Angels, Entrepreneurs, and Gadflies: How Angels View NDAs

Many entrepreneurs ask angel investors to sign non-disclosure agreements (NDA) prior to discussing their businesses. They never hear back from the angels and wonder why.

One reason may be that, initially, angels only want enough information to determine whether a deal interests them. All they want to hear about are the problem(s) solved and the benefits of the entrepreneur’s approach. Rarely do angels want more, much less detailed disclosure of the entrepreneur’s intellectual property (IP).

Indeed, too much early information can hurt the angel. For instance, if a play has widespread applicability, an NDA might preclude the angel’s participation in other deals. Also, pre-existing deals can ensnare the angel in a conflict of interest if they learn too much about a competitive approach under an NDA. Besides, if a deal comes to the angel through an investment screening group, the information usually carries with it a condition of non disclosure.

Thus, often, an entrepreneur-NDA-request goes something like the following. The entrepreneur confronts an angel with an NDA. The investor thinks, “They don’t have any IP protection! Otherwise, they wouldn’t need my signature.” Next the angel thinks, “What will this group do at go-to-market time? Haven’t they thought through their IP position? They are going to get ripped off.” From many angels’ perspectives, therefore, NDA-bearing entrepreneurs are gadflies.

As a result this blog recommends that, prior to fund-raising, entrepreneurs develop and begin executing an IP plan. Of course, not everything must immediately be formalized into a patent, copyright, or trademark application prior to speaking to financiers. Many elements of a business can be held as trade secrets during pre-launch fund-raising. Then, once an angel becomes interested in a play they will ask for more information and won’t mind signing an NDA.

Hall Martin (Vice Chairman of The Baylor Angel Network, Director of The Wilco Angels Network and Director of The Texas Entrepreneur Network) co-authored this article. 

For more information about entrepreneurship in general see The Texas Entrepreneur Network.  

For more information about developing and executing an IP plan see www.villhardpatents.com or call The Villhard Patent Group at (512) 897-0399.

A Lot of Zeros for Patents

$12,500,000,000. That’s a lot of zeros to pay for intellectual property (IP). But that was the price Google paid for Motorola Mobility and, mostly, for their patent portfolio.

In light of the Google/Motorola deal, it bears repeating that investors and companies in the market for acquisitions often look for some combination in their targets of a good idea, a good management team, a developing (or complementary) market, and the existence or creation of entry barriers (e.g., intellectual property). Typically, it takes a measure of all four elements for a start-up or other small or mid-sized business to get on the radar screen of an angel investor or venture capitalist (much more, one of the Fortune 500 companies).

Without passing judgment on them, and as with any M&A activity, I would be willing to bet that not much of the target’s (Motorola) management team will be around in the new Google in one year. For their part, Google claims that Motorola cell phones and other mobile products will remain on the market. Of course, whether you believe that a software company will plunge deep into the hardware market is another matter. That leaves only Motorola’s IP on the table for the apparent reason for the deal.

Thus the Motorola deal shows, with its focus on Motorola’s patents, that an IP portfolio (in its own right) can make or break a deal. The news of the Motorola deal should therefore prompt entrepreneurs throughout Austin (and those throughout Texas and elsewhere) to assess their IP portfolios.

If you would like experienced help with your IP assessment and subsequent IP strategizing, we at the Villhard Patent Group would enjoy helping you. For more information about intellectual property in general, and patents in particular, please contact us at (512) 897-0399 or visit www.villhardpatents.com.

3 Bizarre Things About Patent Applications

Sometimes a business owner, eager to see the company’s first patent application, opens the draft -- and barfs. Never have they paid for such gobblygook.

Many things about patents might strike the entrepreneur as odd. This article is too short to go into all of the reasons for this situation. But, let’s start with why patent drawings tend to look cartoonish. First, patents rarely require detailed engineering drawings. Instead, patent attorneys try to graphically break down the ideas to help others understand the inventions. Many drafters also drop unnecessary detail that might obscure the inventions. Additionally, the Patent Office imposes their traditional and odd stylistic requirements. WYSIWYG!

