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The successful commercial exploitation of new technology requires the rare conjunction of an idea; a market; an entrepreneur; and the necessary finance all at the right time.
My remarks in this paper are biased towards the situation in which an idea is sought to be commercialised through licensing though some of what I will say is applicable to "in-house" commercialisation as well. This bias arises as a result of my own role in the commercialisation of technology. In addition to being a patent attorney I advise extensively on technology licensing and run a small venture capital company.
In my experience the ability to protect one's ideas by patents, industrial designs, copyright or trade secrets is not essential to the successful commercialisation of that idea - it just helps a great deal. In some cases that protection helps in getting the idea commercialised at all. It can often be very difficult to justify the cost of developing an idea to the marketable stage if one's competitors can copy it as soon as it shows commercial promise.
The whole concept of our Intellectual Property laws is to provide the inventor or designer with a temporary monopoly for his ideas. During the period of this temporary monopoly the inventor, or those commercialising his idea, can command a price for the technology which is higher than would be possible if there were a number of manufacturers of the product or suppliers of the service. The extent to which this "monopolists" profit may in reality be obtained depends principally upon what advantages the market sees in the new technology as compared with its next nearest competitor.
During the period that Monsanto's herbicide "ROUND-UP" was subject to patent protection I paid around $900.00 for a 50l drum. The equivalent price now that the patent has expired and Nufarm are selling a directly competitive product is around $450.00. The price of other herbicides on the market has remained substantially unchanged at a price lower than the $450.00 level. The premium price Monsanto could obtain was directly related to:
Even if you can commercialise your idea without industrial property protection your success may be short lived. Once your good idea has been turned into commercial success it may be easy for your competitors to swamp the market. One has only to look at "Mini-Skips" to see this. The creators of the "Mini-Skip" business noted a need for a better way for householders to dispose of rubbish. They were spectacularly successful for a year or so, won numerous awards and were promptly engulfed by their competitors. If you look in the Sydney Yellow Pages today Mini-Skip is but one among eleven full pages of others doing the same thing.
The term Intellectual Property means the body of laws and common law concepts covering:-
I will not endeavour here to provide a detailed description of each of these forms of Intellectual Property as this information can be readily found elsewhere, including other pages of this web site. What is more important is that you do review your business and identify all the Intellectual Property that the business possesses.
I am tempted to say that the most important requirement for commercial success is that the new product or service has a clear market niche. No matter how clever the idea or have brilliantly marketed if there is not a good fit with a market need there will be no success. The requirements of the market place are often so subtle that considerable effort in researching the market is required to find the likely barriers to commercial success. In the early seventies I had a number of inventors through my office interested in one way or another with steel framing for housing. They were all convinced that in a year or two all houses would be built with steel framing and that the traditional light wooden framing would be in decline. Now twenty years later steel framing is still struggling despite apparent benefits of strength, lightness and lower costs. In part the reason is that the traditional building skills and the demarcation between trades, do not fit well with steel framing. BHP are still in there batting for steel frame housing and I understand that their efforts now extend to running TAFE courses in steel frame building. They are looking a generation ahead to a future in which builders will be trained to accept a product which was available to, but largely rejected by, their fathers. There are few businesses that can afford to take such a long term view!
One must also consider how long the market niche will remain and how the innovation will keep pace with the changing market needs. Some of us here will be able to remember back to the days when the Bulova "Accutron" wrist watch, which incorporated a tuning fork, was the most accurate wrist watch around. It enjoyed a substantial market share at a premium price for a few years. Technological advances in the form of cheap electronic watches with digital displays closed up the market niche Bulova had enjoyed.
In assessing the value of the Intellectual Property it is essential to asses the extent to which it will achieve the business objectives that you have. Will your new invention, for instance,:-
If you cannot see a clear benefit to the business then there is no point in investing in the registration of the Intellectual Property. I would interpose here and add that this adage applies just as much to the running of the business as to its commencement. You should be constantly asking "will the next dollar of expenditure on Intellectual Property yield a satisfactory return on investment?"
