Small Business Owners Need to Get It in Writing

ContractWhy do so many business owners only think about the contract AFTER they have done the work?

Let me set up the typical scenario:

Prospective Client:  Hi Attorney Proia.  My accountant, Joe Schmo, suggested that I contact you.

Me:  Hi!  How can I help you?

Prospective Client:  A customer called me up and needed a custom website with X, Y, and Z functionality.  The website came out great, and other customers are interested in it.  Who owns the website?

Me:  What does your contract say?

Prospective Client:  I don’t have a contract.  They needed the work done in a hurry…there was no time to lose…it was a handshake deal…

Ugh!

Why, oh, why didn’t you think about this stuff BEFORE you did the work?

Written contracts are important.  They define relationships.  They sort out the pesky little details like what happens if you don’t perform, who owns what, and how on earth you’re going to get paid.

When I worked in-house, legal was always blamed for holding up the deal.  If it weren’t for legal, we could have booked that order by now.  (I always liked to think that if it weren’t for legal, the company would be out of business because we’d never get paid, everyone would steal our IP, and general chaos would reign, but I digress.)

I know that negotiating contracts can be frustrating and time-consuming.  Contracts can actually be scary for small business owners.  What if I ask for too much?  Will the customer walk away?

When you think that the worst thing that can happen is the customer walking away, it feels better to just take the money without making waves.  Can’t you hear the list of excuses for not getting an agreement in writing?  They seem like nice people.  They’ll never sue me.  I know they’re good for the money.

But then you end up with uncertainty, and let me tell you, uncertainty is WAY scarier than letting the customer walk away.  In fact, after a few rounds of trying to get your money, you will wish you had let them walk right out the door.

By trying to avoid a little pain in the beginning, you could be dealing with a lot of misery in the end.

Don’t let this happen to you.  Get it in writing BEFORE the $#!+ hits the fan (because you can always use the contract to clean up after the mess.)

7 Things American Companies Need to Know About the America Invents Act

patent-reformIt’s amazing how fast 18 months flies by.  It seems like just yesterday I was lamenting the passing of the America Invents Act, and now here we are mere days away from its final implementation.

If you haven’t heard, the United States will officially follow the herd and become a First-Inventor-to-File nation on Saturday, March 16.  In light of this new beginning, here are 5 things you should know about the AIA to ensure that your inventions are protected.

1.  First-Inventor-to-File Wins

Here’s the scenario.

Two competing companies are working to solve the same problem.  Both companies invent the same solution.  Each company files a patent application with the US Patent Office.  Who does the Patent Office award the patent to?

Under the First-to-Invent system, the patent would be awarded to the inventors who could show that they invented the invention first.

Under the First-to-File system, the patent would be awarded to the inventor who filed their application first.

To quote Tom Hanks’ character in Cast Away, “We live and die by the clock.”  You don’t have time to make everything perfect before you file a patent application.  Good enough will have to do.  (You might even have to settle for just OK.)

2.  You Will Spend More Money Earlier in the Process

Under the First-to-Invent rules, an inventor could tinker around with his invention, tweaking it until he turned his concept into a finished product.  At that point, he could file one patent application to cover the end result without fear that someone would step in and file their application before he was ready.

Those days are gone.

You no longer have the luxury of waiting.  An inventor will have to be on top of his patent game from the very beginning.  The new corporate patent process might look something like this: file at conception, file again, maybe multiple times, as the inventor works the concept into something that resembles a more complete product, and at the end when the final product finally reveals itself.

That’s a lot of money earlier in the process to ensure that you have won the race to the patent office.

3.  You Need a New Attitude

In order to make this adjustment successfully, your organization MUST adjust your thinking when it comes to patents.  You can’t file a patent as an afterthought in your New Product Development process.   You need a procedure to identify any and all patent issues as early in the process as possible.  If you don’t, you run the risk of losing your valuable business assets.

4.  The Strategic Use of Provisional Patent Applications

Make sure you and your patent attorney understand how to use provisional patent applications.  When money is tight and time is of the essence, these informal, non-examined patent applications may just be the answer.

