Tech IT Easy » patents

Thoughts on Intellectual Property and dealing with everything else that is out there

Vincent van Wylick — Fri, 30 Jul 2010 10:05:59 +0000

We’ve talked to a number of investor these last months and I can classify their questions into three categories:

Intellectual Property Protection (IPP)
Revenues
and Operations

Revenues is a straightforward concept and reflects market potential, market share, and business-model. Operations can also mean business-model as that clearly affects your operations, it also concerns the team, and it very much concerns *the last mile*—a very detailed understanding of how your product comes of the “factory line” and goes into a customers hands (every step and every screw has to be planned out). And IPP, well IPP is something special.

Intellectual Property Protection refers to legal and other ways that you protect the innovation and knowledge that is built within your company and its people. It is not as straightforward as simply taking out a patent, copyright, or trademark, though those are usually the first avenues that investors will pursue when talking to you about IP. IPP can just as much come from keeping information tacit—inside the heads of your team—, developing systems that spread an innovation across many parts—e.g. the way technology companies prevent copying from factories they outsource production to, by only giving them parts to produce, but not the whole—, another systematic answer could be deep vertical integration, which ensures a higher quality of products and services than can be replicated by vertically smaller competitors (a strategy pursued by Apple and Starbucks), and last but not least: speed—in some industries it pays to just scale very quickly, rather than build a protective base around IP (a contrast between e.g. web and medicine).

But let’s get real for a second. You’re an inventor, you developed something new. The most obvious path to pursue is a patent. The first issue is cost, because taking out a patent is not cheap. Basically, by filing a patent in your country, you can protect yourself for a while because there is a period, 1-2 years, I believe, where you are filing it and it can serve as a type of legal instrument to prevent other companies from filing a similar patent. But in the end, you have to shell out maybe €5000 per country to protect your invention internationally—and those costs do not cover the legal cost or protecting a patent once it’s being breached. Let’s get real x 2: you’re a startup and while your technology may be innovative, it may not be what the market needs (which can relate to actual taste, but also to cost, to regulatory issues, etc.) and that means that your patent, if you decide to take it out, may not be worth squat. Let’s get real x 3: your invention may not be unique, at least not in its current form, and pursuing a patent in that case is not even feasible.

So practically speaking, what do you do? Just to be clear, I don’t have the final answer to this, though it is something I am constantly thinking about as a potential risk in our, a technology startup. So my interpretation and approach are entirely my own, but I am writing this to start a discussion more than to give the final answer.

The answer to me is all about strategy. IP protection has to make sense in the context of a longer term business strategy, long term meaning to me longer than 2 years and preferably longer than 5 (if you have an actual patent and it has market value as well, you have over a decade of protection). And IP, just like a business, is something that can be split up to cover different areas related to supply, to the manufacturing, to the end-product, to the service, etc. So the more broad and comprehensive your way of protecting your intellectual value is, the less it can actually be replicated by your competitors.

All IP concerns aside, it is sometimes of benefit to not protect the whole value chain. This is true in our business, which I will write about some other time, where we can split up our technology into core-components that are integrated into new solutions which act as a platform for more solutions. Locking off that whole chain is perhaps of some benefit, but in some ways we would like to have people innovate in their respective areas and for us to focus on developing better products out of that. My point is that IP protection should be seen as something that can be shifted to those areas most critical to your business and that new development in your industry is not necessarily something to be scared of. In the end, we are in the product business and if we can produce superior solutions for customers that outweighs comprehensive IP solutions.

So the conclusion is, even if you are developing a product that is not entirely novel, there are places in the value chain where you can still develop an IP solution. And if you are developing novel solution, it has advantages on both the supply and the market side, to not make your IP too restrictive and thus diminish your product potential.

Battles in the Virtualization Space

Vincent van Wylick — Mon, 29 Jun 2009 20:39:04 +0000

I’ll spell it American… happy, blogosphere? Here’s a few interesting examples of how the battle is being waged in terms of virtualisation of software:

I can’t run Windows Live Writer—simply the best blogging software on both the Mac and Windows—through Crossover, because it was built in .Net. And .Net apps don’t work in Crossover.
You can use the free Virtualbox from Sun to run your virtual OSs (a great development environment!), but if you want to launch Windows apps from your Mac, you need to pay for either Parallels, Fusion, Crossover, or any other commercial variants for this purpose. Basically, a software like Parallels allows you to place a shortcut to a Windows app onto the Dock or the Desktop, which will launch Windows + the app, when you click it.
The best Windows user-experience on the Mac is through Boot Camp. It would be a million times quicker to boot if you were able to hibernate on the Windows side and safe sleep on the Mac side. If you don’t want to risk losing your unsaved data however (why would it be unsaved?), you’re probably better off booting the traditional way (3-5 min. out the window right there). Well actually, it used to be an official feature, now it isn’t.
Sharing your OS X documents with your Windows ones (in other words, using the same folder for both OSs) is very possible when you use Parallels. When you use boot camp however, it all of a sudden gives you a convenient error.

Georgia, in response to my post about the OS War being over, wrote that she thought that this whole discussion is about standards. I think that the edges are getting very blurry and I eventually see hardware, on the PC-side at least, becoming pretty irrelevant. In the meantime, however, you get these little annoyances, beyond stuff like Office for Mac being inferior to Office for Windows, which make me wonder if they are here by design or because they haven’t gotten around to fixing it yet. I’m betting on the first.

