Monthly Archives: July 2008

Is Hasbro Making a Serious Intellectual Property Strategy Mistake by Fighting with Scrabulous?

Scrabulous was a Facebook hit but Hasbro objected

Scrabulous was a Facebook hit but Hasbro objected

Hearing the news that Hasbro succeeded today in shutting down Scrabulous for apparent infringement of its intellectual property rights, I found it necessary to weigh in on the debate. For those that don’t know the saga of the dispute between Hasbro and two Indian national brothers who developed the wildly popular Facebook application, it is summarized here. In this ongoing legal dispute, Hasbro, the maker of Scrabble(r) and owner of the intellectual property rights for this iconic game, contends that the online Scrabbulous game on Facebook infringes its copyright and trademark rights.

While Hasbro is well within its rights to go after violators of its intellectual property, as an intellectual property strategist (more info here: http://www.jackiehutter.com/), it seems to me that Hasbro may be making a huge mistake by taking an aggressive intellectual property enforcement strategy. There are apparently as many as 1/2 million players of Scrabulous on Facebook in a single day. I would venture a guess that there are not this many players of the board game version of Scrabble in a single week. These players of the board game are likely not young–in my experience, the board game version of Scrabble is generally a game for older folks like my elderly mother-in-law. It thus appears that Scrabulous has opened up a huge new player base for this classic game.

Also, this huge new player base would seem to set up the opportunity for an ongoing revenue stream that does not traditionally exist for board games. Once someone buys the Scrabble board game, a user’s transaction with Hasbro is finished. That user can play Scrabble to his heart’s content, and Hasbro will not gain any financial benefit from that continued play. Continued online play of course provides an imense new opportunity to generate revenue on a continuous basis, and it does not seem sensible that Hasbro would not want to get on this “gravy train.”

Recent BusinessWeek Article Confirms that Energy Innovation is Rampant: Why These Innovations Should be Patented

Green innovation is rampant

Green innovation is rampant

This current BusinessWeek article entitled “The Real Question: Should Oil be Cheap?” confirms that innovations directed toward energy savings are rampant in these days of high energy prices. Specifically, the article states that “[h]igh energy prices [] water the flowers of innovation, making investments in alternatives pay off . . . .” As I wrote in this blog previously, along with such innovations comes the opportunity for savvy corporate managers to obtain exclusive rights to these energy usage improvements by developing and executing on patent strategies that prevent their competitors from benefiting from their investments in innovation. Moreover, as I wrote in this blog post, I believe that The Pickens Plan will open the floodgates of patenting in the area of wind energy and turbine technology.

I realized after writing these blog posts that some people might find the idea of patenting energy innovations distasteful. Such a perspective might be based on a belief that it is better for society for energy innovations to available for the public to freely use. As such, I thought I would address this potential objection in this post.

Private energy innovation takes place within the confidential confines of the firm. Energy innovators will typically not freely disclose energy innovations outside of the firm in the absence of patent protection. Rather, if an innovator is not able to prevent others, especially his competitors, from using the fruits of his innovation investments, it is unlikely that this energy innovator will disclose his technological advances to the public. The innovator will instead likely maintain the innovation as a trade secret, which will keep the details from the public as long as the technology is kept secret.

You may recognize that if the energy innovator does not obtain patent protection, anyone who can reverse-engineer or independently develop this trade secret energy innovation will be free to use the energy innovation. On balance, however, I believe it is better for many energy innovations to be patented.

Innovators: Make Sure Your Company Owns the Fruits of Your Open Innovation Projects

Open innovation

Open innovation

In case there was any doubt, this New York Times article of July 22, 2008 shows that Open Innovation is “hot”. And it is not just consumer products companies that have jumped on the bandwagon: companies such as HP, IBM and Microsoft have reportedly embraced the Open Innovation model. But, did you also know that, if your company is not careful, you could end up sharing patent rights to any inventions resulting from your Open Innovation collaborations?

If you are going to play in the Open Innovation game, you must also understand how to prevent collaborators outside your company from owning the fruits of your company’s innovations. This is a very easy issue to address on the front end of the Open Innnovation process and should be standard procedure for any innovation professional. However, as detailed by Greg Daines in his Ideanomics blog, intellectual property strategy is not a subject that is covered in business school. As a result, simple issues such as this will often be overlooked by innovation professionals because they are not recognized, often with disasterous business results. With this blog post, I hope to provide innovation professionals with a bit of learning that could prevent them from making a huge mistake in their Open Innovation efforts.

When your company collaborates with someone who is not an employee, that person jointly owns any patent resulting from that collaboration. Moreover, that person can use the jointly patented product or technology without payment to the company. Perhaps more significantly, your collaborator can freely license the jointly patented product or technology to a competitor of the company.

