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Sandie Allen
Friday, April 17, 2009
Inside IP Law
Startups scale a legal learning curve with their IP
By Jill Gambon, Special to Mass High Tech
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For many high-technology entrepreneurs, intellectual property is the foundation of their business. However, there’s a legal thicket surrounding IP. Missteps can be costly: A delayed patent filing can cost millions; an oversight in researching competitors’ IP holdings can dampen interest from potential investors; hiring the wrong outside help to handle IP issues — whether a legal team or a contract manufacturer — can weaken a company’s market position.
Several veterans of Boston-area technology firms say that with experience they have become well-versed in strategies to develop, protect and profit from their IP assets which can include patents, copyrights, trademarks and trade secrets.
“I’ve learned a lot about IP — more than I ever anticipated when I thought I’d be building software,” said Timothy Simard, founder and CEO of Anthurium Solutions Inc., a Boston-based startup that has a software platform for matching workers with jobs. In November of 2007, Anthurium filed suit against three companies for allegedly infringing on its workflow technology patent. The case is pending and expected to go to trial in October. Simard’s advice to a startup? “Get the best legal counsel you can,” he said. “It’s not a trivial endeavor to create solid, enforceable IP. As you move forward to commercialize, you need the expertise.”
Several other entrepreneurs agree that while legal fees may be expensive, they are worth the price — if the lawyers are highly skilled in IP law. Law firms should be thoroughly vetted to make sure they’re a good fit, said Todd Burger, CEO of Chameleon Network Inc., a Lexington-based company that has developed software for mobile transactions.
In Chameleon Network’s early days, the company hired a small law firm based on a referral. Before long it was clear the law firm didn’t have the necessary experience or staff to handle the company’s IP claims, Burger said. A delay in filing an application with the U.S. Patent and Trademark Office meant that another company was ahead of Chameleon Network in seeking a patent related to bar code technology. That law firm was subsequently fired and Chameleon did a more thorough background check when looking for a replacement. “I hired a new firm and it was probably one of the best things I ever did,” Burger recalled. The firm, Wolf, Greenfield, & Sacks PC, a Boston-based boutique IP practice, had extensive experience with the patent-filing process, which later helped Chameleon Network launch a successful appeal at the Patent Office.
For technology startups, a strong intellectual property portfolio is a key to attracting investors or buyers. Determining the value of the IP requires a thorough analysis of any possible infringement by other companies, several entrepreneurs said.
“You need to be able to build a claims chart,” Burger said. Once any potential claims are mapped out, the company then needs to figure out how essential its IP is to the businesses it suspects are infringing.
The potential costs of suing or negotiating with the alleged infringers will affect the value of the IP. Burger suggests hiring an experienced patent broker who is independent of the company to help with IP valuation and with sales or licensing deals.
Jack Kelly, CEO of Adva Mobile Corp., a Wayland startup that offers a mobile social networking application to connect musicians with fans, vividly recalls the havoc a lax approach to IP caused a young company in the late 1980s. Back then, Kelly was helping to launch Tylink Corp., a networking company. Someone at the company filed the incorporation papers under the Tylink name without researching to see if that handle was already in use. It turns out a competitor had a product line called Tylink and eventually took action against the startup. Short on cash, Tylink Corp. ended up negotiating a settlement in which it turned over some source code that its engineers had developed so it could keep the Tylink name, Kelly said. The experience was jarring for the young company. “It’s an incredibly disruptive event in the life of a small company,” he said. It was also a learning experience — the firm took a more disciplined approach when dealing with trademarks and other forms of IP after that. And it’s a lesson that Kelly has not forgotten.
Sunny Ahn is CEO of Context Connect LLC, a Newburyport-based firm that has developed systems for directory-based mobile connectivity and mass notification services. He has also come to realize it’s crucial to keep an eye on the competitive landscape to protect his company’s IP. “Because IP is such a core of our business, it’s important to know who is doing what,” said Ahn, whose company holds two patents. One of the company’s sales employees spends half of her time monitoring the market, looking for potential patent infringement. “The market is always evolving. If there’s infringement, you have to address it. We have a fiduciary responsibility to enforce our patents,” he said.
With the increased emphasis on IP, and the presence of big firms such as Microsoft Corp., even developers of open source software are talking to lawyers, noted Steve Huston, president of applications services company Riverace in Franklin. “Once companies with something to lose got into the open source game, they brought their lawyers with them,” he said.
Jill Gambon is a freelance writer in West Newbury.
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