2014 IP for Startups by On Lu

Startups are most often the driving force
behind new products, brands, and creative
designs that appear daily on the market.
Question 1: T/F

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

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”

I don’t need a product or service. I can
generate revenue with only my IP.
Question 2: T/F

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

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

Cost is the most common reason companies
don’t invest in patents.
Question 3: T/F

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”

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

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

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

Why Not Patents?
13

Why Not Patents?
14

If you have NO IP strategy, your chance of
securing funding from an investor is about 0.
Question 4: T/F

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

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

Patents can be positioned as insurance to
investors.
Question 5: T/F

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

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

Patents make up the most significant part of
the IP portfolios of start-ups that are funded.
Question 6: T/F

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

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

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

• 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

• Fluid Marks
26
Branding

In 5 out of 10 cases, someone else has your
trademark or name.
Question 7: T/F

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

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

Clearance
Case Study: Dexas v. Tung Yung
30

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

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

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!

2014 IP for Startups by On Lu

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