Secondly, the writing style in many applications strikes many as stilted and mealy-mouthed. In the written description, the drafter tries to balance two contradictory requirements: being specific and avoiding specificity. Ironically, depending on the words chosen, specificity can limit an application’s scope. But, being vague can invalidate an application for failure to adequately describe the invention. Patent attorneys therefore spend their days agonizing over what to put in, what to leave out, and how to phrase what’s left.

For being bizarre, though, patent claims take the cake. For starters, a would-be-infringer will almost certainly use every word of the claims against the patent owner. Thus, many drafters place a premium on brevity. On the other hand, the claims must describe the invention well enough to alert would-be-infringers of the scope of the claims. That requirement necessitates words and, often, many of them.

Additionally, patent attorneys also try to comply with over 200 years of case law that seems openly hostile to drafters. Perhaps that is why the Supreme Court once said, patent applications are “the most difficult legal instruments to draw.”

We at the Villhard Patent Group caution entrepreneurs that patent applications hold many traps for the unwary. We would be happy to discuss how to protect your ideas. For more information about us visit www.villhardpatents.com or call (512) 897-0399.

Things Entrepreneurs Should Look For in a Patent Attorney

Shopping for a patent attorney may seem pretty simple.  You simply find one with expertise in your technical area.  Right?  However, focusing on the technical qualifications of a candidate alone might not be adequate.

Sure.  Your patent attorney needs to know your technology.  But regardless of who you select, you will still likely be the technical expert for your application.  No one will know your concept better than you. 

Therefore consider some other factors.  Does the candidate you are considering understand your business model?  Does the candidate have a feel for how you will be using your intellectual property; where it fits into your business activities; and the alternatives (including the current state of the art) to your idea?  Moreover, does the candidate understand who your competitors are; who they might be in the future; and how your idea might give you an advantage over them?  Similar questions can be asked about the candidate’s knowledge of your customer base.

Also, has the candidate worked with clients of your size?  Understanding the needs of Fortune 100 companies is one thing.  However, using a patent attorney who grinds out one patent application after another –the model followed by most Fortune 100-based patent attorneys -- might result in a cookie-cutter application that shirks interesting aspects of your idea.  Instead, entrepreneurs might be well advised to look for a patent attorney who regularly deals with other entrepreneurs and understands that your patent application might be your crown IP jewel and deserving of individualized treatment.

Having satisfied these concerns, entrepreneurs can then move on to the more mundane considerations.  How many years of patent related experience does the candidate have?  What sorts of recommendations does the candidate have?  Can the candidate communicate?  Does a match exist between your personality and the candidate’s personality? 

We at the Villhard Patent Group would like to have the opportunity to discuss your intellectual property prospects with you.  Please contact us at (512) 897-0399 or visit www.villhardpatents.com for more information about us.  

I-FORD: IP Found on the Road Dead

“What we’re doing is obvious.  What's patentable about it?”  This question marks the end of the IP road for many entrepreneurs. As a result, many entrepreneurs walk away from protecting otherwise patent eligible web apps, B2B programs, financial service packages, etc. 

The related IP rights eventually lapse, leaving the ideas in the public domain.  Competitors are then free to pick up the abandoned IP, breathe new life into it, and use it for their own benefit. 

Under current law (see the Bilski U.S. Supreme Court case), though, all of the above types of business-related systems (and others) might have received patent protection.  Whether or not the ideas seemed obvious to their originators misses the mark.  Indeed, almost all ideas appear obvious (in a non-legal sense) -- with 20-20 hindsight.  It is worth recalling that, without the benefit of that hindsight, the legal tests for patentability include:

 Is an idea patent eligible?

 Is it useful?

Is it new?

Is it non-obvious?

Can its conceiver(s) adequately describe how to make, use, and operate a system based on it?

Usually, the idea is patent eligible, useful, and can be adequately described.  Newness often relates to whether the patent application includes meaningful “claims.”  Therefore, the test usually boils down to whether an idea is non-obviousness. 

