Monthly Archives: August 2008

How to Make Sure Your IP Strategy Plan is Not Doomed to Failure

Make sure your IP strategy not destined to fail

Make sure your IP strategy not destined to fail

Smart business leaders understand today that IP Strategy should form a fundamental pillar of their value creation-directed business strategy. By taking a “business eye view” toward IP, forward-thinking corporate managers seek to capture the true value of their company, which today is increasingly measured in the form of intangible assets such as patents, trademarks, copyrights and trade secrets.

If you have read this far in this post, you no doubt realize that your company must develop and execute on an IP Strategy in order to maximize intangible asset value. But, IP Strategy is only one part of the process of generating and maximizing this asset value. As an IP and Patent Business Strategist (more info here: The Hutter Group), I have found that even the most robust business-directed IP Strategy is likely doomed to failure if your company does not also establish an IP Culture within your organization. Put simply, as a manager responsible for the execution of your company’s IP strategy, you must work to destroy the “IP Expert” silo that likely exists today in your company.

This silo consists of the designated “IP Experts” in your company who are typically R & D-oriented employees and your in-house IP lawyers. In developing IP rights in this typical corporate silo, an R & D employee will notify in-house IP lawyers that he has invented something, and the latter will validate the “inventiveness” of the idea. Together these designated “IP Experts” will decide whether the invention merits protection in a patent or whether it should remain a trade secret. The decision of whether to obtain a patent happens almost exclusively in this “IP Expert” silo. Moreover, if your business leaders are involved at all in this process, they are only involved with power to veto the previous “IP Expert” validation of the value of the invention. And, in my experience, once the “IP Experts” start on the road to obtaining a patent, few business people are willing to overrule the previous “expert” decision to proceed.

How to Prevent IP Ownership Issues When A Corporate Strategic Alliance, Joint Venture or Open Innovation Project Fails

A broken business relationship can cause IP ownership issues

A broken business relationship can cause IP ownership issues

Technology-focused collaborations form a foundation of today’s corporate planning strategies. Such collaborations can be in the form of strategic alliances, joint ventures, open innovation or other legal structures. Regardless of how the participants characterize and legally structure such collaborations, the most common motivation for forming such alliances is to pool technology and R & D resources. When technology and R & D is involved, it must follow that IP ownership issues should loom large in the planning stage of the collaboration. However, my experience shows that the parties rarely give appropriate consideration to IP ownership in the agreements that are supposed to fully set out the rights and responsibilities of the parties.

I can say with authority that IP issues are not usually given proper consideration in collaborative agreements because my expertise in this area results primarily from helping clients after their collaborations have failed. My clients typically sought my help after their collaborations went sour and they sought to exit the relationship with at least some valuable IP rights intact. In each of these situations, it was apparent that if my client had come to me for advice while they were executing the general business and financial parameters of the collaboration agreement, they may not have needed me to fix things on the back-end. Put simply, if I had been brought in on the front-end to put a fine point on IP ownership issues resulting from the collaboration, I would have been able to prevent questions regarding IP rights from even being a question.

My perspective about the preventable nature of IP ownership issues was confirmed when I recently attended a meeting of professionals who focus primarily on strategic alliances and other types of collaborative ventures. In this meeting of just over an hour, I counted at least 5 instances where someone commented something along the lines of “when the relationship goes sour, the IP issues cause problems.” From the sighs that accompanied the mention of IP ownership issues, I obtained the clear sense from these seasoned professionals that IP was not only a big problem, but also a common occurrence in their collaborations.

Confessions of a Non-Recovering Patent Troll Enabler

Some trolls are nice.

Some trolls are nice.

I came across this TechDirt article: Exposing The Patent Troll Playbook… And How To (Almost) Beat It (h/t Ron Carson, VP of Marketing at Innovation Asset Group). This is an insider’s account of what it is like to be the victim of a so-called “patent troll”. Perhaps better than the article itself are the comments which make it clear how passionate people are about the topic of patent trolls. This is recommended reading, if just for the entertainment value of the comments.

Reading the TechDirt article made me recall my time as a junior litigator at a well-known Atlanta law firm. As a very green (and tired) young attorney, I sent many “licensing offer letters” for the AudioFax Company. In this role, I was an enabler of a very successful patent troll. And, as set out in this post, I have continued to enable patent trolls throughout my more than 13 years as a patent attorney and intellectual property business strategist.

The story of AudioFax is summarized here, albeit in softball form. In short, AudioFax’s owner, Mark Bloomberg, was an entrepreneur selling fax equipment in the 1980’s. Another company, F-Mail, received a patent on the technology that Bloomberg was selling and came after him. Seeing an opportunity in fax patent licensing, Bloomberg acquired F-Mail’s patent, as well as obtaining two more patents of his own. Bloomberg hired a patent licensing company to scout out potential licensees and my law firm to send out letters. Thus, his successful journey as a “patent entrepreneur” began.

