Patenting is an expensive and time consuming affair. Should this be a priority for startups? Read on to find out how different startups are using the power of Intellectual Property to march on side-by-side with big players.
Intellectual property is a rather contradictory thing for a startup. Let me tell you a story – the story of Ditto. Kate Endress had a fantastic proposition. A website that allows you to virtually try on glasses and eventually you can buy the one you like. How it works is rather simple. The website captures a video of your face while you are asked to turn your head left and then right. Once the video is captured, it creates an interactive 3D image where you can put on glasses and rotate the image to see different angles. The company, Ditto, was doing great. They were about to raise a second round of capital, when Endress was hit on the back, in a manner of saying. She didn’t see this coming, and tumbled. Wellpoint, a company worth $25 billion dollars who owns the brand 1-800 Contacts saw ditto as a threat to their business. They sued Ditto for patent infringement on the technology described above. The interesting part is, the patent for this technology wasn’t granted to 1-800 Contacts originally. They bought it from Geomatrix Inc. in 2001. Wellpoint purchased this patent and used it to sue Ditto. Things looked a little uncertain for Ditto, until Endress got up and decided to fight. She parted with a large chunk of equity in return for the legal fee to fight the case.
Well, this was not to scare away the startups. This is the story from one angle. Let’s take a look at another angle. The patent in question was granted to Geomatrix Inc. in 2001. It changed hands with Big Stage entertainment Inc., Image Metrics (who acquired Big Stage), and Global Alliance Inc. before 1-800 contacts acquired it. So, there is someone inventing radical stuff for sure. You could never stop that. It’s a complex game to be able to commercialize the inventions though. There are hurdles for sure, but we forget to look in this direction, until we stumble.
Let me tell you another story. This time, it’s about thermostats and smoke detectors! It’s not about the old run-of-the-mill devices. I am talking about the smart thermostats, ones that learn our behavior and preferences, ones that make energy consumption efficient, and ones that talk to smartphones (of course). Oh oh, and the ones that look beautiful! I am talking about Nest. The Nest labs was founded by Ex-Apple guys Tony Fadell and Matt Rogers. The Nest labs is transforming the otherwise boring thermostat industry and bringing a revolution in home automation. They are also a company who are fighting the big traditional players in their industry head on. A partnership with Intellectual Ventures for Intellectual Property for Defense (IPFD) program gives them access to non-exclusive rights to Intellectual Ventures’ large portfolio of patents through a license agreement. In addition, Nest is acquiring a number of patents in areas of interest to Nest, including systems and methods for automatic registration of devices. So, they’ve built up a strong wall to march on with their plans.
Coming back to my original statement, IP is a rather contradictory thing for startups. On one hand it requires a lot of effort and capital to go this way. On the other hand, there is stiff competition out there and big players won’t think twice before wiping you away with a lawsuit. My suggestion, if you want to go big, better have an IP strategy chalked out, right away.