Economic Benefits of Intellectual Property Rights

By: Shrivatsav.n

1. Introduction
The question of how Intellectual Property Rights affect the processes of economic development and its growth is complex and based on multiple variables. In theory stronger systems for the protection of intellectual property could either enhance or limit economic growth. Nevertheless, evidence is emerging that stronger and more certain intellectual property law could well increase the economic growth and foster beneficial change, thereby improving developmental prospects, if they are structured in a manner that promotes effective and dynamic competition.

As the global protection regime strengthens due to TRIPS, numerous questions arise about the impact on prospects of economic growth. For a lot of reasons, it is not possible to confidently say that the new regime will raise economic growth and improve development process. There are two major reasons. First, many variables affect the growth in ways that can dominate the impact of TRIPS. Second, economic theory points out that intellectual property rights could have a lot of effects on growth, some positive and some negative.

With this background the paper addresses how Intellectual Property Rights may improve economic development.

2. Economic Development and Intellectual Property Rights
Economic analysis of Intellectual Property Rights is utilitarian, questioning whether the benefits of any system outweigh its costs, both in static and dynamic terms. The anticipated benefits and costs depend on characteristics of markets, products and social institutions.

2a. The Purposes and Mechanisms of Intellectual Property Rights
There are two main economic objectives of any system of intellectual property protection. The first is to promote investments in knowledge creation and business innovation by establishing exclusive rights to use and sell newly developed technologies, goods and services. Not providing such rights would lead to economically valuable information could be appropriated without compensation by competitive rivals; hence institutions and individuals would be reluctant to invest money and effort into research and commercialisation activities. The second goal is to promote widespread dissemination of new knowledge by encouraging or requiring rights holders to place their inventions and ideas on the market. Economically, it is efficient to provide wide access to new technologies and products, once they are developed, at marginal costs production. Such costs would be quite low as it might entail simply copying a blueprint or making another copy of a storage medium.

There is a fundamental tradeoff between these objectives. An overly protective system of IPRS could limit the social gains from invention by reducing incentives to disseminate its fruits. However, an excessively weak system could reduce innovation by failing to provide an adequate return on investment. Thus, a policy balance needs to be found that is appropriate to market conditions and conducive to growth.

Different forms of IPRS operate in distinct fashions and it is misleading to group them together. Therefore, it is helpful to mention briefly what the various mechanisms are. First, patents provide the right to prevent for 20 years the unauthorized making, selling, importing, or using of a product or technology that is recognized in the patent claim and that must demonstrate novelty and industrial utility. Related devices are utility models, or petty patents, which provide exclusive rights for a shorter period for incremental inventions, and industrial designs. In most countries patent applications are made public after a prescribed time period. Thus, patents establish a protected market advantage in return for revealing technical knowledge. Several aspects of patent scope affect the effective strength of protection.

Trademarks protect rights to market goods and services under identified names and symbols. Trademarks and brand names must be sufficiently unique to avoid confusing consumers, thereby playing the important role of reducing consumer search costs. These rights encourage firms to invest in name recognition and product quality. They also induce licensees to protect the value of assets by selling goods of guaranteed quality levels. If trademarks were not protected, rival firms could pass off their lower-quality goods as legitimate versions of those produced by recognized companies. This situation would diminish incentives for maintaining quality and would raise consumer search costs. Economists generally believe that the danger of market dominance through abuse of trademarks is slight in competitive economies but such marks could be accompanied by significant market power in countries with other barriers to entry.

Firms develop some technologies that might not be patentable, might not be worth the cost of applying for a patent, or might be more valuable if kept undisclosed. They prefer to keep knowledge of such processes proprietary as trade secrets, or undisclosed information. Trade secrets are protected by legal rules against learning by rivals through dishonest means. Such protection lapses if the technologies are discovered by fair means, such as independent invention or reverse engineering. Protecting trade secrets is beneficial to the extent it encourages the development and commercial use of sub-patentable inventions. Rules protecting trade secrets thus promote adaptive innovation and encourage learning through legal means.

Literary and artistic creations and computer software are protected by copyrights, which provide exclusive rights for some period to copy and sell particular expressions of ideas after they are fixed in some medium. Related IPRS include neighboring rights of performers and broadcasters, moral rights of original artists, and copyrights for derivative products. Like patents, copyrights are limited in scope for various purposes of public policy. The most significant limitation is the fair-use doctrine, under which it is lawful to make limited numbers of copies for research and educational purposes.

Several technologies do not fit comfortably into these traditional categories of protection. Because computer programs may contain elements of industrial utility in addition to their expressive elements, some countries make programs eligible for patents. The designs of integrated circuits typically are awarded exclusive rights for shorter time periods than patents, recognizing that semiconductor designs often embody elements of expression and that technology changes quickly in that industry. Electronic transmissions of internet materials, broadcasts, and databases may not be adequately protected by standard copyrights and two recent treaties reached in the World Intellectual Property Organization call for stronger protection in certain dimensions (WTO, 1998).

Particularly controversial, especially in developing nations, are patents for biotechnological inventions and plant breeders’ rights. It could be argued that patents generate strong and unwarranted protection in the biotechnology industry, because such inventions may not embody a truly inventive step. However, representatives of biotechnology firms claim that patents are required to encourage investment in these risky technologies. There are significant concerns that providing exclusive rights in seed varieties without significant limitations for farmers’ use and competitive research could raise costs in agriculture and reduce biodiversity over time.

A final element of an intellectual property system is its enforcement. Such enforcement entails two opposing tasks: punishing infringement by free riders and disciplining enterprises that try to extend their rights beyond intended levels by acting in an anti-competitive manner. These objectives require the development of extensive legal and scientific expertise.

3. Economic Benefits of Intellectual Property Rights
Consider now the opposite direction of causation. Economists recognize several channels through which IPRS could stimulate economic development and growth. These processes are interdependent and it is appropriate to adopt a comprehensive view of the incentives associated with intellectual property protection.

Intellectual property rights could play a significant role in encouraging innovation, product development, and technical change. Developing countries tend to have IPRS systems that favor information diffusion through low-cost imitation of foreign products and technologies. To become competitive, enterprises in developing countries typically must adopt new management and organizational systems and techniques for quality control, which can markedly raise productivity. Such investments are costly but tend to have high social returns because they are crucial for raising productivity toward global norms (Evenson and Westphal, 1995). They are more likely to be undertaken in an environment where risks of unfair competition and trademark infringement are small. Moreover, IPRS could help reward creativity and risk-taking among new enterprises and entrepreneurs. Countries that retain weak standards could remain dependent on dynamically inefficient firms that rely on counterfeiting and imitation.

An example of this process is that protection for utility models has been shown to improve productivity in countries with lagging technologies. In Brazil, utility models helped domestic producers gain a significant share of the farm-machinery market by encouraging adaptation of foreign technologies to local conditions (Dahab, 1986). Utility models in the Philippines encouraged successful adaptive invention of rice threshers (Mikkelsen, 1984).

Maskus and McDaniel (1999) considered how the Japanese patent system (JPS) affected postwar Japanese technical progress, as measured by increases in total factor productivity (TFP). The JPS in place over the estimation period 1960-1993 evidently was designed to encourage incremental and adaptive innovation and diffusion of technical knowledge into the economy. Mechanisms for promoting these processes included early disclosure of, and opposition proceedings to, patent applications, an extensive system of utility models, and narrow claim requirements in patent applications. The authors found that this system encouraged large numbers of utility model applications for incremental inventions, which were based in part on laid-open prior applications for invention patents. In turn, utility models had a strongly positive impact on real TFP growth over the period, while patent applications had a weaker but still positive effect. They concluded that utility models were an important source of technical change and information diffusion in Japan, while patent applications provided both a direct and an indirect stimulus to productivity. It is interesting to note that as Japan has become a global leader in technology creation, its patent system has shifted away from encouraging diffusion and more toward protecting fundamental technologies.

Recent studies suggest that innovation through product development and entry of new firms is motivated in part by trademark protection, even in poor nations. A survey of trademark use in Lebanon provided evidence on this point (Maskus, 1997). Lebanon has an extensive set of intellectual-property laws but they are weakly enforced. Firms in the apparel industry claimed to have a strong interest in designing apparel of high quality and style aimed at Middle Eastern markets. Such efforts have been frustrated by trademark infringement in Lebanon and in neighboring countries. Thus, local product development and establishment of new firms have been stifled by trademark infringement targeted largely at domestic enterprises.

