2014 IP for Startups by On Lu
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This document provides information from a presentation by On Lu of Novak Druce Connolly Bove + Quigg LLP on intellectual property strategies for startups. It discusses why IP protection is important for startups, including protecting innovations, deterring infringement, and creating business assets. While patents are commonly pursued, the document notes trademarks can be the most significant part of early-stage IP portfolios. It provides examples of companies generating revenue solely from patent portfolios and stresses the importance of clearance searches and developing a cohesive IP strategy to attract investors.
2014 IP for Startups by On Lu
- 1. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© INTELLECTUAL PROPERTY redefined© NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP INTELLECTUAL PROPERTY AND TECHNOLOGY LAW BOSTON | HOUSTON | LOS ANGELES | SAN FRANCISCO | SILICON VALLEY | WASHINGTON DC| WEST PALM BEACH | WILMINGTON IP FOR STARTUPS: 7 Bullets: Enhance. Protect. Compete Presented by On Lu
- 2. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Startups are most often the driving force behind new products, brands, and creative designs that appear daily on the market. Question 1: T/F
- 3. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Why You Need IP • Unfortunately, innovation is not always fully utilized many startups are not aware of the IP system or the protection it provides for their inventions, brands, and designs. • If left unprotected a good invention may be lost to larger competitors that are in a better position to commercialize the product at a more affordable price. • Original creator is left with no financial benefit or reward. • Strategic protection of a company's IP is critical not only to deter infringement, but also to turn ideas into business assets with real market value. 3
- 4. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Why You Need IP 4 Source: Stuart J. H. Graham, Robert P. Merges, Pam Samuelson, & Ted Sichelman, “High Technology Entrepreneurs and The Patent System: Results of the 2008 Berkeley Patent Survey”
- 5. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© I don’t need a product or service. I can generate revenue with only my IP. Question 2: T/F
- 6. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© No Tangible Goods Needed • Generate revenue outside normal lines of business. • Case Study: Dr. Gary K. Michelson – American board certified orthopedic spinal surgeon. – 950+ issued or pending patents worldwide (including 250+ in USA) on instruments, methods and devices for advances in spinal surgery. – Sold portfolio to Medtronic in 2005 for over $1B (sending him onto Forbes 400 list). 6
- 7. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© No Tangible Goods Needed • Lots of interest in buying IP. Many business don’t have funding or time for R&D and therefore outsource by purchasing technology – like yours. – Favored priority date. – Apple buys numerous IP that covers many products in iTunes and OS. • Case Study: Rice Business Plan Competition @ Rice University – U. Cambridge team presented patent portfolio and strategy on coding to investors. – Didn’t finish presentation since portfolio purchased on the spot! • Case Study: Taiwan Manufacturer of Notebooks and Servers – 3rd in revenue worldwide; 11th in patent portfolio. 7
- 8. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Cost is the most common reason companies don’t invest in patents. Question 3: T/F
- 9. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Why Not Patents? 9 Source: Stuart J. H. Graham, Robert P. Merges, Pam Samuelson, & Ted Sichelman, “High Technology Entrepreneurs and The Patent System: Results of the 2008 Berkeley Patent Survey”
- 10. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Why Not Patents? • How much for a patent? $7K -- $15K on patent application • If the idea is worth patenting it’s worth multiples of the costs of patenting. • “Typically, even the dumbest ideas sell for $30K.” – 2012 median price paid for issued US patents = US $221K. – 2012 average price paid = US $374K. 10
- 11. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Why Not Patents? 11 $- $100,000.00 $200,000.00 $300,000.00 $400,000.00 $500,000.00 $600,000.00 $700,000.00 $800,000.00 Novell Nortel Motorola Kodak Anon. Startup Client Value per Patent
- 12. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Why Not Patents? • Need early value patents? Consider expedited prosecution – Track One Examination 1 year – Accelerated Examination DIY – Patent Prosecution Highway (PPH) go global • Describe invention broadly in patent application but start with narrow claims to speed process to issuance. Then follow with broader claims via continuation applications. • Keep family members pending. Failure to file continuations termination of family line. • Build portfolio, not stand alone patents. – Case Study: Thule 12
- 13. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Why Not Patents? 13
- 14. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Why Not Patents? 14
- 15. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© If you have NO IP strategy, your chance of securing funding from an investor is about 0. Question 4: T/F
- 16. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© IP Strategy • Never seen startup get funding without thoughtful IP strategy. – Exception: Ok NOT to have IP portfolio if… • It’s a thoughtful decision vetted by IP counsel; or • Investor will fund patent portfolio. • IP is often the only ‘real’ asset pre-revenue and early stage that companies own. • IP = investment to increase attractiveness to sophisticated investors. – Securing market place – Preventing competition – Creating hedge on capital 16
