Starting up – make sure you cover all bases
Their success is down to numerous factors: right-place right-time, focus on core strengths and products, ability to adapt quickly to change (especially in core markets), and a heavy involvement in setting standards. Although most of this could be attributed to their CEOs, it could not have been achieved without the talent and ingenuity of their engineers and designers. MOST importantly, all of these companies recognised and appreciated, at the very beginning, the value in continually creating core intellectual capital that would be needed by them, their competitors and others. They saw intellectual capital as an asset.
Starting or spinning off a new company in the RF industry with large established players such as these is tremendously exciting as well as very demanding on both the time and energy of those involved. In the excitement, one of the basic tasks, often ignored until it is too late, is an understanding by everyone involved in the company, from the CEO to the engineers, of the value in protecting and commercialising your intellectual capital.
What do we mean by intellectual capital? Most people assume that it has something to do with filing applications for patents or registering a trade mark. This is certainly part of it. But, intellectual capital goes far wider than that. The various elements which make up intellectual capital are shown in the figure below.
Intellectual capital is not just about patents and other formal intellectual property rights (formal IP) such as trademarks, designs and copyright – which are underpinned by various statutes and laws. Formal IP is only a piece of the intellectual capital jigsaw. Intellectual capital also includes workforce skills, business processes, customer and business relationships, branding, reputation and the know-how of employees, importantly all your RF engineers and designers. Ideas and inventions provide a company’s heart beat, while the wider intellectual capital drives growth and sustainability.
Many small companies in the communications and electronics industries have talented engineers who come up with radical inventions, yet these companies for whom they work fail – for a number of reasons – not only to protect, but also to commercialise, those designs and inventions
As a CEO or engineer in a start-up, you might think you are too small or specialised to be considered a threat by any of the giants with established intellectual capital, so they will leave you alone. You may even say, “why bother with establishing or understanding intellectual capital now? I have an accountant and other things to worry about like repaying loans, product deadlines to meet, meetings to attend…”, the list is seemingly endless. But it is worth noting that most start-ups to fail within one to five years. Bear in mind, once your core product or process is marketed and after you have developed a following such that it is eventually desired (or required) by others, a lack of intellectual capital may allow them to copy it. Will this ruin the business you run or work for? And if it does, can you adapt?
The risk of your core product, process or idea being stolen, or that your company is not the first mover you thought it was, can be minimised by understanding where you, as a CEO or engineer, can contribute to the intellectual capital jigsaw and where the core products you are working on lie within the patent minefield. Importantly, are you and those in your company willing to recognise and appreciate, at the very beginning (or now), the value in continually creating core intellectual capital that would be needed by you, your competitors and others?
At the very least, CEOs and engineers in a start-up in the RF industry need to be aware of what patents their competitors hold and how these may affect core products. It is useful to ask the question, what is your core product(s) made up of? What are the key elements? In this industry core products can range from a single component (e.g. D/A convertors, an antenna, a display, or chip), or several components working in unison (e.g. antenna and transceiver chipset, or chipsets for software defined radio), to an entire consumer product (e.g. display, power supply, internal circuitry, antenna, and casing of the product). Simply put, any of the components that make up your core product may be patentable or, at risk to the business, already patented by your competitors or suppliers.
For electronics companies, a key area to watch for is where intellectual capital, in particular formal IP such as patents, meets the standards arena. Most telcos, chipmakers, and consumer electronics manufacturers, for example, have very large patent portfolios, such as those held by Philips, Qualcomm, Samsung, Nokia and the like. As an example, the digital communications field in 2010 alone has seen a 17 percent rise in published PCT international applications (these are a “special applications” that assist in getting patents in many countries/regions around the world) Qualcomm alone had 1,677 PCT international applications published in 2010, which are most likely applicable to the LTE or LTE Advanced standards. Such large portfolios can mean lots of systems, components, and hardware related to RF technologies in this area may have been, or are in the process of being, patented.
What can they do with such a large portfolio? Typically, they can use it for cross-licensing purposes. By cross-licensing portions of their portfolios with each other they can make the latest phones, chips, and electronics that consumers want without fear of infringement issues and expensive litigation from each other. In emerging markets, such as the smart-phone market at the moment, there is a lot of patent litigation in progress focussed on the various components/aspects of smart-phones. In the end, companies may settle and cross licence.
