Posts Tagged: "Startups"

Imagine the following scenario: You have an idea for a new mobile application. As adoption of the app picks up, so does your business, and you hire more employees to provide sales and support assistance. You are on your way to transforming your startup into a successful business. Needing additional capital to scale the business more quickly, you identify a strategic partner interested in investing in your business. Before you can close on the funding, several employees report that they did not receive their paychecks through the direct deposit system. The investigation reveals that several months ago, your organization received a series of spear phishing emails. You learn that multiple employees opened the email and its attachment giving the cybercriminals access to your systems. Not only are you out the payroll money, but you also learn that in addition to your employees’ banking information, the criminals had access to your customer contact information and the source code for your app. A cyberattack is an unwelcome event for any company, but the effects can be especially detrimental to a startup, with 60% or more of small businesses that experience a data breach going out of business within a year of the breach. It is impossible for any size business to guarantee a system that is fully secure. However, not all companies have millions of dollars to invest in cybersecurity and by allocating even limited funds to assessing your data privacy risks, implementing a protection plan and creating an incident response plan, a startup can significantly improve its chances of surviving a cyberattack.

The bipartisan STRONGER Patents Act of 2019 took an important step forward last week, as the Senate Judiciary Subcommittee on Intellectual Property held a hearing on the proposed legislation. Senators Tillis and Coons, the Subcommittee’s Chairman and Ranking Member, should be commended for holding the hearing and focusing attention on our patent system’s role in promoting American innovation and job creation. As several of the hearing witnesses made clear in their testimony, our patent system has been dangerously weakened in recent years through a series of judicial, legislative, and administrative changes. These changes have undermined patent rights and made it difficult for inventors to protect their innovations from infringement. Meanwhile, our foreign competitors, including China and Europe, have strengthened their patent rights. This has put us at a competitive disadvantage and helped contribute to a trend of both innovation and venture capital increasingly moving overseas. For example, the U.S. share of global venture capital fell from 66% in 2010 to 40% in 2018, while China’s share increased from 12% to 38% in the same time period. And despite more than a decade of economic growth following the Great Recession of 2007-2009, startup formation has failed to return to its pre-recession levels.

Patents are often referred to as monopolies. But that is a fundamental misunderstanding of how patents work to enhance competition. The truth is that a patent is a natural anti-monopoly. In a functioning patent system, inventions become investible assets when they are patented, and the value of the invention increases as market demand increases. Because of the direct relationship between market demand and patent value, a patented invention can attract enough investment to compete with entrenched incumbents in the market for the invention. This effect introduces new competitors into the market who are protected against incumbents for a long enough period that they can survive after the patent expires. Thus, patents act to increase competition by introducing new competitors into the market and thereby create competitive markets. But perhaps even more important, some inventions deliver a strong dose of creative destruction to monopolistic incumbents who did not innovate fast enough, causing those companies to fail and clearing the market of dead weight, thus opening the market to innovative new companies. Patents are the ultimate anti-monopoly in a free market. But for this to work, the market must function undisturbed by crony laws and regulations. A patent must be a presumed valid “exclusive Right.”

This week on Capitol Hill, the Democrat-controlled House of Representatives has planned a number of hearings on climate change and antitrust matters, especially where the T-Mobile/Sprint merger is concerned. In the Senate, cybersecurity takes center stage at the Senate Homeland Security and Energy Committees. Elsewhere in Washington, D.C., the Brookings Institution got the week started early with a look at the impacts of artificial intelligence on urban life; Inventing America hosts a half-day event looking at current issues in the U.S. patent system; and the Information Technology & Innovation Foundation examines the future of autonomous vehicles in the freight industry.

Copyrights protect original works of authorship.  This gives a copyright holder exclusive rights to modify, distribute, perform, display, and copy the work. However, as with other forms of intellectual property, there are important things copyright holders need to know in order to best protect and utilize their copyrights. You do not need to register a work to be protected by copyright.  However, registration is encouraged as it provides enhanced protection for copyright holders.  For example, a registered copyright is considered prima facie evidence in litigation, meaning the court will accept, on face value, that the copyright is valid unless it can be proven otherwise. 

A well-devised intellectual property (IP) portfolio can go a long way to ensure a startup biotech company’s business success in the marketplace. Patents allow a patent holder to exclude others from making, using, offering to sell, selling or importing a similar product based on what is claimed in the patent while the patent is in force (35 U.S.C. 154). Biotech startups generally invest in utility patents to protect core inventions and serve as barriers to entry against competitors. When faced with budget constraints, biotech startups can tap into less expensive IP protection options to boost market position, drive up value, attract venture capital funds and generate revenue, including cross-licensing and/or settlement agreements.

