2. Executive Summary
You almost always need some form of protection
for your intellectual property.
The form of protection that you need (patent,
copyright, trade secret, trademark) varies by the
nature of the property and the business situation.
There are very helpful options (provisional patent
application, copyright, trade secret, trademark) to
delay and reduce the cost of acquiring protections.
3. Disclaimer
The information provided in this presentation is not legal
advice and no attorney-client relationship exists on the basis
of your attendance at this workshop or on the basis of
anything stated herein.
If you want legal advice, contact information is provided at
the end of the presentation to enable you to contact the
presenter and seek to establish an attorney-client
relationship.
Nothing that is said in this presentation is warranted for
accuracy, usefulness, or clear-headed thought.
4. A Quick Road Map
“We’ll talk about the large print. You can read
the small print, later.”
--Unknown Mortgage Bond Broker, 2005
5. Do I need a trademark, patent, and/or copyright?
Trademarks (2 slides)
– A brand (words, names, symbols, devices or images) used with goods or
services to identify their source.
Patents & Trade Secrets (10 slides)
– For the protection of inventions and improvements to existing inventions.
Copyrights (5 slides)
– For the protection of the expression of ideas in literary, artistic, software and
musical works.
Business Case (11 slides)
– Exactly how do I make money on this again?
6. A Quick Map of Intellectual Property:
PATENT/TRADE
SECRETS
IDEAS
FUNCTION
COPYRIGHT
TRADEM
ARK
EXPRESSION IDENTIFICATION
8. What is a Trademark?
Words, devices, symbols or composite of both
–also sounds, smells, colors, buildings, package shapes….
Distinguish your goods or services from others
No requirement to register trademark to be
protectable
–but registration increases protection
Trademark
3 of 6
9. What Rights Does a Trademark Protect?
Protects most precious assets of an enterprise -
its goodwill
Provide quality assurance to customers
Protects against unauthorized use of owner’s
mark
11. What can be patented?
Anything you invented:
– Machine
– Article of manufacture
– Process
– Composition of matter
– Improvement of any of the above
Note: In addition to utility patents, encompassing one of the categories above, patent protection is
available for
– (1) ornamental design of an article of manufacture or
– (2) asexually reproduced plant varieties by design and plant patents.
12. Why would I want a patent?
1. To stop others
- from making, using, or selling my invention (the Honey Bunny)
2. Licensing revenue
- Make money on your innovation, no matter who is selling
3. Marketing
- The product itself, because we all know that “patented” means “better”
- Your company. We’ll talk about valuation later.
13. When do I want to apply for a patent:
Immediately, unless:
– You want to keep it secret
– You never want a foreign patent
Within one year (or else) from:
– Any public use of invention
– Any offer to sell invention
– Any publication describing the invention
Failure to apply for a patent within one year from any of these events
will bar you from ever getting a patent on the invention.
14. The patent tradeoff
Nature of patent
– a complete disclosure of the invention
– a 20-year monopoly
Whether this is a good deal, depends on your
industry
– Pace of change
– Detectability
– Reverse Engineering
15. What to patent
Focus on the key differentiator that builds value for
your company, is likely to be copied by the
competition, and is detectable.
16. The small print (read later): Patents
Patent term
– Starts on issue date
– Ends 20 years from earliest effective filing date
Right to exclude others:
– Making
– Using
– Selling,
– Offering to sell
– Importing
Protection for function & structure
– Prohibits all use, not just copying
– Independent creation is not a defense
– Caveat- A patent does not convey to patentee the right
to practice invention
17. Trade Secrets:
Really must be secret (take steps to suppress theft)
Last forever (Coca-Cola)
Does not prevent reverse-engineering
Must prove the theft itself
18. Tips for protecting trade secrets:
Limit access to technical information on a “need to
know” basis.
Limit physical access to sensitive areas to approved
personnel only.
Institute proper sign out procedures for software,
documents etc.
Label confidential information as “SECRET AND
CONFIDENTIAL”
Require confidentiality agreements, non-disclosure
agreements and licenses for parties with access to
trade secrets.
20. Copyright examples:
Literary works
Motion pictures and other audio visual works
Musical works (including accompanying words)
Sound recordings
Software
Plans and Designs
Semiconductor Masks
21. Requirements for copyright
The work must be original (you wrote it)
The work must be fixed in a tangible medium of
expression (floppy disk, paper, hard disk)
24. Which protection is most appropriate to my business?
Patents
– Pros: Strongest form of protection (protects ideas, not expressions); covers innocent infringers; term is
reasonable (20 years from filing date)
– Cons: Relatively more expensive and time consuming to obtain
Trade Secrets
– Pros: Inexpensive and term can be forever
– Cons: Only protected for so long as secret; some things are not protectable as a trade secret (e.g., visible to all
in product)
Copyrights
– Pros: Relatively inexpensive; copyright term is long (life of author + 70 years)
– Cons: Thin form of protection; infringement only when expression copied.
Trademarks
– Pros: Relatively inexpensive; term so long as used in commerce
– Cons: Non-use, non-enforcement can destroy mark.
– (e.g., Escalator, Linoleum, Kerosene, Cellophane, Thermos, Aspirin, Yo Yo and Bikini)
25. A quick outline on relative costs
Copyright registration is cheap and automatic
– on the order of $1000 for a typical group of registrations
Trademark registration is cheap, but it’s not automatic
– on the order of $1000 for a typical application, and an additional $3000-$5000
in prosecution to achieve registration
Patents are neither cheap nor automatic
– On the order of $10,000-$15,000 for an application, and an additional
$10,000-$25,000 over five years to get the patent to issue
26. What we learn from the relative costs…
Copyright and trademark registrations are “no brainer”
business decisions, if they are appropriate.
