For those who haven't noticed this tip yet, if you're into entrepreneurship, you really really *really* need to get into the podcasts from the Entrepreneurial Thought Leader series run at Stanford each week during session.
You can subscribe to the podcast via http://www.stanford.edu/group/edcorner/uploads/podcast/EducatorsCorner.xml. Do it. Now. Listen to it when walking with the dog. Or at the gym. Or on the train, wishing you weren't on the train to work for someone else and that your startup was a bit further down the track. Your won't remember the music you're listening to now in 10 years. There's every chance you'll remember something you hear on these. I've found they even cure hangovers. Seriously. Anyway, back to the topic of ideas and protection. Steve Blank, an entrepreneur I have tremendous respect for and was lucky to meet briefly when I was at this exact event a few weeks ago in Stanford - God I felt old gatecrashing this class - had some interesting comments to make about this in his recent lecture, which served as a wrap up for the semester's speakers, including a wide range of people from the CTO of Sun, former Chairman of Intel, Eric Dries from StartupLessonsLearned and Robin Li, founder of Baidu, and all the way to Chamillionaire. You can listen to it from http://ecorner.stanford.edu/podcasts.html - Steve's is the most recent podcast for the next few days until they do a special on their entrepreneurship challenge. At around the 55:30 mark, a student asked a question, positing that the successful people/companies they'd had present to them (Baidu?) had "stolen" something, and asked Steve if he had any moral regrets (he has founded or been on the initial team of 8 companies over the last 28 years) from his own career. Steve's response was pretty instructive to this debate in my view: it adds weight to one of the early debates on this list where Mike from Atlassian made in his case that ideas aren't what matters: execution is what matters. For two guys in a garage to protect their idea means for them to execute and then build a strategy for protecting their business and/or maximising their valuation in the context of a trade sale (particularly one with multiple suitors) and in this context patents and other tools can be valuable. But in my view, for most tech products (the non R&D heavy ones that characterise the web world we live in), if you spend time writing patents when you could be talking to (potential) customers, validating your market, and developing a prototype, or cutting code, then you're probably doing it wrong. Just me $0.02... -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Another Place Sent: Monday, 16 November 2009 11:35 PM To: Silicon Beach Australia Subject: [SiliconBeach] Re: Was: New business models to protect inventiveness Thanks for your thoughts... On Nov 16, 11:20 am, Sriram Panyam <[email protected]> wrote: > and more thoughts folks... > > On Mon, Nov 16, 2009 at 8:12 AM, Another Place <[email protected]>wrote: > > > > > Some further thoughts: > > > "How is it possible for a small business to protect their ideas? > > Under > > a small business I mean a really small one: two guys in a garage or > > so. > > I wish I was wrong but I think that this is not possible. A small > > business doesn't have enough resources to solve this problem." > > > There are countless stories (whether or not you believe them) about > > two guys in a garage with a good idea, getting it off the ground and > > making lots of money. Somewhere along the line, they must have > > protected that idea and the execution of it. Being small is not about > > being incapacitated - it is about being lean and efficient. > > Actually I am not sure this is as black and white as this... Now in theory > nothing is impossible... So technically for a two man team to protect their > ideas I see the following costs (please add to this or correct me on this): > > * Setting up a company - $800 > * Patenting costs - Anywhere between $5K-20K per patent. > * Opportunity cost of the founders' salary > The costs of setting up a company and opportunity costs shouldn't be counted towards the cost of protecting ideas. They are common to other parts of setting up an IT start up and not costs borne purely for the purpose of getting intellectual property (patent) protection. I agree - the rest is not that B&W. The costs for patenting can be in the order of what you have quoted but this does not mean an IT start up has to shell out this amount upfront. The cost of patenting is like the cost of any other business asset - the cost depends on what you need, how "big" it is (i.e. what you try to cover in your patent), what countries you decide to apply for protection, how important it is to your start up. The $20K might be the costs payable over four years. If you decide to limit protection to Australia or get an innovation patent, the costs could be more in the $10K ballpark - and payable over a 12 month period so not in one go. This may still be expensive but it depends what you want a patent for - maybe you want the patent for marketing purposes or so you can seek VC funding. A patent gives a VC comfort that there is substance in your ideas - because the patent document has to include a full description of the invention. It also gives comfort that their investment is potentially protected so they aren't going to invest just to find that anyone can copy your invention. If the patent covers something that is absolutely fundamental to your business and it is critically important to you to have the ability to lock out other people, then you have to assess whether the investment of say $10K to $20K will give you a good return. Yes, $10K to $20K is a lot but if you compare it to other business costs (e.g. think about how much money you would spend on a couple of mobile phone plans over four years), it's actually not huge. > Now out of naivety I may be way underestimating the numbers. So be it. Now > I see 3 stages of first time entrepreneurs (indulging in small businesses): > > a. Two/Three guys (or girls) in a garage, your primary strengths are > technology > (or the product that you are offering whether it is technical