Author Archives: Jackie Hutter, IP Strategist

About Jackie Hutter, IP Strategist

Jackie Hutter, named one of the Top Global IP Strategists by IAM Magazine in each year since 2009, has almost 20 years experience advising innovation-driven corporations, investors and universities on how to maximize intangible asset value. As an IP Strategist, Jackie does not just "get" IP, she makes sure her clients only get IP that makes them money. Jackie has established this blog to provide forward-thinking business and legal professionals with strategic information to enable them to identify, capture, protect and exploit their organization's intangible asset value. As the CEO of a startup technology company, Jackie also understands the IP and legal needs of small and emerging companies and works frequently in an in-house counsel role for such clients. Jackie lives in Decatur, Georgia, in a groovy Mid-Century modern house with her husband, 2 daughters and far too many pets.

Hey “Patent Experts”: How Do You Like Groupon’s Patent Now? *Crickets*

Patent experts: I can’t hear your opinions about Groupon’s patents over all these crickets chirping.

Yesterday’s announcement of the firing of Groupon’s CEO and the hope for a rebirth of the company’s business model brought to mind a post that I wrote a couple of years ago railing against the self-interested opinions of “patent experts” on why Google offered $6 Billion for Groupon in late 2010.  Re-reading the post in the rear-view mirror, it is more clear than ever that Google made the offer for the precise reason I set out below in December 2010:

Google, and other acquirers, buy business models, not patents.  As we strategy-focused IP people have been saying for years, a patent is worthless unless it covers a viable business model–either yours or one you want to own.  Google is interested in Groupon because it offers them an established business model in an area that fits into their long term business strategy.  Are the patents nice to have? Of course, but if Groupon didn’t have the patents, Google would still want to own them, and likely for a price in the same neighborhood as it bid.  At the end of the day, the Google’s offer for Groupon was a “build vs. buy” decision:  Google ran the numbers and believed that it would make more money buying Groupon than by building something from scratch.  And, I would expect that Groupon’s refusal to accept the $6 billion means that Google will look around for another company that has a similar business model, and these possible partners may or may not have patents.

Of course, we now know that Google did not buy another Daily Deals company but, instead, started its own version a few months after the acquisition attempt by launching Google Offers.  Even with Google’s powerful market share and the growth of the Android platform, this business has failed to thrive.  However, at the same time Google Offers is struggling, Groupon has been crashing, which points to the viability of the underlying business model, not the company that is operating under that model.

Further, to those “patent experts” who opined that Google paid $15.5 Billion to acquire Motorola Mobility’s patents–POPPYCOCK!!  As Techcrunch indicated at the time of the announcement, and as subsequent events revealed, Google shelled out that cash so that it could lay the foundation for its efforts to shape the future of the hardware products on which its software runs.  As a learning organization, Google realized that in order to predict and influence its continued ability to grow revenue, it had to have a say in what products were brought to market.  People seem to put a lot of relevance in Google’s decisions to close plants and shed itself of workers as proof the purchase was “all about the patents,” but this is flawed conclusion:  Google didn’t buy Motorola Mobility to continue making the lousy phones that wouldn’t sell.  So, it makes sense that Google is downsizing the manufacturing side of the acquired company.  Motorola has an established and mature hardware infrastructure that Google couldn’t build if it wanted to.  Even if Google could build the necessary expertise in house, the time it would take to do so would make that route a dead end given the speed with which the tech sector innovates.  With the acquisition, it bought into Motorola Mobility’s expertise and infrastructure and as a bonus, Google got a whole bunch of potentially relevant patents that they needed.  Looking at the acquisition from this framework, $16.5 Billion looks like a bargain.

My uncle, a small town lawyer, always told me “when all you have is a hammer, everything looks like a nail” and if the word “patent” is in your job title as an attorney, this is certainly the case.  When such siloed perspectives are compounded with lazy journalism, we get the ongoing problem of people still think patents create business value standing alone.  The truth is that patents–and other forms of IP and intangible assets–can be critical to allowing one to capture the value of a great business model.  Business people need to look at these as tools in the toolbox of value capture, not as a means to an end.  Significantly, patents cannot create value where there is none.  As Farhood Manjoo said in Slate, Groupon had a “crummy business model” and no patent in the world could help that fundamental flaw.  RIP Groupon and its patent(s).

