Cell Phones and Business Model Innovation

"Cell Phones Could Be Gold Mines for Marketers" is a story about the amazing marketing potential of cell phones. With carriers able to determine where you are at any given moment, there is tremendous potential to identify what products might be of interest or what promotions might be effect. Within the next couple of years, we should see many further innovations in shopping, data management, crime solving and even traffic management tapping into the power of the cell phone data. Truly a gold mine of opportunities for innovation.

Digital Natives: How Is the Younger Generation Reshaping the Telecom and Media Landscape?

CAP Gemini has released an outstanding paper, "Digital Natives: How Is the Younger Generation Reshaping the Telecom and Media Landscape?" dealing with the powerful forces exerted by the rising generation on business and technology.

The article points out how difficult it is to guess what will succeed in the marketplace. Years ago the buzz was that video calling would take off and dominate phone communications, but customers have shied away from it, partly because of privacy concerns when calling (and fear of bad hair days). And who anticipated just how popular SMS would be? Communicating by typing text onto a tiny keyboard - that's going to be popular? But what the interface lacks is more than made up by the convenience inherent to the business model. Simple, fast communications that are good enough for what many people want - just staying in touch with a lot of people.

The lesson here is that you must learn from the market and never think you have it figured out. Explore your business model iteratively and learn from your early forays and mistakes.

This report explores some of the learnings from the marketplace that might be used to guide future business development. A key theme for the "digital natives" - those who have grown up immersed in technology, especially the bracket of 15- to 24-year-olds, is impatience. They want to get things done quickly, using multitasking and "media snacking," with community interactions playing a central role. Yeah, social networking - it has a long ways to go yet. And users need to have control over the technology, allowing it to express their originality.

Product developers need to understand these currents, develop closer ties to the rising generation and their needs, and provide experiences that can be tailored and satisfying in an increasingly impatient world. That will be a key theme in future innovations in technology.

The Inventor I Always Wanted to Meet

I recently met an inventor I always had wanted to meet. He's the inventor of a fascinating business method technology, protected by a significant "business method patent" that seems to be an important asset for a major corporation based on this technology. I've always wanted to meet this inventor because I admired the patent and the concepts in the technology, one that I've frequently mentioned in giving lectures on business method patents and the importance of looking for innovation in business models.

When I met the inventor of this concept, I didn't know it at first. You see, his name isn't on the patent. In fact, he's not part of the company. But his best friend in high school and former business partner is associated with the company. And the real inventor was somehow left behind. But there are piles of legal documents from court proceedings that lasted years hinting at a tragic story that befalls many inventors. My new friend did not prevail in the end, as many lone inventors litigating against large, well-funded companies have learned. But he did learn that he should have been more careful to protect his intellectual property so that outright theft or accidental re-inventing of his wheel by someone else doesn't deprive him of what he created. Intellectual property, NDAs, documentation of meetings and correspondence, etc., are vital to protect yourself in this dog-eat-dog world.

This devastating experience - watching your invention become the basis for someone else's vast wealth. But he has rebounded and gone on to invent other great things. His story will be told more fully one day.

Metallocene Catalysts: Disruption and Patent Rights

A great article on the rise of metallocene catalysts and patent aactivity in this area is "POLYMERIZATION CATALYSTS PAST, PRESENT, AND FUTURE" at Thomspon Scientific. Metallocene catalysts initially were worse than the dominant catalysts used in polymer production, Ziegler-Natta catalysts, but have since proven valuable for many applications, including tough polyolefins and elastomers. Interesting note from the article: Ziegler-Natta catalysts were actually invented by Banks and Hogan (US Patent 2,642,467, 16 June 1953, "Production of high-octane fuel components"). Perhaps they should be called Banks-Hogan catalysts.