Trademarks protect distinctive marks, such as brand names, logos, and designs.  This protection allows a trademark holder to exclude others from using the mark without permission of the owner. The following includes important, basic information about trademarks, as well as how start-ups can protect their trademarked intellectual property.

Intellectual property probably isn’t high on the to-do list for most new nonprofits and business start-ups. There’s plenty enough to do with setting up an organization, paying bills, and serving customers and clients. However, intellectual property is important and shouldn’t be overlooked. Companies and organizations that don’t protect their IP can risk losing hard-earned work and concepts. Also, companies can risk liability if they violate the IP rights of others, even unknowingly or by accident. Patents provide inventors the right to exclude others from using the technologies covered by the patent for a limited time.  In exchange for exclusivity, inventors must disclose how to make and use the invention.  An inventor can apply for a patent with the United States Patent and Trademark Office (PTO), as well as other intellectual property offices around the world.

The patent process is long and complex, but well worth the effort if it means protecting your invention and your new company. Key decisions made along the way can help simplify future steps in the process and make obtaining a patent significantly more efficient. Early on, determining a patent scope through patentability searches can help narrow a patent application to the important novel aspects that are most worthwhile to protect. Similarly, preparing a thorough provisional application can make the non-provisional application preparation much simpler and afford better protection against later published works or filings by others. By thinking about these key decisions ahead of time and being aware of the patent process, you can be more prepared when the time comes to seek protection for your invention.

What if those who own large patent portfolios decided to actually help start-ups by opening up their patent portfolios to those start-ups rather than have those companies operate without a net and worrying about what has become an omnipresent threat of patent litigation? After all, a patent owner with a well formulated licensing program is not one who is interested in going after cash starved start-up companies anyway.

Understory’s first patent covers the sensor device itself which consists of a stainless steel sphere sitting on top of a shaft, a configuration which one of the sensor’s designer called “God’s joystick.” “The sensor detects microdeflections from rain or hail pushing on the joystick,” Kubicek said. Such measurements take place on the order of 50,000 times each second and algorithms processed at the device separates each microdeflection into a data point which can be sent to a cloud-based network of weather data… One has to wonder though whether the Federal Circuit and Supreme Court, when they might get their hands on these patents, will find them to be directed to nothing more than an abstract idea. After all, sensing the weather has been done since at least the dawn of recorded history.

For IP due diligence for investment in a start-up or young company, the most important conversation is with the key developer(s) of the product(s) or service(s) [the “Conversation”].  Ideally, the Conversation is led by an IP attorney who understands the technology.  The goal is to determine the source of the product design.  Was open source software used?  Is this a variation of something an engineer was working on at a prior company?  Was a published article used?  Perhaps consultants were used?  Was the design changed during development after some dead-ends?  Where there isn’t budget for a full-fledged investigation, this Conversation and follow-up will likely get 80% of the risks identified for 20% of the cost.

Wealth in Silicon Valley created and then funded more startups, and the cycle continued. It was like a petri dish, only with a multiplication of startups instead of cells. Today, the petri dish effect will have long term negative consequences for the U.S. as China is capturing technologies that once were controlled by American companies and spinning up massive numbers of startups in these fields.

There can be no dispute that the level of business startup activity has been on the decline in the United States over the past few decades. So alarming is the downward trend that publications like the New York Times, the Wall Street Journal and others have tackled the issue in depth. Inc. Magazine has even asked whether entrepreneurship in America is dead? Still, a disturbing counter-factual narrative seems to be taking hold inside the Beltway, and on Capitol Hill. Despite all research and data to the contrary, some are actually saying that startups are on the rise, and then using carefully selected and tortured data points to claim that patent reforms are the reason for the rise in startups, and more patent reforms are needed.

The decision whether to secure technology using a trade secret or a patent hinges as much on the technology as it does on access to capital. Small companies need funding to commercialize new inventions. A patent provides a private property right that can be leveraged to attract funding. However, most large companies like Waymo, one of the richest on the planet, do not need funding. This is no doubt why Alphabet and its Google subsidiary have lobbied to weaken the patent system. It is understandable because it is in the best interests of their well-funded enterprises. It is, however, not in the best interest of innovation more generally speaking, nor is it in the interest of society… The IP system as it currently exists acts to protect huge monopolistic enterprises at the expense of everyone else – employees, startups, job creation, innovation, and society at large. It is no wonder that startups in America continue to decline, as recently reported by none other than the NY Times.