Recession is the Perfect Time to Innovate

“Recessions signal end of an era; out goes the old way of doing things and room is made for the entrepreneurs to come with new innovative ideas.”

This is according to Kanwal Rekhi, a legendary Silicon Valley entrepreneur and graduate of Michigan Technological University’s electrical engineering program. Dr. Rekhi made this intriguing statement in an article recently published by SiliconIndia Magazine. In this article, he also compares India with the U.S. in the 70’s and 80’s, when many great start-ups were created.

Lecture in Munich

Next week I’ll visit Munich, labeled as one of most beautiful cities in Europe to present a paper and lecture at the Max Planck’s Munich Intellectual Property Law Center (MIPLC).

The subject of the talk is patent advocacy before the U.S. Supreme Court. My co-author James Conley and I have measured the patent advocacy of various types of firms when they file briefs before the highest court of the land. In the past few years, the Supreme Court has taken a more active role in shaping patent laws and policy. This is in contrast to Congress, which has largely stalled in the area of patent reform.

What are some of the key issues facing patent reform today?

First, there is the issue of first-to-invent vs. first-to-file. The U.S. is one of the few countries that follows the first-to-invent rule. In most other countries, whoever wins the race to the patent office gets the patent (first-to-file rule). According to one senior Patent Office official I spoke with recently, there is a strong chance we might adopt the first-to-file rule. Some believe this would favor large companies over the small inventor.

Another major issue is damages. Patent infringement damages, particularly if the infringement is found to have been willful, can be extremely high. Some advocates, particularly the larger companies, want to limit damages.

Some of the theses issues have been recently addressed by the Supreme Court, the topic of our research.

How to think like an i-preneur

I define an i-preneur as someone who can extract value from intellectual assets. An i-preneur has clear goals and procedures to generate income from their knowledge-based assets.

Understanding how intellectual assets generate wealth is the biggest challenge today’s entrepreneurs face. It is also among the biggest opportunities for wealth creation.

I’ve seen many i-preneurs in action. Here is a brief list of the traits that make them stand out and win in a competitive market:

1. They understand how intellectual assets fit within their big picture strategy.

2. They link up their key intellectual assets with their business model, e.g. licensing, exclusive manufacturing, trademarking and branding.

3. They know how to trade their intellectual assets for valuable resources with critical partners. The best i-preneurs I have met trade their intellectual assets for critical and scarce resources like distribution channels, manufacturing capacity, exclusivity and co-branding opportunities.

4. They understand how to bundle their assets and manage patents, trade secrets, designs, copyrights and trademarks to build a strong overall portfolio.

5. They invest in intellectual assets that have the promise of commercial value.

6. They survey the intellectual landscape to secure a strong position.

7. They understand the ins and outs of the options granted by intellectual rights.

8. They manage their intellectual properties, and never expect others to do so.

9. They realize that intellectual assets are only one piece of a larger business coordination puzzle.

10. They can put a dollar value on their rights.

The Patent Piler

I met Allan Tokuda when I was a Teaching and Research Fellow at Northwestern University. I was helping teach a course on Innovation and Invention in the engineering program. Allan was one of the brighter and more inquisitive students. I knew he had some remarkable qualities when, before class one day, he took out a Rubik’s Cube. He could consistently scramble the puzzle and solve it in less than two minutes.

Allan and I eventually put our minds together to attack the problem of patent claim language and its obfuscating qualities. Allan brought top notch software coding and logical analysis. I brought my knowledge of claims and claim structures and the problems lay people and inventors routinely face when they try to read these sentences. Patent claims, for those new to patents, are the legal definition that describes the property boundaries of a patented invention. Patent claims are what get litigated in court and are located at the very end of the patent document.

The result of our combined efforts is something called the Patent Piler (at this Website). It is an open source project and resource guide that allows anyone to look up a patent by the patent number, search and compare any of that patent claims with other claims in the patent. Here is an image of how it works.

Patent Piler
Patent Piler

The tool, as shown above, highlights the differences between claims in the same patent.