Is Traction the New IP for Startups? Maybe Not for Yours.

Traction may be the “new IP” for some startups, but is it the right IP for yours?

Traction is the new IP.”  This emerging mantra results in many startup CEOs eschewing the traditional path of patent and other forms of IP protection.  While I am aware of no rigorous studies conducted to date, anecdotal information indicates that startup entrepreneurs are increasingly saying no to patents, and likely to other forms of IP.  Instead, these entrepreneurs first seek to validate their business models and then follow business plans focused on generating recurring revenue, often avoiding altogether the step of protecting their business idea or product with IP.  From my own interactions with startup CEO’s, I can confirm that the pendulum has swung very far to the “IP is worthless” side of things.  But, is this emerging conventional wisdom actually correct?

There is no doubt that over the years far too many startup company resources have been spent on patents and other forms of IP protection (many of which were paid to me in my former life as a patent attorney).  Moreover, if we were to track the number of patents held by successful startups and those held by failed startups,  a poor correlation would certainly exist between successful exits and the presence of IP protection.  An adherent to Lean Startup Methodology would then likely conclude that scarce resources should be spent on tasks more often associated with startup success.   This could be a huge mistake, however. Continue reading

Do Patents Matter? Lean Startups Should Ignore Expert Advice and Let Their Data Drive Patenting Decisions

Many hold strong opinions on the value of patents to business.  Both in person and online, there are any number of “experts” who stridently insist that without patent protection, a company’s business goals are doomed.  With about 350,000 new patent applications filed in 2012, there is no question that many agree that patents create, and are even critical to, business value.  But, as the 2012 US presidential election cycle demonstrated, actual data can illuminate how expensive experts are often flat out wrong.  So where’s the “real data” that will allow business people to know whether a patent is the right decision for their company?   This information is likely even more critical for startup entrepreneurs, most of whom have no choice but to rely on self-interested expert opinion regarding the value of patents to their business.

Entrepreneurs who follow Lean Startup Methodology understand that decisions must be driven by validated data, not beliefs or opinions.  It would be great if a source of data existed that could illuminate whether and in what circumstances patents matter to new business ventures.  Unfortunately, little information exists regarding the return on investment businesses of any size typically can observe from investment in patents.  There are many reasons for this lack of relevant data upon which to base business decisions, the most pertinent being that data on patent value is highly speculative unless a patent owner itself reports the alignment of patent spend with strategic goals.  In my experience, only the most sophisticated patent filers collect this evidence in the first place, and even fewer companies report this information to the public.  Which brings us back to the “fox guarding the hen house” problem of patent experts insisting to startup entrepreneurs that patents are important to their business plans.

I have recently come across what I believe to be an objective source of real data that can provide a bit of insight into the ROI of patent filings.  An informal study by IP Strategy expert and consultant Suzanne Harrison in her book Edison in the Boardroom Revisited indicates that a group of large corporate patent filers self-reports that only 5 % of patents are considered to be “strategically valuable” to their respective organizations.  While the study does not define “strategic value,” we should understand this to mean that such patents provide the company with the ability to execute on corporate strategy, something that likely is associated with significant revenue capture. Continue reading

Lean Startup Methodology: How Patenting Decisions Fit into this New Business Framework

 

Lean Startup Methodology makes patenting decisions easy enough for a child to understand.

One of the first questions start up entrepreneurs usually ask sounds something like this:  “Is it worth the effort and expense to get a patent on this business idea?”  In countless conversations with clients in my years as a patent attorney, I could usually articulate multiple reasons why the person seeking to to start a new business venture unequivocally needed to file a patent application as soon as possible.  Moreover, I could recite a litany of ills that could follow from failing to follow my advice.   Following this conversation, I could typically expect a fat check from the client, whereupon I would dutifully draft strong patent on the subject invention.  It was a nice living.