Response to WSJ Online Article: What Business Owners Should Know About NOT Patenting

Sometimes it is better for a business to NOT patent

Sometimes it is better for a business to NOT patent

Today, the Wall Street Journal Online published an article entitled “What Business Owners Should Know About Patenting“. In this article, Stuart Weinberg interviews James McDonough, an attorney at the well-respected Fish & Richardson law firm. Mr. McDonough gives excellent advice about the process of building an intellectual property portfolio.

However, he skips over a crucial first step–does building a patent portfolio really create long term value for your business? In many cases, the answer will clearly be “yes”. In many other cases, building a intellectual property portfolio could actually reduce or destroy your company’s asset value. By focusing his advice on the portfolio building step and later, Mr. Donough ignores the foundation on which your company should start the portfolio-building process.

First, an admission: I created a lot of value for myself and my law firm partners over the years by obtaining patents that did not ultimately create business value for my clients. I am not proud of this fact but, as a patent attorney, my job was to get a patent for a client if they thought they needed one. My job was not to tell them whether they needed a patent to support their business objectives. And, certainly if my client was willing to spend $10 – $30K for me to obtain a patent (which is the current cost estimated by Mr. McDonough), my assumption was that they had run the numbers and determined that a patent was a good spend for their business.

I now wear a different hat: as an Intellectual Property and Patent Business Strategy consultant (more info here: http://www.jackiehutter.com/), I do not create value for myself by billing clients on an hourly basis. Thus, I am able to look at intellectual property from a fundamentally strategic basis–does building an intellectual property portfolio create long term business value for my client? Unlike traditional patent attorneys, I can create value for myself by telling a client that they do not actually need a patent to maximize their business value. With all due respect to patent attorneys like Mr. McDonough, under the existing model of patent procurement, law firm patent attorneys cannot make a good living by saying “no”, even if it is the best business interests of their clients to do so.

The Problem with Patent Due Diligence in Mergers and Acquisitions and How to Fix It

The joining of 2 companies requires a good understanding of the IP positions of each

The joining of 2 companies requires a good understanding of the IP positions of each

As a business or investment professional involved in mergers and acquisitions (“M & A”), are you conducting patent due diligence according to the standard practices of your M & A attorneys and investment bankers? When patents form a significant aspect of the value of the transaction, you are probably getting incorrect advice about how to conduct due diligence. The due diligence process must take into consideration the competitive patent landscape. If competitive patents are not included in your vetting process, you may be significantly overvaluing the target company.

In my many years of intellectual property and patent experience (more info here: http://www.jackiehutter.com/), I have been involved in a number of M & A transactions where patents formed a significant portion of the underlying value of the deal. As the patent specialist on these transactions, I took direction from highly compensated M & A attorneys and investment bankers who were acknowledged by C-level management to be the “real experts” because they completed dozens of deals a year. To this end, we patent specialists were directed to check the following 4 boxes on the patent due diligence checklist:

  • Are the patents paid up in the Patent Office?
  • Does the seller really own the patents?
  • Do at least some of the patent claims cover the seller’s products?
  • Did the seller’s patent attorney make any stupid mistakes that would make the patents difficult to enforce in court?

When these boxes were marked “complete” on the due diligence checklist, the M & A attorneys and investment bankers had effectively “CYA’d” the patent issues and were free from liability relating to patents in the transaction.

Technology Start-up Entrepreneurs and CEO’s: If Your Goal is Investment or Acquisition by a Big Company, You are Probably Patenting the Wrong Things

If you want to be acquired, you need to patent in the right direction

If you want to be acquired, you need to patent in the right direction

Do you treat your patents as a fence or a tollbooth? If you wish for your start-up technology company to obtain investment from or acquisition by a bigger player, you had better understand the difference.

Most start-up technology company entrepreneurs and CEO’s understand that patents can be key to establishing the value of a new business idea. Typically, entrepreneurs and CEO’s such as yourself will engage patent attorneys to build an IP portfolio that protects the start-up’s technology and products to the fullest extent possible. The motivation for this effort and expense is, of course, to to protect your start-up’s idea from use by others. As management of a start-up you may be seeking to build an ongoing business around the patented technology, but often the goal of building a solid patent portfolio is to make your business an attractive target for investment or acquisition by a larger company.

As an intellectual property and business strategist (more info here: http://www.jackiehutter.com/), I believe that such an inwardly focused patenting strategy is a misguided approach for companies that wish to obtain investment from or be acquired by larger companies. Why do I think this? Let me use a simple analogy.