sit there costing maintenance fees. Luna: So what do you do instead? Just rely on being fast? Lucas: Speed is part of it, but there's a more structured approach. The framework I like comes from a guy named Henry Chesbrough — the open innovation scholar. He argues that hardware startups should think in terms of 'appropriability': how do you capture value from your innovation? And the answer is rarely a patent. It's often brand, first-mover advantage, complementary services, or — again — manufacturing know-how. Luna: Give me a concrete example of a startup that did this well. Lucas: Sure. There's a company called Nothing — the consumer electronics brand that makes the transparent earbuds and the Phone. They don't have a ton of groundbreaking patents. What they have is a design language and a brand that's hard to copy. And they've built a supply chain relationship with Qualcomm and others that gives them access to components that are hard for a new entrant to get. Their defensibility is brand plus supply chain, not IP. Luna: So for a hardware founder listening, what's the actionable takeaway? Do you skip the patent altogether? Lucas: Not necessarily skip. But I'd say: file a provisional patent application — that costs about 70 dollars for micro-entities — which gives you 12 months to decide. During that year, ask yourself three questions. One: can we actually detect infringement without tearing down a competitor's product? Two: do we have the budget to enforce if we see infringement? Three: would a trade secret protect us better? If the answer to any of those is no, maybe don't pursue the full patent. Luna: That's a pragmatic filter. And what about defensive patent aggregators? I've heard of LOT Network — they have over a thousand companies that agree to license patents to each other if one member gets sued by a patent troll. Lucas: Yes, that's the other piece. For hardware startups, joining a defensive network like LOT Network or OIN — Open Invention Network — can give you a shield without the cost of a big portfolio. You don't need to own 100 patents; you just need to be part of a community that agrees not to assert them offensively. It's collective self-defense. Luna: So the old model — patent everything, then sue — is giving way to a more nuanced strategy. Trade secrets, speed, manufacturing complexity, brand, and defensive networks. Lucas: Exactly. And I think the shift is healthy. Because the worst outcome is spending 50 thousand dollars on a patent that expires worthless while your competitor has already shipped two generations of product. The hardware world moves too fast for that. Luna: It does. And I'm curious — does this apply equally to hardware that has a software component? Like a smart device with an app? Lucas: Great question. Software is actually easier to protect via copyright and trade secret because you don't have to disclose the source code. And software patents are harder to get and easier to invalidate after the Supreme Court's Alice decision in 2014. So for a hardware plus software product, the software side is often better kept as a trade secret, and the hardware side might not need a patent at all. Luna: Right. So the advice is: think about what your competitor can actually copy. If they can copy your circuit board in a month with a $5,000 oscilloscope, a patent won't stop them. But if they need to build a $20 million cleanroom and hire 50 PhDs, that's your real moat. Lucas: That's beautifully put. And that's the lens we should all use. It's not about whether you can file a patent — it's about whether the patent actually changes the competitive outcome. Luna: So for the hardware founder who's worried about a bigger company copying them — what's the one thing they should do tomorrow? Lucas: Talk to a patent attorney, but ask them specifically about trade secret protection and manufacturing complexity. Most patent attorneys are incentivized to file patents — that's how they bill. But a good one will help you map your IP landscape and tell you where secrecy is stronger. Also, set up a trade secret protection program: non-disclosure agreements for employees and partners, access logs to sensitive data, and compartmentalization of knowledge. That's a lot cheaper than a patent and lasts forever — as long as you keep the secret. Luna: And if you do file a patent, file it in a way that's hard to design around. Broad claims, but not so broad they get rejected. Lucas: Right, and consider filing in only one jurisdiction — usually the US or China, depending on your market — rather than trying to get patent protection in 20 countries. That alone can save 100 thousand dollars in translation and filing fees. Luna: Good point. So the takeaway: patents are not a strategy, they're a tool. And they're only useful if you can afford to use them. Lucas: Exactly. And that's the kind of practical thinking that separates hardware startups that survive from those that burn capital on paper. Luna: Alright, next time we should talk about the opposite extreme — companies that went all-in on patents and actually won. I think there are a few in the med-tech space where patents really matter. Lucas: That'd be a great follow-up. Med-tech and biotech are the exceptions — the FDA approval process creates a regulatory moat that complements the patent. But for most consumer hardware, the playbook is different. And that's what we're here to explore.