Session 9: January 29, 2009

Intellectual Property

 

Quote of the Day

"Build a better mousetrap and the world will beat a path to your door." ~ Anonymous

 

Summary

Intellectual Property is the lynchpin of a technology venture. Whereas old economy businesses built value in the form of factories and equipment, new economy businesses create the lion share of their value in intangibles; patents, copyrights, trade secrets and trademarks. An effective entrepreneur knows how to establish these key assets, and how to use them with investors, partners and competitors. Intellectual Property IP issues vary across industries and product categories.  For example, protecting IP with patents is less critical for web 2.0 software ventures than it is for biotechnology ventures.

Government regulation is also an important factor in the market place that must be understood by entrepreneurs. In some cases a change in regulations can raise a company’s costs.  For example, the introduction of Sarbanes Oxley after the Enron scandal had a major impact on the systems to monitor compliance and the cost of building and managing those systems.  Sarbanes Oxley requirements sometimes led entrepreneurs to sell their companies to another company instead of having an IPO because the costs of compliance were too high as a stand-alone company.  In the wake of the financial crisis due to problem home mortgage loans, there are new regulations underway in the commercial banking and investment banking worlds.  There will soon be new regulations for Carbon Emissions as part of a new “Cap and Trade” system.

 

Like IP, some industries have greater regulatory requirements than others.  For example, food, drugs, and most new medical technologies require special approvals form the U.S. Food and Drug Administration (FDA).  The bad news is that the FDA approval process lengthens the product development cycle.  The good news is that it insures the safety of customers, and can make it harder for a competitor to catch up with an entrepreneur who has created a new market.

 

At the beginning of this session you will present your OAPs.  As part of your Opportunity Execution Projects (OEPs) in the next phase of the course, you will need to think about how to create, defend and leverage IP, and how to anticipate regulatory changes that may create challenges and opportunities for your new venture.

 

At the end of this session, Steve Blank and Tom Kosnik will lead a brief discussion about IP and Regulatory Issues for Entrepreneurs.  

 

Required Readings (Policy on Required Readings.)

• Readings from the Textbooks:
• The Monk and the Riddle by Randy Komisar, Chapters 4-10
• Technology Ventures (Dorf and Byers): Ch 9 Knowledge, Learning and Design; Ch 10  Legal Formation and Intellectual Property (Highlights: 9.3; 10.3-10.8)  
• Technology Ventures (Dorf and Byers): Ch 9 Knowledge, Learning and Design; Ch 10  Legal Formation and Intellectual Property (Highlights: 9.3; 10.3-10.8)  

• Web Reading:
• "US Office Joins an Effort to Improve Software Patents" - NYT 1/10/06
• Cruise the US FDA website to see what government information is available: http://www.fda.gov/default.htm
• Watch the following short video clips:
• Jeff Hawkins (PalmOne) - Genesis of Palm Computing
• John Hennessey (Stanford) - Observations on the Biotech and Biomedical Devices Space
• Katharine Ku (Stanford OTL) - Royalties and Patents
• Gil Pechina, (Wikia) Government issues in Entering Global Markets:
• http://ecorner.stanford.edu/authorMaterialInfo.html?mid=1545
• Karen Richardson (E.piphany) Sarbanes Oxley Act: http://ecorner.stanford.edu/authorMaterialInfo.html?mid=1267
• Eric Schmidt and Larry Page (Google) Legal Issues: http://ecorner.stanford.edu/authorMaterialInfo.html?mid=1089

 

Study Questions (Policy on Study Questions.)

• What is a patent? What is a copyright? What are primary differences between the two, and when would you choose one over the other?
• What is a trade secret? How do you establish one? How do your protect it?
• Are trademarks valuable to technology companies? Give an example of why or why not?
• What is the difference between an assignment and a license? What are the critical issues to be defined in negotiating either?
• What IP related issues have you discovered during your OAP?
• What regulatory issues have you discovered that may affect your opportunity?
• How will you go about learning how to anticipate and resolve IP issues and regulatory issues during your OEP?

OAP Assignment (Policy on Online Assignments.)

Present Your OAP. See the OAP project page for a full description of the assignment.