University-Industry Relationships: Impact of the Bayh-Dole Act

When the Bayh-Dole Act was passed in 1980, it was intended to strengthen collaboration between universities and industry. Instead, there is good evidence that in practice it has caused many companies to be wary of funding R&D at U.S. universities, and may be driving significant funding to foreign schools. Some of this evidence was persuasively presented by Susan Butts of Dow Chemical in statements before Congress in July 2007. Excellent food for thought.

Digital Piracy on the Run? A Big Win for Musical IP Holders

The first courtroom case against digital piracy by an individual consumer resulted in a huge win for the plaintiffs, holders of intellectual property for music.

Four major record companies — EMI Group, Sony, Bertelsmann AG and Warner Music Group all joined in the suit against Jammie Thomas. Charged with illegally uploading 24 tracks that could be downloaded by others for free, Ms. Thomas now faces a fine of $220,000. Ouch! This verdict will probably cause many others to settle out of court, and hopefully will encourage more people to think twice before stealing the copyrighted property of others.

Disruptive Innovation Where It Counts: Earthquake-Proof Housing for Emerging Nations

Kudos to Colorado State University and the Indonesia Aid Foundation for innovating where it really counts. They have been developing low-cost ways to make earthquake-proof structures to be used in emerging nations like Indonesia, where huge casualties are inflicted when earthquakes strike. The spirit of disruptive innovation is finding ways to reach low-end users and non-users with innovations that are convenient and affordable, often blindsiding those who are focused on the expensive, high-tech solutions. Earthquake-resistant buildings is a great example. Instead of designing complex foundations and sophisticated reinforcements, low-cost solutions have been found using discarded tires as a shock-absorbing element in the foundation of the building, and bamboo as a replacement for rebar in concrete.

They are going to need help to get these innovations in use globally, and there is a need for further work as well. There may be opportunities to exploit low-cost fibers and fabrics as part of the reinforcement for concrete structures, especially in high-stress areas. And better integration of ceilings into the earthquake-resistant design could help.

Partners could include Cemex and other cement manufacturers.

I'm also looking for innovations in low-cost water purification that can be run from solar power. Let me know your thoughts.

Beware Domain Name Theft

Sobering article from the Wall Street Journal: Web-Address Theft Is Everyday Event by Kevin Delaney. Has some important tips for protecting your domain name from theft. Most important: don't use free online email accounts as your primary contact with the domain registrar. Failure to use the account may result in its inactivation and theft by someone else. You'll spend years and thousands getting it back, in some cases.

Intellectual assets include digital assets such as domain names, and they need to be a key part of your IA strategy at an early stage as you develop new products and services. They are key assets that we help our clients with.

Toxic Fabrics Now Safe Enough to Eat: An Example of Innovation for Improved Profits AND Improved Sustainability

In Made to Stick, authors Chip and Dan Heath discuss the case of once-toxic fabrics used in Steelcase chairs. The Swiss company, Rohner Textil, provided dyed fabrics to Steelcase, but the trimmings of these fabrics could not be disposed of in Switzerland because they had a lot of toxic chemicals - they were classified as toxic waste that had to be shipped to countries with less strict environmental regulations such as Spain. Steelcase and Rohner wanted to come up with fabrics that were not toxic waste, but safe enough for babies to suck on. Rohner hired environmentalist William McDonough and his chemist partner, Michael Baumgart (see McDonough & Partners and MBDC--also see McDonough's Website). They went to the companies that provided dyes and asked to see their books in order to know all about the chemicals they used in their processes. They would not accept "it's proprietary". Sixty companies refused this kind of partnership, but one did: Ciba-Geigy, a Swiss chemical company. They went through the details of 8000 chemicals, and of these found 38 that were safe enough to eat. They found that they could make every color needed by Steelcase except for black. Rohner selected natural fabrics - wool and ramie - and ended up with a truly safe process. When Swiss inspectors came to test their effluent stream, they thought their instruments weren't working. The chemicals they were testing for weren't being detected at all. Then they went to the incoming water stream - Swiss drinking water - and got the normal small positive readings. The effluent was actually cleaner than the incoming drinking water, apparently being filtered by the natural fabrics, without release of harmful chemicals.