5.  Amending Claims Can Change the Rules

It all seemed so simple.

Applications filed before March 16, 2013 will continue to be subject to the old First-to-Invent rules.  Applications filed on or after March 16, 2013 will be governed under the new First-to-File rules.

But nothing is ever as simple as it seems under the AIA.

What if you amend or add claims in your first-to-invent patent application after the March 16, 2013 date?

Even though you had filed your patent application prior to March 16, 2013, certain changes you make to the claims may pull your application into the First-to-File rules, and you may not get the full protection of the First-to-Invent rules you thought you had.

6.  Change to the Grace Period Rules

Like the First-to-Invent system itself, America had another somewhat unique feature in its patent system.  The United States offers what is known as a Grace Period.

In the United States, inventors were given 12 months to file a patent application after the date the invention was first disclosed to the public no matter who disclosed the invention.  That was a benefit of the first-to-invent system.

Now, the grace period only applies to disclosures made by the inventor.  Public disclosure by anyone else anywhere in the world prior to you having a patent application on file means you lose your patent rights.

(Think about how this could impact heavily competitive industries with multiple companies working to solve the same problems.)

7.  Prepare for the Unexpected

Just when you think you understand the AIA things are bound to change.  Like any new law, what the various provisions and terms of the AIA really mean will be decided by the Courts.  Over the next decade (or longer) IP practitioners will closely watch as cases wind their way through the Federal court system.  There is already talk that a Constitutional challenge will be waged against the America Invents Act itself.

Don’t be fooled.  The America Invents Act brings significant change to American business.  In 10 days, we enter into a brave new world, America.  Good luck and God speed.

3 Little Words

It’s January, the month of resolutions, of planning, of strategizing what we hope to accomplish in the new year ahead.

Personally, I don’t make resolutions.  Although there are a few things I could change about me, I know that making resolutions is a waste of time.  Why?  Because I know I’m probably not going to stop procrastinating, there will still be clutter around my house, and even though I pay for membership to our local YMCA, I’m still going to struggle to get my butt over there.  (That’s just who I am.)

I typically make goals instead.

Every year I make a list of things that I hope to accomplish in the 12 months that lay ahead of me.    Some goals are personal, like find a new kitchen table that better accommodates our family or paint the master bedroom.  I might even unpack the last of the boxes from our move 3.5 years ago.  (This particular item has to do with that procrastination thing I mentioned above.)

I also spend a fair amount of time setting goals for my business.   So, during the last week of 2012, I took out a notebook and started jotting down all of the things I hope to accomplish in 2013, like

  • Conduct a webinar once a month.
  • Write an eBook on IP for Entrepreneurs.
  • Blog every Tuesday and Thursday.
  • Build my “List”.

There were goals related to social media and income, as well as a new blog that I’ll be rolling out this month.  When I finished this year’s list, I felt pretty good about it.  With a little effort, each item is pretty easy to accomplish, and if I accomplished every item on the list, I would certainly move by business forward.

Or so I thought.

I was proud of myself and my list.  That is until I read David Ackert’s blog post, Three Words for 2013.  David doesn’t make resolutions.  Instead, David uses Chris Brogan’s “My 3 Words” concept for New Year’s planning.

The 3 words idea is simple.  You identify 3 words that serve as themes for the upcoming year.  These words are supposed to “sum up what you want to work actionably on changing/improving in the coming year.”  According to Chris Brogan, choosing 3 words to focus on helps you look at the bigger story.

“The big story is that which we want to believe about our life and our goals and our plan…Goals are a way of knowing that you’re headed in the direction of your…story.”

So I took another look at my list.

My list was just a list of individual action items.  It’s not a bad list, but merely a laundry list, a to-do list.  It didn’t say anything about what I want to be true and to believe about my life.  Where was my “big story”?

So I came up with my 3 words.

  1. Dare. 

  2. Communicate. 

  3. Earn. 

If I dare to step out of my comfort zone and communicate my message to those who need to hear it, I will earn respect, an audience, and money.

That’s a pretty powerful story.

I challenge you to try this exercise.  Let me know what your 3 words are in the comments below.

