Jaime Siegel is Executive Vice President of of Licensing and Litigation at Acacia Research. He joined Acacia in 2013, coming to the company after serving as Vice President and Senior IP Counsel for Sony Corporation. Siegel has extensive experience in international IP monetization, enforcement and strategic acquisitions, and he agreed to chat with me on the record. Our interview took place on Thursday, October 23, 2014.
Siegel will be attending the IP Dealmakers Forum in New York City from November 6-7, 2014. He will also be on a panel on Friday morning titled Evaluating Public Market IP Investment Opportunities, which will discuss how investors can measure market value and performance of public IP companies, as well as exploring the various business models and strategies currently seen in the marketplace.
My conversation with Siegel was for the purpose of discussing these topics. As you will read below, while our discussion starts there it became a far ranging discussion of the issues facing the industry more globally. If there is a theme that shines through from our discussion it is about the undeniable reality that early stage investors always want to see patents before investing.
How many patent applications has your company filed today?
Facebook filed at least one patent application today, Oracle filed about 3, Google filed about 5, Microsoft and Apple filed more than 8 each, IBM filed nearly 30 patent applications just today. These are the recent averages per workday anyways. Currently Facebook has more than 450 pending applications, Google has about 3500, Oracle has 3700, Apple has 7000, and Microsoft has 30,000 pending applications. I picked these names to come up with the averages because these names have software heavy portfolios, the type of patents that have been feeling some pressure from both the anti-patent circles and from the Supreme Court – as has been amply covered by IPWatchdog.
If you are a typical new economy small tech company with software and internet centric technology or products, the number of patent applications your company filed today is probably zero. Of course filing and prosecuting patent applications is not cheap and that’s part of the explanation. However it is worth noting that most of the successful companies with software-heavy products, including those in the list above, have been filing patent applications from their very early days. An excellent recent article at IPWatchdog revealed that even an overtly anti-patent company such as Twitter has been indeed filing patent applications from its very early days and have been accumulating a large portfolio through further acquisitions. The fact is that patent protection is a hallmark of a successful innovative business, whether the product is software or not. So, it is startling to see the difference in attitude of the small innovators and the already successful large innovators when it comes to protecting their inventions.
A famous song entitled When You Believe by Mariah Carey and Whitney Houston is about believing in yourself and not losing hope. When you are working on a new idea and blazing a new trail, your self-belief and your passion drive you forward, and inspire you and others around you.
Passion is required, but passion alone is not enough. True passion will make you get up early in the morning, stay up late at night, or work for free. However, in addition to pursuing the ideas that you are passionate about, it’s equally important to take steps to protect your ideas. In a recent post, Doesn’t #NFC Stand for National Football Conference?, I wrote about our early entry into mobile payments. In that article I shared that, “In addition to taking action, risks and being customer focused, we also invested heavily in IP.”
Investing in IP is especially valuable when you are early in a market. It’s a mixed blessing though. On the one hand, it gives one an opportunity to file patents with broad claims, which is great for those who recognize the value in that strategy. For example, one of our early investors and board members was Chuck Russell who was one of the first CEO’s of Visa and reminded me of John Wayne. He was a great guy – very smart, charismatic, and honest. When I gave him a presentation on my company, which included one slide on the patents that we had filed, he asked, “Young lady have you ever heard of VHS and BETA?” I replied of course. He then went on to tell me that while VHS won the video tape war, because BETA had a patent on the technology, they were able to close their office and set up a PO box to collect monthly royalty checks. Chuck explained that I could do the same if I wanted. Based on the fact that I had filed patens in mobile payments, he made a significant investment in my company and joined our Board Of Directors.
As the girl in the fairy tale ruefully remarked, “You have to kiss a lot of toads to find a prince!” Raising capital is not much different and is often a difficult, tedious, and frustrating process.
Common sources of capital worth pursuing include the following:
1. Potential Competitors
Companies within the same industry which will be affected by the introduction of the new invention are potential investors. Technology and software companies frequently buy small rivals solely to acquire innovative products. Since 2001, Google has acquired 127 companies, many of which were start-ups whose only asset was protected software. However, inventors approaching their potential rivals should do the following:
be confident that their intellectual property is fully protected and cannot be duplicated
understand that potential competitors will be fore-warned of a new, potentially market-disruptive product and take strategic moves to blunt the market effect
insist on a fixed schedule of deadlines and actions to take the product to market within a specific time frame
Your quest is finally complete. After hundreds of hours of effort, thousands of dollars, and innumerable worries of failure, you’ve finally succeeded. Your idea has become a reality, with riches and fame just around the corner. With the hard work done – envisioning, developing, and protecting your invention – you approach potential investors and buyers for capital to manufacture and sell your product. In the process, you discover one or more of the following:
the majority of people don’t understand the value of your invention or have no interest in it
some claim it is their idea
others try to steal it
those who see its potential want to pay a pittance for the product and leave you standing on the sidelines
Such is life for an inventor. From the years 2002 to 2012, more than 4.6 million patent applications were made and 2.2 million patents issued according to the U.S. Patent and Trademark Office. Yet, only a small proportion of the products covered by the issued patents become commercial successes.
Crowdfunding is a proven way to get initial funding for the commercialization of an invention. Crowdfunding involves posting a project description on the internet, asking for pledges to complete the project, and if the minimum amount of pledges is received by a certain deadline, having the funds transferred to the project. On some sites, such as Kickstarter.com, if the minimum isn’t reached, you don’t get any money. On other sites, such as Indiegogo.com, if the minimum isn’t reached, you still get what you’ve raised.
