ME3608 Technopreneurship

Instructor:
Mashal Tariq
Intellectual Property Strategies for Startups
Why is IP important to Startups?
• To protect core idea upon which the startup is founded
• To create and maintain a competitive advantage
• To protect R & D investment (both time and money)
• To generate revenue
• To defend company
• To protect your brand (once product is sold or service is
available)
• To attract investors
• To use as collateral to secure financing
What is IP?
1. Patents
2. Trademarks
3. Copyrights
4. Trade Secret

1. Patents
• Protects: inventions (e.g., processes, products, compositions)
• Cost to acquire: approx. 20K (from invention to grant of patent)
• Time to acquire: approx. 36-48 months unless expedited
• Rights granted: exclusive right to make, use and sell the
invention
• Duration of protection: 20 years from filing date
2. Trademarks
• Protects: brand, e.g., company name, company logo, product
name, or other indicia related that provides consumers with an
Indication of source or origin of goods or services (e.g., Twitter®)
• Cost to acquire: varies based on how trademark is used and
whether formal registration is sought
• Time to acquire: rights begin to accrue once used in
commerce; if formal registration is sought approx. 8-10 months
• Rights granted: right to exclusively use trademark for specific
type(s) of service(s) or type(s) of product(s) in a certain
geographic region(s)
• Duration of protection: perpetual right provided that the
trademark is being used
3. Copyrights
• Protects: expressions, not ideas
• Cost to acquire: $35 if copyright registration is sought
• Time to acquire: approx. 4-12 months if copyright registration is sought
• Rights granted: right to reproduce, create derivative works, perform publicly,
and display publicly
• Duration of protection: copyright term is life of author + 70 years (95 years
from publication for works for hire)

4. Trade Secrets
• Protects: a secret which gives its owner an actual or potential advantage in
business, and which the owner exercises reasonable measures to maintain as a
secret (e.g., formula for Coca Cola®)
• Cost to acquire/maintain: cost to obtain/maintain secret
• Time to acquire: immediate
• Rights granted: business advantage flowing from secret
• Duration of protection: perpetual as long as secret is maintained
 IP Strategy for Startups
• Key events in the life cycle of a startup can be used to trigger IP
strategy discussions and actions
• Key Events:
1. Company Founded
2. Hire First Employee
3. Product Development
4. Product Release
5. Marketing
6. Talking to potential strategic partners
• As the company matures, a more formal IP strategy may be
developed
 1. Event: Company Founded
• Individuals/Entities Involved: Founders
• Intellectual Property @ Issue:
– Core idea
– Name of company
– Name of product/service
– Know-how
• Intellectual Property Actions:
– Patent core idea
– Perform trademark clearance on company name, product name,
service name
– Execute agreements that include IP ownership and confidentially
provisions
 2. Event: Hire First Employee
• Individuals/Entities Involved: New Employees
• Intellectual Property @ Issue:
– Core idea
– Current R & D initiatives (e.g., improvements to core idea)
– Current Product Development (e.g., source code)
– Know-how
– IP from new employee’s prior company
• Intellectual Property Actions:
– Execute employment agreement
– Address any non-compete issues with new employee’s prior
employer
 IP Elements in Employment Agreements

• Confidentiality clause
• IP ownership clause related to IP generated by employee
• IP assistance clause requiring employee to assist company
with IP protection during and after the period of employment
• Clause requiring employee to return to company all
employee-generated work product at termination of
employment
• Non-compete provisions (vary per state)
• Clause addressing any IP new employee is brought to startup
 3. Event: Product Development
• Entities/Individuals Involved: Founders, Employees, 3rd Party
Contractors
• Intellectual Property @ Issue:
– Inventions within product or service
– Source Code (software products and services)
• Intellectual Property Actions:
– Identify new inventions in product or service and determine
whether to patent inventions
– Address copyright issues (e.g., copyright notice in source code,
procedures to handle use of third party code licensed under an
open source license (e.g., GPL3))
– Ensure IP ownership, confidentiality, and use addressed in
contracts with 3rd party contractors
 4. Event: Product Release (including Beta Release)
• Entities/Individuals: Third Parties
• Intellectual Property @ Issue:
– Inventions within product or service
– Source code (software products and services)
– User manuals
• Intellectual Property Actions:
– License agreement for product (covering, as
appropriate) patent, trademark, copyright, and trade
secret
– Terms of Service for web service
– Proper use of trademarks on product or service
 5. Event: Marketing
• Entities/Individuals: Third Parties
• Intellectual Property @ Issue:
– Trademarks
– New product/service features
• Intellectual Property Actions:
– Proper use of trademarks on product or service
– Ensure that IP discussed in marketing literature has been
protected prior to release of marketing materials
– Ensure customer communication strategy
– Ensure that use of Social Media Channels (e.g., Facebook®
Twitter®) complies with Social Media Channels terms of
service
6. Event: Talking to Potential Strategic Partners

