I am a patent attorney and inventor. My experience has impressed upon me that the key principles for evaluating invention are return on investment (ROI), out of the box (OOB) thinking, and risk diversification (RD). Good ideas help too…
ROI requires that the discounted present value (PV) of the project be positive, and typically remain so throughout the effort. Often, the analysis requires answering the question, what is “my” subjective discount rate? This often comes down to liquidity horizon: when will I see cash for my efforts? The longer the horizon, the higher the discount rate, resulting in an exponential increase. At the limit, an invention may be commercialized only after the IP expires. Most folks can’t tolerate an expected 10-15 years to liquidity, but this is fairly common in IP-centric projects. To address this issue, one key is to carefully manage early stage investment, and consider possibilities for tying the project to continuing or early cash flows, or obtaining fresh investment and providing frequent liquidity events. These later strategies are important for organizations and businesses. The discount rate also encompasses the inherent project risk.
Inventors on Xinova’s recent profile pieces have expressed admiration for bold, out of the box thinking, and for good reason. OOB thinking requires a willingness to forsake best practices, the tried & true, conventional wisdom, and in some cases, common sense. Such endeavors entail heightened risk. While a reality check is always welcome, I find that imposing an objective rationality requirement too early in the process can foreclose true innovation, and mandates incrementalism. Inventors need the freedom to dream big early on.
Often, the best way to achieve an open mind is to invite smart people who have no clue into the process. The best way to limit innovation is to stick to the acknowledged “experts,” and them alone. (That is not to say that we should not value experts–clearly, they represent a reservoir of existing knowledge, knowhow, and insight based on experience).
Bear in mind that, in some fields, disruptive innovation is a bad idea; where the intended innovator is part of an organization that has a large capital investment, forsaking that investment is probably imprudent. However, the organization must always be mindful that external competition knows no such limits, and protecting the capital investment and organizational inertia for too long is itself a cause for failure. Organizations must innovate and adapt lest they decline.
Reliance on knowledge domain experts alone yields narrow or consensus thoughts on solutions. I find that synthesis across fields, and especially outside the field in which the problem arises, provides opportunities for useful synergies. An experienced biologist, for example, may have insights into control systems and advanced materials, derived from study of evolved systems, that are foreign, or nearly so, to physical scientists. On the other hand, a physicist may be able to provide a quantitative analysis to issues that a biologist might have ceded to trial-and-error (empirical evidence), or “unpredictability.”
Successful risk diversification requires availability of multiple bites at the apple, each of which contains a chance at success, without weighing down the project with too many loose ends. Ultimately, this requires prescience, a key inventive skill. The issue is not merely “what can I do that will work,” but rather “what path should I take toward success” that gives the highest probability of a successful outcome (where there may be many possible outcomes, some of which could be successful) and the rewards that ensue.
Good ideas alone are not sufficient for success; proper execution on good ideas is. When the project reaches a decision point, whether previously considered or not, it is vital to know who is empowered to make a decision, and what resources are available to support the sequelae of that decision. Often, RD requires an initial understanding and planning for the options that may be faced, for the potential of both success and failure. Each has its own consequence.
In an IP-centric project, RD compels protecting those elements that may be useful in the ultimate product or service, and likely ensuring that those same options are foreclosed or limited to subsequent market entrants. The IP investment must be made with the specific goal of protecting what happens if the project is or could be successful—is the investment protected? This often requires making early decisions that seem expensive in the event of failure.
IP protection is expensive, both in cash, and resources, but is useful both when the business plan succeeds and fails. The decision to make this investment should consider what is being obtained, and how it is valuable across the spectrum of future possibilities. In addition to the possibility of protection against infringement, IP can also provide strategic opportunity and preserve options for later market entry. Many IP-centric projects take on a second life after initial commercial failure. IP is often valued based on, and dedicated to, the highest value usage, and the opportunity cost for foregone options dismissed.
After that highest value usage is removed, the analysis should be reconsidered. The scope and value of the IP has many dimensions beyond the initial commercial focus, and the possibility of a new commercial or monetization focus, in turn, makes early management decisions, and pivoting, easier and more efficient.
IP protection can therefore serve as a backstop to protect the core business model against competition, and also protect investors and investment, permitting initial failures to serve as pit-stops on the way to eventual success.
Connect with Steven on the Xinova Innovation Network
As head of Tully Rinckey PLLC’s patent law practice in Manhattan, Steven’s practice areas include patent and trademark prosecution and counseling, litigation, licensing, transactions, opinions, and strategic IP portfolio development. In addition to representing clients, he is also named as inventor on over 90 US patents. He has founded a company that focuses on inter-vehicle communications, ad hoc networking, driver assistance, navigational and imaging radar technologies. Steven received his J.D. from the Benjamin N. Cardozo School of Law, where he was on the Law Review. He received a Bachelor’s degree in Applied Biology, and a Master’s degree in Human Nutrition and Metabolism (Department of Nutrition and Food Science, now Bioengineering) both from M.I.T., and a Master’s degree in Electrical Engineering from Rensselaer Polytechnic Institute.
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