Good Reminder from Paul Jones: The Hidden Costs of "Free" Grant Money for Innovators

I'm happy to announce that Paul Jones, an attorney and highly connected champion of innovation with lots of experience helping startups, now has his own blog where he posts about innovation, startups, and the like. One post that caught my eye is "Grant Money: When “Free” is not “Free”." He discusses the temptation to pursue government grants to help a new business, and points out the downsides to taking the free money. He scores several good points. Be sure to read it. In conclusion, he says this:

Now I am not suggesting that grants shouldn’t be part of a good start-up’s financial model. But the financial model should serve the needs of the business and it’s investors, not the needs of grant writers. So by all means, use grants – sparingly – to establish credibility. And, if from time to time you run across a grant opportunity that actually dovetails nicely with your real business needs and timing, by all means go for it. But if you ever find yourself thinking that getting grants is what your business is all about – well, don’t tell that to your investors.

Wise words. Thanks, Paul!

Bed Metrics and Unintended Productivity Losses

One of the constant challenges in innovation, a topic we address in Conquering Innovation Fatigue, is finding the right metrics to encourage meaningful innovation. The problem is that poor metrics can lead to all sorts of unintended bad behaviors that can waste resources or even squelch real innovation. If you measure and reward innovation primarily based on the number of patents a group files, you may gets lots of patents--and lots of legal fees and wasted time, including internecine rivalries as groups try to keep others in the corporation from sharing in the credit for patent filings. One must have a variety of metrics and must constantly scrutinize their impact and application to keep the behaviors they engender aligned with the objectives of the corporation.

To bring the problems with weak metrics down to earth, let me share an example from a Midwest grocery store chain, as reported to me by one of their employees. Upper management imposed challenging goals for cashier productivity as measured in terms of IPM - Items Per Minute - a measure of how rapidly a cashier scans and processes items as customers check out. Naturally, for good customer satisfaction and good ROI on cashier salaries, the Corporation should want high IPM, right? Sure, but there are unintended consequences arising from the way the metrics are determined. The problem comes from the use of "terminal secure mode." Terminal secure mode is intended to essentially shut down a cashier's terminal when a terminal is not in use or the cashier is momentarily away. But it also provides a slick way to game the system and get better statistics, for when the terminal is secured, the clock stops ticking. Thus, local management in at least one store has urged all cashiers to use terminal secure mode frequently. If you have to pause for any reason - helping with bagging, etc. - they are told to use terminal secure mode to stop the clock. This requires two keyboard actions to initiate, and then further actions to bring the terminal back up, all resulting in lost time. But even worse, going into terminal secure mode nullifies the credit card scan that the customer may already have done to prepare for payment, so the puzzled customer finds that they have to scan their card again for payment, causing delay and irritation. Time is lost, customers are annoyed, productivity is lower, and the in-store experience deteriorates, but IPM stats look good and management is happy. Counterproductive metrics. So easy to do.

Always scrutinize your innovation metrics (and all other metrics) for unintended consequences and for alignment of behaviors and incentives with corporate goals. It's something that Innovationedge can help you with today. Give us a call!

Bilski: Relief at Last

After much fretting and many weeks of puzzling delay, the Supreme Court has at last handed down an opinion for the Bilski case. For those of us who find legitimate merit in so-called "business method patents," I'm happy to announce that the decision seems reasonable and does not exclude business-related processes from patentable subject matter. Software patents in general appear to survive as well. There were concerns that the previous decisions that gave life to business method patents, such as State Street, would be completely struck down, but these decisions were not expressly rejected though also expressly not endorsed (the State Street test for patentability, i.e., that the invention "produces a useful, concrete and tangible result," was not upheld and may be dead, but business method patents are not excluded outright). The result, in my view, is no radical change other than clarifying that the machine-or-transformation test is not suitable as the sole test for determining patentable subject matter, a ruling that I think will be helpful to those who favor business method patents. It will probably be the default test for patentability, but failure to meet it is not necessarily fatal, and that's good news in my opinion. You can read the opinion at http://www.supremecourt.gov/opinions/09pdf/08-964.pdf.

Some excerpts:

Adopting the machine-or-transformation test as the sole test for what constitutes a “process” (as opposed to just animportant and useful clue) violates these statutory inter-pretation principles. Section 100(b) provides that “[t]heterm ‘process’ means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.” The Court is unaware of any “‘ordinary, contemporary, common meaning,’” Diehr, supra, at 182, of the definitional terms “process, art or method” that would require these terms to be tied to a machine or to transform an article....

The Court of Appeals incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test....

This Court’s precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101. The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible “process.”...

As numerous amicus briefs argue, the ma-chine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medi-cine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals....

[T]he Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter under §101.

Yes, we need limitations and must not allow business method claims to be too broad or counterproductive, but the Court wisely found that there is no reason to exclude them from patent protection. That's good news, in my opinion.

PatentlyO has also reported on the "business as usual" decision, as has IPWatchdog. Both are good reads.

I'd also like to recommend Deepak Malhotra's review of the Bilski decision. Thorough and clear.

Is It Worth Patenting?

Gene Quinn's discussion of hitch-mounted toilets at IPWatchdog.com leads to a valuable point: just because something is patentable does not mean it should be patented.

Inventors often fail to recognize that companies and investors aren't interested in inventions but in solutions that improve people's lives. If your patentable invention isn't a step forward with practical value, why bother?

Outside eyes are helpful here. Inventors love their work, naturally, but what matters is how others react. If the problem being solved is one that people don't care about, or if the solution is too complex and awkward to be useful, the market won't be interested, no matter how brilliant your voice-activated dental floss dispenser is. It may be patentable, but should you patent it? Is it worth the expense? Get some market input and outside expertise to help you make that decision before you spend your savings on costly patents.