October 21, 2012
Any robotics business whose value is being assessed, whether for a strategic investment, acquisition, IPO, or any other reason, will almost certainly have their intellectual property reviewed as part of that assessment. While two companies may appear similar to potential investors at first glance, a robotics company without intellectual property can appear vulnerable, whereas a company with the right combination of intellectual property will convey that it is well-run and a sound investment.
“Picking the right types of intellectual property to protect will depend on your company’s size, its current competitors and its likely future competitors.”
Intellectual property provides the type of exclusive rights that are necessary to capitalize on your up-front investment without others undercutting your success by piggy-backing on your solution and entering the market with a competitive product at a lower price point.
That exclusive quality is what can separate the companies perceived as a great long term investment from those that are perceived as merely a great idea. But given that the types of intellectual property are many, as are the differences in the price tag that can accompany each, what is the right mix of intellectual property for your robotics company? Picking the right types of intellectual property to protect will depend on your company’s size, its current competitors and its likely future competitors.
Any successful company or company’s robot, especially the ones that quickly go from unknown to widely recognized, will see lots of competitors come out of the woodwork. For example, robotics manufacturers developing Unmanned Aerial Vehicles for the defense market and those producing vacuum robots for the consumer market have each seen their fair share of newcomers.
Competitors in the robotics industry today can generally be categorized into two types. On the one hand, there are competitors who, although may or may not have seen the need for a robot to solve a particular problem before learning of yours, independently developed their own robot that aims to solve the same problem. This is the type of competition that exists between Telepresence heavyweights InTouch Technologies and VGo Communications, who as it happens, are currently locked in a lawsuit over their intellectual property.
On the other hand, there are the competitors started by, or aimed at recruiting, employees who know the trade secrets and the specific technology that was critical to an original product’s success. This later scenario is what iRobot alleged to have occurred when it sued Robotic FX and its founder, a former iRobot employee, back in 2007.
When facing either type of competition, patents are undoubtedly helpful. Patents can provide monopoly-like protection for an invention, which generally lasts for 20 years from the date the patent was filed.
Well drafted patents will force competitors to operate outside of what your patent covers, and if your patent portfolio includes patents with a combination of broad and specific scopes, it can be extremely difficult for another company to enter your particular market.
For a large, successful company in the robotics industry, an extensive patent portfolio is not only useful, but financially practicable. For smaller companies weighing the cost of obtaining patents against the company’s budget, however, a small patent portfolio protecting its key inventions may suffice. This is especially true if the technology you are considering patenting may not take off for another fifteen years.
In such cases, you have to consider that you will only have five years of practical patent enforcement, unless—and obviously in law there is almost always an exception— you expect to have further iterations and continuations of the original invention that could extend your control over that technology past your initial patent’s expiration date.
Still, Intellectual property patents can add value to your company beyond its ability to exclude others from piggy-backing on your hard work. Your company may be in a better position to consider the possibility of licensing or cross-licensing its patents or other intellectual property as a viable alternative to excluding others altogether.
Licensing patents can provide your company with an additional revenue stream based on the success of other companies who may not even be operating in the same area of the robotics industry as your company. Last summer, InTouch Health and iRobot announced that they entered into what appears to be a mutually beneficial agreement that includes extensive cross-licensing of both companies’ patent portfolios.
Although patents are usually the first type of intellectual property that people in the robotics industry think of, they are not the only tool – and certainly not the cheapest tool – that can be employed to protect your company’s future success and thereby make it a more attractive investment today.
Trademarks of your company and robot names, copyright protection of computer code and tricks your engineers (not your lawyers) can implement are other ways of putting your company in a better position when your robot products or company transition from hopeful venture to commercial success. Indeed, trademarks and copyrights are actually longer lasting than patent protection and cheaper to apply for.
Obtaining a patent usually requires between $500 and $2,000 in costs to the U.S. Patent & Trademark Office, which varies, in part, depending on whether your company qualifies under what the patent office calls a “small entity,” and potentially another $5,000 to $15,000 in attorney fees depending on the complexity of the technology being patented and how expensive the lawyer is that you hire. In contrast to the 20-year lifespan and high costs of obtaining patents, trademarks have the potential to last indefinitely and can cost a few thousand dollars to obtain. Similarly, copyrights can also far outlast patents and cost a few hundred dollars or less.
Trademarks are a useful tool for protecting your success and are important not just for when the entire robotics industry booms, but when your company in particular starts to flourish. Trademarks can cover names, slogans and phrases that designate the origin of goods.
“…If your company is getting closer to the finish line, you (and your investors) do not want someone who didn’t run the first twenty five miles of the race to jump in and compete with you on that last mile.”
Companies like iRobot, Aerovironment and Precise Path Robotics each not only have registered trademarks for their company names, but also registered trademarks for one or more of their robots. The more specific your trademark, the harder it is for a competitor to enter the market with a similar name or design with the hope that customers buy their robot out of confusion.
Moreover, robotics companies have a uniquely heightened need to register their trademarks with the United States Patent & Trademark Office as early as possible. First, when successful, robots sell nationally, not just in a single town like a traditional mom and pop store, so each of your robots needs national protection.
Second, anyone who is a robotics enthusiast knows that we all usually learn of new robots before they “hit the shelves” – especially if the robot is cool! Some robots develop a following very early, who refer to your robot by a certain name, and you do not want to find out once you are ready to bring that robot to market that there is a problem with getting a trademark for that name.
Even worse, you do not want to allow another company to file a trademark for your robot’s name before you, which then allows them to hit you up for money when you want to bring your robot to market; yes, this does happen, and yes, it can be costly to resolve.
There are other steps that, even before you talk to a lawyer, can offer your hard work more protection and add value to your company. If you have copyright protectable computer code, access to that code should generally be blocked. Going into the specifics of the law isn’t necessary for this article, but what is useful for robotics companies to know is that a court decision from 2010 in the Court of Appeals for the Ninth Circuit entitled MDY Indus. LLC v. Blizzard Entertainment Inc. determined that merely circumventing an electronic barrier in order to access copyright protected material can constitute a violation of the Digital Millennium Copyright Act even if no actual copyright infringement occurred.
This is a change from what many thought to be the law, which required infringement as well. Merely circumventing the electronic barrier to take a look at copyright protected material was previously thought by many to be legally acceptable as long as there was no infringement.
By simply blocking access to any copyright protectable code for your robots, you may have added a claim against any future competitors if at some point they try to gain an advantage by circumventing your electronic barriers to take a look at your code. Although the protection may not be as grand as patent protection, the costs are minimal, and it is always a good sign to investors that you are spending money wisely to protect their investment.
Given that almost every robotics company’s business model involves a tremendous amount of upfront R&D costs, investors not only want to see the potential for a great product, but also a business’ capability to “protect its success.”
In some industries the up front costs of R&D are low, which makes it harder for a competitor, after seeing the success of your company, to swoop in and piggy back off that success by entering the market with a lower cost for their product.
That is certainly not the case in the robotics industry. Companies in the robotics industry are marathon runners, not sprinters. That means if your company is getting closer to the finish line, you (and your investors) do not want someone who didn’t run the first twenty five miles of the race to jump in and compete with you on that last mile. Accordingly, it should be apparent to potential investors that your company has claimed its area of the robotics industry and can deter competitors who are intentionally “late” to the party.
To do this, you are going to need to have planned in advance. That planning, as all business decisions, must balance the cost of obtaining that protection against when and how you will use it, as well as the cost of using it, and the value it may add to your company. Savvy investors know these rights need to be secured early, which is why it can make your company a more attractive investment today even if you are focusing on building the robots of tomorrow.