photo credit: sergeant killjoy

Do you treat your patents as a fence or a tollbooth? If you wish for your start-up technology company to obtain investment from or acquisition by a bigger player, you had better understand the difference.

Most start-up technology company entrepreneurs and CEO’s understand that patents can be key to establishing the value of a new business idea. Typically, entrepreneurs and CEO’s such as yourself will engage patent attorneys to build an IP portfolio that protects the start-up’s technology and products to the fullest extent possible. The motivation for this effort and expense is, of course, to to protect your start-up’s idea from use by others. As management of a start-up you may be seeking to build an ongoing business around the patented technology, but often the goal of building a solid patent portfolio is to make your business an attractive target for investment or acquisition by a larger company.

As an intellectual property and business strategist, I believe that such an inwardly focused patenting strategy is a misguided approach for companies that wish to obtain investment from or be acquired by larger companies. Why do I think this? Let me use a simple analogy.

Let’s say you have worked diligently for several months of weekends to get your yard perfect–and it is perfect. When you finish the yard, you realize that if someone walks on your lawn, perfection will be lost. So you put an expensive fence around your lawn–and it is the best expensive fence you can buy: a virtual masterpiece. But what good is the fence if no one wants to walk on your lawn anyway? You wasted all that money on the fence.

The great majority of patent seekers (including those at otherwise sophisticated large companies) believe that patents are best used to keep others off their “technology lawns”. As such, patents are generally focused inwardly–that is, on the patentee’s own technology or products. This is known as “defensive patenting”. Defensive patenting is a tried and true patent strategy, but it can be a poor choice for companies that wish to obtain investment from or be acquired by bigger players. Like the example above, if these bigger players have no interest in walking across your technology lawn, your defensive patent fence is a wasted expense.

So how does a technology start-up company such as yours get the attention of these big players? It is quite simple–by putting a patent fence around the big company’s technology lawn. When properly formulated and executed, this strategy (which is not surprisingly called “offensive patenting”) makes technology or products patented by your company an attractive target for a bigger player. Your company’s patent(s) will reduce or prevent the bigger player’s free movement in its desired business space. Such a savvy offensive patenting strategy effectively requires the bigger player to ask your start-up company for permission to play on its own technology lawn. Your start-up company can provide that permission in the form of a licensing of the patent(s) at issue or by sale of your company to the bigger player. Either way, the your start-up company is benefiting financially from this smart offensive patenting strategy.

Of course, if offensive patenting was easy, smart entrepreneurs and CEO’s such as yourself would already be executing on it in droves. In truth, however, offensive patenting can only be effective against big players through use of expert competitive patent and business intelligence. Such techniques have unfortunately not been readily accessible outside of the large corporate and investor environments.

This is changing, however, as more intellectual property professionals with corporate business experience, such as myself, are entering the consultancy business. I have been able to work with clients using patent filing data analysis to identify where a large company was likely going to be focusing its technology or product efforts in 3-5 years. Together, the clients and I will brainstorm a “next generation” improvement to that technology or product. We then will work with the client’s patent attorney to draft, file and prosecute patent applications that are directed toward reducing or preventing the large company’s future ability to freely compete in that business or technology space. The objective is to end up with the client owning patent(s) that would be infringed by the large company’s future business plans. Rather than change its business plans, the large company will pay a patent “toll” in the form of a license or acquisition of the client.

Admittedly, offensive patenting is a bit like looking into a business crystal ball. However, the information needed to successfully execute on this patent strategy is out there and, when collected and analyzed by the right person, it is actually hiding in plain sight. Experts believe that those who collect and act on available data are more likely to be successful in today’s data-driven economy. I believe that smart entrepreneurs and CEO’s of startup companies can achieve the investment or acquisition they want for their companies by collecting and analyzing patent filing data to make it necessary for big companies to pay for permission to play in their desired business spaces.

So stop thinking about patents as a fence, but instead as a toll booth. One can usually walk around a fence, but if the toll booth blocks the only road to a big company’s business destination, the toll is likely to be paid.

Jackie Hutter is Principal of The Hutter Group, a leading provider of IP (“Intellectual Property”) business counseling and competitive analytics to forward-thinking organizations that seek to maximize firm asset value by capitallizing on the power of intellectual property. She has over 13 years experience counseling innovation-driven companies, universities and business development and investment professionals in maximizing their firm intellectual asset value. Jackie was named a SuperLawyer(R) in Intellectual Property in Georgia in 2004, and she has been a frequent speaker on IP issues to her fellow lawyers. Jackie was formerly Senior Patent Counsel at a Georgia-Pacific LLC, where she had sole responsible for Dixie(R) patent matters and, later, the company’s Chemicals business.