Similar problems exist in China, as found in a second survey (Maskus, et al, 1998). While the information was anecdotal, it suggested that trademark infringement negatively affected innovative Chinese enterprises. Many examples were cited of difficulties facing Chinese producers of consumer goods, such as soft drinks, processed foods, and clothing. The establishment of brand recognition in China requires costly investments in marketing and distribution channels. Enterprises that achieved this status quickly found their trademarks applied to counterfeit products. Such products were of lower quality and damaged the reputation of the legitimate enterprise. Furthermore, this problem was difficult to overcome and, in some cases, forced enterprises to close down or abandon their trademarks. According to survey respondents, this situation had a deterrent effect on enterprise development and effectively prevented interregional marketing. In turn, enterprises were less able to achieve economies of scale. Chinese trademark infringement was concentrated on products with low capital requirements and high labor intensity. These are sectors in which China has strong comparative advantages. On this evidence, the authors concluded that trademark violations may be particularly damaging to enterprise development in poor nations.

Similar comments apply to copyrights. Copyright industries, such as publishing, entertainment, and software, are likely to be dominated by foreign enterprises (which can absorb temporary losses and afford the costs of deterring infringement) and pirate firms in countries with weak protection and enforcement. Thus, lower-quality copies would be widely available but the economy’s domestic cultural and technological development would be hampered. This situation was clear in the Lebanese survey. Lebanon has a small but vibrant film and television industry that could successfully export to neighboring economies if those countries engineered stronger copyright protection. In China, the domestic software industry has grown rapidly in the area of particular business applications, which did not suffer extensive unauthorized copying, but has faced obstacles in developing larger and more fundamental programs. Thus, domestic commercial interests in stronger copyrights have emerged and are now playing a role in promoting enforcement.

Intellectual property rights also could stimulate acquisition and dissemination of new information. Patent claims are published, allowing rival firms to use the information in them to develop further inventions. This learning process takes place in 10 to 12 months in the United States (Mansfield, 1985). Knowledge formation is cumulative and as new inventions build on past practices the process of technical change could accelerate (Scotchmer, 1991). Patents, trademarks, and trade secrets also afford firms greater certainty that they face limited threats of uncompensated appropriation. This certainty could induce them to trade and license their technologies and products more readily, enhancing their diffusion into the economy.

In strengthening their IPRS regimes, either unilaterally or through adherence to TRIPS, developing countries hope to attract greater inflows of technology. There are three interdependent channels through which technology is transferred across borders. These channels are international trade in goods, foreign direct investment (FDI) within multinational enterprises, and contractual licensing of technologies and trademarks to unaffiliated firms, subsidiaries, and joint ventures. Economic theory finds that technology transfers through each channel depend in part on local protection of IPRS, albeit in complex and subtle ways.
There are important practical implications of this analysis. First, countries with weak IPRS could be isolated from modern technologies and would be forced to develop technological knowledge from their own resources, a difficult and costly task. Second, those countries would obtain fewer spillover benefits and demonstration effects of new technologies in their economies. Third, technologies available to such nations would tend to be outdated. Finally, nations with weak IPRS would experience both limited incentives for domestic innovation and relatively few inward technology transfers.

Recent survey evidence from China supported these arguments (Maskus, et al, 1998). When interviewed, managers of many foreign enterprises expressed reluctance to locate R&D facilities in China, citing fear of misappropriation and patent infringement. Nearly all reported that their enterprises transferred technologies that were at least five years behind global standards, unless other means could be found to protect them, or brought in technologies that would be obsolete in a short time. Note that the importation of lagging technologies is not necessarily inappropriate for China’s cost conditions and such knowledge could help encourage follow-on innovation. However, as China moves toward best practices in technology the problem could become more restraining. Moreover, concerns about weak IPRS discouraged foreign enterprises from fully integrating their Chinese operations. Instead they tended to divide production processes among facilities in order to avoid revealing the full nature of their technologies in any one location.

Indeed, IPRS should encourage the development of interregional and international distribution and marketing networks that are critical for achieving economies of scale. Weak IPRS could limit incentives for such investments because rights owners would be unable to prevent their marketing outlets from debasing the quality of their products, nor could they readily deter counterfeiting of their trademarks. Thus, IPRS should permit effective monitoring and enforcement of activities throughout supply and distribution chains, providing both innovators and distributors an incentive to invest in marketing, service, and quality guarantees.

Quality assurance is important for safeguarding the interests of consumers. However, widespread distribution of counterfeit products can ruin reputations achieved at considerable cost, a problem that can be overcome only with additional investments. For example, in food products, beverages, cosmetics, and medicines, counterfeit products can be hazardous for consumers. Indeed, field research in China suggested that despite the benefits to poor consumers of low-cost product knockoffs, they were becoming resentful that market saturation by unauthorized goods diminished the available range of legitimate goods (Maskus, et al, 1998).

A further potential benefit of strengthened intellectual-property protection is that it could induce greater R&D aimed at meeting the particular needs of developing countries. Inventive firms in developed economies tend to orient their research programs toward products and technologies for which they expect a large global demand and that may be protected through IPRS and trade secrets. This means that a disproportionately small amount of global R&D is focused on the needs of developing economies with low incomes and weak IPRS. For example, the World Health Organization (1996) claims that of the $56 billion spent globally on medical R&D in 1994, only 0.2% was aimed at pneumonia, diarrheal maladies, and tuberculosis, which together account for 18% of global illness.

It is possible that the new patent regimes introduced by TRIPS could change this situation. The total market size for pharmaceuticals of the countries that must upgrade their patent protection over the medium term is sufficiently large that, even at current shares of drugs patented elsewhere, the rise in demand could be as much as 25% of global spending (Lanjouw, 1997). Thus, the incentives generated for R&D focused on diseases of poor countries could be significant. While this is a crude calculation, it suggests that pharmaceutical firms could anticipate higher profits in developing nations, some portion of which could be devoted to research on their endemic diseases.

Nonetheless, there is considerable uncertainty about this outcome and it is possible to doubt its practical significance. Even with stronger patents (the enforcement of which would be problematic), the ability of impoverished people to buy protected treatments would not rise much for a long period of time. In this context, a strong argument for public promotion and international procurement and distribution of new drugs may be made.

4. Conclusion
Economic theory demonstrates that IPRS could play either a positive or negative role in fostering growth and development. The limited evidence available suggests that the relationship is positive but dependent on other factors that help promote benefits from intellectual property protection. In brief, IPRS could be effective and market-based mechanisms for overcoming problems that exist in markets for information creation and dissemination. However, their existence could pose problems in terms of their potential for costs and anticompetitive abuse.

Accordingly, modern IPRS systems are not sufficient by themselves to encourage effective technology transition. Instead, they must form part of a coherent and broad set of complementary policies that maximize the potential for IPRS to raise dynamic competition. Such policies include strengthening human capital and skill acquisition, promoting flexibility in enterprise organization, ensuring a strong degree of competition on domestic markets, and developing a transparent, non-discriminatory, and effective competition regime.


6 Startup Strategies That Turn Off Most Investors

By: MartinZwilling

Don’t bash the competition. Every investor knows how vulnerable a new startup is to competitors, so investors always ask about your sustainable competitive advantage in the marketplace. How an entrepreneur answers this question speaks volumes about their knowledge of business realities, customers, confidence, and their ability to handle investor funding.

There is no perfect answer to the competitive advantage question, but investors are looking for how your offering will keep ahead of competition, not just at this moment, but throughout the life of their three to five-year investment. They are also seeking to find out how you handle one of the many tough questions that a new founder will get in today’s market.

A strong answer should be something like “Our product introduces a new lower-cost technology, which we have patented and trademarked, that makes us very attractive today, and will provide a wealth of additional products as we move forward.” That says you are competitive today, have a real barrier to entry, and the potential to remain ahead of the competition for a long time.

Based on my own experience as an angel investor, and feedback I get from many other investors, here are a collection of answers that we often hear instead, from the least credible to at least reasonable:

1. Insist you have no competitors. Leading with this answer will likely terminate any further investment opportunity with this investor. He or she will assume your comment means there is no market for your product or service, or you haven’t looked. Neither speaks well for you or your startup. Even if you hedge by saying no direct competitors, we all know that existing cars are still big competition to your new flying automobile.

2. Claim the first mover advantage. This is one of the most frequent responses I hear, and is rarely convincing. The problem is that startups have limited resources to keep them ahead of big companies. If your early traction highlights an opportunity they have missed, they can mobilize their huge resources and run over you. First mover advantages are only sustainable by large companies, or founders with deep pockets.

3. Proclaim your solution as a paradigm shift. If you insist that your technology is so new and unique that it will disrupt your competitors and the whole market, investors will fear that neither they nor you can afford the time and marketing required to weather the change. They will likely decline on the basis that historically, pioneers get all the arrows.