About the IP Asset Maximizer Blog

Readers will note that much of this blog was added in bulk during July 2008. This content was authored by me over the course of several months when I was associated with another organization. Since I have established my own IP Strategy and Consulting firm (more info here: www.jackiehutter.com), I look forward to posting new content at this location frequently. Please contact me at jackiehutter@gmail.com if you have any questions or would like to suggest ideas for new blog posts.

It’s All About the Numbers: SuperCrunchers of Patent Data will Gain Competitive Advantage

Supercruchers details the value of data to business

Supercruchers details the value of data to business

A recent book entitled Super Crunchers: Why Thinking-By-Numbers is the New Way to Be Smart (available at http://www.amazon.com/Super-Crunchers-Thinking-Numbers-Smart/dp/0553805401) presents an intriguing perspective of how forward-thinking companies can use the wealth of data available today to obtain an edge against competitors. The book, written by Ian Ayres, an econometrician and law professor at Yale University, posits essentially that he who crunches the available data will come out ahead in this modern world of massive amounts of data. A detailed review of this book from Newsweek is found here: http://www.newsweek.com/id/40860.

The “Super Crunchers” premise applies strongly to the world of patents. Indeed, when leading companies such as P &G, GE and others engage in multi-faceted corporate intelligence programs, it cannot be a controversial to contend that those companies that mine and apply the results of data analysis of both their own patent portfolios and those of competitors will obtain valuable information that can be deployed to make better business decisions.

Moreover, the application of patent data dovetails nicely with the modern world of innovation and product development, which focuses sustainable and disciplined internal processes rather than the traditional methodologies that favored, in large part, intuition. Part of these processes can and should be continued review of your company’s patent portfolios, and those of competitors.

50% of Money Invested in Venture Capital is Lost: The Right Patent Analytics Can Improve These Odds

Over half of all venture capital investment is lost

Over half of all venture capital investment is lost

According to this article by Arlene Jacobius in Pension and Investments Online, 50% of all investment in venture capital is a loss. This article, which is based upon separate research projects by a Chicago Graduate School of Business professor and a former Chief Economist at the SEC, indicates that the actual return on venture capital investment is not much different from the average annualized returns on the smallest NASDAQ stocks. In particular, the return on venture capital investment from 1987 to 2001 in these smallest stocks was 62% as compared to the 59% mean return of venture capital funds. This 59% value certainly does not reflect the investing public’s general perception that venture capital return on investment markedly outweighs what one can obtain on the stock market. And, it is this apparently erroneous assumption of perceived higher return that presumably justifies the risks associated with venture capital investment by the public. Investor perception certainly does not match investment reality for venture capital.

Why this disconnect between perception and reality on venture capital returns? Professor Cochrane, the Chicago GSB professor, posits that, in effect, traditional methods of measuring venture capital return do not take into account the fact that ventures that are a total loss disappear and are not measured. Because these losing ventures are not around to be measured for calculation of rate of returns, Professor Cochrane states that this survivor bias significantly skews the rates of return on venture capital. His simple explanation of the effect of these missing numbers is telling (quoting from the Jacobius article): “They collect the returns for everybody that is around,” he said. “It is like collecting data from everyone still in the casino: They’re not asking the people on the bus … who are on their way home.”

Prediction: The Pickens Plan for a Green Energy Infrastructure will Launch a Gold Rush of Patenting Followed by Rampant Patent Litigation

T. Boone Pickens

T. Boone Pickens

The day after I posted this about patenting green energy innovations: Corporate Managers: Are You Failing to Obtain Maximum Value from Your Energy Savings and Green Innovations by Ignoring Patent Issues?, multi-billionaire oil man T. Boone Pickens announced The Pickens Plan. This plan, if successfully implemented, will constitute a giant step toward reducing America’s dependence on foreign oil by embracing domestically-produced green energy as a significant source of America’s power. To show he is serious about this plan, Mr. Pickens intends to spend $58 million of his own money to publicize it and, if the number of radio commercials I have heard about his idea in the last week is any sign, he is well on his way to spending his advertising budget.

In the last week, much has been written, both laudatory and critical, about The Pickens Plan. You can check out some of the articles indexed by Google News here yourself but, to briefly summarize, the plan calls for 1000’s of wind turbines situated in America’s wind belt—an investment of up to $1 trillion. New power lines would be needed to connect the wind farms to users in various parts of the US who are not currently connected to the power grid that would be fed by these turbines—an investment of up to $200 billion. Mr. Pickens states that about 20% of America’s power needs could be served by a fully-functioning, wind-fed power grid. In a second part of the plan, natural gas that is currently used for electrical power generation would be channeled for use as a transportation fuel.