The resulting process was not just cleaner - the costs of the product dropped by 20%. They didn't have to spend money to ship trimmings to another country, but could sell them to local farmers to make mulch or insulation. Workers didn't need to wear protective gear to work with the fabrics. And Steelcase could sell furniture with fabrics safe enough to eat. Innovation, economic advantage, and sustainability/environmental responsibility were achieved.

Yes, it's possible to innovate for business growth and profitability while also improving your green, sustainable position and reducing your environmental footprint.

Stanford's Resource on Fair Use and Copyright Law

Many people wonder when they can use material from a copyrighted source under the Fair Use Doctrine. Stanford University's Copyright and Fair Use Overview resource on the Web includes an excellent chapter on Fair Use. Thanks, Stanford! Here's a brief excerpt:

In its most general sense, a fair use is any copying of copyrighted material done for a limited and "transformative" purpose such as to comment upon, criticize or parody a copyrighted work. Such uses can be done without permission from the copyright owner. Another way of putting this is that fair use is a defense against infringement. If your use qualifies under the definition above, and as defined more specifically later in this chapter, then your use would not be considered an illegal infringement.

So what is a "transformative" use? If this definition seems ambiguous or vague, be aware that millions of dollars in legal fees have been spent attempting to define what qualifies as a fair use. There are no hard-and-fast rules, only general rules and varying court decisions. That's because the judges and lawmakers who created the fair use exception did not want to limit the definition of fair use. They wanted it--like free speech--to have an expansive meaning that could be open to interpretation.

Most fair use analysis falls into two categories: commentary and criticism; or parody. . . .

Some of our clients might benefit from considering their article, "Copyright Protection for Short Phrases" by Richard Stim.

Ten Overrated Business Books: Bnet.com's View

BNet.com has an article, "Ten Overrated Business Books." I agree strongly with most of the listed books, but actually find a lot of benefit in Covey's Seven Habits (but I'm biased!). Instead, I would suggest adding Fish! to the list of books that get way too much mileage in the business community. Purple Cow also.

Business Models to Avoid: Hijacking The Customer (Real.com's Rhapsody Example)

The power of disruptive innovation often comes from providing non-users and others with new levels of convenience. A successful disruptive innovation can be "worse" in some ways than other existing products if it excels in the dimensions of convenience, choice, ease of access, portability, or low cost.

On the other hand, there are "innovations" that are "anti-disruptive" in the sense of adding new burdens on the backs of consumers. "Improved" products that are less convenient or take away consumer choice and flexibility are the kind that are just begging for extinction - and often will face extinction when a disruptive innovation comes along with fewer bells and whistles but new dimensions of convenience. It doesn't even have to be much of an innovation when arrogant business models are implemented that ignore the customer experience.

Occasionally, a product "upgrade" comes along that is so inconvenient, so suffocating of customer choice, that it screams out for extinction. This is particularly so when the customer feel hijacked, forced to move forward with an unwanted upgrade the removes valuable features that out-of-touch businesses think can be jettisoned in favor of their new flavor. Customer hijacking is a warning flag that a company is out of touch and headed for the death spiral, or totally vulnerable for competitive disruption.

And that brings me to Real.com, whose music player, Rhapsody 4.0, is a classic example of customer hijacking that takes the customers to it's own version of Cuba where previous freedoms and conveniences are a thing of the past.