• Entities/Individuals: Potential Strategic Partners

• Intellectual Property @ Issue:
– New product/service features (e.g., features in
product road map)
– Know-how
• Intellectual Property Actions:
– Non-disclosure agreement
– While not required, good practice to protect IP prior
to discussion with potential strategic partners
 Technology Transfer
• The Process by which existing knowledge , facilities or capabilities
developed under R & D funding are utilized to fulfill public and private
need.
 Ways “Technology” is Transferred
• Consulting
• Graduating students (“moving heads”)
• Faculty moving on (“moving heads”)
• Collaborative research
• Patenting and licensing
• Service and outreach (“extension”)
• Spin-off companies
 Technology Transfer Agents
R&D Units
• Universities
• Public Research Centers
• Technology Institutes (institutions, labs etc)
Companies
• Supplier of technology and R&D to third parties
• Spin-off, start-ups
• Large R&D department
• Competitors, suppliers…(technological alliances)
 TYPES OF TECHNOLOGY
1) EMERGING TECHNOLOGY- is an innovative technology that
currently is undergoing bench scale testing, in which a small
version of the technology is tested in a laboratory.

2) INNOVATIVE TECHNOLOGY- is a technology that has been field

tested and applied to a hazardous waste problem at a site, but lack a
long history of full-scale use.

3) ESTABLISHED TECHNOLOGY- is a technology for which cost and

performance information is readily only after a technology has been
used at many different sites and the result fully documented is that
technology considered
Proper Research – By proper research we mean firstly
that in which the result are reproducible and issues
such as scale up, stability etc and other practical now
has been addressed, also that in which problem were
taken up in first place.
Proper work- This refer to institutional and guidelines
regarding IP Protection licensing modalities etc. which
must be in place beforehand. In the absence of these,
decision get delayed, lack of fairness in decision e.g.
case of X institute, which came up with good
technology but since no guidance were there, kept
running around for two years and then gave up.
Pricing – most difficult and critical area of Transfer of technology.
- Too high price can put off buyer, leaving the technology
unsold.
- Too price a result in revenue loss.
- There are basically two model regarding pricing
1)Price charged for a technology should depend upon market force i.e.
impact of the technology irrespective of amount spent on developing it.
2)Price charged should include all expenses involved in developing it.

Publicity – It is important to identify and then approach buyer i.e.

adopt targeted Publicity and not blanket publicity. Specific journal,
website, letters to manufacturer, personal selective visit etc. are some
common approach which help in locating buyer.
EXAMPLES OF TECHNOLOGY TRANSFER
CHINA
L – Phenyl alanine
By enzyme method
(Ref : APC – 4041 – TOF)
# Chinese company offer technology for the production
of L- Phenyl alanine by the enzyme method.
Area of Application
# Food industry
Advantage-
• Low input
• Advanced process
• No environmental contamination
• Clear production
Stage of development
commercialized
Economic data
• Total project cost 4 million
• Equipment 1.38million
Transfer form
Known how, consultancy, equipment, training
Target country
world wide
Language
English
 INTRODUCTION ORIC

Office of Research, Innovation, and

Commercialization
• ​HEC aims at​ motivating and facilitating the Higher Education
Institutions (HEIs) to make research a top priority for a
sustainable economic growth and future knowledge economy.
• For this purpose, a centre is being established in universities
to serve as a pivotal point, encompassing all the research
activities - from development of research proposal to the
commercialization of research products - under a single
umbrella.
• These centres will be called "Offices of Research, Innovation
and Commercialization (ORICs)".
• These ORICs will provide strategic and operational
support to the research activities/programmes of a
university and it will have a central role in
facilitating the outcome of the university's
researches.
• These researches will focus mainly on turning
invention (pure knowledge) into innovation
(products and production processes) that can
ultimately impact the welfare of community welfare
• ​In collaboration with Intellectual Property Organisation (IPO) Pakistan and
Ministry of Science & Technology (MoST), the HEC of Pakistan supports the
establishment of Technology and Innovation Support Centres under the World
Intellectual Property Organisation (WIPO) TISC programme at ORIC in higher
education institutes and Government Organisations.

• TISC provides the following services:

– Access to online patent database systems and science and technology
resources
– Access to intellectual property related publications
– Assistance in searching and retrieving technology information
– Training on searching databases
– On-demand searching (novelty, state-of-the-art and infringement)
– Technology and competitor monitoring
– Basic Information on intellectual property laws
– Basic information on intellectual property management and strategy
– Basic information on technology commercialisation and marketing
• The Higher Education Institutions (HEIs) - preferably those that
have notified ORIC and Government Organization - will ensure
their contribution through making their premises, technical
infrastructure and personnel available.
(Manager Intellectual Property / Legal Services appointed by
ORIC).
• The contributions of HEC, IPO Pakistan and WIPO include:
• To support access to patent database systems and science and
technology
• Build technical skills for future TISC staff via training and distance
learning courses
• Information and training materials
• Provide platforms and activities to facilitate an exchange of
experiences within national networks of TISCs or between
different networks
1. SZABIST ORIC