4. Highlight your world-class team as the secret sauce. Insisting that your team is better than any other, giving you a sustainable competitive advantage for the long term, will likely come across as naiveté or arrogance. Investors know that no startup has a lock on the best people and processes, and investors don’t deal with unrealistic founders.

5. Declare that you will offer the product or service free. Free is a dirty word to investors, since they need a return on their investment. Perhaps you intend to collect money from advertisers, but this requires a large investment to get the audience you need before monetization can work. Facebook spent over $150 million before revenue.

6. Intellectual property as barrier to entry. I like patents, trademarks, and trade secrets, so this answer is a better sustainable competitive advantage than the other five answers. Now all you have to do is defend your position, and we all know that patents can break a startup in court battles, and will have alternative implementations if the price is right.

Thus, there is no perfect answer to this question, so the best entrepreneurs see it as an opportunity to highlight their own advantages, rather than put down a competitor. Being negative is never the answer. For example, it’s tempting to say that your worst competitor has poor quality products, requiring costly maintenance, but it’s much better to say that you provide a five-year free warranty that no competitor can match.

After highlighting your best competitive features and your intellectual property barriers to entry, I encourage you to put on your humble face, and proclaim your determination to never stop improving your products and processes to out-distance competitors. You want investors to believe that you are a realist, but have the confidence and determination to win.

Investors know that winning in today’s highly competitive environment is more a mindset than a product feature. Competitor bashing is not a skill that you need to hone. I look for entrepreneurs that can sell themselves and their offering to discerning customers. Money from customers and investors is the same color.


5 Clean Water Startups Emerging in Israel

By: Eze Vidra

There is no human need more basic than water. We simply can’t survive without it. I talked about Charity:Water in a previous post, but today my focus is on agtech.

This week water has been on my mind for several reasons. One is the sale of Israel’s Netafim, the company that invented drip irrigation, to Mexichem for $1.5 billion. Netafim’s technology essentially enables farmers to “grow more with less,” increasing yields and improving crop production while preserving quality and quantity of water and soil fertility. The story of Netafim is profiled in the Coller Venture Review issue on deep innovation.The second reason is connected to Philanthropy. Jeff Bezos asked the world how he should donate his money on Twitter. He got more than 46,000 responses, but that created a new problem: how can he sift through all the answers, create themes and understand which ones would be most impactful.

That’s where AI came into the picture in the form of, a startup specializing in a form of advanced decision making called swarm intelligence, which essentially emulates the behavior of a bee swarm to come up with the most complete community decision. Bottom line is, after a rigorous process which included human evaluators ranking 6 choices at a time, a winner was clearly chosen. You guessed it: Universal Access to Clean Water topped the list.

Israel is a hotbed for agtech in general, and water tech more specifically. It came from a necessity: a small country with limited fresh water supply, Israel needed to figure out how to desalinate water, save water, and irrigate the desert. Netafim started in a Kibbutz in the 1960s, but to this day, there are approximately 130 startups operating in the water space in Israel alone, and it’s a buzzing space. There’s even a dedicated Water Tech conference.

You can find the full list on Startup Nation Central, but here are a few select Israeli agtech startups in the water space:


WaterGen’s cutting-edge technology provides an abundant, renewable source of fresh and clean drinking water by extracting it directly from the air. With the patented GENius, the world’s most energy-efficient atmospheric water generator (AWG) module of its kind, Water-Gen’s various water-from-air generator models can serve the clean drinking water needs from a small house to whole villages to an entire country.


Utilis technology is based on the analysis of multi-spectral, aerial images that capture the area of a suspected leak. By processing these images and applying algorithms, the system uses essential physical parameters, such as geological, meteorological, and hydrological factors. After calculating and adjusting for any distorting factors, the information is intersected with piping infrastructure layouts to indicate the location of underground water leaks.


TaKaDu’s patented technology uses raw data from multiple sources, analyzing the data to detect and manage the full life-cycle of network events, including leaks, bursts, and faulty assets.

Based on big data analytics and sophisticated algorithms, TaKaDu’s IoT cloud-based solution helps water utilities detect problems early, reduce water loss, shorten repair cycles, and improve customer service.


Indegy provides visibility and security for industrial control networks. The platform delivers comprehensive visibility and oversight into all OT activities, including changes to controller logic, configuration, and state.


Desalitech is a provider of high-recovery water production and effluent treatment solutions. The company’s ReFlex reverse osmosis (RO) systems offer maximum recovery and feature Desalitech’s patented closed-circuit desalination (CCD) process.

CCD represents an improvement in RO water treatment by achieving efficient use of water resources, reduced emission of brine waste, increased flexibility and reliability, and lower power consumption, all using standard, off-the-shelf RO components.


How Big Companies Use Licensing to Fund Startups

By: Administrator

When it comes to developing new technologies, many large companies are finding creative ways of using licensing to partner with startups with promising new technologies.

One of the biggest banks in North America is now in the startup funding game. TD Bank Group created a $3 million plus investment fund to provide patent application funding for startups in the fintech space.

The goal is to help startups with one of their biggest and most important expenses – protecting their valuable IP. It’s  non-equity based funding and gives the bank relationships with early stage startups. In return TD bank gets a non-exclusive license to the patent. If the technology proves out, the bank offers larger rounds of funding.

The upside for the bank is rights to use the latest in fintech to  build their business. The upside for the startup is a big licensing partner to launch their IP into the market as soon as it’s ready.

IP plays a critical role in today’s startups.  According to a recent study by the US Patent and Trademark Office, startups with patents are more successful than those without. The study found that a patent increases a startups chance’s of receiving investor funding by over 50%. Startups with patents also created more jobs, had higher sales revenues, were more innovative, and were more likely to go public or be acquired.

For many startups today, a corporate venture fund (CVF) offer a better route to go.  Unlike institutional or private VC’s, which are short-term focused on financial returns, CVF’s like TD Bank, invest for longer term strategic reasons.  CVF’s are also less hands on, giving the startup more control over their company and IP development. In return, the CVF offers several exit opportunities, including licensing, OEM partnerships, new sales channels, or an acquisition.

CVF’s are growing because startups are playing a critical role in developing innovation. According to a report from the NSF, R&D spending by startups and small businesses increased from just over 4 percent in 1981 to  about 24 percent in 2009 (NSF 2012). A big reason for investment by corporations is it’s a faster way for finding complementary products and services, acquiring new disruptive technologies, or finding new market opportunities.

Companies such as Google, J&J, Qualcomm, Comcast, Dell, Microsoft, Nokia and Intel all have a CVF. Not only do these funds invest significant capital, they also offer other resources such as access to corporate labs, skilled R&D personnel, marketing, sales, manufacturing and regulatory know-how, which accelerates a startups’ innovation activities. In certain industries, such as life sciences, where there’s lot’s of development risk, high capital investment amounts, and longer time to market, big corporations make the investments to  encourage new innovation development in their industry.

This is the approach GE Ventures uses. They invest in startups with technology in areas of health care, manufacturing, software, energy, and even IP that improves their internal productivity and efficiency. The company offers several investment options including equity, joint business ventures, and licensing. Plus they offer access to other resources such as labs, technical expertise, and even partners and customers to help a startup scale up revenues.

Rather than going head to head with big competitors, consider partnering with them to fund your startup. Not only can CVF’s be a great source of capital, they can also be a great licensing or strategic alliance partner, providing key resources to help accelerate your time to market. Click here, here and here to read more about CVF’s.



By: articlesly

Over the course of humanity, every discovery has yielded more questions as we continue to explore new territory. As we continue to explore the frontier known as cyberspace, and discover new ways to use the medium, we are opened up to more ethical dilemmas and questions. Intellectual property has always been a thorny issue. The internet however raises new problems for businesses and individuals seeking to protect their intellectual property. With the easy access to information, protecting your IP is a virtual minefield.

What is Intellectual Property? Intellectual property (IP) is subject matter that is a product of the intellect or mind. The term however, actually reflects the legal entitlements that are attached to intangible ideas, concepts, and certain types of information in their expressed form. In example, a book or movie is the expression of creative and artistic work and intellectual property that would provide the copyright holder exclusive rights for a period of time to control the reproduction and adaptation of that work. Copyrights, patents, trademarks and industrial designs are all examples of intangible subject matter. An often overlooked intangible is trade secrets. Trade secrets can be protected under Intellectual Property.

Intellectual Property is a valuable business asset which can be leveraged in the marketplace to as a competitive advantage. An IP audit can help you to determine what hidden assets you may have in your business. Many firms will send you an IP audit checklist which has a series of questions designed to impossible valuable business assets. Once you have uncoovered your IP, you should take steps to protect it.