After being a loyal customer of Rhapsody for four years, a tool that has been valuable for my musical family, I finally canceled my subscription. But I begged for help, I begged to be allowed to stick with the previous version of Rhapsody which wasn't so buggy and slow as the new version, and which was far more convenient. But attempts to launch Rhapsody immediately forced us into an install of version 4.0 - without an explanation of the changes and new system demands, and without an explanation of how tediously long it would take to install the new software. It was a nightmare install, one that required lengthy waits, strange error messages, multiple restarts, and many calls to a truly out-of-touch foreign help desk that may have been speaking English at times. And after all the steps it took to install the software over a two-hour period, it still didn't work and hung up completely when looking at recordings of J.S. Bach. The clunky software simply can't handle artists with numerous albums, at least on the computer I was using. Tech support was able to reproduce the problem, but could not offer any help and didn't seem interested in helping. Tough luck.

Running Rhapsody 4.0 hijacked my computer in several ways, eventually hijacking the processor and taking 100% of the CPU for over 15 minutes before I gave up and killed it.

After waiting over 20 minutes to talk to someone to cancel my subscription and get a refund for their questionable overcharging (I found they had raised my monthly bill without my knowledge), I told them how frustrating my experience had been with the tech support staff. One person there, for example, refused to transfer me to someone else even though I really could not understand him and asked to be transferred, and then asked to speak to a supervisor. Truly annoying. The English-speaking customer service person told me that Real would value my feedback, and urged me to email real's feedback department (feedback@real.com). I explained my story and how pained I was as a loyal customer to feel forced to abandon Rhapsody after being hijacked with non-functional software. I expected that there would be some effort, some incentive or at least an olive branch offered to retain me as a customer. But no, I got a reply back from another person in India. After a superficial sentence saying he understood and apologized for the trouble, the response then became a form letter (maybe the whole thing was a form letter) regurgitating the alleged benefits of their crummy version 4.0. What ridiculous customer service. Out of touch.

When a company is so out of touch that they can hijack customers, provide tech support that can barely speak English, and ignore the complaints of long-time, loyal customers who are trying to find a way to continue on as customers, that company is begging for competitive disruption.

I don't think Real's Rhapsody offering is viable any more.

Corporate Inventors: Don't Blame Opposition on Management Stupidity

Inventors around the world in large corporations are often amazed that management fails to appreciate the genius of their inventions. There is a real temptation for sharp inventors to assume that those in management are simply stupid when they decide not to commercialize inventive new concepts. Such thinking is usually unjustified and will only make life more painful than it needs to be.

Clayton Christensen's works on disruptive innovation explain how intelligent managers making sound business decisions based on successful past criteria will frequently kill the most important innovations they encounter. It's not their intelligence, but the corporate systems and culture that is at fault. Corporates become successful by listening to their customers and by pursuing sustaining innovations based on the established criteria in the market place that meet the needs of their most valuable customers. But these criteria are at odds with the occasional disruptive innovation that may be off-target for mainstream customers and off-base for established performance criteria, instead appealing to non-users or low-end users by offering new convenience or other features not demanded by the high-end users. Corporations need special systems and structures to deal with disruptive innovations - and the tendency to kill them can be expected until top leaders specifically address disruptive threats and opportunities.

Your management was smart enough, brilliant enough, to hire you and keep you on the payroll. Don't blame their lack of interest in your invention on stupidity. Rather, understand how corporate pressures and objectives may be a barrier, and learn how to work around those barriers. Spinning your invention as a way to avert a competitive threat is one such way. I'll give more suggestions in future posts.

Innovation Pathways: Encapsulation Technology Moving into Numerous Areas

I'm amazed at the many clever uses of micro-encapsulation technology in recent years. Over 50 years ago, researchers at NCR working with Appleton Papers (now just "Appleton") created a truly disruptive innovation that was the basis for modern carbonless copy paper. The technology was based on the clever use of microencapuslated reagents that, when ruptured by the force of a pen or pencil acting on an upper layer, would react and turn blue, creating in-situ ink from materials that were previously colorless. Brilliant!

