October 27, 2014 in ATDC News, Blog, Uncategorized

Intellectual Property Strategy: What Every Startup Entrepreneur Should Know

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Jackie Hutter, a globally recognized attorney in intellectual property law and strategy, is leading a three-part education seminar on IP at ATDC.

By Péralte C. Paul

So you have the next big idea. It could be the catalyst for a great startup.

What do you do?

According to Jackie Hutter, a globally recognized attorney in intellectual property law and strategy, a critical analysis of that idea — how it’s different, who is the target customer, and how to protect it via an intellectual property strategy — is a key first step for any startup.

Hutter, principal of The Hutter Group and former senior patent counsel at Georgia-Pacific LLC, says intellectual property, or “IP,” means more than obtaining a patent. In fact, analysis shows about 5 percent of patents obtained by some of the world’s largest companies are actually strategically valuable.

“These companies have large staffs of lawyers, marketing people and the like, but are still unable to get valuable patents 95 percent of the time,” says Hutter, a startup entrepreneur herself. “It follows that startups without the resources to hire experts internally must do an even worse job in generating strategically valuable IP.”

To help startups navigate the complexities of IP and how they should address it and incorporate it into their business development plans, the Advanced Technology Development Center at the Georgia Institute of Technology is leading a twice-yearly education seminar in IP Strategy, which Hutter teaches.

The seminar, which is free and open to all who register to attend, will be divided into three parts on Nov. 3, 10 and 17. It will cover the basics of how to leverage IP assets to maximize startup value, as well as provide insights into licensing startup technology.

“The course is intended to allow entrepreneurs to better understand how they can create IP that better allows them to get paid for their hard work of creating a startup company,” Hutter says. “I say, ‘good IP makes it cheaper to go through than around you.’”

In this week’s Tech Square Talk, Hutter breaks down the importance of IP and why any would-be or just-starting-out entrepreneurs need to understand it and how it can drive their business objectives.

Q: What is the objective of the ATDC IP Strategy seminar? What do you want participants to leave with in terms of understanding?

A: Most entrepreneurs think it is enough to hire an IP attorney to take care of things for her, but attorneys are not experts in the customer, the competition and the market. Instead, they are experts in IP. If you want good IP, hire a good IP lawyer. However, if you want to protect your business from competition by obtaining good IP, you first need to understand how you need to align your business objectives with an IP strategy. This means that the startup business team must first develop the strategy, often with an IP strategist like myself, and only later bring their lawyers into the mix. This course aims to introduce entrepreneurs to the skills they need to develop and manage their IP strategy to ensure that their adviser works with them to create and maximize the value of their startup business model so they can obtain the exit value they deserve.

Q: When we say “intellectual property,” what does that cover?

A: For most people, IP means the “usual suspects” of patents, trademarks, copyrights and trade secrets. These are legal property rights recognized by the law and are things that lawyers help you generate and protect. While these well-known forms of legal rights can create value for many companies, “intangible assets” also form a huge source of value for startups and other companies. “Intangible assets” is actually a broad category of corporate value in which patents, trademarks, copyrights and trade secrets reside. Intangible assets that are not IP include things like “sticky” customers, employee knowledge and expertise, contracts that create recurring revenue, customer relationships, access to resources or anything that creates value for a company. The easy way to look at it is to do an audit of where value lies in a company. If the company would be worth less if the patent, customer, employee, etc., were not present, an intangible asset exists. Many times people are surprised to find out their startup’s value lies in places other than they thought.

Q: How do you “protect” or “own” an idea? Or is the IP really to help the startup protect the process or disruptive solution they are bringing to market?

A: An idea can be protected if it meets the legal requirements for patentability. However, a patent covering an idea for a product that the customer does not care about only rewards the IP attorney for her efforts. By definition, many startups are creating new markets by solving unmet needs, often by bringing disruptive solutions to the customer. Frequently, there are a number of ways to solve the same customer problem. While these solutions were not evident prior to the startup’s successful market entry, often alternate solutions become crystal clear because by solving the problem the startup has effectively presented a roadmap to its competitors. If the startup does not obtain IP protection that encompasses the full suite of solutions that serve the market (as opposed to a single product) — I like to call this “protecting the why, not the how” — not only is it not stealing if another company creates a product to serve the same customer, the free market demands such competitive activity. Moreover, the competitor can now enter the market at a lower risk because the customer has been shown to exist, which means the startup will now have to compete not just on technology, but also on price.

Q: What should startups consider when deciding if they need IP protection?

A: While different startups will have different sets of criteria, generally speaking I recommend examining the following: Have you identified an unmet need in the market that is solvable with a new technology solution? Are you solving an unmet need in one market with an old technology solution from another market? Can the same customer be served with a substitute product that serves the same unmet need? Is the market big enough that once you do the work of identifying a paying customer, others will try to serve the same customer? Will the market for the product last more than three years? Does your technology solution have uses in markets that you will not be addressing at this time? Do your investors or potential buyers value IP? Do your customers value IP to demonstrate that they are purchasing innovative products?

Q: What’s the biggest mistake or misconception people make or have with respect to their understanding of IP and what it does?

A: It’s thinking that value will result automatically from the activity of getting IP. Time and again, I have to tell entrepreneurs that their IP doesn’t cover what they think it does, either because they or their attorney — or both — didn’t understand how to craft protection that would prevent competitors from playing in the same market space.

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