These days, I work as a startup technology company CEO and look at patents much differently than I did in the past:  as a consumer of patent services myself, I now examine patenting issues from the vantage point of an entrepreneur, not as a lawyer whose business model centers on patents.  My viewpoint has been further honed in the last year as I have become a practitioner of the Lean Startup Methodology, a startup business framework that, in short, states that if an entrepreneur cannot validate her business model with actual, paying customers, she has no business being in business.  In this new operational paradigm, when a company is in the startup phase, all efforts not spent on determining whether a profitable revenue model exists with customers should be considered wasteful.  It then necessarily follows that obtaining a patent on a product or service that no one will buy is by definition waste in the world of the Lean Startup.

Lean Startup Methodology is just now growing in adoption with entrepreneurs like myself.  Few patent attorneys likely participate actively in the thought processes circulating in the startup world–why should they–their business is patents, not building a startup business.  It is therefore doubtful that patent advice relevant to Lean Startup has started to permeate the legal advice world.   Moreover, advice that entrepreneurs not patent as frequently, which will inherently result when an entrepreneur follows the Lean Startup Model, will necessarily reduce the income streams for patent professionals.  I expect that unless patent lawyers quickly generate a new business model that allows them to generate substantial income from clients by recommending NOT patenting, patent lawyers will be slow in incorporating the Lean Startup Model into their advice to entrepreneurs.

In later posts, I will endeavor to provide a reality check to those who wish to get beyond opinions based on anecdotes and self-interested experts regarding the likely return on investment that entrepreneurs can expect from filing for patent protection for their business or product idea.  For those entrepreneurs also following the Lean Startup Methodology in their business, these posts will hopefully provide your team with a framework to determine whether patent filing will comprise wasteful effort and expense that can detract from the ability to achieve success.

The initial takeaway for Lean Startup Method entrepreneurs should be that when a patent professional is giving you patent advice, you should apply the Lean framework to his business model.   As long you continue to accept his advice and pay him to obtain a patent on your business idea, you are validating his business model.  As I said, it’s a great business.  It’s up to us Lean Startup entrepreneurs to force them to develop a new model that serves us better as we embrace this new business paradigm.

 

image Dribble.com

The Apple vs. Samsung Verdict Actually Demonstrates that Patents Do Promote Product Innovation

Apple’s win over Samsung actually demonstrates a functioning aspect of our dysfunctional patent system.

In the time that the Apple vs. Samsung patent fight has been underway, we have been inundated with an untold number of articles on how Apple is stifling innovation in the SmartPhone world.  (Haven’t seen these:  just do a Google search for “Apple stif . . .” you don’t have to type any more than this–the search auto-completes itself.)

I often take a contrarian view from that stated by most “expert” commentators–be they members of the press or actual patent professionals, and the Apple v. Samsung verdict is no exception:  I think the result actually demonstrates that the patent system is working just fine in this instance, thank you very much.  But how can this be when Samsung got hit with more than a BILLION US DOLLAR jury verdict last week?!?  Doesn’t the fact that Samsung could not make a product without infringing Apple’s multitude of patents mean that Samsung is effectively prevented from competing with Apple in the Smartphone market?

Not necessarily, as is shown by this great post from The Verge entitled:  “How Android has evolved while steering clear of Apple’s designs”.  What is most interesting to me about this article is how we see that while making phones for Google, Samsung was nonetheless capable of creating non-infringing and–yes–innovative designs.  The illustrated “evolution” of Google’s Nexus branded products demonstrates to an IP Strategist like myself that Google’s team understood clearly the scope and content of Apple’s patents BEFORE they began the process of designing their products.  Their innovation and patent teams apparently worked together to define the available design path available to them and that which was closed off due to Apple’s (and presumably others’). This resulted in their bringing to market products that (at least for now) avoid Apple’s pre-existing patent rights.* Continue reading

Google Changes the Game Again–This Time for Patent Owners and Those Who Serve Them

Patrick Anderson of the great Gametime IP blog reported the details of Google’s new prior art searching tool*.   This is such important news, I thought it important to repeat it in a separate post.  Patrick provides detailed instructions for how to use the Google patent searching tool, and I will not repeat that information here.  This post provides commentary on why I think this is a very good development for the patent world.   Google’s original announcement on its blog is here.  It does not appear coincidental that Google is upgrading its patent searching capabilities:  in this press release from June 2010 we are informed of the partnership between Google and the USPTO to increase the amount of US patent information available to the public.

