Monthly Archives: August 2010

Facebook’s “Trademark Bullying” Should Serve as an IP Strategy Lesson for Startup Entrepreneurs

Like other forms of bullying, Facebook's aggressive trademark activities can be attributed to "poor parenting"

This week, Facebook’s trademark action against a small online teaching company has been all over the news.  In summary, Facebook contends that TeachBook infringes its trademark rights in the “Facebook” name because, presumably, the “book” part of the name is associated in the minds of the relevant consumer public with the now well-known Facebook brand.  Today, it was reported that Facebook is now trying to own the rights to the “face” part of its name.

Most wouldn’t be surprised that the word “book” is used as a part of the name of a multitude of products and services, which would make it appear that Facebook is using its resources to beat up on smaller companies.  The natural response from the layperson is “why is Facebook being such a trademark bully?”   But to someone with experience in IP strategy, the business reasons behind Facebook’s actions are clear.

From a legal perspective, Facebook likely has little legal standing to extend its trademark rights in a direction that will allow it own either “face” or “book” as individual aspects of future trademarks in as-yet-introduced third party products or services.  These words are just too non-specific and common to legally signify the source of a product or service.  That is, if you as a member of the public saw the word “face” with another word–say “music”–would you think the company providing that product was the Facebook company?  Probably not.  So, should Facebook be allowed to own all rights to “face” or “book” when combined with another name, as it is now apparently contending?   Certainly not, and, without more legally relevant evidence, the Trademark Office is likely to deny Facebook the ability to prevent others from using face or book in their products or services.

Given the lack of legal basis for its contentions, Facebook’s actions instead appear to be directed toward using its vast financial and legal resources to either get smaller companies to forfeit their probable superior trademark rights or to obtain settlements with cash-strapped start-ups–like TeachBook–that will allow Facebook to expand its products and services in the direction needed in the future.  Is it legal for Facebook to do this?  Yes, and it appears that they have been successful in doing so previously.  Is it right?  I don’t think so, but business is business.   Nevertheless, I hope that Facebook is thwarted in its attempts to leverage the legal system and deep pockets to fix errors made by the founders in the early days who decided that “Facebook” was a cool name for, well–a facebook–as well as the later failures of its business advisors to craft a more scalable and protectable name.  In other words, much like the bullying that occurs with children, Facebook’s current “trademark bullying” is a result of the “poor parenting skills” of those managing the company when it was a young start up.  Continue reading

Contrarian Viewpoint: Patents Likely Matter Little to US Innovation and Job Creation

My Soapbox: Patents matter little to innovation and job creation.

Many experts insist that innovation cannot succeed without patents, and that the delays in the US Patent Office stifle innovation.  This viewpoint is like to become more widely believed by the public as US Patent Office Director Stephen Kappos sees a way to improve the dismal operations of the Patent Office by equating patents as job creation tools, which necessarily requires patents to be asserted as critical for innovation to occur.

I believe it is highly misleading, and even harmful in many cases, to say that patents are the end-all be-all to innovation.  I also think that fixing the Patent Office–which will invariably mean that more people will see value in obtaining patents to support their business idea–should be viewed more as a job creation engine for patent attorneys and those who support them (including Patent Office employees), as opposed to creating jobs that can help improve the dismal employment figures the US is experiencing today.

No doubt, it is true that patents are necessary to create value from many innovations, and that jobs can then result when the patent owner is able to build a business around the idea (assuming the company and its employees are actually present in the US–but we won’t go there).   As one example, I am currently working with a start up company with technology involving a disruptive energy innovation.  For this company, IP rights are critical to success.  But, our business model is based on licensing:  if we do not obtain bulletproof patent rights, we won’t have any way to make money, at least at the early stages.  Jobs do come into play with the patent rights, namely ours.  But, we do plan on building a sustainable business here in the US so, for us, it will be very important that we obtain patent rights and that these issue quickly from the US and other patent offices.

Another example where patents are important for both innovation and job creation is when small or medium sized companies that need ownership of their innovations in order to keep knock-offs out of the market.   Once they establish the market for their products, other companies can come in and undercut their prices before the innovator has a chance to recoup make sustainable profits and grow further.  Unfortunately, many of these companies fail to recognize the importance of patents to the sustainability of their business models.