Standards, for now at least, are still causing wars.

Vincent

(Picture is of course of the game Virtua Tennis 3, and has absolutely zero to do with this post)

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From medical to space-tech – How technology affects incubation-strategies

Vincent van Wylick — Thu, 24 Apr 2008 06:42:47 +0000

It’s funny! Recently, 37signals’ David Heinemeier Hansson gave an interesting talk on finding a business-model for your start-up. He said something along the lines of “It’s no rocket-surgery!” Well, what I’m about to speak of is in fact rocket surgery.

As some of you may know, I wrote a thesis a while back on high-tech start-ups, their strategies of finding funding, and how they interrelated with incubators, a key-component in the innovation-system for high-tech start-ups. As it turned out, not all the start-ups I interviewed were high-tech, which showed some interesting differences in ambition, funding-need, and funding-strategy, but also not all the incubators, I looked at, were focussed on high-tech.

For some, it was a conscious choice; ESI, the ESA-incubator, faces the unfamiliarity in the market with space-technology, and their focus is to promote the utilisation of space-technologies, which is very-very different from the development of space-technologies. For instance, you can use materials or mechanisms used in space-tech in creating products like bikes, which obviously carries far less risk and development-times.

With high-technology, it’s all about making life a little easier, because the market is simply not able or willing to carry the technology- and market-risks that companies (to be) carry in this segment. Of course, this is a problem with entrepreneurship in general. For instance, back in the day, the first *official* VC-fund was American Research & Development (ARD), which collected funds, not from a limited set of institutions and for a limited time-frame, as is common practice today, but instead just opened itself up to common shareholders. Since high risk and high reward are correlated, it attracted a lot of attention, and eventually lawsuits followed from people that felt cheated (most often by some investment-adviser collecting his commission) when the risks proved true. And then VC-funds became more conservative, and less and less commercial money went towards highly risky ventures, like e.g. Space.

Today, most VCs prefer there to be no technology-risk, and many would also prefer for there to be no market-risk either (which translates into a company already having customers, which is generally good advice, but doesn’t work for all companies).

Back to incubation. I consider ESI a medium-tech incubator, and it does take measures, both on the technology-side and the investment-side, to make life a little easier for both start-ups and investors. As opposed to the Erasmus Medical Centre (EMC), which I consider a very high-tech institution, and acts accordingly. Why is it high-tech? Medical patents last around 15 years. Yet development can cost billions, the risk of failure is high, approval from regulatory institutions can take a long time, sometimes bringing the whole process to about 10 years of development-time. So not only is the chance of success low and the cost high, but you don’t have much time to collect the reward!

How the EMC works is like any high-tech institution. Scientists develop a process or product, it is part owned by them and part owned by EMC. Actually, it is very much owned by the EMC, though I won’t reveal the exact percentage. But considering the possible reward is huge, even a small percentage will set that inventor up for life. The EMC basically has complete freedom to do with the technology as it pleases. Often, it will license the patent, sometimes it will sell it, and sometimes it will decide to start and incubate a company.

In this case, still, it holds complete control. The inventor can decide to take part in that process, but essentially the EMC chooses who runs it. It also set up a seed-fund with banks and VCs, of which it also collects part of the rewards. Nice, no!?

Compare that to the ESI. The ESI usually licenses its technology, fairly freely from what I can gather. Their objectives are different, they want to educate the market. They don’t own equity in firms, though obviously there is a licensing agreement in place somewhere. When I interviewed them, they were planning to do something to make seed-funding for start-ups easier, but at the time of my working there, it was basically all left up to me and my partners.

From my research, I understand that the way incubators behave, very much depend on the objectives of their stakeholders. The objectives of the EMC and the ESA are very different. The EMC creates technologies that are meant to be commercial, and is also a cornerstone of Dutch innovation. The ESA creates technologies that are used in public programmes, licenses it to partners, but is also fighting an uphill battle as far the public’s and business-world’s perception of space-tech is concerned; it is simply too abstract for many to care, which raises questions about whether programs like the € XX-million space-toilet should really exist. Of course, when you bring space-tech *to earth*, that changes the picture somewhat.

Incidentally, there are very few successful independent incubators, simply because society considers it unethical for an incubator to exist—either because they don’t understand the kind of service that incubators can provide (nor is there a real quality-guarantee), or because they consider their residents as sub-par to regular, independent start-ups—both topics for another day.

There’s definitely much more to say about this, including the role, I think, incubators should play in (funding) high-tech entrepreneurship, but I’ll leave that for another day.

P.S. I hope this sheds some light on why I still don’t see software (and webware) as high-tech (1 & 2) and why VCs like that world so much.

P.S.2 This also sheds some light (in my opinion) on the media-industry, which others and myself frequently write about on Tech IT Easy. Music is just another technology, with its production- and high marketing-costs, as well as high risks of failure, and the way record-companies deal with artists reminds me a lot of the EMC-model. Food for thought…

This piece was written by Vincent van Wylick, co-author extraterrestrial on Tech IT Easy. The image is courtesy of rocket-surgeons.com.

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Tech IT Easy » patents

Thoughts on Intellectual Property and dealing with *everything else that is out there*

Battles in the Virtualization Space

From medical to space-tech – How technology affects incubation-strategies

Thoughts on Intellectual Property and dealing with everything else that is out there