It is not enough to be merely saying "my product is patented (or patentable)". The patent (or other Intellectual Property) must be broad enough in its scope to be effective in keeping competitors or potential competitors the niche that you have identified.
I think this can be illustrated again by the "ROUND-UP" example I gave earlier. Monsanto had a patent on a group of compounds including sodium glyphosate, the active ingredient in "ROUND-UP". They obtained over the next few years a bunch of patents covering every synthesis method that they could think of for making the compound - presumably in an effort to extend the life of their patent monopoly. In the event, as soon as their product patent expired a competitive product was on the market made by a method which managed to weave its way between Monsanto's process patents. In assessing your chance of commercial success then, look not at the mere existence of patents or even the number of them that are held. Look, rather at the quality of the patents. Will they give the business a competitive edge?
Often you will need to be creative in getting value from your Intellectual Property. The value might be in a tax benefit, it might be in improving your balance sheet, it might be in forcing a potential customer to re-think a proposal to put the product you supply out to tender. There are many ways in which the inventive business man with the right advisers can wring extra value from Intellectual Property.
The next issue to be considered in valuing the Intellectual Property is to consider whether the idea is new and non obvious, in the case of an invention, or distinctive in the case of a trade mark. The most important point to remember is that if you have publicly used or otherwise disclosed the idea before filing a patent application for it then it is no long possible to do so.
A third important issue is to be sure of the ownership of the Intellectual Property. Intellectual Property normally is owned by the person who created the idea originally. This is subject to the rights of an employer to claim ownership of an invention or other Intellectual Property right made in the course of the originators employment. An investor should be diligent in ensuring that the alleged owner of Intellectual Property does in fact have good title to it.
One must also consider whether the ownership of the Intellectual Property is securely held by the licensor of the technology. One must assure oneself that the person or persons stated to be inventors are really the inventors. One must then see that there is a good transfer of title from the inventor(s) to the patent applicant. I have seen a number of good ideas fail because of disputes between alleged inventors or between parties making competing claims to ownership of patents. There are enough risks for a licensee or venture capitalist in commercialising new technology without taking on the hassles of internecine warfare between the inventor and the patent proprietor, between inventors or within the licensor entity. Get your house in order before you start the commercialisation process.
I should also say that it is easy for people with no experience of the difficulties in commercialising new technology and the time it takes to get terribly "Dollar Struck" once there appears to be the prospect of commercial success. Try and get ownership sorted out early in the process so that everyone involved knows where they stand before people start getting greedy and having unrealistic expectations.
The Intellectual Property may be commercialised in a number or ways. For instance the owner of the Intellectual Property may commercialise through:-
The nature of the appropriate Intellectual Property may change to some extent depending on the approach that is taken to the route for commercialisation. In the case of licensing, for instance the role of the Intellectual Property is absolutely crucial as without some Intellectual Property there is probably nothing to licence!
You have to be sure that your new product or process does not infringe upon a third party's Intellectual Property rights. This risk can to a large extent be quantified by searching. Searching is however a notoriously difficult task. I liken it to clambering through a haystack. If you come out without pricking your finger you can't say there is no needle in the haystack; you can only say you didn't find one. This searching activity is also useful in revealing what your competitors are up to and how they are trying to tackle the market sector you have in mind. If you do find a blocking patent this is not necessarily the end of your venture. You may be able to design around the patent; you may be able to take a license under it; there may be countries where it doesn't exist in which you can work; or it may expire soon.
There is little point in registering your Intellectual Property in countries where you are not going to trade. It is often thought that it is most important to register in those countries where your competitors are located. There are cases where this is most important however it is far more common that there are manufacturers in many countries and this strategy is only a distraction, If you can do your research properly in the first place then it should be possible to select those countries where the technology has the highest prospects and to concentrate ones Intellectual Property efforts in those countries.
