Strategic Patent Strategy with Shmuel Silverman
Below is an edited transcript:
Mark Brinkerhoff: Today I am interviewing a friend of mine, Shmuel Silverman, from Multi-Innovation. He and his company do something very unique that I think is extremely important in the IP space. Most of our customers come to us with patent requirements or needs, and they patent whatever they can. Shmuel and his team help you decide what should be patented--not what could be. Let me let him introduce himself briefly and then will get into the interview.
Shmuel Silverman: My name is Shmuel Silverman, been in technology for quite a while, started in the early eighties. Realizing that when we create or when we patent technology, we try to make sure that nobody copies what we are doing and realizing over time working with large companies like Motorola and others, that just protecting the technology does not mean you protect your business. Multi-Innovation is about protecting your business. We use patents and patent portfolio to increase your leverage in the market.
Mark: How long have you been doing this kind of work?
Shmuel: I started as director of advanced technology and strategy in about 2000. Did it for Motorola for six years and just continue to do it for the private sector for the last 20 years.
Mark: My perception of the IP process is one that is mostly focused on smaller companies. We do work for large ones as well, but the smaller ones tend to need more advice in the patenting space. Has that been your observation too?
Shmuel: Absolutely. I believe it's because of the mindset and the thought process that come before IP. Smaller companies are trailblazers, they hope to conquer some business space and they think that if they create one or two patents that they can own that space. And the reality is that they cannot. Instead of protecting their technology, they need to consider how to protect their value proposition. They normally believe that their solution is the best for a large market space--that no one is going to solve the same problem either better or differently. That's the kind of mindset that leads to poor results.
Mark: So what would you tell someone who's done an initial patent search and found a patent that might be in the way of their idea becoming a reality? Should they give up? What should they do?
Shmuel: They should absolutely not give up. First and foremost, IP or patenting is only a part of the bigger picture. Your business is not just your technology; it's much broader than that. To accomplish your business, if you have some IP in the way, it means that you may need to license or work around it. To license it, you will need to figure out who the current owner is and what their needs are so that you can negotiate with them.
Mark: So, a kind of trade or is it a financial thing or both? How does that work?
Shmuel: In most cases, it's trade. Sometimes it's financial. The larger companies who may acquire you do not want to have something in the way of whatever IP you're creating. So you need to pay attention to what you're creating. If somebody has already solved the problem in one way, it does not mean that there aren't other solutions that could be actually better or different. You just need to be different. There are probably five or ten different ways to achieve what you need to accomplish.
Mark: Let's say I'm in a startup with an idea and I've done my initial search. I've looked in the patent database, looked on Amazon, and looked in stores that might have my product idea. I tell myself, "Okay, so far it looks good. I can't find anything." What do I do next?
Shmuel: Starting with a search for IP that you may be infringing on is a mistake. The first thing to do if you have an unique product idea is to go and build it. If you find IP that you may be infringing on and you move forward, you become a "knowing infringer", which is much more serious.
Mark: So invent it first and then pursue the IP later? When do you jump into the IP space?
Shmuel: Go to somebody who understands the IP space and purchase that service. Somebody's going to do search, usually a technologist, not necessarily a lawyer. And we can come back to it and say, "Hey, I looked at the space, and you're safe," or "I looked at the space .and I'm recommending for you to do something a little bit different and here are my recommendations." At that point, you're not exposed. The service that you purchased, actually they are not exposing either. They're providing you with support, but they know what's out there. You don't know and there's no way for you to say, "Yes, I've seen it. I know that I was in trouble and I decided to do it differently. So now I think I'm good." It's like you farm it out. You move the problem away, you need to be remote from any problem like this in your process and you don't need to worry about it either. Let somebody else worry about it.
Mark: Can you share an example of a pursuit that used strategic opportunities to broaden their business value?
Shmuel: Yes. When you develop a technology, whatever the technology is, you always have more opportunities than just the narrow field that you're looking at. Let me give you an example: the Blade Group is a company here in the Valley, it's actually a French company. They're provide for gaming environment PC-based games. It works with your phone, with your laptop, with your video, whatever it is that you have. They can project it, supporting up to 4K resolution at up to 240 frames per second. It is a great solution. Both Microsoft, Sony, and Google announced that they're entering the game. Microsoft and Sony just purchased another company with tons of IP, so they can kind of like own the space, at least they wanted to. And Google announced that they're going to provide this service for free. Now, if you're Blade playing five years in this market, wouldn't you like to have the right IP to block it, before these guys are sharing them?
Mark: Yeah. So, that's an example where they didn't do strategic planning with their IP.
Shmuel: They tried, they did their very best with their understanding of the technology and protecting the specific technologies they've got, but there are other ways to do it. And other people just step in, they have better distribution, better name, higher number of completion, and they're doing it for free. Oh wait a minute. How can I deal with that?
Mark: Yeah, Microsoft often does that. Right, they'll buy a technology and then they'll integrate it into office for free, voice recognition, whatever it is and all kinds of companies go down because of that.
Shmuel: Yes, and it's not that they are trying to do anything against, there's nothing personal about it. It's just they see good business and they step into and grabbing good business. If you're a trailblazer, and I don't care where in what kind of vertical you are, bio farm, whatever it is, device, whatever you create, it's you blazing the trail, you create a business, people starting to pay attention and a large company can either say, "Okay, I'm going to do it myself," or they can buy you. They will buy you if you can block the space. If you don't block the space, why would they even buy you? Might be cheaper for them to actually do it themself. So the early stage startups, many times will go to large law firms. Cost for a simply patent might be $15,000. And if you want to have broad coverage, you end up bouncing back and forth with the U.S. PTO or other entities, it's around $40,000 per single patent.
