What does it take to be a successful disruptor? As well as learning lessons from entrepreneurial companies such as SpaceX, Uber, Bloom Energy and others in CNBC’s Disruptor50 list, it is important to understand how to protect your innovation as it develops so you can maximise your profits when the time comes, says Paul Foot, a patent attorney at Withers & Rogers.
For every disruptive innovator, or business entity that is out to disrupt an existing marketplace, it is important to have a long-term intellectual property (IP) strategy in place from the start. It doesn’t really matter whether your business plan is based on being bought out by the incumbent, or usurping their place in the market, without the relevant patent protection in place, you won’t get very far.
Tesla’s approach to the development of driverless cars shows a strong appreciation of the value of IP. The company has had no fewer than 293 patent applications published in the last five years. As a result, the company has secured a strong position in this fast-developing area of technology. While it may seem counter-intuitive, Tesla’s decision to freely license its patented technology in 2014 is further indication of an IP-savvy business that wants to ensure its own innovation is favoured in the race to standardisation, and the market for electric cars as a whole can grow.
Elsewhere in the automotive sector, there has been a flurry of deals struck by vehicle manufacturers with disruptive businesses recently. Most have been linked to on-demand services, which give the consumer access to cars on a pay-per-minute basis, such as Ford’s GoDrive car-sharing service, which launched in London last year, and GM’s investment in Lyft – an Uber competitor.
Not all disruptors sell their innovation, however. When James Dyson launched his cyclonic vacuum technology onto the market in the 1990s, he licensed the technology in Japan, but went alone in the rest of the world after being rebuffed by Hoover and other makers of bag-type vacuum cleaners. When Hoover subsequently adopted cyclonic technology, he was able to use his patents to block the sale of their cleaners and obtain a multi-million pound damages award.
It is not unusual for early-stage disruptors to want to break into the market gradually; allowing time to build up a strong customer base and some significant critical mass before making a play for market domination. They may also want time to explore other potential applications for their technologies. In these cases, particularly when that area of the market is moving fast, it is important for the disruptor to file patent applications at the earliest possible stage; referring to all other conceivable uses of the technology. Then, as the technology is refined the application can be “re-filed” one or more times within a 12-month time period, to capture and stake a claim to the emerging refinements as they evolve.
When disruptors launch their products and services into the marketplace they can be susceptible to copycats or reverse engineering. Having patent protection in place from the start means the business will be able to challenge such opportunists by asserting their IP rights through the relevant courts. Without this protection, the disruptor could find his or her window of market opportunity closes just as quickly as it opened.
Even established businesses that are investing in their own disruptive innovation may prefer to keep their R&D activity low key to begin with to avoid alerting the competition to their future intentions. For example, some larger businesses may set up a separate business entity, perhaps under a different brand name, to own the IP rights for the technologies they are developing. Such structures can make it easier to sell or spin-off the technology, if non-core, or bring it back into the business if it is seen to be central to its future revenues.
The modern trend of open innovation could also pose risks to an unsuspecting disruptor. Lots of innovative businesses now believe that sharing IP and looking outside the business for new ideas is essential to secure a strong position in a dynamic business environment. However, disruptors should never allow themselves to be put in a position where they are divulging technological insights without patent or other IP protection in place. If necessary, they should also be prepared to document information carefully before any meeting takes place to ensure there can be no mistake over who owns their ideas. Before sharing any information, there should also be a clear agreement in place to determine who will own the rights to any jointly-developed innovation.
There is no doubt that disruptors can have a significant and lasting impact in their chosen markets but they are unlikely to succeed without a sound understanding of the value of IP.
Paul Foot is a patent attorney and advanced engineering specialist at intellectual property firm, Withers & Rogers.