In the food industry, encapsulation of baking powder or other leavening agents in shells of fat are the secret to self-rising pizza crusts. If the leavening were active in the dough before freezing, the dough would have very little rise left by the time it was cooked. But by keeping the baking powder separate from the moisture in the crust until the dough is heated - thus melting the shells around the encapsulated powder - the rising action is delivered just in time and provides the popular rising crusts of several leading brands.

Encapsulation is moving to new heights - or temperatures - through the use of new temperature resistant technology in which the shell of a yeast cell is the body of the capsule. This Thermarome® technology from the Swiss firm, Firmenich, has exciting potential. The yeast encapsulation technology acquired previously from the UK firm MicCap, can allow high-temperature processing (e.g., frying)to be done without releasing flavoring agents, something not possible with other typical encapuslation technologies used in food. See some of the latest developments in this area in an article at NurtraIngredients.com.

Encapsulated flavors can pose the challenge of not being smelled until after they are in the mouth, reducing some of the user experience. But clever combinations of multiple technologies or different capsule types can help overcome this.

Is there a disruptive innovation beyond the encapsulation of aroma and flavor that may challenge the established players? Could active rather than passive delivery play an increased role in the future? Or could other matrix loading technologies provide the next big boost for flavor and aroma? Stay tuned!

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By the way, the story behind the pursuit of patent protection for carbonless paper has lessons for innovators that still need to be taught today. The story is told briefly by Appleton in their article on Lowel Schleicher, one of the inventors:

While at NCR Corporation, Schleicher began working with the Barry Green, a company scientist who introduced the first commercial example of a system of liquid-filled microcapsules dispersed within a solid coating. It was this microencapsulation system that was used to develop carbonless paper.

During 1952 and 1953 Schleicher and Green worked together to further develop and refine the microencapsulation system. They co-invented the system that is used to produce much of today’s carbonless paper and filed the patent on June 30, 1953.

During the patent application process Schleicher proved he was as capable of explaining his ideas as he was at creating them. "The examiner refused to believe that capsules existed and instead felt the paper contained nothing more than oil and water emulsion," said Schleicher. "So I put my equipment and materials on his desk and demonstrated the entire process right in front of him." The patent office approved his application.

Schleicher, Green and others at NCR Corporation collaborated with Appleton Coated Paper Company, the predecessor company to Appleton, to commercially introduce carbonless paper in 1954. Schleicher continued to work with Appleton and, after NCR Corporation acquired Appleton Coated Paper Company in 1971, he moved to Appleton in 1973 and was named Appleton Papers' director of basic research, a position he held until his retirement in May 1990.

Moral? There are several:

1. Examiner interviews are valuable tools for advancing the prosecution of a patent.
2. Demonstrations can be powerful teaching tools in interviews (they require prior approval and must not use unsafe materials - discuss the proposed demo carefully with the examiner before the interview).
   
3. Patents are stronger when inventors are closely involved in the preparation AND prosecution of the patents.
   
4. Knowledgeable inventors who can explain their invention and teach others really make a difference. Invention without good communication will usually not realize the potential that was there.
   

Microsoft Patents the Uncrackable Digital Watermark?

InformationWeek has previously highlighted the impressive track record of hackers in getting past digital rights management systems. Now they point out that Microsoft may have developed and patented a truly robust digital watermark for audio files that can resist all (?) efforts to remove it. Good luck, Microsoft!

Microsoft (MSFT) may have just succeeded in giving the lie to claims by anti-DRM advocates that tech and record companies should forget about digital-rights management because they can never come up with something that's totally immune to cracking.

That's because two inventors working in Redmond, Darko Kirovski and Henrique Malvar, have taken concepts from spread-spectrum technology--used by the military for secure radio communications--and adapted them to the task of permanently inserting the owner's (aka content producer's) name within MP3 and .WAV files.

Microsoft was awarded U.S. Patent 7,266,697, entitled "Stealthy audio watermarking," on Sept. 4, for the duo's work.

