An Organizational Approach to the Design of Patent Law

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274 MINN. J. L. SCI. & TECH. [Vol. 13:1
Most of the existing research connecting patents to entrepreneurship
has focused on the roles patents might play in obtaining
financing for new ventures. The relationships between
entrepreneurs, their employees, their financers, their suppliers,
and their customers can be usefully explored by looking at the
intersection of formal rules and governance structures. At the
pre-financing level, patents can serve an information function,
signaling the value of intangible assets and human capital to
potential funders in a way that facilitates the financial transaction.
266 Patents can also facilitate financing of early stage ventures
by providing investors with property rights over intangible
assets. 267 Post-financing, venture capital backed firms tend
to have higher patenting. This can be explained in terms of the
higher innovation levels of venture-backed companies (a plus)
or in terms of the short-term nature of venture capital strategies,
with their interest in creating signals of market value to
allow for early exit. 268
The organizational approach also provides opportunities to
tie in relevant research from other disciplines in order to refine
patent strategies to promote entrepreneurship. At the level of
the firm, the management, operations research, and organizational
design literature offer interesting insights into the connection
between organizational structure, information systems,
and knowledge generation and transfer, with under-explored
implications for patent law. 269 Exploring firm structures that
shape the institutional setup that would govern activities in a particular
field.”).
266. Clarisa Long, Patent Signals, 69 U. CHI. L. REV. 625, 627–28 (2002)
(discussing patents as mechanisms for firms to signal their R&D capacity and
the value of their intellectual assets to attract financing and licensing opportunities).
267. See Eisenberg, supra note 36, at 1024–28.
268. See, e.g., Simona Fabrizi, Steffen Lippert, Pehr-Johan Norbäck & Lars
Persson, Venture Capital Financing of Innovation, Patenting, and Long-Run
Performance of Private Acquisitions (Massey U. C. of Bus. Res., Working Paper
No. 13, 2010), available at http://ssrn.com/abstract=1629226 (to access article,
select One-Click Download) (examining the relationship between venture capital
financing, patent intensity, and firm performance in light of facts such as
the higher patent count of VC intensive industries, and also studying the incentive
effects such as role of patents in signaling company value prior to exit).
269. The study of how firm structure influences knowledge management
offers an alternative entry point for studying characteristics of firms that are
successful innovators. See Richard Baskerville & Alina Dulipovici, The Theoretical
Foundations of Knowledge Management, 4 KNOWLEDGE MGMT. RES. &
PRAC. 83, 90–92 (2006).