If You Have to Ask Your Patent Attorney What Your Company’s Patent Strategy Is, You Don’t Have One

IP Strategy is Business Strategy

IP Strategy is Business Strategy

Tonight I had dinner with a patent attorney friend of mine who I have known for more than 10 years. For the purposes of this post, let’s call her “Sue.” Sue and I met as young patent attorneys at an intellectual property law firm and grew up together to become partners there. Unlike myself, however, Sue has remained in the law firm environment. These days, she works at a highly prestigious national law firm and has a billable rate of close to $600 an hour. Of course, at this rate, Sue’s clients expect to obtain quality representation and, having been a client of hers when I was an in-house corporate attorney, I know that my friend is a great patent attorney and gives excellent service.

As an IP Business Strategist and Consultant, I am no longer engaged on a daily basis in working with clients to obtain patents. In this IP Strategist role, I have developed the view that too many patents are worthless because they are not filed based upon a relevant business case. Put another way, it is my opinion that a patent is worthless unless it supports a current business strategy of the company that is seeking the patent. This strong opinion is easy to state, and I have been seeking to have it validated by someone who makes their money from obtaining patents for business clients.

Corporate Managers: Are You Failing to Obtain Maximum Value from Your Energy Savings and Green Innovations by Ignoring Patent Issues?

Green innovations are protectable

Green innovations are protectable

In this world of ever rising energy costs, your company likely has one or more teams of people working to reduce energy consumption and improve the efficiency of your company’s processes. Your company is also probably working diligently on ways to make your operations more “green.” For example, if your company exhibits a large carbon footprint in its manufacturing processes, someone in your organization is likely thinking about ways to reduce your carbon emissions in advance of the possible adoption of government-mandated carbon cap and trade system directed to fight global climate change.

However, because the external forces of energy costs and possible governmental regulation are driving these and green innovations inside your company, it is quite likely that these efforts are occurring outside of normal R&D channels. That is, your company’s Manufacturing, Operations and Logistics personnel are likely responsible for developing and testing these potential new innovations, and for bringing them on-line as soon as possible.

I have found that when such non-R&D personnel are responsible for corporate innovations, a company often misses out on opportunities to obtain patent protection for such valuable proprietary advantages. This is due to the fact that non-R&D personnel typically do not think of themselves as “inventive” and/or they operate under the radar of the company’s in-house or outside patent counsel. As a result, when these personnel develop innovations, they often do not possess the knowledge to recognize that a patent should be pursued to keep competitors from benefiting from their company’s innovations. And, even if they do know about the importance of patents, corporate patent resources may not be readily accessible to them.

Recent Worldwide Conference of Thought-Leaders Demonstrates the Criticality of IP Strategy as a Business Issue

As I have been writing about for the past several months on this blog, business and investment professionals should consider intellectual property (“IP”) to be a critical matter for business, not just lawyers. The correctness of this concept was validated by the occurrence of a recent conference attended by worldwide thought-leaders in IP. This first annual Business IP Congress(tm) occurred in June 2008 in Amsterdam.

From the final program contents, it appears that the 2 day conference consisted in large part of an examination of what the role of a Chief Intellectual Property Officer (“CIPO”) is and should be in today’s global IP-centric business environment. The overall context of a thought-leader led discussion of what a CIPO is and should be confirms the emerging modern view that IP is a matter for the C-level business operations of an organization, and should not be relegated to the “backwater” (my words) of the legal department.

I was not able to attend the Congress this year, but obtained a high-level overview of the take-aways from Duncan Bucknell at his IP ThinkTank(tm) Blog. A more detailed summary is provided by Joff Wild at the IAM Magazine Blog (IAM Magazine was a co-sponsor of the Congress).

I will leave the summaries of the Congress to the excellent first-hand accounts of Duncan and Joff. The reason I bring up this event after the fact is because the fact that it even occurred at all provides further proof that IP strategy has become a critical BUSINESS function of leading corporations throughout the world. Thus, any business or investment professional who has not yet developed and executed on an IP strategy that is aligned with his/her business strategy is undoubtedly making a significant management error.

Moreover, taking taking point #4 from Joff’s summary, the consensus of the Congress attendees was that US business remains “woefully uninformed about intellectual property”. As an IP Business Strategist and consultant (more info here: www.jackiehutter.com), Joff’s observation demonstrates to me tremendous opportunity for first mover advantage for those seeking to get a leg up on their competition. That is, if your company wakes up to the value of developing and executing on an IP strategy directed toward protecting your proprietary innovations, even while your competitors still remain “woefully uninformed” about IP, you can effectively (and legally) keep your competitors out of your profitable markets. Of course, if your competitors cannot play in your space, you need compete less on price and, as a result, will be able to earn a premium in the marketplace for your company’s successful differentiated innovations.

The establishment of the Business IP Congress as a forum for worldwide thought-leaders to share and develop best practices in the business of IP should send a strong signal to business and investment professionals that IP strategy is only going to become more prevalent in the management functions of the modern company and, thus, become even more critical to its effective operation. Corporate leaders should not wonder WHETHER their company should adopt and execute on an IP strategy, but rather IF they have beaten their competitors to the punch in the IP strategy game.