- 17. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© IP Strategy • What patents communicate to your investor: – Provisional Patent • More than just an idea. • You understand the IP implications of your business and have invested time and money to protect your innovation. – Issued Patent • Solid stake is in the ground that proves innovation. • If potential competitors exist, they are obviously not easy to find, and/or may be behind the current inventor and therefore not innovators. 17
- 18. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Patents can be positioned as insurance to investors. Question 5: T/F
- 19. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Risk Protection • 9/10 of start-ups fail. • Patents = insurance for capital investment • How? Patent is an asset, and like any other assets, can liquidated if the business fails. 19
- 20. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Risk Protection • Case Study: Online Gaming App – NDQ guided patent prosecution strategy. – Company failed to meet investor milestones, and funding was cut. – Investor sought to acquire valuable patents and purchased startup. – Sale of IP assets returned slight assets to investors. • Case Study: Social Media App – Technology involves identify non-intuitive connections between users on social media platform. – Received patent on how operating system conserves computer resources when interacting with media content. – Company failed due to competition from Facebook, Instagram, etc. – Currently selling patent to auctioneer or NPE to recoup investment. 20
- 21. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Patents make up the most significant part of the IP portfolios of start-ups that are funded. Question 6: T/F
- 22. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Branding • 15% have patents; 15% have copyrights; BUT 33% have trademarks. • Yesterday: Top U.S. Exports = defense, entertainment, information technology • Today: Top U.S. Export = branding 22
- 23. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Branding Top Ten Brands of 2013 (Interbrand) 23 Rank Brand Country Value ($Billon) 1 Apple USA $98.32 2 Google USA $98.3 3 Coca-Cola USA $79.2 4 IBM USA $78.8 5 Microsoft USA $59.5 6 GE USA $46.9 7 McDonalds USA $42.0 8 Samsung S. Korea $39.6 9 Intel USA $37.3 10 Toyota Japan $35.7
- 24. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Branding • Of the Top 30 only 9 are non-US. 24 Rank 11-20 Brand Rank 21-30 Brand 11 Mercedes-Benz 21 H&M 12 BMW 22 Pepsi 13 Cisco 23 American Express 14 Disney 24 Nike 15 HP 25 SAP 16 Gillette 26 IKEA 17 Louis Vuitton 27 UPS 18 Oracle 28 eBay 19 Amazon 29 Pampers 20 Honda 30 Kellogg’s
- 25. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© • Traditional marks: words, logos, slogans – The Google logo – FACEBOOK – Just Do It • Non-Traditional Marks – Coca Cola bottle – Levi’s Arcuate stitching or its Red Tab – Tiffany blue – The Intel Sound Mark – McDonald’s arches • Trends – Motion marks in technology and film industries – Scents – Fluid marks 25 Branding
- 26. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© • Fluid Marks 26 Branding
- 27. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© In 5 out of 10 cases, someone else has your trademark or name. Question 7: T/F
- 28. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage©28 Protectable Marks Stronger Weaker 1. Arbitrary or Fanciful Marks 2. Suggestive Marks Terms You Cannot Protect 4. Generic or Common Names Clearance 3. Descriptive Marks
- 29. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Clearance • If you’re going to use a trademark make sure it’s CLEAR! – Why? Embarrassment. Cost to correct. Indemnification of licensees • Case Study: Proview v. Apple • Apple paid $60M to Proview in China for “iPad” • Case Study: Intel SkinnyBook – Whenever there is a new product. Nail down marks in 20-30 countries before launch – Intel bong, Intel Inside logo, Intel Ultrabook need to clear names before naming product. 29
- 30. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Clearance Case Study: Dexas v. Tung Yung 30
- 31. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© Clearance Case Study: Dexas v. Tung Yung • Jury Trial in Northern District of Texas • Chinese company settled patent suit but sued over trademark use. – Plaintiff: Dexas – Defendant: Tung Yung International (TYI) • Case was fight over shelf space at Walmart. • Plaintiff sought $MM for $200K in sales, and would not settle. • Jury composition, venue & verdict 31
- 32. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© NDQ – FIRM PROFILE Smarter, faster, and more cost efficient than traditional firms. • 5th largest IP firm in the USA. • #1 Patent Re-exam + IPR firm in the USA; success rate is 85-90%. • Named a “Top 20” IP firm by The National Law Journal. • 150+ lawyers + legal professionals Over 90% hold a technical degree 40% having an advanced degree 100+ professionals registered with USPTO 70+ lawyers in litigation practice; 30 who have been 1st or 2nd chair 14 hold a Ph.D. More M.B.A.s than any other law firm in the USA • 8 offices – San Francisco, LA, Silicon Valley, Washington DC, Boston, Houston, West Palm Beach, and Wilmington. Coming soon: Philadelphia & San Diego. • 20+ years of IP litigation experience in the ITC, federal courts, and PTAB. 32
- 33. NOVAK DRUCE CONNOLLY BOVE + QUIGG LLP | ready to engage© BOSTON 100 Cambridge Street Twenty-First Floor Boston, MA 02114 Phone: 617.367.4600 HOUSTON 1000 Louisiana Street Fifty-Third Floor Houston, TX77002 Phone: 713.517.3400 LOS ANGELES 333 South Grand Avenue Twenty-Third Floor Los Angeles, CA 90071 Phone: 213.787.2500 SAN FRANCISCO 555 Mission Street Thirty-Fourth Floor San Francisco, CA 94105 Phone: 415.814.6161 SILICON VALLEY 21771 Stevens Creek Blvd. First Floor Cupertino, CA 95014 Phone: 408.414.7330 WASHINGTON D.C. 1875 Eye Street, N.W. Eleventh Floor Washington, DC 20006 Phone: 202.331.7111 WEST PALM BEACH 525 Okeechobee Blvd. Fifteenth Floor West Palm Beach, FL 33401 Phone: 561.847.7800 WILMINGTON 1007 North Orange Street Ninth Floor Wilmington, DE 19801 Phone: 302.658.9141 www.novakdruce.com THANK YOU!