Start-ups play an increasingly important role in translating innovations into economic and social value. Intellectual property (IP) is undoubtedly a critical facet of innovation and entrepreneurship. For many start-ups, formal IP is expected to protect innovations from unauthorised imitation, attract investors, create commercial opportunities, and support scale up activities. Yet the lived experience of many entrepreneurs is more complicated.
Recent New Zealand research examining the experiences of scientist-entrepreneurs found that IP was viewed as both essential and problematic at the same time. This contradiction emerged so consistently across entrepreneurs’ accounts that it became the study’s central finding: The IP Paradox. In practice, IP was experienced as both an enabler and an impediment to successful entrepreneurship.
Start-ups’ ability to navigate IP effectively can influence whether promising innovations become successful products, services, or export opportunities. Therefore, understanding the IP Paradox matters for the New Zealand economy, given the Government’s stated interest in leveraging innovation for economic growth and the important role that small businesses play in the national economy.
While the research was conducted relation to scientific start-ups, many of the challenges identified are unlikely to be unfamiliar to other start-ups and SMEs.
The IP paradox in innovation and entrepreneurship
For entrepreneurs, obtaining formal IP – often patent protection – would typically be a prerequisite for investor engagement and securing vital scale up capital. In this respect, IP functions as a signal of commercial viability.
However, entrepreneurs generally described IP as expensive, resource-intensive, and difficult to navigate. Formal IP applications, maintenance, portfolio management, legal advice, and international filing strategies demanded substantial financial and managerial resources at a stage when many ventures were already operating under considerable constraints.
One entrepreneur described IP as “inherently complicated”. The observation may resonate with many involved in technological innovation, where scientific, business, legal, financial, and institutional considerations intersect.
The protection dilemma
The challenge extended beyond cost. Entrepreneurs also expressed concerns about invention disclosure. While public invention disclosure sits at the heart of the patent system, several entrepreneurs worried that disclosure could weaken competitive advantage by allowing competitors to develop alternative approaches or circumvent patent claims. Others questioned whether they would realistically possess the resources necessary to enforce their rights if infringement occurred.
This finding is important because innovation systems typically place significant emphasis on formal IP protection as a pathway to commercial success. The experiences of entrepreneurs suggest that the reality is more nuanced. Rather than relying exclusively on patents, many ventures combined formal and informal protection mechanisms, including trade secrets, confidentiality agreements, and careful management of commercially sensitive information.
As one entrepreneur explained, they operated in “a sort of space of tension between patenting and going with trade secrets”.
What entrepreneurs can learn
The research also highlights the role played by innovation ecosystems themselves. For SMEs seeking scale up, IP decisions are rarely made in isolation. In this regard, entrepreneurs should expect to interact with investors, funding agencies, IPONZ, government agencies, MBIE, and professional advisers such as IP lawyers and patent attorneys, among other stakeholders. These stakeholders have different objectives, expectations, and risk tolerances.
In many cases in this study, patenting was not driven solely by the entrepreneur’s own assessment of commercial value. Institutional expectations, investor requirements, and innovation systems often shaped IP decisions. While these structures are designed to support innovation, entrepreneurs sometimes experienced them as adding further complexity to an already difficult process.
What the IP paradox means for stakeholders
The findings do not suggest that formal IP or patents are unimportant. On the contrary, entrepreneurs largely regarded IP as essential. The findings instead raise a broader question for innovation systems: how can innovation frameworks encourage appropriate protection without unintentionally increasing barriers for the ventures they are designed to support?
The answer is unlikely to be less IP protection. Rather, it may involve a more flexible understanding of how different forms of protection contribute to innovation and entrepreneurship under different circumstances. Patents remain important in many sectors and situations. However, they are costly, and not always straightforward, or universally beneficial.
For commercialisation professionals, investors, research institutions, and policymakers, the findings serve as a reminder that patent counts alone may not fully capture the realities faced by innovative ventures. Successfully translating innovations into economic and social value depends not only on creating IP, but also on navigating the practical trade-offs associated with protecting, managing, and leveraging it. Understanding these trade-offs may be just as important as understanding the legal rights themselves.
This article is based on research findings originally published in Intellectual Property Forum, the journal of the Intellectual Property Society of Australia and New Zealand (IPSANZ).