When used correctly, Google’s tool can help “democratize” the patent analysis process by putting more power in the hands of those who are not part of the closed “guild” of patent professionals.  For example, before spending money on a search (and the opinion that most patent professionals will insist on writing to put context to the search), an inventor can herself get a feel for not just the patentability of her invention, but also how broad the claims will likely be and how easy or difficult (e.g, expensive) it might be to obtain a patent given the amount of prior art cited by Google.

Of course, the inventor can ask the patent attorney these same questions, but asking someone who makes her living writing patents if it makes sense to file a patent application is a bit like “the fox guarding the henhouse,”  n’est-ce pas?  I liken this new Google tool to a home improvement show on HGTV–I am never going to build an addition to my house on my own, but having access to professional-grade advice certainly allows me to ask better questions to my contractor and, perhaps, possess a stronger BS detector than I would have without being able to first conduct some self-learning to ground my go-forward actions in the face of “expert” opinion.

While Google ostensibly created this tool to help find prior art (e.g., to invalidate actual or potential patent claims), Patrick correctly notes that this product can also be used to help identify those who might be playing in the same space that is covered by another’s patent.   The new Google patent search can provide the owner of an existing patent with insight as to whether another person or company might be building on technology that first appeared in her patent.   This could illuminate whether potential licensees and/or infringers exist, an inquiry which to date has typically been one big question mark except for circumstances of obvious marketplace infringement or for entities with sufficient resources to pay a team of patent professionals to conduct the requisite investigation.

A word of caution, however.  As detailed in this blog post from 2008, analysis of patent claims is not a trivial process.  Before any patent owner acts on a belief that another party is infringing on her patent, it is imperative that an experienced patent lawyer be contacted so as to ensure that one does not end up in a declaratory judgment lawsuit as a defendant.  Google’s tool can thus serve only as a signal of potential infringing activity, but I have no doubt that this new product will serve as yet another disruption to the patent profession.  And, that is a good thing.

*  Yes, Google has had a patent searching tool for sometime, however, I have found it fairly difficult to use–perhaps because it was built without reference to the parts and content of patents.  When clients came to me with patent search results from Google, it was ALWAYS the case that a search of “real” patent databases turned up wholly different results.  With the emphasis now on patent claims–and the ongoing partnership with the USPTO referenced above, I strongly expect the quality of Google’s patent search to now be improved.  The addition of European in a search with US patents will also be a plus (however, I have always liked the search quality of the European Patent Office’s tool for searching ex-US documents).

Patents–Who Needs Them? Not Most Startup Entrepreneurs.

A recent article in TechCrunch indicates that entrepreneurs are less likely to file patents than in the past.   Nonetheless, there remain countless patent lawyers and agents who will argue convincingly that an entrepreneur must obtain a patent in order to succeed and who will take their $5-15K to file a darned good patent application that won’t provide them a bit of business value in the long run. Even worse, the resources expended in the patent process robs the entrepreneur of needed cash that will allow them to gain customers, and of their most valuable asset: time.  But when the only tool you have is a hammer, everything looks like a nail–which is why those still in the business of writing patent applications will continue to make their case to entrepreneurs (and investors) who lack the domain expertise to know better.

Now that I no longer make money obtaining patents–instead, I am the CEO of a startup battery charging company–I understand that patents are generally a poor way for a startup company to expend scarce resources.  I rarely, if ever, recommend that my startup colleagues file for patent protection for any tech/web-based ventures.

Further, when asked what they should do with their pending patent application, my regular advice is to let it die.  Why? Darned near all successful startup companies change their business model not just once, but multiple times prior to achieving success–that is, by the time they find paying customers.  As a result, by the time the Patent Office reviews the invention, the patent application filed 18 or more months ago is rarely relevant to the way their business is being conducted today.  In other words, their initial business idea may be patentable, but it didn’t surround a business model that anyone cared about after customer discovery efforts were conducted.

For those very few startup companies that hit on a valid business model out of the gate, success will breed copycats.  The patent filing gives a road map that likely will be designed around or with the steps performed outside of territorial boundaries so as to avoid infringement liability.  The successful startup has thus provided its competitor with a lower cost way to enter the market that it created.