Ensure that you own the rights. In today's world, many businesses outsource functions which are not their core competency. Paying to have something created does not grant you ownership. You may have paid an outside contractor to develop a sophisticated software program, or a graphic designer to revamp your logo or even a writer to develop your marketing contractual. When hiring outside firms to create something for you, you should always use a Work for Hire Agreement. Standard agreements are widely available. A Work for Hire Agreement basically transfers all rights from the creator to the payer.

Do not forget your employees. Many organizations have their employees sign employment contracts which stipulate that any work created for the company belongs to the company. It is similar to a work for hire agreement with independent contractors in that the rights belong to the organization and not the individual. You are paying the employees to create the work on your behalf.

Protect yourventions. If you have invented a business method, process or other patentable invention you need to take steps to protect it. It is advisable to refuse from selling a patentable invention until you have taken the necessary steps to protect your rights. Filing a patent application is expensive and is something that should be done by an attorney specializing in patent law. If you are a new business, there are interim steps that you can take that will offer you protection until you have the cash to file the patent application. File an Invention Disclosure Document. This document can be purchased for about $ 10.00 and when filed with the United States Patents & Trademarks Office will protect some of your rights for approximately two years. You can also document your invention in an invention diary or something similar and mail it to yourself via the United States Postal Service. It is important to use the US mail system rather than an outside carrier such as FedEx, or DHL. The post office is a federal agency and will be accepted by the Patents and Trademarks Office. Once you receive the package, do not open it – store it in a safe place until you are ready to take the next steps.

Notify others of your rights. If you have created written works or other information which falls within copyright laws, use the copyright symbol, which is the C within a circle. This can be followed by the year the work was created and your organization's name. An R within a circle indicates a registered trademark and should not be used unless you have in fact registered the item (ie logos, brand name). However, you can use TM (trademark) or SM (service mark) next to your name or logo. This will deter others from stealing your work. Additionally, if your internal or external contractors are creating software for you, have them embed footprints in the code to protect you in the event that someone steals your software. The footprints are identifiable information that can be used to prove that you created the software.

While you want to share your IP with the public to drive business, it is equally important to take the necessary steps to protect this valuable asset.


Protect Your Startup’s Intellectual Property By Avoiding These Costly Mistakes


Copyright, trademark, patents, and licensing — all words that are important knowledge for startup founders with innovative products, but ones that are often used in the wrong context. That can be dangerous, as your intellectual property, the ownership right on ideas or creations from somebody’s mind, may not be as protected as you think.

If your startup has specific branding and/or unique technologies that are essential to your product and growth, it’s time to explore options to protect your intellectual property. Adding legal counsel early on can help you skip some of the pitfalls that may stop your business on its tracks.

One of those big, easy-to-miss intellectual property pitfalls? Your company’s name, says John Lyon, a senior associate at Thomas Horstemeyer, LLP, an Atlanta-based intellectual property law firm.

“It’s easy and cheap to re-brand before you launch,” says Lyon. “Not so after. If you’ve already launched your company and then a year later, after you’ve built up a customer base and received funding, you receive a letter saying, ‘Please stop doing this under this name because I’m already using that company name and I have a federal trademark,’ — I can’t tell you how many times that’s happened.”

Lyon’s main focus is electrical/computer patent prosecution, litigation, and open source software licensing. Here, he breaks down the importance of exploring copyright issues and trade secrets as you scale your company and what you should keep in mind.

Intellectual Property concepts
Trademark: Branding falls under trademark. It can be a word, name, or symbol or any combination which is used to identify the goods or products of one company from others. For example, you know when you see the Nike ‘swoosh’ on a t-shirt, it will conform to Nike standards and quality. It’ll probably have certain designs and certain features. That’s valuable.

Copyright: Copyrights are the rights granted to creative types regarding the ability to control who can make copies of their creation or expression, whether it be art and marketing materials, written code, computer code, or music.

Patents: Government-sanctioned monopolies protecting an inventor’s rights to make use of their invention. With a patent, your invention receives 20-year protection from the government in exchange for revealing the inner working to the public.

Start by searching Google for your prospective company name
“I can’t tell you how many times someone has come up with a great company name or logo, become emotionally attached to it, and they don’t look to see if anyone else is already using that name or a similar logo,” says Lyon.

It’s cheaper to re-brand before you launch, shares Lyon. He suggests googling every prospective startup name you have in mind before landing on one and checking available trademarks.

Don’t skip the copyright, software startups
Avoiding admin costs and legal fees can become an issue down the line if you have an informal partnership in place and haven’t taken the steps to make sure your product is formally protected by copyright. While product development or launching may be at the top of your to-do list, Lyon warns founders about forgetting to copyright their intellectual property.

“Things like who owns the copyright to the code gets overlooked,” says Lyon. “You can get into an awkward situation where the startup ends up not owning the copyright for the code that forms their product.”

“It may be that a contractor or developer owns it and it was never assigned to the company because they didn’t do all the paperwork that needed to be done. Or, one of the co-founders owns the code instead of the company itself, so if you have a falling out between cofounders, the company can go under because the company doesn’t own the copyright and the code for their program or their product.”

It’s an easy fix, says Lyon. All you have to do is complete a one-page, form document assigning the copyright and the code from the developer or a co-founder to the company. You can grab this form off of Legal Zoom or via your legal counsel.

Be aware of the patent timeline
“Everyone’s aware of what patents are, but not very many people are aware of all the rules that surround patents and how you could forfeit your rights accidentally,” says Lyon.

“If you think you might want to patent this, pull up a calendar and start highlighting some critical dates here. If you want to file a patent application, you may want to wait before you start offering it for sale, or you may want to wait before you go do a demo.”

If you wait until after it goes public, you have 12 months to file a patent application. However, the lengthy process includes several steps such as finding a patent lawyer, doing a disclosure, and several rounds of edits.

Patents are not a one-time done deal
Often startup founders make the mistake of thinking that patents are a one-and-done deal. This is not true, as products are always evolving and improving.

“As their product evolves, they need to ask themselves whether or not any of those new features they’re adding might be worth trying to protect with a patent,” says Lyon.

“A lot of companies, when they’re small and growing, they may file one patent application, based off of their prototype. Two years later, they’re at version 4.0 and things have changed quite a bit. That’s something to consider so they don’t overlook things and  can make sure they’re always protected.”


Protecting Your Intellectual Property Is More Important than Ever


When you see or hear the abbreviation “IP,” it stands for Intellectual Property.  IP is a key asset in a small business. Simply put, intellectual property is the ownership of concepts, processes and ideas, as opposed to physical property which characterizes a tangible asset. IP is fast becoming the major delineator among business owners who are competing for market share and customers.

There are four basic types of IP that small businesses often rely on.

Copyrighted Material

This category encompasses everything from literary and artistic works to video and audio recordings to architectural drawings and computer code. Although a copyright is the most common form of IP, it does not cover ideas or concepts unless they are written down, creatively rendered, or recorded in some other fashion. However, you can not copyright a book title unless it’s a book series. Though technically speaking, you don’t have to register a copyright in order for it to be valid, doing so is relatively inexpensive and gives you more solid legal footing should a dispute ever arise.


While copyrights focus mainly on creative works, trademarks protect anything that is related to branding. Things that can be trademarked include company symbols (like McDonald’s golden arches), names (like the Super Bowl), or logos (like the blue and white F for Facebook) – as long as it is distinctive (for instance, the name “AAA Plumbing” probably couldn’t be trademarked). Trademarks can be filed with the U.S. Patent and Trademark Office (USPTO) for a few hundred dollars or a bit more if you utilize a lawyer.


These days, patents are the least common types of IP among small business owners. That’s because patents only apply to invented products, processes, and methods which are determined to be “novel,” “non-obvious,” and “useful” according to federal statutes. Also, the patenting process with the USPTO can take months or years and cost thousands of dollars, and it always involves securing the services of a patent lawyer.

Trade Secrets

This is a more nebulous classification which covers any type of process, recipe, formula, or design that gives your business a competitive advantage (like a family secret pie recipe, your unique 3D printing process, or Coca-Cola’s secret formula). Here’s the problem: the government doesn’t provide any registration process for trade secrets (which would defeat the purpose, after all), so it’s up to the small business to restrict access to its trade secrets. Legal relief only comes if the IP is leaked or stolen (which is theft) or an employee violates a non-disclosure agreement (which is a breach of contract).