Why is this useful? Oftentimes the most confusing thing about reading patent claims is distinguishing why one claim is different from another. One claim might be different from another due to a difference of just a few words.

The software also does useful things like break down claims by their type, for example methods, products, chemical compounds  or machines. The software also allows you to select independent claims, those claims which stand by themselves and are modified by subsidiary claims, called dependent claims.

Try it out for yourself. If you don’t have a specific patent to analyze, try inputting this curious patent number in the box: 6584450

If you like to code and want to make reading patent claims easier, try improving the source code, it is freely available at this site.

A quick note: for now the software runs great on Firefox, not so great on Internet Explorer.

Use I.P. To Increase Your Company’s Value

In the knowledge economy, two-thirds of a company’s balance sheet assets are comprised of intangible assets. The true value of companies no longer resides in factories or real estate. It resides in the minds of talented employees and in the intellectual property these employees generate, properties like trademarks, trade secrets, designs, know-how, copyrights and patents.

Yet intellectual property is notoriously hard to value. Why? Because unlike most other assets, there is no transparent public market that matches many buyers and sellers. Also, intellectual property is often highly specialized and context-specific, making it hard to develop value models based on similar transactions.

A similarly difficult value determination involves setting a price on your start-up, since there are few cash flows. However, as entrepreneurship guru Tim Berry mentions in his post “5 Concerete Steps to Starting Valuation“, the value of your start-up depends on the “cards you bring to the table.” As Tim mentions, you can improve your hand by owning a defensible product with intellectual property. So, before you shop around for investors, build a portfolio of intellectual property rights and use them as bargaining chips to negotiate value. It can mean the difference between giving up a majority stake in your business vs. giving up only a minority stake.

To learn more about intellectual property valuation methods click here.

Will Google Shut Down Copycat Site?

A student in my Entrepreneurship class recently made me aware of the site: “Let me Google that for you” .com (LMGTFY).

As the name of LMGTFY implies, the site shows you how to search Google if you follow the simple steps listed on the site. I showed the website in class, and one student immediately thought it was a joke. “That’s not so unique” was one comment. “Why not get rid of the middleman and go straight to Google?” another student asked.

As it turns out, the website is dedicated “to all those people that find it more convenient to bother you with their question rather than google it for themselves.” So, if you receive an annoying question, rather than ignore the person or say something nasty, you can send them to LMGTFY and hope they get the message not to bother you again.

The website raises some intellectual property issues, however. I asked the class if they would be willing to invest in this company. The site apparently is trying to raise advertising revenues and claims to have a “steady stream of traffic made up primarily of affluent 30-somethings.” They also claim to have received 1.25 million visitors in February. One student said he would not invest because Google would be able to “shut them down fairly quickly”.

Under what grounds? First, there is the possible trademark issue since the Google trademark and logo are used on the site. Also, the Google website is secured under copyright.

Knock-Off Awards

Can you tell the difference?
Can you tell the difference?

Shame on you. That’s the purpose of Plagarius, a German cereremony that awards the most blatant knock-off  artists. The purpose of the awards is to send a message that stealing innovations is not acceptable.

Having their innovations knocked off in this manner can be an innovator’s worst nightmare. With some money and determination, they can shut down the knock-off artists. This kind of behavior really highlights the law of the market: if you succeed others will imitate.

Click here for the full BusinessWeek story.

Acknowledgment: Thanks to Arvind Natarajan for sending me the link to this story.

What A Business Plan Competition Judge Looks For

Successful entrepreneurs write good business plans. Good business plans win competitions.

I routinely conduct business plan competitions in my entrepreneurship class. As part of the job, I have to recruit savvy and successful entrepreneurs to serve as judges for each competition. Someone who I have often asked to judge is Dan Brown, President of Loggerhead Tools and inventor of award-winning and blockbuster products like the Bionic Wrench. Dan is a true entrepreneur and master of industrial design, patenting, marketing and merchandising.

This year, I want to give my students a leg-up and show them what expert judges look for in a business plan competition. So, naturally, I asked Dan. Here is what he replied.