Step Into the Arena and Be Prepared to Get Dirty

 

VS

 

 

 

Intellectual property is a full-contact sport.

Yes, you read that right.

I mean full-contact, complete with trash talking, gloves come off, smack-down contact.

Punches are thrown.  Combatants get bloodied and bruised.  There are winners and losers.

Don’t believe me?  Just check out the ruckus surrounding Samsung and Apple in their battle for smart phone supremacy.

Unfortunately, there are those in the media who don’t understand this simple concept.

An ill-informed media pretend that they understand the intricacies of patent law after an interview or 2 with a disgruntled company and a few hours of research.  They twist words, spew fiction as fact, and completely misrepresent the law.  Then these reporters refer to patent lawsuits as “WAR” as if U.S. lawmakers never intended for companies to sue over patent rights.

They would have you believe that IP is like golf.  That it’s a gentleman’s game where nobody gets hurt.  No one sues anybody.  Everyone gets a license with great terms if they want one, and companies that choose litigation over licensing aren’t playing by the rules.  They point to an increase in the number of patent contests as a sign that the system is broken.

But anyone who knows a thing or two about patent litigation knows that’s not true, and never has been true.

Patents first and foremost are offensive weapons.

Patents aren’t magic amulets that protect your product or your business from infringers.

They are the means by which companies assert their rights to their government-granted monopoly.  And guess what?  Lawsuits are, and have always been, the intended method of asserting those rights.

In fact, patent lawsuits have been around for a very long time.

So why is there so much criticism now?

What has changed (and brought a massive amount of exposure to patent litigation) is the number of prominent participants, especially Apple, as well as the huge amounts of money at stake.

A few high-profile technology giants decided to up the ante in patent litigation.  For the first time in decades, some of the biggest patent owners in the US turned to their patent portfolios to protect their market share.  And Apple’s involvement in serious patent litigation brought massive amounts of attention to something that no one in the mainstream media ever cared about before.

For years, most people, including journalists, never thought twice about patent litigation.  Suddenly, Steve Jobs says that Apple will go thermonuclear on Google, and people demand to know what’s going on.  A big verdict and a few billion dollar+ patent auctions later and the world as they understand it has been turned upside down.

However, the world of patent litigation, as most people understand it today, never existed.

IP has always been about how you use it to protect your market share.  It’s meant to stop anyone who would intrude on your property.  It’s is not passive or defensive.

So it’s time to stop pointing to the “Smart Phone Wars” as an example of what’s wrong with the system.

THERE’S NOTHING WRONG WITH THE PATENT SYSTEM.

In fact, this is exactly how the system was designed to operate.  You just didn’t know that.

I’m sorry if you don’t like it.  I’m sorry if this type of aggressive action somehow offends you.

Apple, Microsoft, Samsung, Google…they all know what they are doing.  It’s the risk they decided to take when they put their products out into the marketplace fully aware that there could be patents out there that could impact their business.

So to everyone who wants to be in business today…

  1. Ignore your intellectual property at your own peril.  If you’re the second inventor or you file your patent application late, you are probably out of luck.  That great thing you “invented”.  You may not own the rights to it.  Not everyone is guaranteed a trophy in this contest.
  2. Ignore another company’s intellectual property at your peril.  You aren’t guaranteed a license.  In fact, assume you won’t get one.
  3. If the only thing you’re willing to do is get a patent, you are wasting your money.   I know I said it before, but it needs to be repeated, patents aren’t magic amulets that protect you from patent infringement.   It’s a business tool that can help you achieve great success, but only if you use it!
  4. If you aren’t prepared to step into the arena, walk up to your opponent, and throw that patent around, what are you going to do with it?  And please don’t say frame it and hang it on the wall in the lobby.

If you want your intellectual property to work for you, you have to be prepared to fight for your rights.

How a Provisional Patent Application Could Save your Business

You invent something on May 1, 2012.

You are still in the conceptual stages, so you put off filing for patent protection.

On October 15, 2012, you are given the opportunity to give a presentation on your invention at a local conference.  You jump at the chance, and present your invention to the assembly of attendees.