But we need to think hard about patents. The costs are
high.
Why would I spend that much money?
28. Why patent?... Access to funding!
According to the 2008 Berkley patent survey of entrepreneurs, 76% of venture backed
entrepreneurs and 67% of all entrepreneurs say patents are
absolutely vital to obtaining funding.
Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1429049##
Link: http://www.nytimes.com/2010/08/06/opinion/06nothhaft.html?_r=1
29. Why patent? … Increase in valuation!
Is there anyone here who would not pay $30,000 for
an asset to be valued at $3M in 5 years?
According to Greenberg (2010), a doubling of
patent application stock is associated with a 22%
increase in startups valuation, which translates to
$2.9M per application.
Link: http://www2.druid.dk/conferences/viewpaper.php?id=500704&cf=44
Greenberg study sampled patenting and venture finance activity of 369 Israeli technology startups that received a total of more than 1000 rounds of financing between 1994 and
2009.
30. You just said $3M in valuation for $30k?
Maybe. It varies wildly.
There are 7,000,000+ United States patents.
Many are junk. But some aren’t.
Gambradella et al. (2008) base their results on the large-scale PatVal European survey, which asks inventors what is
the minimum price for which they would sell the rights to their patent. They find that the distribution of
values is extremely skewed, with the mean patent value equal to 3.4 million
euros (in mid 1990s euros) and the median equal to a tenth
of that.
Link: http://onlinelibrary.wiley.com/doi/10.1057/emr.2008.10/pdf
31. Another patent valuation study ($2.3M)
In Hsu and Ziedonis (2008)'s fixed-effects regression analysis of 813 financing rounds by 269 American
semiconductor firms they found that a doubling of a company's
application stock is associated with a 28% increase
in pre-money valuations which translates to a value
of $2.3 million per patent in 2008 prices.
They also find that the signaling value of patents is
greater in earlier financing rounds.
Link: Hsu, D. H., and R. H. Ziedonis. 2008. "Patents as Quality Signals for Entrepreneurial Ventures". Academy of Management Best Paper Proceedings
32. Yet another patent valuation study
Mann and Sager (2007) examine software firms that received their first financing round
during 1997, 1998 or 1999, count their number of granted patents before December 2004
and relate it to the total investment received by a company before January 2005.
They find that an increase of 1 in the total number
of patents is related to an increase of $2.7m ($3.04
in 2008 prices) in total investment.
Source: Mann, R. J., and T. W. Sager. 2007. "Patents, Venture Capital, and Software Startups". Research Policy 36, 193-208.
33. What happens when you don’t get the patent?
Lower valuation:
Hsu (2004) found that having no patents reduced a
start-up's pre-money valuation by about 17% to
20%.
Source: Hsu, D. H. 2004. What Do Entrepreneurs Pay for Venture Capital Affiliation? Journal of Finance LIX (4), 1805-1844.
34. What happens when you don’t get the patent?
No funding.
Take the case of Stanford Immunologist, Sam Strober, one of the very top people in his field. He
invented a new treatment for Lupus … and launched a start up called Innate Immune. Then he recruited
the former director of clinical research at Genentech Dr. Andrew Pearlman to be the firm CEO. …
Exactly the kind of opportunity that venture capitalists look for and sure enough, Innate Immune soon
had VCs lined up and ready to commit 30 million dollars to develop the drug.
There was only one problem, they couldn’t get a patent. … So the VCs
walked away. I mean what else could they do? Who would invest huge sums of money it
takes to bring a new drug to market without any promise of market exclusivity and a healthy return on
investment that a patent offers? And with no money of course Innate Immune couldn’t hire the scientists
and technicians and marketing administrative staff needed to develop their drug.
Source: http://ipwatchdog.com/2016/01/27/start-up-reality-no-patent-no-funding-no-business-no-jobs/id=14659/
35. An example from MSFT – I don’t represent them.
MSFT has made five times more money from
Android than from Windows Phone 7.
– Microsoft gets $5 for every HTC phone running Android, according
to Citi analyst Walter Pritchard, thanks to a patent settlement with
HTC over intellectual property infringement.
• Link: http://daringfireball.net/linked/2016/05/27/htc-citi
Of course, MSFT also lost $200M on a patent
infringement case in 2009.
– McKool Smith announced a $200m patent infringement verdict
against Microsoft in favour of i4i Inc. The complete verdict amount
also included awards for lost profits and royalties.
• Link: http://daringfireball.net/linked/2016/05/27/htc-citi
38. About Stephen Mason:
Stephen Mason’s practice focuses on patent application preparation and prosecution in
technical areas including semiconductors, microprocessors and memory, testing and
verification, databases and storage, graphics processing, electronic commerce, network
equipment and software, and mobile computing and sensor systems.
From 2006 to 2007, Stephen served as the general counsel of an Internet advertising
company in Austin, Texas. His practice has previously included intellectual property
aspects of merger and acquisition transactions, software licensing agreements and
research contracts.
Stephen began his legal career at Bracewell & Giuliani. Prior to entering law school, Mr.
Mason worked in PBX configuration and competitive intelligence at Nortel Networks in
Richardson, Texas.
Mr. Mason is admitted to practice in Texas and before the United States Patent and
Trademark Office. He received his Bachelor of Science degree in Electrical Engineering
from Texas A&M University and his Juris Doctor degree from Baylor University. Stephen
has served as president of both the Texas Aggie Bar Association and the Capital City A&M
Club.