These two examples are only a small subset of the business types and models that seek to obtain patent rights to protect their innovations, however.  And, I expect that more jobs are ultimately created from innovations that are not patented (or even patentable) than vice versa. Continue reading

An Innovation Expert Sticks Up for IP Lawyers!

IP lawyers and Open Innovation teams can make great teams.

Regular readers of this blog know that I strongly believe that IP lawyers can do a whole lot more to better serve the needs of innovation teams.  Much of the disconnect between what IP lawyers do and those of their innovation clients can be traced to misalignment of incentives, as well as a structural and cultural impediments that makes it difficult for legal and business experts to communicate and work well together.  Last week, along with my good friend Deb Mills-Scofield and Mike Riegsecker of Menasha Packaging, I co-led a workshop on this topic at the 2nd Annual Open Innovation Summit.  The workshop was well-attended, and the response was very positive.

Also, it appears that my message got through to at least one attendee, who is a prominent innovation consultant.  Keven McFarthing of Innovation Fixer wrote this post in which he asks open innovation professionals to not just look at their IP lawyer as an “extraneous irritant,” but instead as a member of the team.  Kevin also provides these recommendations:

  1. Ideally, make the lawyer a member of the formal team. If that can’t happen, treat them as if they are on the team.
  2. Don’t leave the final decision up to the lawyer. After all, legal risk is only one part of a project, there are risks associated with R&D, manufacturing etc. You should have a senior decision maker who decides what will happen based on ALL the inputs.
  3. When it all works out, say thank you. If it doesn’t work out, treat it as a collective setback for the team, not the individual who put their neck on the line to try to help the innovation succeed.

I agree with all of these, but I would add to the first one that innovation folks need to recognize that their colleagues in the law department–in particularly legal management–may not be accepting of lawyers being closely integrated into a business team due to a perception that they “are getting too close to the business.”  Innovation managers should be on the look out for signs that their lawyer might be effectively be getting “beaten up” for going out on a limb for the team.  Moreover, innovation professionals need to understand that by asking their IP lawyers to take risk for the sake of the business, the person who is going to suffer most if that risk plays out is the IP lawyer.  That is, if the innovation team embraces IP litigation risk and legal cost or litigation ensues, it is the IP lawyer who will experience the most “blowback.”  Innovation managers must therefore be willing to provide their IP lawyers with the resources–both by way of budget and staffing–if the innovation decision leads to undesirable legal results.  I provide more detail on this subject here.

It’s great to see innovation folks sticking up for IP lawyers!  Thanks, Kevin.

2 Ways to Reduce Open Innovation Risk: Convert the Naysayers and Bring on the Seasoned Veterans

Open Innovation efforts are often perceived to result in inordinate risk to the organization. This doesn't have to be.

Open Innovation is risky.  It’s like letting a stranger in your house to see what valuables are there for the taking, and letting them keep the key to your secrets even after you finish working with them.  For some, this perception of risk is enough to stop any attempts of Open Innovation in its tracks.  Other corporations respond to the risk by “lawyering up,” which, at a minimum, markedly increases the costs of proceeding or, at worst, causes the relationship to break down before any collaboration can occur.  And I, as IP counsel to a number of corporations in my prior life, must admit to being responsible for shutting down Open Innovation due to my role as IP risk the person responsible for mitigating my clients’ IP risk.

After leaving the Friendly Confines of defined roles and responsibilities set out in my corporate and law firm life where it was clear that my job was to stop risky behavior, I now realize that this approach to risk mitigation was, quite simply, wrong-headed and misdirected.  Indeed, halting or slowing third party collaboration as a result of perceived risk is actually more risky than taking the leap into Open Innovation.  I mean, how risky is it to assume that the smartest people are in your building, and that you can’t benefit from help by others not on your corporate payroll?  Ok, maybe you don’t need the smartest people ARE in your building if all of the following are absolutely true:

  • You hire flawlessly
  • Your consumer insights are perfect
  • Your team’s execution of innovation–from inception to the shelf and beyond–will be 100 % on the money