You have now disclosed your invention to the public without the benefit of having a patent application on file.  Fortunately, you know about the 12 month grace period in the United States.  You know that if you file a patent application on or prior to October 15, 2013, you won’t lose your patent rights.

Time flies when you are busy working on your invention, your business plan, and your Kickstarter campaign.  You finally file your patent application on August 1, 2013, but that’s OK.  You filed well before your October 15, 2013 deadline.

What you don’t know is that one of the conference attendees really liked your idea.  In fact, he liked it so much that he decided to file a US patent application on it on April 1, 2013.

Two patent applications and the same invention…who gets the patent?

What you will painfully discover is that you don’t have the patent rights you think you do.

The final implementation of the America Invents Act goes into effect on March 16, 2013, and as of that date, the old rules no longer apply.

When you disclosed your invention at the October, 2012 conference, the United States was under a First-to-Invent system.  If there were two inventors claiming to have invented the same invention, the court would award the patent to the inventor who invented the invention first.  In our scenario, you would be awarded the patent.

This system gave the original inventors time to tinker with their inventions without having to file for patent protection.  This removed any fear that he would lose his patent rights if someone filed a patent application on the same invention before them, as is the case in the above scenario.

Unfortunately for you, the First-to-Invent rules end in March, 2013.  Patent applications filed on or after March 16, 2013 will be subject to a different set of rules.  As part of the America Invents Act, the United States will implement a First-to-File system.

Under the new system, if there are two inventors claiming to have invented the same invention, the court will award the patent to the inventor who filed the patent application first.

In the example above, the patent would be awarded to the conference attendee because he filed first on April 1, 2013 under the new rules.  And the kicker in all of this is…if you continue with your plans to make, use or sell that invention, you probably infringe his patent.

In order to get the benefit of a grace period and the old rules, you should have filed your patent application before March 16, 2013.  By waiting until after this date, you run the risk of someone filing a patent application on your invention before you.

The lesson in this story is the quicker you get your application on file, the better.  There will no longer be safety in delaying your patent application filing.

Filing a simple, inexpensive provisional patent application would have saved you a lot of heartache.  Having a provisional patent application on file prior to your disclosure would have ensured that you had the benefit of a full 12 month period before you had to file your non-provisional application.  The early filing date of your provisional application would have trumped the conference attendee’s later filing.

Don’t fall into this trap.  The rules are changing.  You need to understand those changes and how they impact your business.

If you must publicly disclose your invention, think seriously about filing a provisional patent application.  It could save your business.

Are You Making a Bad Investment?

Do you know what you are going to do with your patent?

 

Yesterday morning I sent the following tweet.

“All I hear is how expensive IP is.  Maybe you don’t understand its value; its purpose.  If you knew how to use it, you might spend more.”

This sparked a short twitter conversation with @ManagingIP about what aspect of IP is seen as expensive: protection, enforcement, or defense,  and whether IP spend is seen as a tax or an investment.

I think most companies see IP spend as a tax, and that the grumbles about IP being expensive are around protection, especially patent protection.  Maybe it’s because I’m listening to a lot of start-ups lately, and they’re short on money.

Or, maybe it’s because I’ve been doing this long enough to know that, even though IP enforcement and defense are expensive, the average company doesn’t really think about that aspect of IP protection.  The main event is protecting the invention or the brand, with little thought given to what they’re actually going to do with it once they get the patent.  (If I had a dollar for every time I heard, “You mean I have to enforce my patent?”)

The way I see it, many organizations in general view IP as a necessary evil.

Based on my 12+ years as an intellectual property attorney, I am under the firm belief that most companies protect their intellectual property out of habit.  They really don’t know why they want that patent.  They just do it.  And if these same companies just knew why they were protecting their IP and plan for its future use, they’d see a greater return-on-investment sparking more, and dare I say better, investment.  (Hence yesterday’s tweet.)

All of this got me wondering…

Why is the ‘getting’ so important?  I can’t think of any other business asset that people stockpile like patents.  Of course, I do understand that to use patents, organizations typically have to wait for a future event to happen, like an infringer comes along, counterfeit goods are being sold into your market, or someone wants to license your technology.  So, the stockpiling does make sense because you have to get it early for use later.