As the patent's abstract explains it: "The watermark identifies the content producer, providing a signature that is embedded in the audio signal and cannot be removed. The watermark is designed to survive all typical kinds of processing and malicious attacks."

The stuff is probably the most thorough and complicated technology ever to be applied to 99-cent music files. It's robust enough to resist all attempts to remove the watermark from the clip, including changes in time and frequency scales, pitch shifting, and cut/paste editing.

Disruptive Health Care Trends: Intelligent Dispensing of Meds

A key to many disruptive innovations is finding ways to simplify life for the user. In the area of health care, one of the biggest challenges is compliance - ensuring proper medications are taken on schedule, for example. RFID and many other technologies have been applied to create smart packaging solutions that can track the taking of medications with the intent of helping home users, but the compliance monitoring tools don't necessarily increase the convenience experienced by the patient. Focusing on the convenience of medical care professionals is a different matter. A medication delivery system that helps them properly dispense and track medications through automated systems could make life simpler and more convenient for these high-stress jobs.

An example of a company that is pursuing such a business model is Omnicell (Nasdaq: OMCL). They provide medication cabinets that use barcodes and other tools to automate many aspects of drug delivery in acute care facilities. The are profitable, growing, and filling real needs in the marketplace. The stock is up about 30% in the past year, and rising nicely today while the rest of the market is struggling.

Global Innovation Fatigue: The Demise of International Intellectual Property Rights

The protection of intellectual property rights in the US has arguably been a key factor in the explosive right of the American economy and strength of this republic realized in the dew short decades since its founding. The US Constitution itself is the basis for this protection. Article 1, Section 8 stipulates that "Congress shall have Power . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." It is the inventors--not those who first file a patent application--who should have the exclusive right to their inventions for limited times.

The notion of property rights is embedded in the language of the Constitution's "Intellectual Property Clause." Our Founders recognized that protection of these rights would promote, not stall, progress in science and the useful arts. When property rights exist, people are motivated to invest time and effort in developing that property, whether it is land, a business, or an invention. When such rights are not secured, when others can simply take what you build or invent, then the motivation to develop and invent is removed. When the only way to protect an invention is to keep it secret, then progress is stymied and we return to the Dark Ages, when inventions were not made public but hidden within the protections of archaic guilds, requiring years of apprentice work before one could be trusted with the secrets of technology. Such a system keeps nearly everyone in the dark and hinders scientific progress.

The beauty of the social compact in the US patent system is that inventors are offered exclusive rights for a limited time, if they will share their secrets with the whole world in the form of an enabling disclosure in the specification of a patent. Once their limited period of exclusivity expires (now 20 years from the date of filing), the monopoly is over. Inventors are motivated to invent and to share their knowledge, and progress can be incredibly rapid. But not when property rights are denied.

Sadly, intellectual property rights are not recognized or adequately protected in many parts of the world. And there are increasing global pressures to weaken intellectual property. Though collective rather than individual rights can sound appealing, the result of collectivist systems is often a far cry from the promise of politicians. Make drugs free for all, take away the property rights of those who take on the risk and expense of developing and testing drugs, and suddenly the incentive to discover and develop safe, effective drugs has vanished. Government can appoint and fund labs to do this work, but the inherent tendency of government to be bureaucratic, monolithic, and inefficient will result in pathetic results, on the average, compared to what inventors can do when their rights are protected.

"Innovation fatigue" is felt strongly in countries where corruption or poorly developed legal systems result in little or no protection for intellectual property. This has been cogently argued by Hernando de Soto, a Peruvian economist and winner of many awards such as the 2006 Bradley Prize for outstanding achievement from the Bradley Foundation and the 2006 Innovation Award from The Economist magazine (December 2, 2006) for the promotion of property rights and economic development. De Soto has shown that a key factor in keeping poor nations poor is their lack of property rights.