Intensely Protect Your IP

Though the process for safeguarding or registering various forms of IP can differ depending on the company and the context, here are some general guidelines for how to protect your business:

Do your homework. Identify your IP, categorize it properly, and know your rights and limitations.

Don’t procrastinate. The USPTO operates on a “first to file” system, so even if you come up with the idea first, you’re out of luck if someone else registers it with the USPTO before you do.

Seek expert advice. For complex IP types like patents and trademarks, hiring a who specializes in IP law to help you navigate the process.

Monitor your IP rights. Once you have registered your IP, it’s up to you to watch out for infringements; the government won’t do it for you.

Handle disputes wisely. If you find someone using your IP improperly, don’t automatically run to the courthouse. Consider sending a notification letter to the perpetrator; or if the revelation might actually boost your business, it may be prudent to ignore it altogether.

Overlooking your IP could have negative ramifications for your business. But don’t wait to find out you’re wrong by watching a competitor leverage your creative ideas or logo to make money for their business. When it comes to IP, Prevention is worth a pound of cure.

For more insights on running your small business, follow me on Twitter.


The Manual for Indian Startups: a guide to documents, plans, templates and agreements

By: Madanmohan Rao 

The book is authored by Vijaya Kumar Ivaturi (co-founder of Crayon Data), Meena Ganesh (CEO of Portea Medical), Alok Mittal (co-founder of Indifi), Sriram Subramanya (founder of Integra Software), and Prof. S. Sadagopan (Director of IIIT-Bangalore).

“The operating models of startup ventures in India differ from the Western models,” explains Infosys Co-founder Kris Gopalakrishnan in the foreword. The book provides the Indian context in terms of compliance and documentation needs, and has been supported by CII’s Startup Council.

I have listed some of the necessary documents, plans, templates and agreements in Table 1. The book ends with a state-wise list of 64 incubators in India along with hub location and contact information (see also YourStory’s Startup Hatch profiles of accelerators and incubators).

The material is spread across 142 pages and makes for a quick read, but its real value is as a handy reference and process guide to make sure a startup is on track and does not face nasty operational surprises down the road. Related books reviewed by YourStory include Startup CEO, Startup Boards, Disciplined Entrepreneurship, and Startup Checklist.

At concept stages, founders should be prepared to do a lot of experimentation and field research to arrive at proof of concept for their idea. It is important to strike a balance between capital efficiency and product or solution completeness.

The founding team should have freshness as well as expertise in some areas like product, domain, business and operations. The founders’ agreement should capture their expectations of contribution, ownership and sharing of equity, as well as ‘what if’ scenarios (eg: redefinitions of roles further down the road; non-compete clauses). There should also be clauses for dispute detection, resolution, mediation, and arbitration.

In the entity-creation phase, most VCs and public funds require the creation of a public limited company. Founders should understand the nuances of holding companies, regional operating firms, overseas registration, and point of effective management (POEM) laws. Early-stage compliance applies to labour laws, environmental laws, IPR, liability acts, taxation, and public procurement.

On the intellectual property front, founders should carefully weigh patent jurisdiction, novelty, licensing, and portfolio management. Patent analytics helps make informed decisions on tech trends, R&D/M&A deals, and even talent management.

For startups filing for patents, there should be clear demarcation of public information, confidential information (only for employees), and classified information (only for core team). The authors advise founders to invest in creation, protection, and monetising of IP as relevant; it can also be a long, tedious, and costly process.

Marketing online and offline should be guided by market size, market wealth, competitive presence, and value proposition. Startups should have clear strategies for targeting customers, employees, media and investors.

There will be different Above the Line (ATL) and Below the Line (BTL) considerations for B2C and B2B contexts. Commission models and network effects will take some time to kick in, but can be well worth the wait.

Funding options include seed funding (Rs 10–30 lakh for 1–3 percent equity), angel funding (Rs 70 lakh–7 crore for 15–29 percent equity), and Series A (starting at Rs 14 crore, for a 24-month runway and 20 percent stake). A full-time finance person is required from angel-funded stage onwards, and a balance between market share and profit share will need to be struck at the Series A stage. Startups seeking the accelerator route may find that some companies make investments while others give grants.

Provisions and outcomes should be made for raising funds in multiple tranches and bridge rounds, along with requirements like board rights for directors and observers. Alignment between founder and investor is key for long-term success, especially with respect to exit rights and transfer rights.

In sum, the book gives a good conceptual overview with operational insights for new founders and aspiring entrepreneurs. Other resources, consultants, professionals and mentors will add further value as the startup scales (see also the article Understanding the science and art of engaging advisors and mentors).


Declines in U.S. innovation, entrepreneurship the focus at Capitol Hill patent policy event - | Patents & Patent Law

By: Steve Brachmann 

“Innovation and creative endeavors are indispensable elements that drive economic growth and sustain the competitive edge of the U.S. economy.” Thus reads the start of the executive summary for the 2016 update to the Intellectual Property and the U.S. Economy study jointly produced by the U.S. Patent and Trademark Office as well as the Economics & Statistics Administration. The report identifies 81 IP-intensive industries which employ about 30 percent of the American workforce and account for 38.2 percent of U.S. gross domestic product in 2014.

“All of the giants today were once garage startups that clawed, fought and used every means to their advantage to overcome the incumbents,” said Robert Aronoff, executive director of the U.S. chapter of the International IP Commercialization Council (IIPCC). “These companies benefited greatly from the system as it was.” Aronoff’s remarks came at the start of an IIPCC-sponsored event taking place in the basement of the U.S. Capitol on May 8th, an event titled Promoting Innovation, Investment and Job Growth by Fixing America’s Patent System. The event featured a series of panels and keynote speakers addressing various concerns raised over recent changes to the U.S. patent system and how those changes have created an uneven playing field to the detriment of individual and small startup stakeholders in the system. See our other coverage here, here and here.

Anyone who has paid attention to the current political climate in the United States, especially conversations surrounding economic nationalism and the renegotiation of international trade agreements, would have to acknowledge that there are many who feel as though the American economy is lagging. Last October, The Wall Street Journal published a story titled Sputtering Startups Weigh Down Growth which outlined the gradual decline of U.S. startups since 1977. In 2014, only 8 percent of private U.S. firms were less than one year old, down from more than 16 percent in 1977. As well, the share of U.S. workers working at firms less than one year old has dipped over that same period of time from nearly 6 percent of U.S. workers in 1977 down to 2.1 percent in 2014.

At the same time that America’s business climate has become too acidic for a vast majority of domestic startups, the nation has also been losing its place in the global supply chain while other major global economies, like China’s, are becoming increasingly self-reliant. Another Wall Street Journal article published last October not only showed recent dips in the value of China’s overall imports and high tech imports but also the percentage of foreign inputs used in Chinese exports. Such foreign inputs in products sold by Chinese manufacturers rose sharply from just more than 5 percent in 1981 up past 40 percent by the mid-1990s, but these foreign inputs dropped steadily to 19.65 percent by 2015. “There’s less and less reason why they need us, they’re protecting their innovation and tech more and more,” Aronoff said of China, adding that this issue deserved further discussion.

Still other issues facing innovators hoping to use the U.S. patent system to commercialize emerging technologies were highlighted by a Hope Cycle for Emerging Technology report issued last year by market research firm Gartner. This report identifies trending emerging tech like virtual reality, augmented reality, machine learning, smart robots, gesture control devices, smart data discovery and virtual personal assistants, as well as consumer expectation levels and the length of time until the emerging tech becomes fully commercializable. As Aronoff noted, much of the innovation in those sectors relies on software. “Is that even protectable anymore?” Aronoff asked.

“We’re here to have a frank discussion about, ‘Are we doing the right things to protect the engine of innovation of America,” Aronoff said. He highlighted several issues that would be discussed at length throughout the day, including the need for patents, costs/benefits of patent licensing and patent invalidation, patent monopoly and patent troll myths, the state of the U.S. patent system from the trenches, costs/benefits of a strong U.S. patent system and strategies for getting the country back on track in terms of sensible patent policy. “With the new patent enforcement gauntlet in the U.S., what does it really take for a small company to protect its IP in the current system?” Aronoff asked, adding that the patent troll myth could very well be a red herring which has distracted U.S. patent policy makers.

Aronoff’s remarks were followed by Dr. Carl Schramm, professor at Syracuse University and an U.S. IIPCC board member. “There’s an entrepreneur crisis in the U.S., which is reflective of an innovation crisis,” Schramm said, adding that while the two distressing trends were happening together, they weren’t being well understood or seen by mainstream observers.