In a patentability sense, “obviousness” is a legal term of art having little to do with how that term is used in every day conversations.  Indeed, the concept of obviousness happens to be so complex that most Patent Attorneys spend the bulk of their time arguing about it.  Unfortunately, many entrepreneurs jump to a conclusion about the obviousness of their ideas.  They then leave their ideas for their competitors to find on the roadside not dead but quite well and ready to go to work.  

The Villhard Patent Group encourages entrepreneurs who have business services related systems under development to consult with a Patent Attorney before concluding that their ideas are “obvious” or otherwise unpatentable.  Please contact us at www.villhardpatents.com or (512) 897-0399.

Intellectual Property Games

In the 70s and 80s Pong, Centipede, and Pac-Man held those of us admittedly old enough to remember them awestruck.  I remember sneaking into a lake-front bar and force feeding these primitive games money.  As a kid I could not imagine the advanced graphics, 3D game spaces, world-wide interactivity and other technology (i.e., intellectual property) now programmed into even simple games. 

Imagine having been in a position back then to protect ownership of the game engines, related APIs, components, and other engine features that enable today’s performance levels.  Unsurprisingly, the Patent Office database currently lists 721 published patent applications using the phrase “game engine.”  They also list 101 applications using “game engine” in the claims.  Clearly, someone is patenting game engines (e.g., the engine developers). 

But game developers can also get into the game.  More particularly, as game developers conceive of new game functionality (e.g., the advance from Pong’s 2-D game space to today’s 3-D game spaces) the programs underlying that new functionality might be patentable.  Moreover if, as a result of the new functionality, the engine or engine API must be modified those modifications might also be patentable for the game developer.  Of course, these sorts of modifications would need to meet patentability requirements (i.e. be new, non-obvious, etc).

In addition, the game developer would have to be able to describe how to program and operate the modified engine.  Even if the developer needs help programming that modification, though, the game developer might at least be a co-inventor of the idea.  In either case, the game developer (and/or his company) would be well advised to consult a patent attorney before disclosing it to others.  That way they can obtain an informed opinion of the technology’s potential patentability and ownership before making the first move with outside parties.

The author wishes to thank Todd Simmons for his valuable contributions to this article.  For more information about Todd see: http://todd-simmons.com/.

For more information about the patentability and ownership of gaming related intellectual property please see www.villhardpatents.com or contact us at (512) 897-0399.

Free Software

Many in the computer industry believe that software should be free.  This belief often surfaces when talk turns toward protecting newly developed Web apps with patents.  Indeed, a strong under-current exists resisting such software patents.  Yet, U.S. law is clear.  If a web (or other computer) application otherwise meets patentability requirements (e.g., it is new, useful, non-obvious, etc.) the computer application merits patent protection even if it implements a business method.  See In Re Bilski.

Yet the resistance to patenting software persists.  In many ways that attitude is understandable.  Speaking as a former programmer, I never wanted to re-create the wheel.  Let’s face it.  Coding and debugging can be tedious and frustrating.  Why go through all of that effort when someone else developed a suitable application?  For another thing, don’t we want to direct new efforts toward creating new and better services?

Therefore, those who advocate for free software, unfettered by patents, suggest that software developers should be free to give away their creations.  IP (intellectual property) advocates, in contrast, favor letting developers benefit from shedding their blood, sweat, and tears creating new services. 

Fortunately, U.S. patent law allows software companies freedom to choose between these approaches.  Companies that want to give away their technology can.  The existence of myriads of General Public Licenses (GPLs) stands as tribute to their choices.  In contrast, the, thousands of software patent applications stand as tribute to the flip side of that freedom. 

Of course, the rub comes when a free software advocate wants to re-use patented software.  They have to pay royalties or risk an infringement lawsuit.  They do, though, have another option: developing a competitive, non-infringing service.  The latter option represents what the patent system seeks to foster: choice for end-users between competing technologies.  That result benefits us all.

For more information regarding patent applications and Web apps please see www.villhardpatents.com or contact us at (512) 897-0399.