Dan’s Top 10 Business Plan Presentation Topics:

1. Is there a market opportunity? Does your product or service address an unmet or underserved need and add value to customers?

2. Identify and claim your white space. Have you identified a market segment best suited to establish a strategic foothold for launch?

3. Claim an opportunity gap. Have you realistically identified your competition,  and is there an opportunity for sales based on a value-added strategy?

4. Carefully define the wow-factors. What are the customer-getting differences that add value and compete for the customer’s attention and dollars?

5. Are there opportunities for intellectual property protection? Look at patents, trade names, trade dress and other brand-reinforcing strategies. Do a thorough intellectual property search to be sure there will be no unpleasant surprises after launch.

6. Research several competitive benchmarks and quantify the cost and sales drivers necessary for success in the market.

7.  Have a thorough and realistic development, investment and sales budget, with a realistic cost analysis for development, tooling, and commercialization. Know your costs.

8. Develop a roadmap. Develop an actionable plan that identifies the resources, costs and time required to complete product development and commercialization.  Failure to plan is planning to fail.

9. Generate a simple pro-forma (forward-looking) 3-year sales forecast of investment, cost, and projected revenue with a cash flow analysis. Do you show a return on investment?  Do the numbers support your plan?

10. Assemble a winning management team and advisory board that can succesfully complete the development, commercialization and management of your business.

Kauffman Foundation Lecture

I just finished leading an intellectual property workshop for entrepreneurs here in Houghton, MI. The event was sponsored by the SmartZone, a local high-tech business incubator.

The FastTrac TechVenture Program is a learning program administered by the Kauffman Foundation. Here are some of the topics covered in this program:

  • Determine market opportunities and business strategies and pursue them successfully.
  • Define your target customers.
  • Develop a solid marketing plan.
  • Learn to assess and build a top management team.
  • Calculate the funding needed at each stage of your business and discover the best ways to access it.
  • Learn the importance of protecting your intellectual property through licenses, patents, trademarks, and copyrights.
  • Hone your elevator pitch and investor presentation.

One question was asked, and I think it would be useful to highlight. A participant asked,  “If a small technology entrepreneur has a valuable idea, what can they do to save money and protect their idea from a large company that just takes it without permission?”

Here’s a brief checklist:

1. Make sure you are an expert in your technology space. The more you know what the state of the art is, the less time and money you will spend defining your invention during the patenting process.

2. Understand the nature of your intellectual property rights. If you have a broad and solid patent, you can obtain, or threaten to obtain, a speedy injunction to stop competitors from copying your technology.

3. Patent litigation can be very expensive, with a full patent trial costing millions of dollars. A technology entrepreneur can share the expense of a patent trial with a contingency fee patent litigator. Several law firms specialize in taking these cases if: the inventor has a strong patent, there is a clear case of infringement, and the accused infringer has deep pockets. Here is one law firm that specializes in these cases.

Finding The Hidden Customer

Invention is defined as “discovery, finding” by The Mirriam-Webster Dictionary.

National Public Radio (NPR’s) On the Media reports this story about an inventive print newspaper:

Print newspapers are either dying, or dead. That is the common wisdom. Yet, El Diario, the largest Spanish speaking newspaper, is thriving .The reason why is because it has targeted an audience that mainstream newspapers have largely ignored: immigrants and working-class readers. As the editor of El Diario said in the NPR show:

“There are large pockets of our society that are simply not covered.”

What does this thriving ethnic-media case study teach us?

It teaches the value of filling a void in the marketplace and embracing a niche that cannot be readily served by competitors. Large print newspapers targeted suburban readers who later abandoned print news for free online media. Filling an under-served  niche nimbly is something that large organizations often fail to do, leaving room for entrepreneurial firms like El Diario.

The fragmentation and localization of markets is happening all around us. It happened in the music industry, as listeners continually migrate to online communities. It has also recently occurred in finance, as people migrate back to their local credit unions and micro-loan sites to obtain financing no longer provided by big banks.

If you are an entrepreneur, there is no better time to capitalize on this growing go local movement.