The Green IP Revolution
Governor Arnold Schwarzenegger recently celebrated over a report released by the Cleantech Group and Deloitte which showed that California’s clean tech companies received the highest venture capital funding in the second quarter of 2010.
“California has led the world in enacting policies that harness the private sector to create the clean and renewable technologies needed to combat climate change and reduce our dependency on oil. And our efforts are paying off, as illustrated by a wave of green innovation all over the state that is spurring investment and creating jobs. These numbers showing California is getting the most clean tech investment is just the latest example that we are moving in the right direction of building our green economy and creating a brighter, more sustainable future for us all.”
The report’s preliminary 2010 second quarter results showed that clean technology venture investments in North America, Europe, China and India, totaled $2.02 billion across 140 companies. For North America, California led the way with $980 million in investment, more than two thirds the total share. As the Green revolution heats up in the Golden state, we at Foresight are keeping an eye on what this means for innovation and IP. Entrepreneurs and business owners know the importance of ideas and intellectual assets, which are often the result of years of research and development. Their IP lies at the heart of their Cleantech company’s competitive advantage.
Late last year the Obama administration, with an eye on Cleantech being the growth engine for the economy, developed a pilot program to accelerate the examination of green technology patent applications at the U.S. Patent and Trademark Office (USPTO). We had learned earlier this year that the Kappos Administration has been heavily involved in streamlining the USPTO and this appears to be an area of particular importance. This is what Commerce Secretary Gary Locke said when the program was announced:
“American competitiveness depends on innovation and innovation depends on creative Americans developing new technology. By ensuring that many new products will receive patent protection more quickly, we can encourage our brightest innovations to invest needed resources in developing new technologies and help bring those technologies to market more quickly.”
The average examination time in the past had typically been 30 months for green technologies. Not only has the time frame for examination been accelerated, barriers have also been lowered for what qualified as “Green Technology” subject matter for patent applications pending before the USPTO. When the Green Technology Pilot Program was announced in December 2009, the program was limited to inventions in certain classifications in order to assist the USPTO in balancing the additional workload and to gauge the resources needed for the program. The USPTO has determined that the classification requirement is unnecessary because the workload has been balanced with other mechanisms, and the requirement was causing the denial of petitions for a number of green technology applications that would have otherwise qualified for the program.
The Program is available to the first 3,000 applicants and ends on December 8, 2010. The Patent Office estimates that approximately 25,000 of the currently pending patent applications meet the requirements needed to be classified as a Green Patent. To date, more than 950 requests have been filed by applicants who wish for their application to be eligible for the Green Technology Pilot Program. Only 342 of those have been granted, primarily because many of the inventions weren’t in classifications that were eligible. The lifting of the classification requirements is expected to allow many more applications to be eligible for the program. If interested, applicants should act quickly and carefully weigh the Program’s benefits against the requirements needed–most notably, claim limitations, abbreviated restriction practice, and early publication.
10 Lessons Learned @ LES Anniversary Event
Below is a list of 10 lessons that we have learned at the event – one lesson for every year that the chapter has been around…
1. The USPTO is working hard on reconnecting with its stakeholders. It was interesting to get two perspectives on the state of affairs at the USPTO under the new leadership of David Kappos. One was by Todd Dickinson, the former head of the USPTO under the Clinton administration, who gave a comprehensive overview of the last decade in his keynote address. Andrew Hirshfeld, USPTO Chief of Staff (standing in for David Kappos who unable to attend at the last minute) gave a hands-on view of the various initiatives taken by the office to improve contact with stakeholders, including: increasing examiners’ productivity, addressing backlog and churn problems, and so on.
2. Public Debate over IP Reform is heating up. After the release of two studies on IP, one by the National Academy of Sciences and other by the FTC, there is growing debate over how to bring laws up to date and how to be more forward thinking. Todd Dickinson has participated in sessions “inside the beltway” and seen how different groups have presented their views, including congress, industry, lobbyists and public interest organizations, such as the software alliance. Needless to say, there is a lot of work ahead.
3. Accounting for intangible assets is completely misunderstood. From a sample of audience questions and private conversations, we conclude that there is a high degree of ignorance when it comes to understanding accounting for intangibles. …we plan to address this topic in one of our future blogs, especially since the US GAAP accounting rules for intangibles are about to change with the introduction of IFRS (international accounting standards) over the next decade.
4. IP valuation is still a vague concept for many people. Todd Dickinson characterized IP Valuation in his keynote address as “notoriously difficult”. I have spoken to over 30 people throughout the conference (mostly attorneys), and the 2nd question I consistently got (after asking what FVG does…) is – how do you value patents? This is another topic that will be addressed in our future blogs
5. Engineers are not trained to succeed as entrepreneurs. Several panel discussants voiced their dissatisfaction with the curriculum at US universities and how it stifles innovation. While we disagree with the generalization inherent in such statement, it seems like it might have some merit when it comes to engineers. As summarized by one of the panelists, engineering graduates usually lack the three most important requirements for starting a company: (1) Understanding a business model; (2) Evangelism; (3) Teamwork. That explains why so many engineers end up in business school to get an MBA…
6. University role to grow in entrepreneurship & innovation. In the panel “The Crystal Ball: A Perspective of the Future”, Katherine Ku, Director of the Office of Technology Transfer at Stanford University gave her overview of University – Industry relations. She emphasized that when it came to education, there is great demand for classes on entrepreneurship from both students and faculty. She sees the role of research growing at universities as funding for R&D shrinks in the private sector (especially pharma) and there being a healthy mix of “open innovation” & “proprietary research”. As a result, she predicts the growth of licensing activity at universities
7. The “Value” of IP has grown immeasurably over the last decade. Todd Dickinson, in his overview of the last ten years, spoke about how the “value” of IP has grown immeasurably – its uses have expanded and its role in acquisition deals has grown. He noted the rise of trolls and the role of patent auctions, such as Ocean Tomo.
8. IP is still not driving VC funding. When asked about the role of IP portfolios in securing start-up funding, a distinguished panel of entrepreneurs and investors unanimously recommended start ups to “get a customer first, and the patents will follow…” We thought that this was a very eye opening comment!
9. Consensus is in; there will be a Venture Capital shakeout. As panelists discussed the role of startups, naturally discussion veered to funding and the question arose whether “VC’s were a dying breed”. All five panelists agreed that there will be a shakeout in the upcoming years. Of the 800 plus VCs, perhaps a half would disappear. The strong, well established firms will still be around, investing, but there is change ahead.
10. You must have a great team and a pretty darn good product to have a successful startup. When you have a panel full of successful entrepreneurs and funders, including Bill Reichert, Managing Director, Garage Technology Ventures, you know someone is going to ask “How do I get funding?” Well the answer is unchanged. You need an a team of talented entrepreneurs and a pretty darn good product. The two are linked, since if your market changes or your product needs to change, you need a nimble, smart team to roll with market conditions.
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