Schramm led off his remarks by pointing to a couple of inverse correlations, which can be inferred when looking at U.S. entrepreneurship and innovation. Despite the fact that academic programs for entrepreneurship have exploded from four schools in 1990 up to more than 3,000 schools employing more than 6,000 entrepreneurship professors currently, and yet U.S. entrepreneurship has declined. Similarly, business incubators have spurted from 12 local incubators in 2002 up through 1,400 such incubators today. “The more of them we open, the fewer entrepreneurs we produce,” Schramm said. He added that less than 20 percent of such incubators currently keep statistics on the success of incubator startups, calling that a “terribly disturbing statistical vacuum.” “Why would local guys who are mostly picked by governors and mayors to be venture capital advisors do better than the professionals?” Schramm asked. “There is no science in this business.”

Teaching students to become entrepreneurs in their early 20s is something that we’re “enamored with” in the U.S. but young adults have a limited worldview compared to those in their late 30s; the average age of a person beginning a successful startup earning over $1 million in yearly revenues is 39. In Schramm’s view, about 70 percent of the startup ideas coming from students in university entrepreneur programs relate to university-specific problems, such as reducing food waste in cafeterias or parking management systems for football stadiums.

Schramm wound up his remarks by focusing on four aspects of the current landscape affecting American innovation, beginning with the sensitivity of American innovators to the signals that it’s becoming more difficult to be a successful innovator as an individual. Much of this sensitivity has been triggered by an abundance of regulations which have left business students with questions as to whether the federal government will essentially need to approve new business concepts or industries. “If you don’t think that it’s an overburden on people’s ability to think freely, you are really, really wrong,” Schramm said.

Another issue has been the consolidation of power into larger firms which has led to a presumption that big business is where true innovation occurs. Schramm pointed to the consolidation of the U.S. healthcare industry which has been impacted most significantly by the 2010 enactment of the Affordable Care Act (ACA). As a result, the number of healthcare companies has dropped drastically from the 211 health insurance providers operating prior to the ACA. “America is moving in a direction where government, big business and big labor would control the economy and give us endless prosperity,” Schramm said. “It doesn’t work, and it couldn’t work because it stands in the place of the individual.”

The consolidation of larger firms leads to Schramm’s next point, that current viewpoints on antitrust litigation were rather lax. Whereas entrepreneurs used to create companies with venture capital investment which they saw as their life’s work, Scramm said that 80 percent of startups today are sold to other companies. Many startups have exit strategies in place which consider a sale before the company even begins operations. “It’s very hard to find an entrepreneur who says that ‘I’m going to build this company in my vision,’” Schramm said. Finally, Schramm noted the “dangerous vision” that jurisprudence on patent policy and other issues were shifting from the United States to Europe. “We’re the only country on Earth that does things really right,” Schramm said. “Any time I hear that we’re going to harmonize with Europe, I get hives.”


Guide to Intellectual Property Law

By: Harrison Barnes

What do you think about this article? Rate it using the stars above and let us know what you think in the comments below.

Probably the hottest practice group in all respects for the past several years has been intellectual property law. However, many attorneys have little idea (1) what the definition of intellectual property law is, (2) why intellectual property is so popular, and (3) the four types of intellectual property attorneys and what area is the most marketable. The purpose of this article is to answer the question ”What is IP law?” and these other two questions.

A. What is the definition of Intellectual Property Law?

1. Intellectual Property is a Term Encompassing Several Different Fields

On a daily basis, attorneys call us and say they want to do intellectual property law. We are always interested in talking to an attorney with experience in intellectual property law because it is, generally speaking, one of hottest practice areas in the United States. Most sophisticated firms in every market that we serve have an interest in intellectual property attorneys with certain backgrounds. However, "intellectual property law" is a very general term. There are many types of intellectual property law, and many areas of intellectual property law are not hot at all. To define what intellectual property law means and what’s hot and what’s not is very important to our discussion.

One of the most amusing facets of intellectual property law to us is that unless someone is practicing it, or quite familiar with it, he/she is unlikely to have a good idea about what the meaning of intellectual property law is. We have found that there is a bit of confusion with respect to what it really means to be an intellectual property lawyer.

Recently, one of our recruiters received a call from the Managing Partner of a well-known law firm. This Managing Partner had been practicing law in excess of two decades and was very well known in a practice area other than intellectual property. This a rough approximation of what this conversation went like:

Similarly, each and every day we receive calls from associates who say something like the following to us: "I am currently a litigator; however, I went to X Law School, which is ranked very highly in intellectual property law. I want to join a firm where I can do more intellectual property law." When this same associate is asked what kind of intellectual property law he/she would like to do, he/she inevitably replies, "What do you mean?" At that we point we guess that the caller really doesn’t know what the answer to this question is: what do intellectual property attorneys do?

If you are already an intellectual property attorney, you can appreciate how humorous these conversations are when someone asks (after a while): what is an intellectual property lawyer anyway? At the end of this article, if you currently know little about intellectual property law, you will understand why these exchanges are so humorous.

2. What Intellectual Property Attorneys Do

The term "intellectual property" is used in its general sense to describe:

A product of the intellect that has commercial value, including copyrighted property such as literary or artistic works, and ideational property, such as patents, appellations of origin, business methods, and industrial processes. (The American Heritage® Dictionary of the English Language, Fourth Edition. Copyright© 2000 by Houghton Mifflin Company. Published by the Houghton Mifflin Company. All rights reserved.)

Intellectual property examples include music, books, movies, artwork, product names, logos, slogans and packaging, inventions that qualify for patent protection, and information that is kept secret and not commonly known. Over the past 200 years, a variety of laws have developed within the United States to give intellectual works the same protections that real estate or other forms of property enjoy under the law. Indeed, intellectual property can be bought or sold just like a house or a car. Intellectual property types can even be leased out.


A Lean Startup Definition of Innovation

By: Tendayi Viki

In my previous post, I wrote about the false choices that innovators face. These choices seem to present teams with the option of using business plans to manage innovation or just doing it without a plan, and basing decisions on vision. Often customers are excluded from the process in both cases. And this ultimately leads to innovators failing to make stuff people want.

At the end of the post, I also wrote about a third way which is based on the toolbox that lean startup methods bring to the table. But to fully understand how the lean startup toolbox can help, we need a clear definition of what innovation really is. Without a shared view of what constitutes successful innovation, management and their teams will often speak at cross-purposes and conduct their work with different expectations. The goal of this post is to help provide some of this alignment.

Innovation Is Not Creativity

Creativity is an important part of innovation. I would even go as far as saying that you can’t have innovation without some elements of creativity. However, novelty or newness by itself does not an innovation make. My gripe with the “just do it” camp of innovation is that they place too much emphasis on the value of ideas. Yes, cool new ideas are important. But even with the coolest idea ever, this coolness factor will not make it an innovation. Sorry!

There a load of patents at the US patent office right now that have never been commercial successes. The inventors and scientist made some cool discovery and came up with some interesting stuff, but this is not innovation. These are starving artists. The ones who makes critically acclaimed art but never reach the levels of commercial success necessary to stop working at McDonalds.

To be certain, there is the place for that sort of creativity in the world. My favorite hip-hop artists, the ones I considered to be the best lyricists ever, have never had a number one record on billboard. Some of my favorite gadgets were ultimately flops in the market. They were great to see and we were all wowed by them, but their market failure means that they cannot be considered successful innovations.

And so it is for large companies. Innovation is not setting up a labs, painting white walls, putting in bean bags, postit notes, sharpies and business model canvases; and then telling your people to come up with some cool new products. Innovation is a process that needs management. Giving people a creative space is not enough. To be successful, we have to understand that: Innovation is the combination of creative ideas and sustainably profitable business models.

What Is Sustainable Profitability?

I will reiterate that creativity is an important ingredient for innovation. Creativity has been an important part of our progress as humanity. But the products, ideas and discoveries that have made the most impact on human progress are those that have gained some sort of traction. This usually involves some exchange of value between the innovators and the users of the innovation. And so to do innovation well, we have to accept that customers are the ultimate arbiters of value.

But what do we mean when we say sustainably profitable business models. To my mind, a sustainable business model is one in which we make stuff people want, and we also figure out a way to create and deliver that value to customers in a manner that is sustainably profitable. Without these elements you do not have successful innovation.

It is possible to make money while delivering rubbish products. This might be for various reasons. Your company may have a lock on the market with high switching costs. Customers may have no other alternatives for meeting their needs. If this is your business model, good luck to you. But you are a charlatan! You might be making money now, but your are a snake oil salesman. You will be found out soon enough!

