How to Draft an IP Strategy
Consistently the weakest part of investor pitches I see deals with intellectual property strategy. An ip strategy is NOT a list of patents and patent applications. Even at the Series A stage, most investors expect to see (and SHOULD see) a proactive plan that accomplishes two things: 1. ensures that your company can use its technology in its business without fear of infringement, and 2. shows how your company may generate royalty revenue from licensing its ip. It is not essential that you have applications or patents in place prior to financing, as long as you have an overall pitch about how you will proceed.
As general counsel of a startup, I got tasked with developing this part of our story. Later, as a VC, I got to review a strategy from one of our portfolio companies in California that for me remains the gold standard of ip strategies. If it had been a man, I would have taken it home and made it breakfast the next day. (Well, taken it home and then driven it to Starbucks the next day for a scone and a vente bold with an espresso shot). Based on these, I've developed my own flashpoints for shaping an ip strategy:
1. Summarize your company's inventions, products in development and planned development. Identify which areas are likley to yield future inventions.
2. Provide your own assessment of the quality of these inventions/patents. A strong patent not only helps defend your company's market position, but also provides you with leverage to extract licenses for other strong ip from companies who infringe your patents. For inventions that have not yet been patented, assess and identify those which are likely to be strong future patents. As a rule of thumb, these generally are inventions from products with longer life cycles and those which (in whole or in part) are likely to continue to be modified into new products.
3. Identify defects in patents filed, and any prior art issues that may be lurking. Defects in patent applications are often the result of using the cheapest agent, instead of a lawyer/patent agent who is an expert in yoru space and can draft correctly.
4. Explain your competitors' patent situations- for example, the relative strength of their portfolio, what trends you see in their filings or expected filings (aka "whitepaper roulette"). A good patent agent will insist that you do some assessment here, so that he/she may draft claims with a view to capturing potential infringers. If there are prior art or overlapping claim issues, a good agent can also draft a work around so that your patent works.
5. Add some blue sky to your strategy story; give examples of how your strongest patents may be licensed for uses outside of your core business' market.
6. End with a basic plan for policing and enforcing your patents and other ip.
Having a strategy is a critical part of your business plan at any stage. It shows the breadth and quality of your long-term thinking about your company and its place in the market. Stop hiding that light under a bushel!
As general counsel of a startup, I got tasked with developing this part of our story. Later, as a VC, I got to review a strategy from one of our portfolio companies in California that for me remains the gold standard of ip strategies. If it had been a man, I would have taken it home and made it breakfast the next day. (Well, taken it home and then driven it to Starbucks the next day for a scone and a vente bold with an espresso shot). Based on these, I've developed my own flashpoints for shaping an ip strategy:
1. Summarize your company's inventions, products in development and planned development. Identify which areas are likley to yield future inventions.
2. Provide your own assessment of the quality of these inventions/patents. A strong patent not only helps defend your company's market position, but also provides you with leverage to extract licenses for other strong ip from companies who infringe your patents. For inventions that have not yet been patented, assess and identify those which are likely to be strong future patents. As a rule of thumb, these generally are inventions from products with longer life cycles and those which (in whole or in part) are likely to continue to be modified into new products.
3. Identify defects in patents filed, and any prior art issues that may be lurking. Defects in patent applications are often the result of using the cheapest agent, instead of a lawyer/patent agent who is an expert in yoru space and can draft correctly.
4. Explain your competitors' patent situations- for example, the relative strength of their portfolio, what trends you see in their filings or expected filings (aka "whitepaper roulette"). A good patent agent will insist that you do some assessment here, so that he/she may draft claims with a view to capturing potential infringers. If there are prior art or overlapping claim issues, a good agent can also draft a work around so that your patent works.
5. Add some blue sky to your strategy story; give examples of how your strongest patents may be licensed for uses outside of your core business' market.
6. End with a basic plan for policing and enforcing your patents and other ip.
Having a strategy is a critical part of your business plan at any stage. It shows the breadth and quality of your long-term thinking about your company and its place in the market. Stop hiding that light under a bushel!
posted by Suzanne Dingwall Williams at
10:21 PM
5 Comments:
Good advice as always Suzanne. I don't think most entrepreneurs will take the time to put this stuff in writing. Especially the ones who are being courted by multiple investors. The best approach may be to address these topics in a discussion with the entrepreneur.
I agree - you have to do the homework but you don't necessarily have to have the tactics mapped out in writing. If you're one of the first entrants in a hot new space, you may even get away with less, but that window closes pretty quickly. Once a lot of VC money has placed their bets on a space, you will need a compelling proposition - including IP - to explain why it makes sense to dabble further. I thnk you're seeing this now in Web 2.0.
Your post is a good one, but needs to recognise the breadth of the topic. As for being *good*, it is useful to note the views on IP strategy of European senior executives as recorded in our Flash featuring graphics from the Economist Intelligence Unit's late 2006 white paper and survey: http://www.dilanchian.com.au/content/view/205/36/
As to the need for *breadth*, see "The joy of IP strategy - top 10 questions" at http://www.dilanchian.com.au/content/view/129/36/
See? This is why we Canadians always listen to Aussies. GO check out Noric's site - its' got good stuff on it. I agree that my post is very high level - I'm not about to discuss the merits of blocking patents on a sector by sector basis. But what I'm trying to do is frame the thinking that should be part of any startup sales pitch for financing. The items I target are for me the pillars of any ip story I would look to invest in.
A good list, but it seems like more of a to-do list for leveraging a currently existing portfolio of patents.
As a point of discussion, my interpretation of an IP Strategy is a roadmap for the whole process. Which parts of your business you will patent, publish, or keep trade secret. How you will rank inventions and allocate patenting resources (money), and future areas of your business you will spend time inventing" in.
Your list seem like it could apply more to an operating business than an entrepreneur.
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