De Soto referred to the need for property rights for the poor to be able to rise out of poverty in his speech, "Most People Cannot Participate" given in Brussels, October 30, 2001:

Over the last 6 years, my organisation, the Institute for Liberty and Democracy, ILD, has travelled all over the world, working directly with Heads of State, to determine how many of their citizens' assets can travel globally. Let me give you the example of Egypt which my Egyptian partners have allowed me to reveal.

After many years we determined that the poor in Egypt had accumulated an enormous amount of assets. In real estate alone they owned over US$ 241 billion in land and buildings. US$ 241 billion is more than 55 times the value of all foreign investment in Egypt over the last 200 years, it is 30 times the value of the Stock Exchange of Cairo, and it is 70 times the value of all foreign aid received by Egypt since the times of Napoleon, including the cost of the Suez Canal and the Aswan Dam. But none of it is titled in such a way that it can secure a loan, enforce a mortgage, and permit the sale of any of these assets on a global or even a national scale. Which means that most of the assets that the poor in Egypt own, even though they exceed the value of private foreign investment and public foreign aid, cannot reach the levels required to produce real wealth and be assessed globally.

The case of Egypt is the same as that of other developing countries. On average over 80 percent of the assets that the poor own in developing and former Soviet countries cannot enter the market through legally governed representations. So the first challenge globalisation faces is how to include the overwhelming majority of citizens of the world who cannot participate in the global economy, and who are therefore at a tremendous disadvantage.

To answer then the question of Prime Minister Verhofstadt "How can the poor benefit from globalisation?" the reply is through property law. The problem in the world is that there is a huge legal lag. We have forgotten that the capitalist economy is essentially a legal construct. Capitalism and globalisation is nothing else than a legal framework which through representations and rules allows us to interconnect. And over 4 billion people in the world have no way to interconnect because the law does not apply to them.

The Marxist ideal of no property rights has been demonstrated to be powerfully effective - not in liberating the lower classes, but in holding them firmly trapped in poverty. It is respect of property rights that has created the means for men to be equal - not in results, but in opportunity. The lone inventor can stand before the giant corporation, patent in hand, and declare, "This is my property, and you have no right to take it as your own for free."

As valuable as such property rights are, they are being eroded globally, and American businesses and leaders everywhere need to be more active in resisting this threat. In fact, I would suggest that it's the socially responsible thing to do!

Bruce Lehman discusses some of the global IP challenges in his chapter, "Global IP in Crisis: The Threat to Shareholder Value" in Making Innovation Pay (Bruce Berman, New York: John Wiley & Sons, 2006, pp. 125-139):

While the 1990s was a time of strengthening of the global intellectual property systems, recent years have seen a dangerous shift toward weakening IP protection around the world. The thought is that those with patents have too much power or that the patent system is somehow broken and in need of a major overhaul. For example, in the current Doha Round of trade negotiations, developing countries are pressing for lowering the high level of IP protection reflected in the TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights) that was achieved in 1994 in the prior Uruguay Round of trade discussions. An illustration of this pressure for weaker IP rights is a proposal by Brazil and 13 other developing countries to modify the charter of the World Intellectual Property Organization (WIPO) to establish the principle that a country's level of intellectual property rights should reflect its level of development. In other words, the poorer the country, the less it needs to recognize and enforce intellectual property rights. While this approach may seem fair to some, it is potentially very dangerous to innovation and world prosperity, not to mention shareholder value.

Another problem that has surfaced in WIPO concerns negotiations to harmonize the world's patent laws. For several years, WIPO has been attempting to formulate a new patent law patent law treaty. For the most part, negotiators from the United States and other developed countries have been experts from national patent offices, who are generally seeking to reach agreement on important technical and legal issues (e.g., prior art, grace period, novelty, and inventive step) to improve the efficiency and operation of national and regional patent systems. In contrast, the representatives from developing countries are largely trade diplomats who also deal with highly political trade issues. Rather than improving the coordination and functioning of national and regional patent offices, their goal is to extract concessions on trade issues. In addition, they actively work to stall progress on the technical and legal IP issue of interest in an effort to gain leverage in trade negotiations that are taking place in WIPO's sister organization, WTO.