Mark: Expensive.
Shmuel: It's expensive for an early stage this is a big amount of money to get. And to realize that whatever they got, no matter broad it is, it can easily be circumvented. If you knew that you could easily be circumvented, that somebody else can accomplish what you are trying to accomplish using different technology or a different way and just dance around it, would you spend $40,000 out of the zero money that you have to start a company? Probably not. I think it's more cost effective even in the early stage to spend a little bit time on strategizing and figuring out how to own the space. With what kind of portfolio, without creating a single patent, and use this in their next round or next raise round say, "Hey, I didn't create patents, but we can own the space, and here's how." I think it's a very compelling story, definitely when you are very early stage. And obviously when you are at 200 million, it's a different sport.
Mark: Right. So if someone comes to you and says, "Here's my technology and I'm interested in creating the proper IP portfolio to add value to my business," how do you help them? What is the process? What do they share that with you? How does it work?
Shmuel: If you're extremely early stage where you just need to a little bit of advice and it's probably half an hour to an hour and a half of brain capacity, and a lot of experience to bring to the table. Then I will recommend to just to do an hour or two, we'll just talk about it. I understand, I'll give you some advice, and then I stepped back, and now it's your turn. What's your next move? Your next move is probably to get to a very small raise, maybe $250,000. At that point, where it's not your money, but other people start to believe in you and you raise that, we can come back and take a closer look at your space and identify all the ways to solve your value proposition. Just identify them and figure out which one can be blocked and which one cannot. So at least you have this knowledge.
Shmuel: You still didn't create any patent. I mean, but this is a work, this is like a preliminary strategy that we do for you. This enables you to see what to do next. For example: do I need a patent portfolio of six patents? 12 patents? What does it really give you? What kind of patents? What's the content of them? What do I need to claim in those patents? Is it technology that I'm developing or actually just technology to block the space? But now, you have this entire story in front of you. You go to your next round. You don't need to spend money on IP yet. You just go to the next round, say "This is how much it's going to cost me to block this amount of the space." This is part of my grade, this is what I want you guys to invest, but this is the value that he brings to you. Beyond this round, if I wanted go and somebody wants to buy me, if I wanted that or whatever it is, I want to show them how much of the market I actually own and why.
Mark: I see, so in the form of your output at that stage might be a report, a recommendation, a methodology, a strategy.
Shmuel: It's a strategy. It's about, depends on what we are working on, anywhere from 25 to 45 page report, very detailed, identifying different technologies, identify how we solved the problem. How did the next five years going to look like for this technology? What are the risks? Who are the other players that create risk? What do we want to accomplish as we play in that space? Also, just to be aware of it, we want to protect the value proposition. This is how we protect the company. We protect their value proposition in the market and there are many ways to accomplish that value proposition, so you need to figure out which one you want to protect or not, and what the priorities. Value proposition for a very early stage does change over time.
Shmuel: Your clients, potential clients and market, and your alpha and beta release of whatever product or device that you're creating will teach you a lot. What you are going to learn is that there are other ways to do it, but your clients told you that if you change these products such and such way, it's going to be so much easier or more effective for them to do their job or run their operation. These problems you solve along the way can be a big deal. So blocking the solution to those problems become key factors in your value proposition and this is what we want to go after.
Mark: So I get it, it makes total sense. So now, I'm putting my thoughts in the mind of a startup individual or group and I'm thinking, "Okay, so I don't have any patents yet and I need to protect the trade secrets or that nature of it. So I assume I use non-disclosures along the way for when I'm fundraising so that I don't share the methodology with the world." Is that appropriate?
Shmuel: Yes and no. You want to talk, but this is where our hourly based advisory comes into play because we can identify what elements you share that is good enough for the investors to understand as you move forward and make it believable. And at the same time, "Here are the things that I'm not sharing with you guys and this is why."
Mark: I see, so you protect it via not saying it, not sharing.
Shmuel: We are very familiar with the investment community - whatever is being shared in that community is open source. There is no NDA. They see three or five like you a day. They're not signing five different NDAs because they would be chained to their chairs at that point.
Mark: Yeah, they couldn't do their business.
Shmuel: Also, a business or an investment group will look at your technology and compare it with another. Sometimes they will get the two teams together and say, "If you guys work together, we will invest. If you don't, then we will not." They feel that they need to be aware of all of it but they cannot be liable for anything.
Mark: Do you ever decide not to patent something but keep it a trade secret?
Shmuel: Yes, that's another thing in our process of evaluating your strategy. Sometimes you design and debug your technology, you figure out other things that enable it, that are needed to make it work. Sometimes we will patent those items instead and won't expose your base technology, keeping it as a trade secret. We don't divulge the know how you acquired through a lot of sweat and hard work.
Mark: Thank you very much for coming to visit today. It's fantastic to have you here. I think the service you provide is one that most people aren't even aware exists. And I'm hoping this exposes them to that because I think the strategy behind IP management, patent generation is one that's overlooked too often and shouldn't be. So thank you.
Shmuel: Thank you.