“If necessary, they should also be prepared to document information carefully before any meeting takes place to ensure there can be no mistake over who owns their ideas.” 40+ years ago, when I returned to my own country to bring to it the benefit of my several years experience working in the USA, one of those concepts I brought back was in the area of patent protection. All researchers of any merit are required to record in a formal laboratory note-book, their ideas, experiments, thinking. This has to be co-signed by a competant colleague ‘capable of understanding it’: AND THAT IS ALL! The date of invention is taken as being the date of its first recording as above. Needless to say adopting this would have eclipsed almost all of the UK necessity of ‘running’ to a hired verbal thug, who makes a living ‘selling’ protection.
At its simplest, the only ‘maximizing’ of profits will be to the benefit of the verbal thugs. Hey Ho
Mike, the notebook practice you outline used to be critical under US patent law to provide evidence of when an invention was conceived and developed, because until a few years ago, the person who would rightfully be granted a US patent was the first inventor to invent. The US has now moved to a “first inventor to file” system like the rest of the world and it is less critical for this reason.
Noting inventions in a lab book never actually provided the protection that a patent affords, however. The only way to obtain the right to exclude others from carrying out your invention is via a patent (which I’m afraid means you would normally have to interact with a patent attorney such as myself!).
Despite good lab book practice not being as critical for US patents any more, I would still recommend that inventors follow this approach for precisely the reasons set out in my article, i.e. to establish who devised a particular invention, and when they did so, so it can be used as evidence if there is a dispute about this later.
Paul
thank you for correcting my recollection(s) And indeed for your courteous tone. I must confess that there have been occasions in the past when I have been less than courteous to patent agents. Perhaps particularly when (working for the company -a UK public one which made the machines that put the ‘crimp’ into Crimplene,-that terrible yarn/fabric worn by your grandmother!) I recognised that the directors of that firm were ‘scamming’: they gave! the patent for an idea created in the UK to a private Swiss Company: and then ‘we’ had to buy what were very simple parts at grossly inflated prices from that firm. It does not take a ‘legal’ genius to work out what was actually happening. Though later, working with a UK company, I had an idea for a simple hand knitting machine. Imagine my surprise to find out that it had been patented by another. I had a lot of fun in the patent Court ittitating the individual who had stolen my idea. In fact the examiner described me as’an emminently reasonable man with a keen and genuine sense of grievence”
My thesis is simple: I have argued this out with your professional body: if patents are so important, rather than an individual or tiny firm having to spend many Thousands- UP FRONT to protect its ‘property’ [money which would be better spent in R&D, market development, to ensure the invention is successful] let PAs do the necessary for a ‘slice’ of the action, once successful.
Your grasping, money-grabbing ambulance chasing colleagues in the longest and largest ‘conn’ -present legal practices- since the Middle Ages have already gone along this route “no-win-no fee?!” so fiddling the books for future value is quite within their thinking: so why not yours.
I do agree about the necessity for keeping proper records. I am reminded of a comment from a neighbour in Philadelphia in the late 60s , who worked for that part of Boeing that had built an important part of the Apollo Space items: “that had they piled up all the paper generated by the project the astronauts could have walked to the moon!”
Paul PS
I believe the change in US practice to be a step-backwards: as I have had occasion to point out several times recently, some 70% of ALL the persons who have ever been trained in science, Engineering, technology throughout mankind’s history are alive and practicing at present. And particularly in the field of ‘light current, cyber developments, control electronics… I believe this is an absolute tipping point: I cannot think of any reason why ‘we’ should continue allow those who ‘attempt’ to put our skills (I will allow myself to use the word brilliance for those who have developed advances in medical, scientific (nano-to macro/astronomical) and manufacturing!) into words… to be apparently 6 times as successful and valuable (if average rewards are any measure) as we. Frankly, move over gracefully or we will push you!
Perhaps Paul deserves to hear some more of my views:
Intellectual property -that’s an oxymoron if ever there was one. Somewhat like military intelligence of legal profession. Rule of Law? a great idea: ” the will of the people, expressed through Parliament and interpreted by HM justices in the Courts” What do we actually have? the rulings of lawyers. constantly looking backwards for precedent, rather than forwards with inspiration, and doing so in dingy Dickensian offices in the cess-pits they have created outside the court-room door: their involvement and its location depending on how much they are paid? Am I right?