The Sweet Spot of Innovation

Steve Blank defines startups as temporary organization setup to search for a sustainable business models. The sweet spot of innovation is when your teams have developed a really cool new products, that meet customer needs and make sustainable profits. So in our new book The Corporate Startup, we provide the following lean startup based definition:

Innovation is the creation of new products and services, that deliver value to customers, in a manner that is supported by a sustainable and profitable business model.

Non-Profit Innovation

When I present the above graphic, I often get push-back from two groups of people; those working in non-profits and those that work on improving internal processes for companies that are not directly customer facing. My answer to them, is that regardless of what you are working on, it cannot be considered innovative unless it has a lasting impact. To classify something as an innovation I look for more than just a great new management process, a great new discovery in medicine or a new method for helping the vulnerable in our society.

I also look for whether the new thing that has been developed meets people’s needs well, and whether we have discovered a sustainable method for making sure we continue to meet people’s needs. Even internal management processes have customers (i.e. the employees who use them). In a recent water resources hackathon I co-hosted for The World Bank in Harare, we placed a strict requirement on the teams that they had to hack around the needs of citizens, rather than try to come up with anything that is cool and interesting. They also had to think about how their solutions could be sustainably taken to scale.

The Job Of Innovators

Management in established companies often struggles to figure how to manage the intrapreneurs in their businesses. What are we to expect from them? But with the definition above, we can start to build management frameworks for innovation. We now know that the job of innovators is not to simply come up with cool new stuff. They have to do that; and also discover sustainable business models. This expectation provides us with clues of how we can manage innovation without the need for business plans.


Five New Cryptocurrency Startups You Should Know for 2018

By: Luke Roth

here’s no denying that in the world of cryptocurrency, there are four main coins people think of: Bitcoin, Bitcoin Cash, Ethereum and Litecoin. These are the most visible coins, they are worth the most, and they are the most easily accessible via Coinbase, the most widely used exchange. While these coins are all successful in their respective ways, it is not the coins themselves, but the way these coins can be used that makes them truly successful. Now that there are several established coins, the market is blooming with new startups looking to utilize those coins, as well as the blockchain technology behind them.

In the coming year, we will begin to witness a societal shift towards cryptocurrency, especially with online payments. Right now, many developers realize the great potential for cryptocurrency to help their ideas grow, and want to incorporate cryptocurrency into their startups. As we journey further into the age of information, it seems our new technology is advancing much quicker than our governments can regulate it, and cryptocurrency will widen the gap between technology and regulation even wider. From its ability to provide users with a bank in their pocket, to providing an avenue for those who have lost faith in the federal financial systems, cryptocurrency has many reasons why coins are the next gold rush, and there are several promising startups helping make that a reality.

Here are five knew startups you need to know about for 2018:


Cypherium is a cryptocurrency-based startup run by a team of developers with histories at Amazon, Google and Microsoft. This startup sees many flaws in the current blockchain, and wants to address it, not through patching up the current blockchain, but by creating their own superior version in the hopes that it will be widely adopted. Advised by cryptocurrency industry leaders Emin Gun Sirer and Jeremy Gardner, this project seems to be headed in the right direction. Their new blockchain will be widely scalable and permissionless for users.

Cypherium will become the only blockchain designer to implement a multi-level governance design aims to make this blockchain more secure than any other. They will be separating governance both at the protocol and applications layers. Cypherium shows real promise to compete in the blockchain market, especially as it actively seeks regulation so it can be most easily adopted for mass use, and is certainly a startup to keep an eye on for the coming year.


This decentralized, long-term rental platform has been disrupting the rental industry since 2015, and seems poised to take off in the next year. Rentberry uses the blockchain to automate steps in the renting process, from finalizing contracts to paying monthly rent, saving both the landlord and the tenants time and money, while expediting legal agreements between both parties. Most importantly, Rentberry’s blockchain and enhanced contracts technology allows tenants to save thousands of dollars in security deposits.

Rentberry began with $4 million in investments from 11 international investors, and has since gained another $3 million in crowdfunding. Their initial coin offering is currently live, and they are hoping to raise an additional $10 million during their sale. The platform has over 120 thousand users and growing. As the market for rental properties continues to grow, Rentberry provides a trustworthy solution to potential renters and landlords alike, wishing to make the rental process as seamless as possible. With interest from the likes of Forbes, NBC, Wall Street Journal and almost every major cryptocurrency news source, I see this platform exploding over the next several years.


Loci is a venture-backed technology startup best known for their patent research tool, InnVenn, is finishing a platform expansion which will allow it to include the ability to buy and sell intellectual property. Users do this via Loci’s native coins, called LOCIcoin. Loci aims to improve and update the patent process by posting creation and disclosure of new claims for IP onto the Ethereum blockchain.

Loci understands that patenting ideas and creations can be a very confusing and expensive roadblock to creating, especially for individual inventors as opposed to large corporations equipped with teams of lawyers. They see blockchain technology as the answer, since it can provide a much quicker, safer and more cost-effective way of procuring a patent. Overall, this could encourage more growth and competition on the global market, which is always healthy, and should be a great startup to watch grow over the next year.


Coinlancer sees a problem within the existing online freelancing markets, and wants to address the problem through the integration of blockchain technology and cryptocurrency. Built on the Ethereum platform, Coinlancer addresses the problems currently faced by many online freelancers, such as unexplained account suspension, unaddressed and prolonged disputes, and failure to make payment, with the implementation of a safe, secure and transparent blockchain. Coinlancer will act as the host for job postings and freelancer accounts, as well as a wallet for transactions. For a project to begin, Coinlancer will need the agreed upon payments in escrow with them, offering security to both the client and the freelancer. These projects are paid out in Coinlancer tokens, of which the initial sale is happening now, which can be easily converted to or from over twenty different cryptocurrencies.

Among the technologies used by the Coinlancer platform are distributed ledgers, an open application programming interface, smart contracts, the blockchain and digital signatures. Each of these innovative technologies allow for further growth and optimization of the Coinlancer platform. If you are a freelancer, or in need of a freelancer, this is the platform you should be using, although you’ll have to wait, as full development is expected to finish in October of 2018.


Trippki, created in September of 2017, sees a disconnect between hotels and the people that stay in them. They want to bridge that divide in terms of rewards. The Trippki platform is essentially a travel-rewards program that allows hotels to reward guests for staying with them. The platform is decentralized, and offers increased flexibility to hotels when compared with the already offered rewards programs, thanks to its masterful integration of the blockchain. Hotel-stayers can use their earned rewards tokens, called Trip tokens, to pay for hotel stays in the future.

This platform understands that travelers are constantly bombarded with offers for rewards based on their travel, but often these rewards come at a price. With Trippki, travelers will be rewarded for their stay, rather than rewarded because they chose from a list of preferred hotels with deals offered by their travel agent. The Trippki presale is open now, but the technology will not be complete until 2018. When it is ready to be used, I predict it will become a major player in the travel industry.

Are there any other startups you think I need to know about? Let me know in the comments below!


Patenting intellectual property for artificial intelligence as complex as some AI code

By: Denise Deveau

Benjamin Alarie, co-founder and CEO of Blue J Legal, says the patent for its AI software for legal and accounting firms is filed and pending. But in an AI world, he’s the first to admit it is far from a simple process.

“Patents take three to five years to process. At the same time, technology is moving very, very quickly. If you wait too long to patent something that’s truly innovative, it’s likely someone else will file.”

Securing intellectual property (IP) can be a major hurdle for startups at the best of times. But software – and in particular AI — brings its own unique challenges.

“There are specific complications compared to mechanical patents that are more straightforward,” Alarie says. “For example, there are a lot of nuances there in terms of what is patentable. If you have a relatively small startup, it may be advantageous to have some IP protection in order to defend your work, but it can be very expensive. The key is, how much do you want to bite off to protect yourself?”

Organizations such as TD Bank Group are recognizing the challenges facing the startup community on the IP front. It has recently announced a $30 million investment pool that will provide patent funding and expertise to new fintech ventures, so they can focus on rapid growth and innovation. “The AI domain is exploding and there is lots of potential out there,” says Tim Hogarth, vice-president, Innovation Framework & Strategies. “This program is intended to help them move faster and get done more quickly.”

Speed is only one part of the equation, however. Guy Levi, principal with Levin Consulting Group in Wyckoff, N.J., notes that the first question on the part of investors, or anyone interested in a merger and acquisition of a startup or its technology, is whether they wholly and solely own its IP. Yet the answer is not that straightforward with AI.

“Why AI is so challenging is that patent law progresses linearly, while advances in AI move more quickly creating an accelerating return situation,” he explains. “In other words, the gap between issues created by advances in AI technology and the ability of the law to address them is getting wider. Three to five years is pretty much an eternity in the AI world and any time in that process, you could be stepping into someone else’s IP.”