Prior to joining Georgia-Pacific, Jackie was a shareholder at the prestigious IP firm of Needle & Rosenberg, PC (now Ballard & Spahr), where she represented mulit-national companies, universities and innovators in protecting their IP to create maximum asset value. Jackie has also been a patent and IP litigator, which gives her a unique perspective in how to maximize firm IP value by avoiding litigation. Prior to attending law school on a full academic scholarship and where she graduated with honors, Jackie obtained her M.S. in Pharmaceutical Sciences and she spent several years as practicing chemist at Helene Curtis (now Unilever). She is a named inventor on one U.S. patent. Jackie lives in Decatur, Georgia, in a groovy mid-Century modern house with her husband, 2 daughters and several pets.

photo credit: A. www.viajar24h.com

If you are an inventor or an entrepreneur, obtaining venture capital funding is most likely a major concern for you and your business. During the dot com boom, venture capitalists were fueling the growth, research, and ventures of many new companies. Now that the dot com boom has cooled, those worried about obtaining venture capital for business startup may have a more difficult time securing funding for their budding business.

Venture capital money can come in many different forms. There are actually companies that specialize in researching new companies to invest in, in order to earn a modest return on their investors money. These companies receive thousands of requests for funding monthly and may decide to fund one to two small start-ups a month. Some venture capital companies specialize in specific projects such as real estate or a technology based company. Many large, corporate construction projects are funded via some sort of venture capital agreement.

Another way to obtain venture capital for a business start up is through angel investors. An angel investor can be an individual or a group of investors that gather in order to decide which businesses have the most likely hood of succeeding. Once a business has been selected, the paperwork is drafted for the loan agreement and the business start up is funded by the individual or group angel investors. This method of obtaining venture capital for business startup may also be called hard money or hard money lending.

Recently, obtaining venture capital for business startup has come to reality television. The reality show focused on inventors that had developed a product for introduction to the retail market. The investor was coached and given seed money in order to fully develop their product. This competition played out over several months on reality television with a winner being chosen at the end. The winner was chose based upon how the judges rated the potential retail market success of the inventors product. This reality show was a neat little twist to the venture capital process.

If all of this has you a bit concerned or confused about obtaining venture capital for business startup, there is a bit of good news. The good news is that there is still capital available. If you have a solid business plan or product that you are seeking funding for, your chances are relatively high of getting the funding that you need. Venture capitalists may not be throwing money around like they once were but there is still money available for those that are deemed fit via a solid business plan.

Author: Rebecca Game is a 30 year entrepreneur and owner of Digital-Women.com®, an online networking community for women in business. Visit: Digital Women- Loans for Women

photo credit: Berd Whitlock

International business plans require additional study compared to domestic ones. These require additional expense and time to resolve. Here we will discuss four critical ones for a business plan.

First, we must decide on the business structure. Countries have favorite structures that evolve slowly. When considering international companies, different structures might be required. Typically, the type of business structure must be discussed with a business consultant in the country itself. This will most often be a lawyer from that country. It’s possible that a lawyer in your home country would know the laws of another, but it’s not very common. This information is critical for the correct filing of papers, company organization and other important details. As we are deciding which structure to use for a foreign country, the decision on how to control it is also important. Will the foreign company be a stand-alone? Will it be a subsidiary of another company? These questions can only be answered after much consultation. The research answers will heavily influence the resulting business plan and the resulting company.

Next, we must evaluate the government and legal environment in our home country and the new country. Our business plan must account for and demonstrate an understanding of challenges. It is common for countries to place severe restrictions on how foreign companies are organized, operated and owned. Some require a resident citizen to be involved in a company, while others require varying amounts of capital and social spending to operate. Too, the tax structure of the country may place restrictions on how capital flows into and out of the company and country. Also, taxes must be levied, collected and remitted according to laws of all the countries involved.

Some countries allow capital to flow in freely but don’t allow capital to flow out. Another concern is the stability and freedom that the country enjoys. Many countries have whimsical or tyrannical dictators that change policy at their leisure. This can create an atmosphere where investment is encouraged and then after all the hard work is done, they nationalize or repatriate the company. This is very common place in third world countries and should be factored into any decision for the business plan. Too, there are many other financial facets in operating internationally, such as: currency valuation and devaluation; import and export taxes; inflation and deflation; and world economic changes.

Third, we have the movement of funds. Earlier we touched on it in relation to putting capital into the company or moving it out. All countries have laws related to the movement of funds. Most also track fund movements and force financial institutions to collect and supply information concerning funds moving across international borders. Some of this has happened because of the fight against world terror, but most as evolved over time with the terror struggle being an excuse to collect information. These laws may restrict the amount, form and the timeliness of funds transfers. It is proper to discuss fund acquisition in the business plan; but for an international company, fund transfers and currency concerns must also be covered items.

Finally, extended control of an alien company must be determined and discussed in the business plan. It costs time, money and other resources to control a company far from the normal environment. People must often travel there to evaluate and monitor progress. Personnel must do accounting and reporting within the guidelines of the country where the business is located. This control and monitoring function is daunting for international companies because it brings together differing ideals, cultures, laws and experiences plus often there is a language barrier to be traversed. This leads to a challenging business environment. It’s not one that is impossible, but it is one to be scrutinized and considered carefully during the business plan development and feasibility reviews.

Michael Russell
Your Independent Business Plan guide.