But what if you know that you will NEVER sue anybody for patent infringement?   Why do those companies still spend lots of money protecting their IP?

Is the amount of money companies spend on intellectual property worth it?

At what point is intellectual property protection a good (or bad) investment?  (And how do you know?)

If intellectual property is a business asset, that asset should bring the company value.  How do you measure the value IP brings to any given company?

Is it the amount of money the asset brings to the bottom-line?  If so, we’re most-likely talking about companies that engage in expensive licensing and litigation practices.  I would argue (based on the low number of patents that ever go to litigation) that’s not the average IP owner.

Or is the value in the portfolio size?  That strategy works for Japanese companies.

There is also value that is intangible, just like the asset itself.

There are a lot of factors that enter into answering these questions, like industry, type of technology involved, size of company, country of origin, risk tolerance, and 100 other factors I haven’t even thought about.

I have to admit that I’m not really sure how to answer these questions right now.

If you have thoughts, dear Readers, on what makes IP a good or bad investment, please let me know in the comments.

Big News from IP made simple

I am so happy to announce that I am offering a short guide with 10 helpful tips to get the most out of your intellectual property portfolio to all IP made simple Subscribers.

The guide is called 10 Things Every Business Should Do With Their Intellectual Property: A Quick IP Owner’s Guide. It is designed to give the typical IP owner a roadmap for how to best manage their intellectual property, and covers everything from knowing what the different types of IP are to how to plan and manage your intellectual assets.

Managing your intellectual property is not rocket science.  It is actually pretty simple.  It only requires that you to have a process or system in place (just like the systems you already have that manage your sales accounts, your finances, your customer service, etc.)  This Guide lays out the simple steps that every IP owner needs to take to create a great portfolio.

To get access to this free guide just go to www.ipmadesimple.com and type your email address into the box that says ‘email’ located in the big blue box on the home page. You will receive a welcome email with a link to the Guide as soon as your confirm your subscription to IP made simple.

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Be on the lookout for 2 new product offerings from me in the coming months.  Before the end of 2012, there will be two new ways to learn about intellectual property.

1.  I am in the process of creating a library of short tutorials on various intellectual property topics.  These short 10 – 15 minute presentations will allow you to learn everything you ever wanted to know about IP at your own pace.

2.  I will be also be offering you a chance to work with me one-on-one.  I will be offering a consulting option.  Under this program, on top of the 6 hours of IP training, I will conduct an IP audit of your business, review your contracts, and provide you with a plan to address your intellectual property issues.

More information on both of these products will be available shortly.

Houston, We are Go for Launch!

INTRODUCING

On a mission to end IP ignorance forever.

 

 

Did You See this Billboard Recently?

FBI Billboard

If you did, it means you live or work in a city with industries and companies at high risk for trade secret theft.

Last month, the FBI put up these billboards in 9 communities across the nation, including Boston, New York, Washington, D.C., and San Francisco, in an effort to raise awareness about a growing problem: industrial espionage.

What exactly is ‘industrial espionage’?

It’s when foreign governments, corporations, and citizens spy on US companies in an effort to steal information that can provide them with some sort of economic benefit or advantage.  They are often looking for technology, pricing information, test data, or customer lists, a.k.a. the company’s trade secrets.

Why does the US Government care about trade secret theft?

Because it is a big problem for US companies.  The FBI estimates over $13 billion has been lost since October, 2011 due to trade secret theft.  That’s $13 billion in only 7 months!

In fact, state-sponsored espionage targeting the intellectual property of U.S. companies is growing so fast that the FBI considers trade secret theft a national security issue.

To be honest, the Government should be concerned about the rise in industrial espionage, and if you are an innovative company, you should too.  I’m just not sure a billboard campaign is the right approach.

How many people are going to really understand the message behind the billboards?  Seriously, I wish I had seen one in person, but RI didn’t make the cut.  Would the average person driving around in their car, stop and think about whether or not their trade secrets are at risk?  Would they even know what a trade secret is?

I’m not sure they would.