But, when do all of the stars align to make this happen?  The data show that the failure rate of new products is shockingly high, the result being that, even in the best of times, corporations succeed in their product development efforts only a small amount of the time.   The odds are even lower today, as discussed in more detail below.  So, regardless of whether your company’s decision-makers believe that Open Innovation is risky, I believe that most organizations must bite the bullet and move forward to make it a go.  In order to be successful (and not only have a single chance to try Open Innovation), one must be able to navigate the corporate politics that would stop the process, as well being able to minimize the risk associated with going outside for new product ideas.  I think I have a solution to each of these concerns. Continue reading

Corporate Business Leaders: Want to Create Value from Your IP? Stop Making it Your Lawyers’ Problem.

Business leaders should expect their lawyers to provide them with legal guardrails, not roadblocks for their business.

One of the biggest complaints I get from corporate innovation and product development professionals is how risk averse their lawyers tend to be about dealing with intellectual property (“IP”) issues.  It doesn’t matter whether these business people are talking about their outside or in-house lawyers, either.  To a person, the complaint generally tracks the contention that their IP lawyers “don’t get what they do” and, as a result, make it more difficult for them to meet the objective of adequately filling their product pipelines and introducing innovative new products that will keep the lights on at their corporations.

I have written and spoken about this topic on several occasions.  But, recently, I have been thinking a lot about the issue of risk aversion and IP lawyers for a couple of reasons.

First, I am co-leading a workshop at the 2nd Annual Open Innovation Summit next week in Chicago with my good friend Deb Mills-Scofield and Mike Riegsecker of Menasha Packaging.  In this workshop, we are going to discuss our experiences with corporate culture and incentives as these relate to achieving success in the world of Open Innovation.   Much of what I am going to talk about is how those seeking to implement Open Innovation in their organizations can understand their lawyers better–by way of incentives, thought processes and mind sets–so that they can reduce the possibility that their lawyers will put the kibbosh on their efforts.

Second, I have recently wrapped up a substantial project with a large consumer products company where I worked jointly with a VP of Innovation and her legal team to navigate a competitor’s highly complex patent portfolio to provide product design direction in the face of substantial patent infringement liability risk.  In the past 7 years, the competitor has obtained a number of patents that appear to be of questionable validity.  In short, the competitor obtained multiple patents on a consumer product that closely match products that existed in years prior to the date they filed for patent rights.  At a minimum, most of their patent filings reflect obvious improvements over the prior art and, as such, should not be patentable.  Moreover, the competitor’s strategy clearly was to “throw stuff against the wall to see what would stick” in regards to its patent filings and, somewhat surprisingly, some of the filings “stuck.”  In other words, the competitor had been successful in obtaining patent rights that are likely invalid, but which nonetheless held a presumption of validity in the eyes of the law.

For my client’s perspective, the competitor obtained patent rights that effectively prevents his company from participating in the market by offering a product in a growing category.  My review of the patents and patent filings demonstrated that the patent examiner who allowed most of the patents to issue was either asleep or incompetent (or both), and the competitor capitalized on this to file continuation patent applications incorporating increasingly complex language to describe was actually a pretty darn simple product.  This complex patent language was certainly a good strategy:  in recent months the “kinder, gentler Patent Office” has granted even more of these filings, one of which covers a product that has likely existed in the marketplace since at least the mid-1980’s.

There is no question that the competitor’s actions in regard to its patent strategy is–in a word “skeezy”–and, some might say, could amount to a violation of the US antitrust laws.  But, from the perspective of my client’s IP lawyers, the multiplicity of patents and pending patent applications gives rise to a huge potential for risk.  As we know, the role of the IP attorneys is to reduce or eliminate such risk, and they are incentivized by the organization to do so. Therefore, the natural tendency of the attorneys is to not be open to allowing the innovation team to undertake a project direction that, at best, heads toward the possibility of expensive legal opinions and, at worst, contentious litigation involving the competitor’s complex patent portfolio.  So, even if the IP lawyers ostensibly understand the need to investigate whether the business situation requires that they should develop a competitive product, they naturally will want to move in a different direction.   Continue reading