IP

IP Tips for Startups – Dr Justin Blows Interviews BT Imaging CEO Dr Ian Maxwell

This huge machine is Ian’s company BT Imaging’s QS-W2 , the photovoltaics industry’s premier silicon wafer robotic inspection system.

Justin Blows, Principal  of Phoenix Intellectual Property, interviews one of our long time contributors Dr Ian Maxwell about IP & Startups.

Ian has a wealth of experience with high-tech start-ups in Australia. He has run start-ups in areas as diverse as polymers, water treatment, medical diagnostics, ICT, touch screens, solar technology and software apps. He has also been a venture capital partner and invested in many more start-ups.

With all this experience, I couldn’t wait to discuss patents and start-ups with Ian. Ian has kindly agreed to reproduce part of our discussion here.

Justin: As an experienced investor, do you believe Australian start-ups should have patents?

Ian: For an investor, the correlation between patents and investment return is too strong to ignore. I greatly prefer to invest in Australian companies that can have patents. I strongly encourage start-ups that I invest in to pursue patents. The reality is, however, that most investors in Australia are investing in start-ups that don’t have patents and don’t get a return. I advise entrepreneurs to only invest their time and effort into businesses where it makes sense to patent certain inventions.

Justin: Not everyone believes that start-ups should have patents, especially when it comes to start-ups developing software.

Ian: Yes, there are sceptics, many of whom haven’t looked at the evidence. As a scientist, however, I believe in looking at the evidence.

Pulling together the results of two studies, I found that, on average, a software start-up with patents is around four times more likely to go to an initial public offering (IPO) than a software start-up without patents. Each IPO had an average return of around four times greater than a trade sale. That is, a software start-up with patents has the potential to provide a greater return on investment than a software company without patents. (A full account of this analysis is here).

Software companies with patents are bankrupted at half the rate of software companies without patents. In my experience, when a company is bankrupted, patents offer the highest value assets to help recoup investment losses, resulting in better portfolio returns for investors.

I expect the importance of patents to be even greater for start-ups in areas other than software.

Justin: What about from the perspective of the start-up? Are patents worthwhile?

Ian: Most start-ups in Australia have a default position of not pursuing patents. Start-up founders have limited funds and find it hard to find the time for patents. These are valid issues.

In my experience, however, patents are worth pursing from the start-up’s point of view because they generally attract a better quality investor and increase valuations, and may add value on exit if the acquirer assigns value to the patent. In one study, software companies with patents received 73% more funding. This is because companies with patents represent much better business investment opportunities.

Justin: What are your start-ups’ experiences of patents?

Ian: As yet, patents have not affected the exit value of my start-ups due to particular circumstances, but I am a strong believer in the evidence.

Patents have provided value in others ways: engaging with the patent system has made some of my start-ups aware of prior art that they probably would not have found otherwise. In a competitive environment, it’s not a good idea to replicate something that has already been tried. It may also be important to work around your competitors’ patents.

Justin: What is an appropriate patent strategy for a start-up?

Ian: A start-up should consider the impact that patents will have on the likelihood of a successful exit and the exit value. A patent strategy is generally easy to develop when this question is considered.

If your patent portfolio matches industry expectations then the likelihood of a successful exit increases. To gauge industry expectations, it can be useful to look at the patent portfolio of other start-ups in the same field that have successfully exited.

 

 

 

Four Tips For Saving Money When Patenting Overseas

Here are four valuable tips for saving money when obtaining patent protection overseas.

Identify your markets

There is no such thing as a “worldwide patent”, but you can patent an invention all over the world by applying for a patent in each national jurisdiction, for example, the USA.

However, the cost of patenting an invention increases with each additional jurisdiction covered by a patent. You can save a lot of money by only obtaining patents in jurisdictions that matter to you.

How should you decide which jurisdictions to protect?

I generally advise my clients to first pinpoint the geographical markets for their technology. Where will the technology be sold and used?

Those are the areas where patent protection may be worthwhile. I say “may” because it’s still a business decision, and you may have different objectives and strategies.

If the invention will be manufactured in a foreign country, it’s usually a good idea to protect it with a patent there too.

What if you plan to licence the technology to other parties? The same principle apples: patent the invention in the jurisdictions where the licensee will sell, use or manufacture it.

You can save substantial money by limiting your patent protection to the jurisdictions you really need. In making this decision, it helps to estimate the size of the opportunity in each market and then rank them.

Once you pick the top half dozen countries, you’ll probably find most of the market is covered.

Get market feedback early

This is a big issue, but easily overlooked. The aim is to assess the business case for the product (and associated patent) in each patented jurisdiction.

Try to get practical feedback about the product in each of your chosen jurisdictions. For example:

  • How big is the market?
  • Exactly who will buy it?
  • What do potential customers think of the product?
  • Does it have the features they want?
  • How much will they pay for it?
  • What are the competing products?
  • Are there any cultural reasons for customers to prefer a competing product?

Ideally, this data should come from your potential customers. Third party market reports are no substitute for data from potential customers about your specific product.

After you lodge a provisional patent application, you will have 2.5 years before you need to choose jurisdictions for patent protection.

Use that time wisely.

Be prepared to kill

Be prepared to “kill off” patent applications in some of your chosen jurisdictions. Why would you want to do this? Well, you may get new information about the market demand for your product so you’ll need to be ready to modify your patent strategy.

For example, you may find that the demand for your product in a particular jurisdiction is less than originally estimated, and the business case for a patent there does not stack up. You can save money by discontinuing the patent application in that jurisdiction while keeping the others.

Engage a good patent attorney

This might sound a bit self-serving, but the reality is that the business of patenting is a complex field with many pitfalls to be aware of. Not only will a good patent attorney steer you through the minefield, they will help you get better value for money.

Your technology and circumstances are unique, so there is no one-size-fits-all strategy for patenting. There are many opportunities to save money and act strategically, but it takes an experienced patent attorney to recognise them.

 

Justin Blows is the Founder of Phoenix Intellectual Property. 

Justin is experienced in protecting a very broad range of technologies, including mechanical, electrical, information and communications technologies (ICT), mining, optoelectronic and photonic, water, and energy. 

Prior to his present career, Justin co-founded and was a chief investigator of The Centre of Excellence for Ultrahigh Bandwidth Devices for Optical Systems at The University of Sydney, a highly prestigious and world leading research centre. 
He is a reviewer for the IEEE Photonics Technology Letters, and be a member of technical committees for prestigious international conferences such as the Conference for Lasers and Electro-Optics (CLEO).

Justin has authored over 100 articles in the fields of science, engineering and patent law, including the effects of Carbon Emission Trading Schemes on patent strategy.

You can contact Justin via Linkedin 

Thanks to Wikipedia for the image of the The US-american cipher machine SIGABA