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Intellectual Property 101 for Start-Ups

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Rob McInnes, one of Australia's leading patent and technology licensing lawyers gives an overview of IP basics and recent developments aimed at startups.

This was presented in a recent workshop for the INCUBATE startups.

Published in: Technology, Business
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Intellectual Property 101 for Start-Ups

  1. 1. IP 101 for Start-Ups Rob McInnes
  2. 2. 2 Today’s Content   Why does IP matter?   IP basics   IP in start-ups   (If time permits) IP management © DibbsBarker
  3. 3. 3 Why Does it Matter?   IP is how competitive advantage is sustained in the knowledge economy   Other barriers are falling away as trade is freed, labour is more mobile, capital is less rationed and customers have more access to information   IP is a tradeable asset in its own right   As businesses move away from in-house R&D towards outsourcing and in-licensing   As “virtual integration” increases   “NPEs” exist solely to enforce patents   Defensive patent pools   Patent auctions/patent licences as tradeable instruments © DibbsBarker
  4. 4. 4 IP is Big Money   Apple/Microsoft/RIM paid $4.5Bn for Nortel’s 17,000 patents   Google paying $12.5Bn for Motorola, with the stated aim of expanding its patent portfolio   Apple brand valued at $185 Bn   IP-based transactions were worth >US$18 billion in 2011-12, compared to US$450 million in 2010-11 (IAM Magazine) © DibbsBarker
  5. 5. 5 What’s Special About IP?   Capital markets and investment analysts increasingly focus on intellectual assets   80% of the value of the S&P 500 companies (not just high- tech companies) was attributed to intangibles in 2005, up from 17% in 1975   There’s more IP around   < 1million patent applications in 1985 to > 2 million in 2010   Patents cover more than they did 20 years ago   But the pendulum is swinging back © DibbsBarker
  6. 6. 6 How Does IP Add and Create Value?   Inhibits competition against the company’s existing products   Helps extract value from technologies not used in products sold directly   Allows technologies to be acquired with some assurance of value   Codifies the company’s knowledge both internally and to investors © DibbsBarker
  7. 7. 7© DibbsBarker Human Capital - expertise - know-how - skills - creativity Intellectual Capital - processes - innovations - methodologies Physical Capital Intellectual Property IP Within an Enterprise
  8. 8. 8 IP Rights - Registered   Patents for inventions   Utility Models etc. for lower level innovations   Registered Designs for 3-D articles   Registered Trade Marks for brands & logos © DibbsBarker
  9. 9. 9 IP Rights - Unregistered   Copyright for literary & artistic works (including software)   Confidential Information & Know How   Goodwill & Reputation © DibbsBarker
  10. 10. 10 What is a Patent?   Reward for an inventive contribution to society’s knowledge   Exclusive (20 year) monopoly   Protection for a technical result, not an abstract idea   Not a positive right to market (subject to law and the IP rights of others) © DibbsBarker
  11. 11. 11 What Can Be Patented?   An invention   Not being excluded subject matter   That is new   And that involves an inventive step compared with the prior art © DibbsBarker
  12. 12. 12 What are Patents Granted For?   Routinely:   Machines, devices, hardware   Processes, techniques, methods   Materials, chemicals, drugs, alloys   Cell lines   Not Always:   Medical treatments   Yes in AU, US   No in EP, NZ, JP   Software   Not “per se” in EP, NZ   E-commerce & business methods   Pendulum has swung against   Gene sequences   Higher animals
  13. 13. 13 Typical Steps in Patenting   Awareness of IP landscape   Is it an invention? Is it novel and non-obvious?   File provisional application   Can order a search to get early indication of problems   At P+12 months file a PCT application (multi-country)   Will be examined and an opinion issued   At P+18 months application will be published   At P+30 months need to file individual country or regional applications   Not unusual to take 5-7 years to grant © DibbsBarker
  14. 14. 14 Copyright   Protection against copying (not a monopoly)   Long term protection   Automatic protection (optional registration in USA)   Does not protect concept or abstract idea   Infringed by taking a ‘substantial part’ © DibbsBarker
  15. 15. 15 Confidential Information   Must in fact be confidential   Can the information be derived/reverse-engineered?   Confidentiality should be asserted   Should be documented   Of value but not a monopoly   Value eroded by independent discovery   Not really ‘property’, so care with licensing and assignment language   A licence may permit use but not disclosure © DibbsBarker
  16. 16. 16 Trademarks / Brands   A “sign” can include words, logos, shapes, sounds, even smells   Must be distinctive, or capable of becoming so   Choose a protectable brand   Register it   Beware DIY registration   Control its use © DibbsBarker
  17. 17. 17 IP in Start-Ups   Any professional investor will carry out due diligence on IP   Full IP due diligence on a mature company will be a six-figure job that takes weeks   Any successful tech company will be subjected to full IP due diligence whenever an early investor has a chance to exit   How do we avoid creating issues that will not pass IP due diligence?
  18. 18. 18 Key Questions   Identify the key technologies of the company and its key IP rights.   Do the key technologies fall within the key IP rights? Will that continue to be the case?   Does the company actually own its IP? Identify in- licences that may be relevant.   Is it contractually free to exploit its IP as desired? (Having regard to licence terms, funding conditions etc.) © DibbsBarker
  19. 19. 19 Key Questions (cont.)   How likely are its pending patent applications to proceed to registration? How likely are the resulting patents to be valid?   What will be the effective scope of monopoly afforded by the IP rights covering key technologies?   Will its technology will infringe any third party IP rights?   Generally, does the company manage its IP well? © DibbsBarker
  20. 20. 20 Ownership/Control Issues   Inventors and employment   distinguishing employees and consultants   student and academic issues   Chain of title   Licence conditions   Funding conditions
  21. 21. 21 Acquiring IP   In-house development   formal process of IP capture   Licensing in   issues of royalty base, restrictions on field, rights of use, background IP   Collaborations   issues of IP ownership, licence rights (beware joint IP)   Purchase/M&A   need to do your own due diligence
  22. 22. 22 Beware Patent Puffery   No “worldwide” patent   An application will almost never be granted in the form applied for   A granted patent may not be valid or enforceable   Different national principles apply
  23. 23. 23 Best Practice IP Management   Dealing with staff and contractors   Dealing with research collaborators   Dealing with suppliers & customers   Planning and conducting R&D with IP issues in mind   Understanding the IP landscape   Building and maintaining the IP portfolio
  24. 24. 24 IP Landscape   To inform business strategy development and R&D planning   For competitor intelligence   To understand the technology and IP position of prospective licensees/collaborators   To determine what is available to in-license   To look for strategic and blocking IP opportunities © DibbsBarker
  25. 25. 25 R&D Processes Should…   Filter projects by IP and market as well as technical criteria   Institutionalise IP acquisition in the development of new products and processes   Raise the question of how protectable the new product or process will be   Analyse at an early stage the avoidance of infringement of third party rights   Require consideration of in-licensing technology rather than developing it in-house © DibbsBarker
  26. 26. 26 Different IP Business Strategies   Comprehensive product protection by building mutually reinforcing bundles of rights including patents, designs, copyright and brands   Placing roadblocks in competitors’ paths   Generating cross-licensing currency to deal with blocking rights of third parties   Building value for market perception   “Fit” with technology/IP deficits of prospective licensees © DibbsBarker
  27. 27. 27© DibbsBarker Any Questions? Rob McInnes T +61 2 8233 9556 E rob.mcinnes@dibbsbarker.com
  28. 28. 28© DibbsBarker

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