IP – Patents vs. Brands
There is a vast range of intellectual property that comprises the strategic asset base of any company. In appraising the opportunities of early stage tech start-ups, I’ve witnessed a significant gap between the thinking of government agencies and large corporations vs. the thinking of entrepreneurs and angel investors.
The big institutional thinking is that patents matter. Indeed they do. One patent I’m extremely proud of is one I have actually co-authored. It addresses critical security exposures in real-time (voice and video) communications channels and seeks to prevent them from becoming covert channels for malicious data transmissions. It’s really quite important stuff and the cover page makes a really cool wall plaque. The problem however, is that it took six years to get final approval. It’s still relevant but the business to drive it ran out of steam, and cash, and the team has moved on to greener pastures.
I personally think that being first and fast to market always matters more for the start-up. Yes, I used the word “always”. I would really appreciate if anybody could show me a start-up that succeeded because of a patent. Patents usually require a great deal of precision to be approved quickly. Specific design elements are common quick turn-around patents.
Do patents really make a difference though? A completely different approach to intellectual property is the real economic value created in a brand. Yes, a brand is intellectual property. Trade names, trade marks and trade secrets are all protected property. However, brands have even better protection in the perceptions that clients and customers hold towards the brand. Analysts have attempted to value brands by looking at the incremental value a company earns in revenues beyond the generic value of their offerings. Google, Facebook, Apple, IBM, McDonalds and Target are all up there. However, these are all big companies so they are not best case examples to argue that a start-up brand might be far more important IP than it’s patents. Yet that is my precise conjecture here.
I believe that “brands” carry far greater value for an early stage company over patents. I think this is true for technology plays as much as it is for consumer products. Would you rather patent your micro-brew formulation, disclose the recipe and hope nobody gets close to it or would you rather have the brand associated with the formulation. If you develop an anti-cancer formulation, the chemistry will be quite different than the beer (but I would love a cancer curing beer and if anybody is working on one please submit your business plan!)
Isn’t there a case for the cancer treatment? Yes, it should be patented. In fact, it’s a must, but by publishing your formula there’s a road map for others to follow and for the start-up, the big companies can leverage this base of science and it’s disclosure to beat you to critical refinements and often, to the finish line.
In subsequent posts I’ll itemize the five critical situations that mandate a patent but even saying patents are absolutely essential in these situations, I’m not suggesting that they’re as valuable as the brand!