WASHINGTON — NASA’s Space Technology Program is looking for visionary advanced concepts. This year’s annual call for NASA’s Innovative Advanced Concepts Program (NIAC) is seeking proposals for revolutionary concepts with the potential to transform future aerospace missions. Proposed concepts should enable new missions or significantly improve current approaches to achieve aerospace objectives.
NIAC studies visionary aerospace architecture, system or mission concepts that are exciting and unexplored, yet credible and executable. The concepts are early in development — generally 10 years or more from operation. They are chosen based on peer review of the potential impact, technical strength and benefits of the proposed study.
“While Goddard or Tsiolkovsky envisioned rockets taking humans to space, the rest of the world focused on the industrial revolution and challenges of the early 20th century,” said Michael Gazarik, director of NASA’s Space Technology Program at the agency’s headquarters in Washington. “These visionaries had radical ideas of space travel and exploration that would take dozens to hundreds of years for maturation, but were worth waiting for. NASA’s NIAC seeks proposals from today’s visionaries who have futuristic concepts that may transform how we live, work and explore the high frontier.”
Pulling the plug and letting out the baby with the bath water is ridiculous, on that everyone can agree. What people can’t agree on, surprisingly, is selecting a path for the future from the playbook of winning plays. Time and time again any more “do-gooders” seem to want to call plays from the playbook of plays that have never succeeded. In what universe does that make any sense whatsoever? When will they realize that plays that have not worked have failed for a reason? Success is not overdue. Get a grip!
With a firm grasp of some alternate reality, critics of the patent system, and specifically the critics of software patents, would have the United States forfeit the future in favor of something that has never worked. Curtailing patent rights has never worked to produce more innovation anywhere it has been tried. The inconvenient truth is that there is no evidence that a weaker patent system fosters innovation, but there is overwhelming evidence that a strong patent system does foster innovation, leads to growth, investment from abroad and a growing more prosperous economy. Indeed, weak patent rights virtually guarantee innovation simply won’t happen.
So what is fueling the anti-software patent hatred and ridiculous claims that software patents are somehow evil? It is a particular world-view or ideology that approaches religious zealotry. It certainly isn’t anything that resembles factual truth or reality.
Did you know you could secure a business loan with your patent(s)? Many people are unaware that a patent or patent portfolio can be used as collateral to secure a loan, but if you take a look at the assignment records at the USPTO you can see just how common this practice really is.
An assignment indicates who owns an issued patent or pending patent application. They are registered with the USPTO and available for public inspection. There is a special type of assignment called a “security agreement”. A security agreement indicates that a patent owner has used its patents as collateral for a loan. The security agreement says that the lender will get ownership of the patent if the current patent owner defaults on the loan. The security agreement also restricts what the patent owner can do with its patent so that the value of the patent is preserved. A patent owner might be obligated, for example, to pay the maintenance fees for an issued patent. Once the loan is paid off, the security agreement is released. If the loan goes into default, however, the ownership of the patent is transferred to the lender.
All too often inventors and entrepreneurs spend so much time creating that they have their head down, plowing forward, focusing only on the day to day operations associated with inventing and growing a business. Almost without fail, inventors know very well what they have invented and what they plan to do, but they have a terrible sense of what their invention could be. Just the other day I had a conversation with an inventor who thought we might not be understanding his invention because the first draft of the patent application seemed to miss the simplicity of his invention. Our job as patent attorneys is to not only try and protect the invention presented, but to work with the inventor to figure out the full glory of what the invention could be and what it could evolve into.
A patent application should certainly protect what the inventor is doing and what they want to do, but remember that in order to get a patent you do not have to produce a working prototype. You just need to be able to explain the invention with sufficient detail so that others skilled in the relevant technology area could both make and use the invention themselves without having to engage in undue experimentation. What is “undue experimentation” is a topic for another day, but suffice it to say that invariably what the “invention” is from a patent perspective is much broader than what an inventor thinks they have, and that is one critical reason (among many) why if you can afford to hire a patent attorney or patent agent you are always going to be better served by doing so and will wind up with much broader protection than doing it yourself.
Patent Agent, engineer and Internet entrepreneur Kevin Prince is attempting to raise money on Kickstarter. His project? A book that celebrates the art contained in published U.S. patent applications and granted U.S. patents.
Before going any further it will probably be beneficial to discuss what Kickstarter is, and what it is not. Kickstarter is a funding platform focused on a broad spectrum of creative projects, and is fast becoming a popular way to raise small but meaningful amounts of capital to kick-start a project, even an invention or company. It is different than raising money for an equity position, which is specifically prohibited by Kickstarter. The Kickstarter funding model instead is based on the offering of rewards – copies of the work, limited editions, fun experiences, etc.
Louis Foreman, the producer of the Emmy Award winning PBS television show Everyday Edisons and the publisher of Inventors Digest, announced in April 2011 that he was launching of a $25 million Innovation Fund. Phase 1 of the search for inventions for the Fund to invest in was completed in mid-June 2011. Phase 2 of the search for inventions and ideas has just begun and will run through Monday, September 12th, 2011.
“The Fund is off to a great start and we have received some very innovative technologies as part of the first wave,” Foreman said. “I am amazed at the creativity and ingenuity. It just reinforces our original premise that everyone has a great idea, but most people don’t follow through. The Fund has become a catalyst to submit these ideas and see if they have commercial viability.” The proceeds of the Fund which will be invested by Edison Nation to bring innovations to market. Inventors who have their inventions or ideas selected will share in any profits with Edison Nation.