Trade secrets are often afterthoughts in corporate America, and companies with really good trade secret awareness tend to be large.  Most everyone could identify a trade secret when asked (the formula for Coca-Cola usually springs to mind), but most companies can’t identify their own trade secrets, especially small technology firms.

Why?  They don’t understand trade secrets.  They don’t quite know what they are or what they can and should do to protect them.  Which leads to the problem…if companies don’t understand trade secrets, then they can’t identify them and take the necessary steps to protect them.

I’ll continue this conversation next week with a short primer on trade secrets.

Here are a some great resources to get your trade secret education started.

- The FBI Website has some good information on trade secrets and the problem of industrial espionage.

- The National Intellectual Property Rights Coordination Center (IPR Center) is a multi-agency taskforce designed to share information, develop initiatives, coordinate enforcement actions, and conduct investigations related to IP theft.  Check out their website here.

In the meantime, if you think your company could use some help identifying and protecting your trade secrets, call me at (508) 878-3590 or email me at kelli@ipinfocus.com to set up an appointment.

I first wrote about this issue back in 2010 after I attended a workshop on economic espionage.   Click here to check out that post.

The Last Refuge of a Troubled Company

There is an unfortunate trend in American business today. With yesterday’s news of the AOL patent auction, I can emphatically state that the last refuge of a troubled company is their patent portfolio. Kodak, Yahoo!, and now AOL are all leveraging their patents in an attempt to turn their fortunes around, increase their stock price, and get some much needed cash, be it through outright sale (AOL) or through patent litigation (Kodak and Yahoo!). Unfortunately, it’s a strategy that will fail. Not because their patent aren’t valuable, but because it’s too little too late.

In the latest incarnation of the trend, AOL sold 800 patents to Microsoft for over $1billion, and kept 300 key patents and patent applications for future use. The beleaguered internet company saw its stock price hit a 52 week high on the news. In a statement about the patent sale, AOL’s Chairman and CEO, Tim Armstrong, stated:

“We continue to hold a valuable patent portfolio…The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value.” (Emphasis added.)

Congratulations to AOL on finally realizing that their patent portfolio is a business asset, has value, and can be leveraged. In fact, good for them for leveraging it in such a way that they were able to sell off some of their chaff and keep some wheat. They now have cash and a better stock price today because they sold some patents, but it doesn’t fix their underlying problems.

Unfortunately, this sale didn’t really improve the long-term future of the company. As Ben Popper reported in Venture Beat:

“While it’s true that AOL still retained some patents and will be able to license them to other players, this seems like a one time deal that represents a large portion of the value AOL held in its patents. The emphasis on returning the money to shareholders seems to indicate that AOL is hoping to goose its stagnant stock price with the promise of a payout, giving Armstrong more breathing room as he looks to turn the media/advertising business around.” (Emphasis added.)

AOL has time and money, but will it get them a ‘product’ that people want to invest in? I mean, isn’t that the only ‘real’ solution to AOL’s woes?

Shame on AOL (and Kodak and Yahoo!) for not recognizing the value in their portfolio sooner! The truth is AOL needed to use its IP years ago when it still had the chance to build the business. Now it can only use its patents as a stopgap measure to boost share price in the short term. They’re too far down the proverbial rabbit hole for any patent to help them out.

The real inquiry is ‘what should these troubled companies have done with their patents’? Why weren’t they using their valuable portfolios already? Seriously, why wasn’t their intellectual property part of their business strategy from the very beginning?

Of course that’s a rhetorical question. I already know why. They only cared about getting the patents. No one told them that possessing patents isn’t enough. It’s how you use them that matters.

Could the fates of Kodak, Yahoo! and AOL been different had they leveraged their IP portfolios before the ‘writing was on the wall’? You can never know for sure given the multitude of decisions that go on in any company. Maybe at one time AOL could have used their patents to achieve their business strategy, and found success, but I think that time is over. Their patents can’t save them from their past mistakes and their lack of strategy.

UPDATE: On April 23, 2012, Microsoft announced that it sold some 650 patents and applications it acquired from AOL to Facebook for $550 million in cash. Facebook will also license the remaining patents (~275 assets) that Microsoft obtained in the AOL deal.