I now turn to a number of non-Intellectual Property factors which are, in my view, crucial to the successful commercialisation of new technology:
In my experience the nature of the inventor or inventors is vital to commercial success of the inventor's ideas. I would firstly look for an inventor with a solid grounding and practical experience in the field in which he is working. I would secondly look for qualities of tenacity, the ability to stick doggedly at the task of solving the next most pressing problem in the commercialisation of the technology. I have found that many inventors, particularly people who are not professional researchers, will be distracted sideways onto a fresh and unrelated idea when the going gets hard on the first idea they are trying to commercialise.
Thirdly I would look for an ability to work with others, an acknowledgment that the individual inventor is unlikely to be able to handle the whole commercialisation process himself or herself. The inventor is characterised by a dissatisfaction with at least some aspect of the status quo. He has invented a "better mouse trap" because he doesn't think existing "mouse traps" are satisfactory. This inclination to "march to the beat of a different drum" is essential to the innovation process but if taken too far can endanger the commercialisation process.
So often one finds that when a significant stumbling block appears on the road to commercialisation it is the original inventor who solves the problem. A committed, tenacious, free thinking innovator often is uniquely placed to redesign the product or whatever is necessary to surmount the hurdle. Keeping the inventor or inventorship team involved over the long term therefore is most helpful to successful commercialisation. If the inventor wants to take this money up front and run or if he storms out of every meeting in a "huff" it is unlikely he will be around to solve the real problems which will arise. Similarly if he runs off onto interesting but unrelated ideas when the going gets tough he won't be much use.
The entrepreneur working with the inventor or inventors has, of course, to be sensitive to the nature of the inventor. This entrepreneur may be a university liaison office, an employer, a venture capitalist or a licensee. On rare occasions the entrepreneur may be the inventor himself who establishes his own business and commercialises an idea. In my experience it is very much more common for there to be another party or parties working on the more mundane tasks of arranging finance, marketing the idea, obtaining regulatory approvals, preparing budgets and business plans, worrying about the rent, the employees, the government and the professional advisers. A business flair; a sensitivity to the practical and emotional needs of the inventor; and a practical and logical approach to life coupled with meticulous attention to detail and a high degree of pragmatism characterise the successful entrepreneur. I think it goes without saying that the entrepreneurial team needs a "product champion" - someone who has unyielding faith that the product will succeed.
The assembly of the necessary capital can be an extremely difficult task. Without a track record an innovator may find him, or her self knocking on a lot of doors. A major attraction of licensing is that the capital requirement is typically much lower than with any other route.
Skilful marketing of the idea by the inventor or entrepreneur can be important for commercial success. If the idea can be given "respectability" by receiving favourable press coverage or peer group accolades this can give the inventor or entrepreneur credibility with potential licensees. A client recently gave a highly successful press conference in respect of a novel syringe designed to avoid "needle stick" injury. Careful attention to detail in selecting the attendees and in structuring the presentation together with a lot of luck in striking a quiet day for news resulted in articles in almost all of the significant Australian papers, national news coverage on all T.V. networks and a lot of overseas coverage as well. This has resulted in a flood of licensing enquiries from a substantial number of countries around the world.
There is a potential downside to publicity of course. It may draw unjustified adverse comment or it may merely serve to alert your future competitors to your plans. My experience however is that the skilful use of publicity is one factor which can assist the inventor/entrepreneur achieve success.
It is a good idea to institute a formal market surveillance such as a patent watching service as soon as it can be afforded. This will allow the business to follow the activity of its competitors. Having operatives scanning the market is also desirable though more expensive, Such watching activities is likely to reveal not only new product developments by your competitors but also possible infringement of your own Intellectual Property.
It cannot be assumed that just because you had the right approach to commercialising your Intellectual Property last year that it will necessarily be right this year. Similarly the Intellectual Property that you registered last year may no longer have any value to the business today. It is necessary to be constantly reviewing your business plan and your Intellectual Property portfolio to see that they are still appropriate.
The organisations that succeed in the commercialisation of new technology seem to be the ones that are constantly looking for a better way of doing things. There is not only technical innovation but also innovation in all of the other areas of the business such as finance, marketing, production etc.
In summary then I would suggest that you:-