Even if there is ultimately infringement liability that can be pursued, time and again good startup businesses are made lame by getting tied up in patent litigation.  I think that Vonage is a great example of this:  consumer adoption of VOIP  was retarded due to the focus of Vonage’s management on being a defendant in multiple patent litigations.   Only when Vonage settled litigation did it have the ability to focus on gaining customers instead of burning cash on legal fees and settlement costs.   No reasonable startup should base business success on the ability to prevail against a competitor after spending millions on litigation–especially when adding the opportunity costs and market uncertainty that results from such a business strategy.

This is not to say that SOME startups–such as those in the business of making tangible things that can be cleanly and broadly described (e.g. semi-conductors, chemical compositions and my own startup)–do not crucially need patents, but certainly we are in the minority since most new companies today are based upon developing new business models, not in making products or technology that goes into products.

When startup entrepreneurs come to me for advice about whether they should get a patent, I make sure they understand how having a patent would benefit them in the long run, and usually the consensus is that it will not.  For those who are concerned that an investor might want to understand their patent strategy, I let them know that not getting a patent is a patent strategy if you make the decision for clearly articulated business reasons.  In other words, a patent is only one of the many tools available to the entrepreneur who is seeking to build a sustainable and valuable business model.

Historically, patents have operated as a “black box” for everyone other than patent professionals.  If a patent attorney says “you need a patent,” then the entrepreneur had no way to stress test that recommendation against her peers.  As more articles like this one in TechCrunch reach entrepreneurs, I am hopeful that more startup folks will be able to decide for themselves whether patent protection makes sense in the long run.

How to Improve your Innovation ROI with Early Stage Patent Expertise: In Depth Management Article

Innovation Management Magazine

This article, How to Improve your Innovation ROI with Early Stage Patent Expertise,  was published in late 2010 as a pay for download article in Innovation Management Magazine.  It later became free for download, and I can share it with readers in this link.  I hope those responsible for creating value from IP in their organizations can find the insights in this article helpful.  Here is a synopsis:

Innovation teams are often removed organizationally from a company’s patent matters. This can mean that corporate innovation processes move forward with little or no consideration of whether competitors can legally “knock off” the resulting consumer offering. Companies may then not attain expected ROI because competitors can legally copy the innovation—be it a product, technology or otherwise—without incurring legal liability.

It may not always be necessary to protect innovation efforts with patents, such as where a product has a short shelf-life or where the company may desire to maintain trade secret protection for the technology. However, for innovation endeavors where go-forward financial models assume exclusivity, companies often require patent protection. Also, the absence of patent insights at an early stage frequently means that innovations are not properly scoped for potential infringement risk until significant efforts are expended, a fact which can further limit innovation ROI.

It follows that companies can realize financial benefits by including patent information at an early stage. A key to successful inclusion of patent information in early stage innovation processes is the realization that not all patent experts can operate in this environment and that corporate leadership must competently manage the situation. Nonetheless, companies that effectively include business-focused patent counsel on innovation teams can improve the ability to obtain innovations protected by patents as well as reducing legal risks to improve ROI.

 

 

This blog is back in town!

The blog is back in town.

A bit more than a year of effort as a CEO of a battery charging startup has taken me away from this blog.   It was, and remains, an incredible journey.  As we move ever more close to commercialization of our battery charging technology, I will be posting more in the coming weeks and months (after a well-deserved vacation starting next week).   We have learned much in the last year about getting a new technology to market, especially as it relates to building a team, fundraising and finding technology and licensing partners.  I will likely be cross-posting on another blog site.  But in the meantime, I am posting some articles on creating value from IP (this is the IP Asset Maximizer Blog after all) that readers may find interesting.

A Startup Company’s Experiences with Open Innovation-Part 2: Adventures of a Chief Frog Kisser

Start up companies need to keep searching for their prince

After many years of counseling small companies on how to license their technology to large companies as an IP attorney, the tables are now turned.  My new role is as CEO of a startup company with breakthrough battery charging technology available for licensing.  I am finding that many of the things I knew to be true as an expert, really aren’t true at all now that I am an entrepreneur.  This is the second post in what I hope will be an ongoing narrative that tells of my journey through the world of Open Innovation as we attempt to find one or more licensing partners for our company’s breakthrough battery fast charging technology.  (The first post is here.)