http://oric.szabist.edu.pk/

2. http://www.ipo.gov.pk/
 Risk and Return
• The pursuit of important opportunities and big goals by
entrepreneurs requires them to assume more risks than they
might take on working for a mature company or the
government.
• Introducing a novel product into a new market has an
uncertain outcome. An outcome resulting from an action is
said to be certain when it will definitely happen.
• An outcome resulting from an action is said to be uncertain
when the outcome is not known or is likely to be variable.
• Risk is the chance or possibility of loss. This loss could be
financial, physical, or reputational.
 Scale and Scope
• The scale of a firm is the extent of the activity of a firm as described
by its size. The scale of a firm’s activity can be described by its
revenues, units sold, or some other measure of size.
• Economies of scale are expected based on the concept that larger
quantities of units sold will result in reduced per-unit costs.
• Economies of scale are generally achieved by distributing fixed costs
such as rent, general and administrative expenses, and other
overhead over a larger quantity, q, of units sold. This effect is
portrayed in Figure 7.3.
• The cost per unit decreases, reaching
a minimum at qm. As the smaller, new
Entrant firm grows in size, it can also learn
to reduce its costs per unit and price
competitively with larger firms.
• Scalability refers to how big a firm can grow in various
dimensions to provide more service.
• There are several measures of scalability. They include volume
or quantity sold per year, revenues, and number of customers.
• Capacity is the ability to act or do something. Any firm has
processes, assets, inventory, cash, and other factors that must
be expanded as the company growsits sales volume.
• A firm that can easily grow its capacity is said to be readily
scalable.
• Working capital is a firm’s current assets minus its current
liabilities.
• Sources of working capital for an emerging firm can include
long- and short term borrowing, the sales of fixed assets, new
capital infusions, and net income.
• Managing a firm for scalability is important to its success.
• To preempt or match competitors, a firm must attempt to
foresee increases in demand and then move rapidly to be able
to satisfy the predicted demand.
• This strategy can be risky since it involves investing in
resources before the extent of the demand is verified.
• The total cost, TC, of the production of units is described as:
• TC = FC + VC
• where FC is the fixed costs
that do not vary with the quantity
of production.
• The variable costs, VC, do vary
with the quantity produced.
• The scope of a firm is the range of products offered
or distribution channels utilized (or both).
• The sharing of resources such as manufacturing
facilities, distribution channels, and other factors by
multiple products or business units gives rise to
economies of scope.
• For example, the cost per unit of Procter &
Gamble’s advertising and sales activities is low
because it is spread over a wide range of products.
 Network Effects and Increasing Returns
• In recent years, realization has been growing that network economies are
an important element of competitive economics for new entrepreneurial
firms.
• Network economies arise in industries where a network of complementary
products is a determinant of demand (also called network effects).
• For example, the demand for telephones is dependent on the number of
other telephones that can be called with a telephone. As more people get
telephones, the value of a telephone increases, thus leading to increased
demand for telephones.
• Network economies work when revenues grow faster than costs.
• An increasing returns to scale occurs when the output increases by a larger
proportion than the increase in inputs during the production process.
 Network of five nodes and eight links
• The value of each node (participant) will vary.
• Furthermore, some links will be strong while others
are weak.
• Customers value the number of nodes in the network
but also key links in the network.
• A network of five nodes and eight links is shown in
Figure 7.8. Note that not all nodes are connected by a
link to all other nodes in this example.
• Consider a bank network with 100 branches. Most
people do not visit many other branches except their
local branch and perhaps one near their work.
• For many customers, the link to their account at their
local branch and online or via telephone is what they
value.
• Thus, designers of a network business must analyze
their customers’ needs and build their business on the
best information.
 Risk versus Return
• Reaching for higher returns
carries higher risk.
• Assuming the entrepreneurs
and their investors are rational
beings, they will demand
higher potential annual
• returns for higher-risk ventures.
We illustrate a risk-reward
model in Figure 7.9.
• The expected return varies as
• ER = Rf + R
• where ER 5 expected return, Rf
risk-free rate of return (T-bill),
and R risk.
• Compact fluorescent lights (CFLs) are an energy-efficient
replacement for traditional incandescent bulbs. They use up
to 75 percent less power than incandescent lights and could be
the replacement for most home uses. Ellis Yan, a native of
China, came to the United States and recognized the
opportunity presented by CFLs. He took a risk by making the
bulbs when CFLs were largely ignored by large manufacturers
and others in the market. CFLs are now seen as the climate-
friendly solution for traditional lighting. By 2011, his company,
TCP Inc. in Ohio, captured over half the U.S. market and
generated revenue of almost $300 million dollars for a large
return on his investment.
 Managing Risk
• Managing risk requires anticipating threats and reversing
them [Slywotzky, 2007].
• Defeating risk is based on a keen knowledge of the customer,
a unique value proposition, and a winning profit model.
• As industrial and technological change occurs, a well-managed
enterprise is ready to quickly adapt to any challenge.
• Firms can manage risk by constantly asking about potential
challenges to product, brand, and business model.
• During an economic recession, a heightened sense of risk of
capital exists. However, a new venture’s success is sensitive to
risks other than an economic downturn.