It is evident that the electronics field, in particular in RF communications, is very crowded in terms of patents. Many small to medium sized companies in this area may not realise how vulnerable they are. Nowadays, a small company simply implementing a product that conforms to a standard can risk infringing another company’s patent(s). A start-up company can inadvertently step on the toes of the “giants” due to a lack of understanding of the patent landscape within which the start-up is operating or is intending to operate. For some, this can end the dream.
Start-ups and spin-out companies need to understand that they should take advice on their freedom to operate in relation to their core product(s) and also how they can establish their intellectual capital, e.g. when should they patent their inventions? How should they go about it? To build a patent portfolio that is worth cross-licensing, there needs to be patents and/or good pending patent applications in it. What is a “good” patent or patent application? As a patent defines an invention (e.g. it may define an antenna structure in general terms), it is the scope of this definition of the invention that can prevent others from making variants of the invention (e.g. slight modifications to the antenna structure). At the very least, a “good” patent should: 1) have a broad definition of the invention; 2) cover obvious work-a-rounds or variants; 3) still be commercially applicable to the business; 4) cover the aspects of the core product that implements the invention.
In order to obtain a patent, an invention should be new (i.e. the invention has not been made available to the public before the filing date of the patent application) and inventive (i.e. not obvious over all mankind’s knowledge so far). An invention is obvious if a person skilled in the art (that is, an “unimaginative” expert in the field – this is a fictitious person), whom using their common general knowledge and the documents available to them prior to the filing date of the patent application, i.e. the invention, would have found it obvious to modify or adapt these documents or knowledge to put the invention into effect.
Formal IP law can be complex, but to ensure that your particular trade mark, design or invention is properly protected, in all the relevant jurisdictions/markets, the advice of a specialist intellectual property lawyer or patent attorney is often recommended. Remember, even though the “giants” now have in-house patent departments and outsource their patenting work to specialist patent attorneys, they were once start-ups and still sought advice. This will ensure your company is starting on the right foot to build a sound and watertight foundation.
Depending on the business needs, in the telecommunications/electronics industries it is important to find a lawyer or patent attorney who is within your budget, has an excellent technical grounding in electronic engineering, computer science, and/or physics, who is not only able to understand a complex technical brief quickly, can draft a specification rapidly, but also is able to engage with engineers and the inventors and draw out alternative embodiments or examples of the invention, and alternative ways of doing something, in order to fully claim the invention. They are out there.
Intellectual capital issues should not just be treated as an add-on for a start-up or small business. Ideas are its lifeblood. New and small businesses should not take unnecessary risks, especially in the current climate. Taking all the steps required to get a company up and running and trading successfully is quite enough to worry about without the fear that someone might steal your assets or that you are accused of stealing theirs. Yet it is surprising how many companies function without taking these basic steps – even some quite large ones. Taking steps to protect your intellectual property is something that many companies think they will get round to later, but never do or it is too little too late. If done early on, it can save a great deal of heartache – and even possible insolvency.
Protecting intellectual capital is vital. However, many companies stop there. It is important not just to protect but also to understand the commercial value of the IP and ensure that you are fully exploiting it, having a clear idea of the commercial goal from the outset. Choice of business model is the key to considering whether value is realised from manufacturing, production, direct sales or licensing. For some companies with the correct experience and know-how it makes sense to manufacture a new product. For others, a license to an established manufacturer/supplier is the best way to get a return from your invention. The correct business model, product proposition and route to market need to be laid out as inputs to an IP strategy ideally from the outset, so that the best form and details of protection can be established. In addition, market issues need to be factored into the process to guide and inform the key IP decision making steps along the way.
Despite the market downturn, new opportunities to trade internationally are still being created at a rapid pace and there are opportunities for start-ups who can provide products or services that will be taken up by the marketplace. However, companies need to ensure that, in taking advantage of these new opportunities, they do not leave themselves open to exploitation.
About the author
Jackie Maguire is the CEO of Coller IP, a specialist in commercial IP management and valuation based in Wallingford, UK. Her contact details can be found at: www.colleripmanagement.com.
If you enjoyed this article, you will like the following ones: don't miss them by subscribing to :