or > otherwise)... > Getting council on non-core parts of your venture is going to cost > you > (hint hint legal)... > b. Alternatively if you are someone in the later stage of life, ie with > family and > mortgage, while the costs may not be that bad (being optimistic here > and hey > easier to get a loan), the risks associated with them are way too > high. > c. Which leaves the third group - people who have enough mullah > (inheritance > or via accumulating from years of saving) starting the businesses... > > Is it me or are the most innovative group in the above list also the most > price sensitive? Imaging working for months on a prototype just to realise > it is covered by the vaguest of patents by either a patent troll or a big > company? And similarly imagine investing upfront on one or more patents > only to realise the same. Again all this before any revenues start coming > in. > Yes it is a risk if you build a prototype only to find that someone else had patented it before you. However, the whole idea of patent databases is to put inventions on the public record. The reality is that some patent areas are quite 'crowded' in that there are quite a lot of patents sitting around certain technologies - all co-existing. It may be that you have to rethink parts of your invention and rebuild part of prototype to avoid infringing the patent. Because the patents are there to be read (although I have to qualify this because they can't be publicly viewed initially), you can work out what you need to do differently. Your total investment in a prototype is not lost. The same applies if you invest in your own patents - finding out that someone else has done something similar or almost identical means you have to work out a way to do it differently. Often working out that way is inventive and that is what your patent should cover. My view is: all is not lost in the scenarios you have painted and it is better to find out about the competition before you get to market. It's all part of what you need to establish competitive advantage. (Of course, if your invention is only covered by the "vaguest" of patents then you would have to ask: is it truly covered? If someone is going to assert infringement, it's up to them to make their case - at their cost) > "My current approach to the problem of protecting ideas: "do not do > > > > > it" (well, almost). It is better to fail because someone "steals" > > "your" idea than to fail because you spend time and money trying to > > protect it. The net result is the same but the first way is much > > quicker :) " > > > I do not agree with your approach - it is totally defeatist. It is > > like dying at birth. Unless you give something a go, you can NEVER > > succeed. Sure, you may get burned along the way but hopefully you are > > smart, brave and will learn along the way. Maybe you will lose some > > money - maybe you won't. If you are tight with your resources and > > prepared to cut your losses if necessary, then you hopefully will not > > lose too much. If you are thinking ahead of the game (because you > > truly have a great idea), then the people copying you will always be > > one step behind. > > > It is a given that execution is the most important thing in a startup... > > in an ideal world id agree that a frivolous IP related lawsuits would be > thrown out... and in an ideal world the capital backing an enttity would > not affect the outcome of a lawsuit... but in reality how many weeks (or > days) can a small business/startup withstand before being burried in legal > fees? Yes if you have a truly great idea you *should* think ahead of the > game.. but again how common is that? i hear you saying "if you cannot or do > not think ahead and proactively you have no reason being in business..." > absolutely... but i think argument was about vague small businesses > spending/wasting energy staving of patents and lawsuits grounded on > intimidation rather than pure merit or marketing strategy or technical > innovation (all of which if you dont have you deserve to die, no > arguments)... > > "Patents? In the majority of cases they are for big companies like > > > > > arms > > race is for big countries. A patent is just a piece of paper and it > > protects nothing until a court decision is made. I think a small > > company is better off spending their very limited resources on > > something else but drafting patents and defending them later in the > > court (which seems hopeless). " > > > Patents are not like the arms race. Maybe more like real estate but > > actually not as expensive as the typical median house price in a major > > capital city. A land title is also just a piece of paper. You also > > have to spend money protecting and maintaining your investment there. > > It may not be cheap but if it houses your dreams then it can change > > your life and you will benefit from it not only financially. Running a > > business is also expensive but is it better not to do it? > > > Actually patents are not "that" far from being an arms race... drafting a > > patent costs a big company "small change"... very very low downside... huge > rewards to crush a potential competitor (again based on vagueness rather > than genuine innovation - did i send that application by microsoft to patent > the "sudo" command?)