One piece of advice that I knew even before embarking on this entrepreneurial journey that was absolutely not true was”build a better mousetrap and the world will beat a path to your door.”  As I have written about before, ideas themselves mean little when 90 % or more of the “better mousetraps” covered by patents are worthless.  So, I knew that our technology destined to become “shelfware” unless we did something to get our name out there.  An old friend with sales experience gave me perhaps the best advice which was along the lines of “you gotta be in it to win it.”  So, as we move along the path to successful licensing, I am working hard to be “in it” so that we can find that special company that will become our licensing partner.  This effectively means that as someone seeking to license my company’s technology, it is my job to meet as many people as possible.

In the past few months, I have been continually surprised at the number of people who actively seek me out to discuss my company and our technology.  Many of these are also cold-calls where someone finds out about us and wants more information.   Significantly, these cold calls have almost always resulted from our efforts to generate press not just related to the benefits of our technology itself, but press that clearly indicates that we are seeking licensing partners.  This is in contrast to many, if not most, press efforts dealing with new technology, which tend to focus of the “gee whiz” nature of the breakthrough, not the business plans of the IP holders.  As someone who is looking to license my company’s technology, it is more important for me to advertise that I have something for sale–that is, our technology–than it is to gain accolades from the public about the greatness of our ingenuity.

In recent months, there have also been tons of meetings with potential licensees, as well as potential investors and team members, many of which have moved into the preliminary negotiation stage.   As I map out the next few months, I can visualize literally dozens more.  This reality has led me to realize that as the CEO of a small company seeking to license our technology, my role and responsibility in this position can be characterized at this stage of our company’s existence as “Chief Frog Kisser.”  Really, what I do every day is kiss alot of frogs as I seek out our prince–that is, the person or persons who are going to invest in my company, or join our team, license our technology, or champion us within their networks, or a combination of the above.

Sometimes this is a very pleasant process.  I have met many people over the last few months who will likely become friends.  Many people have generously given their time, advice and introductions to their deep networks.  But sometimes this is not a very pleasant process.  I have thought a lot about why some interactions result in less-than-optimum experiences, and can almost unilaterally chalk these up to the other person’s being close-minded or too sure of their knowledge.  There is no reason to lose sleep over these ineffective conversations because it is doubtful that people with this sort of perspective would be likely to be successful in the world of Open Innovation.

So I continue to seek out new opportunities to meet potential partners on a daily basis.  However, I often find that my pragmatism is not shared by most IP owners who seek to license their technology to another party.  Instead of casting a wide net to find potential partners (sorry for changing the metaphor on you from frogs to fish), they tend to self-select who they think is the right connections, and stick with that choice.  Even worse, when they identify someone who they think may make a good partner, they set the hook and reel in the catch without regard to whether there is a shark, minnow or yummy sushi grade tuna on the other end.   The lawyers usually get brought in at this point, and the parties start down the path of expensive negotiation, even in the face of the fact there is not a good match.  What then happens is that the IP owner pays his lawyers to draft an agreement and–even worse–burns time and effort, even when the other company is not likely to be the catch it was thought to be.  These are folks who apparently believe the myth of the better mousetrap, and they are not only unlikely to be successful, they will probably lose much of their and their investor’s money.

That’s why it’s more important for startup companies to kiss innumerable frogs before trying to reel in a big fish.  Those of us seeking to licensing our technology to other companies, gain investment or otherwise enhance our businesses prospects must meet as many potential suitors as possible before we make a commitment.   We also need to be willing to move on quickly when the chemistry isn’t there.  Of course, when you have gained the attention of an ostensibly attractive suitor, it can be hard to move on, but recognizing early that your company is not the right pedigree for this “prince” is part of the growing process, and by extension, the way a start up company will maximize long term shareholder value.

So, this Chief Frog Kisser is puckering up.  One of these days–hopefully very soon–we will meet our prince and we will live happily ever after!  But in the meantime, pass the Chap Stick.