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One major issue is that AI startups typically use one or multiple open source software resources to build their solutions. But not all licence agreements are the same, Levi notes. “Some don’t allow you to protect your IP; others exclude you from excluding others using the source codes; while still others allow you to get a patent, but restrict you from enforcing any claim. The problem is, most companies do not know what open source they have.”

A second and intriguing challenge is that machine learning by its nature constantly writes its own code to improve itself. So who is the owner or inventor and how do you know if that code infringes on someone else’s IP?

The third conundrum is, what exactly do you protect, whether through copyright, patent or classifying it as a trade secret? Is it the source code, data set, test data sets, or other component of the process?

“These are issues we are always talking about,” Levi says.

Patents take three to five years to process. Technology is moving very, very quickly. If you wait too long to patent something, someone else will file

While it may seem insurmountable, there are some steps a startup can take when considering their IP options.

Be very clear who owns the resulting intellectual property before embarking on anything. “Sometimes people get so excited about discovering things and moving the field ahead, they can get caught unawares further down the line,” Alarie says. “If you’re part of a hackathon team for example, have a common agreement amongst the team members before you start.”

Then take the time to understand the licence agreement for the open source software you are using.

Since patent rights are based on first to file, getting an early filing date is also essential, Hogarth says. “That claim date is applicable worldwide. Hence it is critical for startups to file as early as possible, which is often when money is the tightest.”

Things could  get even more complicated as the industry evolves from narrow, single task AI applications such as a cancer diagnosis or parking, to general AI that will perform more than one task (e.g. improving the quality of life on Mars), Levi says. “When we get to general AI, all bets are off.”


6 Startup Strategies That Turn Off Most Investors

By: MartinZwilling

Based on my own experience as an angel investor, and feedback I get from many other investors, here are a collection of answers that we often hear instead, from the least credible to at least reasonable:

 1. Insist you have no competitors. Leading with this answer will likely terminate      any further investment opportunity with this investor. He or she will assume      your comment means there is no market for your product or service, or you      haven’t looked. Neither speaks well for you or your startup. Even if you hedge      by saying no direct competitors, we all know that existing cars are still big      competition to your new flying automobile.

 2. Claim the first mover advantage. This is one of the most frequent responses I      hear, and is rarely convincing. The problem is that startups have limited      resources to keep them ahead of big companies. If your early traction      highlights an opportunity they have missed, they can mobilize their huge      resources and run over you. First mover advantages are only sustainable by      large companies, or founders with deep pockets.

 3. Proclaim your solution as a paradigm shift. If you insist that your technology      is so new and unique that it will disrupt your competitors and the whole      market, investors will fear that neither they nor you can afford the time and      marketing required to weather the change. They will likely decline on the      basis that historically, pioneers get all the arrows.

 4. Highlight your world-class team as the secret sauce. Insisting that your team      is better than any other, giving you a sustainable competitive advantage for      the long term, will likely come across as naiveté or arrogance. Investors know      that no startup has a lock on the best people and processes, and investors      don’t deal with unrealistic founders.

 5. Declare that you will offer the product or service free. Free is a dirty word      to investors, since they need a return on their investment. Perhaps you intend      to collect money from advertisers, but this requires a large investment to get      the audience you need before monetization can work. Facebook spent over $150       million before revenue.

 6. Intellectual property as barrier to entry. I like patents, trademarks, and      trade secrets, so this answer is a better sustainable competitive advantage      than the other five answers. Now all you have to do is defend your position,      and we all know that patents can break a startup in court battles, and will      have alternative implementations if the price is right.

Thus, there is no perfect answer to this question, so the best entrepreneurs see it as an opportunity to highlight their own advantages, rather than put down a competitor. Being negative is never the answer. For example, it’s tempting to say that your worst competitor has poor quality products, requiring costly maintenance, but it’s much better to say that you provide a five-year free warranty that no competitor can match.

After highlighting your best competitive features and your intellectual property barriers to entry, I encourage you to put on your humble face, and proclaim your determination to never stop improving your products and processes to out-distance competitors. You want investors to believe that you are a realist, but have the confidence and determination to win.

Investors know that winning in today’s highly competitive environment is more a mindset than a product feature. Competitor bashing is not a skill that you need to hone. I look for entrepreneurs that can sell themselves and their offering to discerning customers. Money from customers and investors is the same color.

Martin Zwilling


How Intellectual Property Can Give Your Business an Edge

By: Charles T. Collins-Chase, Ryan H. Ellis, Michael E. Kudravetz, Justin E. Loffredo

Picture this: It’s the first powder day of the season. You’re in the lift line, ready to go, and you overhear the person in line behind you explaining her idea for an improved snowboard binding she’s developing—the exact idea you spent the last year perfecting at your company. Despite the cold, you have to open your jacket vents as you consider the implications, which haunt you all the way down your first run of the year.

Later that morning you’re warming up with a coffee when you spot your company’s brand name on a ski helmet you didn’t make, with a strange logo next to it. Suddenly, the first powder day of the year is feeling pretty slushy. What should you have done? What can you still do?

What Is Intellectual Property?
Both scenarios illustrate the importance of protecting one of the most important assets your company has. But what exactly is intellectual property (IP)? Simply put, IP is the ideas that drive businesses. If you or your company put resources (time, money, blood, sweat, tears) into developing a product or service, chances are you won’t look kindly on copycats. Protect your innovations and your brand name and help advance or secure your position in the industry.

The various tools used to protect your intellectual property—such as patents, trademarks, copyrights, and trade secrets—each have a different purpose and protect different things.

Patents give you the right to exclude others from practicing your useful inventions, such as Thomas Edison’s revolutionary “Electric-Lamp” (light bulb).
Trademarks are words, names, symbols, or devices that a business uses to identify its goods and distinguish them from others, such as McDonald’s two golden arches or the name “Google.”
Copyrights protect original works of authorship, and can apply just as much to a PistenBully owner’s manual as it does to a Hemingway novel or Tom Petty song.
Trade secrets protect any valuable business information, such as a formula or compilation of information, that is not generally known, is subject to reasonable efforts to maintain its secrecy, and has economic value (think Coca-Cola’s secret recipe).
These are all types of IP, and protecting them has been the life blood of all of these successful enterprises.

How Can You Protect Your Inventions?
When you hear that person in the lift line talking about her idea for an improved snowboard binding that you have already patented, a patent may offer several ways to help you keep her—and any other potential infringers—from harming your business. You could file a lawsuit asking the court to award damages for infringement or prevent an infringer from continuing to make bindings covered by your patent.

But a lawsuit is not the only way to leverage your patent rights. You could also use your patent to generate an income stream by licensing your invention to the infringer or even by offering to sell your patent outright to the competitor. And sometimes, just holding a patent scares potential competitors away from infringing activities out of fear of a lawsuit.

So how do you get a patent on your invention? The U.S. Patent and Trademark Office grants patents only after conducting an examination of your patent application, carried out by a U.S. patent examiner knowledgeable in the relevant technology, to determine if your application meets all the requirements, including that it is novel and non-obvious compared to the existing state of art. A “utility patent” protects the functional or technical aspects of your invention for 20 years from the date you file your patent application. You can also obtain a “design patent” to protect the decorative features of your invention for a period of 15 years.

If you have a secret manufacturing process (e.g., a particular way of making a composite laminate ski core or a high-fluoro ski wax), trade secrets may be a useful way to protect those inventions. Better still, trade secrets never expire as long as they have value and remain a secret.

How Can You Protect Your Brand?
Trademarks and trade dress are a powerful tool to help you protect your company’s name, product names, logo, and even product packaging. Trademarks also make it easier for customers to find you and can make your products stand out in a crowded field.

And like a patent, you can assert trademarks in court to stop infringers. So when you see someone in the lift line wearing a ski helmet with your name or logo on it, having a trademark is vital to stopping the rival company from stealing the goodwill you have built in your brand.

Similar to patents, trademarks also undergo examination by the U.S. Patent and Trademark Office. But unlike patents, trademarks may be protected in perpetuity as long as you continue to use them.

Learn More About How to Use IP
In future posts, we will dive deeper into IP issues including: an overview of the process of obtaining a patent from the U.S. Patent and Trademark Office; using design patents to protect ornamental aspects of your products; how to choose between patent and trade secret protection; licensing and selling patents to generate income; and what to do if someone is using your trademark.

Don’t be the person in the lift line thinking about anything other than how to get the most and best runs possible on that perfect day. Protect your IP in advance and carve the perfect line on this valuable business asset.

Intellectual Property Rights