... atleast one aspect of the arms race resonates with > patents - the cold war and a standoff! you might find this article on the > game theory behind patent litigation interesting: > > http://semiconductorlawblog.com/blog/?p=21 Thanks for the article. I am interested in game theory and patenting generally, and I agree with the conclusion: "a product or services revenue company should seriously consider all reasonable alternatives before launching into patent litigation even if its initial decision is to make a small scale assertion with the hope that litigation will be contained. The odds are high that litigation will escalate significantly." HOWEVER (there's always a "but")...the conclusion is not particularly new or enlightening. No reputable IP lawyer/patent attorney will advise a client to litigate without first considering all reasonable alternatives. In fact (in Australia anyway) you can't get embroiled in litigation before having had some commercial discussions first. The courts generally disapprove if there hasn't been some attempts at settling before getting to court. It is true that big companies might flex their muscle in all sorts of ways but you won't find yourself unexpectedly in court (unless you have automatically "filed" letters from their lawyers in the trash or otherwise ignored them). > as for realestate.. with realestate, the chances of me being challenged to > my right to my property are very very very miniscule (yes a big corporation > could lobby that my neighbourhood be appropriated for the "common good" but > not with out a public stink)... > > "Non disclosure agreements? It is a mater of a goodwill of a big> company to > honor the agreement and there are many ways to workaround > > NDA. Again, it is a matter of resources if one wants to draft an NDA > > and then to ask a big company to sign it. They may even refuse to > > talk > > to you if you start from NDA. " > > > Sure, NDAs are not perfect but the cost of an NDA is minimal and there > > are numerous NDAs available out there at little or no cost. I see it > > like crossing at the lights instead of jaywalking - you get additional > > protection for relatively little effort. > > > that is assuming a big entity does not throw you out or not refuse to see > > you because you are "demanding" an NDA... but yeah sure, an NDA is great > for little effort if you can pull it off but really depends on who has more > leverage right? and yes the argument about "if you dont have leverage dont > be in business" can also be applied... > > > > > > > "Here is a more specific question along same lines: > > How would you sell a product to a big company? What would stop them > > from implementing a similar thing by themselves or outsource it to > > their partners? > > The only one thing that helps here is when the idea is well executed. > > But, by definition of a small company, an idea can't be very well > > executed (no resources)." > > > We would all love to have unlimited resources but I totally disagree > > that "by definition" a small company cannot execute an idea well. > > There are numerous historical examples that true innovation often > > springs out of difficult economic times - business (big and small) is > > forced to stretch resources further and to think through ways to do > > that. There are plenty of examples also where big business (and dare I > > say it, public service) wastes plenty of resources executing ideas > > poorly. > > > you are right in this case... while greater resources do help ... history > > has shown that usually it is a small company that is nimble and flexible out > performs and out maneuvers a larger corporation... and again historically > bigger entities somehow seem to be, well fatter, slower, less efficient and > more bureaucratic... and ofcourse when pushsed to a corner a smaller > entity has to fight for its life but these are all psychological arguments > but at the end of the day lack of resources does emphasize or even demand > leanness and flexibility... > > > This might sound a bit like a team-building rave but the Australian > > economy (like the rest of the world) is actually run on SMALL and > > MICRO business (i.e. two people at home or in the garage). > > > again are we talking about technical startups or ma/pa > > restaurants/laundries/fish-chips etc? I am not actually sure of the exact figures but small business makes up 90% of business and that includes people working out of their loungerooms as well as ma/pa and fish and chips. My point is that small business, including technical start ups, are significant contributors to the economy and very capable of executing ideas well. Maybe ma/pa restaurants, laundries and takeaway businesses have the advantage of cash flow over technical start ups but they have significant cost disadvantages in start up and running costs - you can't legally operate fish and chips or restaurants out of a garage or your lounge room, you have to buy and prepare stock, you may have considerable costs for consumables and perishables...I don't see technical startups as disadvantaged just because they might have expenditure on IP. The costs of IP for technical start ups is a fraction of the cost of retail space or stock. I also know of innovative takeaway and other non-technical start ups that have spent on IP, in addition to their bigger cost base. So technical start ups are not unique in their IP needs/exposure. Thanks for your thoughts and the articles Cheers > > cheers > Sri > > > > > ... > > > On Nov 16, 12:43 am, Dmitri <[email protected]> wrote: > > > Hi, > > > > Here is a general question I would like to ask after reading the > > > discussion on "protecting inventiveness": > > > > How is it possible for a small business to protect their ideas? Under > > > a small business I mean a really small one: two guys in a garage or > > > so. > > > > I wish I was wrong but I think that this is not possible. A small > > > business doesn't have enough resources to solve this problem. > > > > My current approach to the problem of protecting ideas: "do not do > > > it" (well, almost). It is better to fail because someone "steals" > > > "your" idea than to fail because you spend time and money trying to > > > protect it. The net result is the same but the first way is much > > > quicker :) > > > > Patents? In the majority of cases they are for big companies like arms > > > race is for big countries. A patent is just a piece of paper and it > > > protects nothing until a court decision is made. I think a small > > > company is better off spending their very limited resources on > > > something else but drafting patents and defending them later in the > > > court (which seems hopeless). > > > > Non disclosure agreements? It is a mater of a goodwill of a big > > > company to honor the agreement and there are many ways to > > ... > > read more ยป --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Silicon Beach Australia mailing list. Guidelines on discussion: http://tr.im/ujKF No lurkers! 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