How do ventures create value while protecting their intellectual property? Amid some tension there are tricks to the trade, according to an expert panel at Cambridge Judge Business School.
Startup ventures in sectors such as technology face a dilemma: they want to elicit lots of feedback in hopes of perfecting the next great thing, while at the same time protecting their intellectual property (IP) against rivals big and small.
So how do entrepreneurial ventures create value while protecting IP? That was the topic of the Enterprise Tuesdayevent at Cambridge Judge Business School last month, part of a series organised by the School’s Entrepreneurship Centre. The sessions are held on Tuesdays in November, February and May each year.
The session was introduced by Dr Matthew Grimes, Reader in Organisational Theory & Information Systems and Co-Director of the Entrepreneurship Centre at Cambridge Judge, and chaired by Shaun Grady, Vice-President of Business Development Operations at pharmaceutical giant AstraZeneca. Panellists were Heather Richards, CEO of Cambridge-based knowledge automation company Transversal, and John Snyder, a Cambridge Judge Entrepreneurship Fellow and co-founder of Grapeshot, a contextual intelligence platform that was acquired last year by US software company Oracle.
Here is an edited summary of the discussion at Enterprise Tuesday on 12 February:
Squaring the circle
Matthew Grimes: “This topic is rife with a lot of tension. Clearly there’s a need to protect one’s intellectual property but also a need to open up and get external feedback.”
The need for patenting differs by sector
Shaun Grady: “Applying for a patent is costly, maintaining patents is costly. But is there a sense that you need to be patenting because it’s a proof point of your innovation and your growth as a company?”
John Snyder: “I think it’s mandatory in life sciences where you have a business model not based on revenue and a lot of customers, but based on hypothesis, which is very intellectual, so you need a very strong patent base. But in other businesses your real winning formula isn’t the patent, it’s how you conduct and how you grow your business and it’s the quality of your team and everything you put into play, not just the IP.”
In patent applications, a little bit of information can go a long way
John Snyder: “The problem with patents is you have to publish your method. So you can have a knife used to cut bread, but you need a patent to show that it can also spread butter – and you have to demonstrate that in the patent application. We didn’t want to tell the world how we were doing our algorithms, so I purposely went off and did one patent that was left of field, just to tick the investment box.”
Heather Richards: “Early on there was our core method, part of which was patented. We thought, for the same reason, why do you want to broadcast to the world the very things that make you special? But it’s possible to get out there not the full code – but enough to get the idea out there and communicate to potential investors that this is what we’re focusing on.”
Pay close attention to the language of your contracts
Heather Richards: “I’ve talked to some founders who didn’t realise until three or four years later that the way their employment contracts are written, the coding belonged to the coders and not the company. Also, make sure that NDAs (non-disclosure agreements) are in place for employment contracts. Then, as you start selling product, look at the contracts you have with firms you are selling to: some might want exclusivity, so you have to ask is that something you want to do – as it could keep you from doing a deal with a bigger company.”
Keep excellent IP records for potential acquirers down the road
John Snyder: “You need to lock down who owns the IP in all cases. They need to see a complete audit trail and where the IP sits. You have to be absolutely sure you have that wrapped up.”
Shaun Grady: “In therapeutics, we walk away from a few deals once we decide to go for them, and the absence of strong IP is typically the reason we walk away.”
The Cambridge ecosystem – how good is it for startups?
Shaun Grady: “Let’s talk about talent: what was it like getting access to the clever people who would help you fulfil your vision? Is Cambridge the right place to be? Is Cambridge big enough to get the resource and intellectual capital to feed the innovation?”
John Snyder: “Cambridge is an awesome place to be. A good friend coined the phrase: ‘It’s a low-risk place to do high-risk things.’ It’s the culture of Cambridge: You can recruit people who don’t want a payday salary, they want a challenge and a problem and a mission.”
Heather Richards: “Cambridge is a great place to be, that’s one of the reasons we’ve stayed here. There are so many bright people who, if you put a problem in front of them, can do amazing things even if they’ve never tackled that problem before. What’s changed dramatically is the competition we have in hiring people in Cambridge. Ten years ago that didn’t exist. We’re now part of “AI Alley” – just footsteps away from Apple, Amazon and, Microsoft in a little corner of Station Road.”