Another disturbing development is the number of anti-IP non-governmental organizations attending WIPO meetings. . . . Their aggressive presence and lobbying at WIPO are making it more difficult to harmonize and strengthen the patent system. By contrast, there has been much more limited and ineffective participation by IP-dependent industries in WIPO.

Ironically, while the financial press is full of stories emphasizing the importance of global markets and developing economies to corporate growth, few corporate leaders today seem to be responding to these assaults on the system that protects their shareholders' intellectual property rights in these very same markets. If this assault on the international IP system is to be controlled, senior management of IP-dependent companies (practically every global 1,000 company) need to become more engaged, proactively working with their own governments and sending the message that strong IP protection and enforcement is worth fighting for.

Weakening intellectual property rights around the world bodes poorly for innovation and prosperity, while raising the spectre of increased "innovation fatigue" for prospective inventors, who only need a little recognition and protection for their creations in order to benefit us all with their work.

Design Patents: A New "Obviousness" Test?

Patently-O's story, "Design Patents: Novelty Requires 'Non-Trivial Advance Over The Prior Art'" raises a great question about the recent Egyptian Goddess v. Swisa case before the Federal Circuit. Does the stated requirement for a "non-trivial advance" over the prior art in a design patent go beyond the intent of lawmakers in introducing a new obviousness test for designs?

Could this be one more (small) step that weakens intellectual property rights for inventors?

Disruptive Innovation in Health Care: Winners Announced

Changemakers.net recently sponsored a contest for Disruptive Innovations in Health and Health Care: Solutions People Want, in collaboration with the Robert W. Johnson Foundation. It just concluded on Aug. 29, 2007, and now you can see the winners or look at all 308 entries from 27 countries. Some tremendous concepts were submitted. Some don't seem disruptive, but hey, winners were selected by a popular vote and not necessarily on strict criteria related to disruption. Fascinating reading.

Innovation in Business Models: AxisPointe's SmartBuilder Suite for Home Builders

Innovation in business models is often more important than innovation in materials and products. After all, the key to disruptive innovation typically is the business model in which a product or service is deployed, rather than in the physical product itself. So it pays to keep your eyes open to clever new business models to understand what can be done and what might be applied to other areas.

As an example of an innovative business model, take a look at the services provides by AxisPointe, a company based in Utah's innovation corridor (a rising entrepreneurial region extending from Salt Lake City to Utah County in the south). AxisPointe's HomeBuilder Suite helps home builders and contractors by simplifying many of the post-construction service and support issues they face, including walkthroughs, inspections, troubleshooting, repairs, maintenance, etc. A central source is provided that brings together various providers, manages interactions, documents calls and responses, and makes life simpler for both the homeowner and the builder. A nice combination of software tools, support personnel, and contractural arrangements bring it together into a business model that offers convenience, ease of use, and cost savings. Could be a huge competitive advantage for those who use it.

If you've had experience with AxisPointe's services, I'd love to hear from you. Would like to see how this fares in this difficult economic time for the housing market.

Why Publications?

I'm surprised at how few of the nation's leading companies aggressively use defensive publications to strengthen their intellectual asset portfolios. One major company I talked with recently told me that when they have a concept that they think should be published, they will write it up as a patent and file it with the PTO - paying big bucks to get a publication on file. Not to mention raising questions about knowingly filing something they don't think is really an invention. Doesn't sound wise at all! When I talk about the aggressive publication efforts I spearheaded at Kimberly-Clark, I get a lot of surprised looks. "Oh, we didn't think of that." "Didn't know you could do that so easily." "Hey, that really makes sense." But very few say anything like, "Right - we've been doing the same."

HP and IBM are vigorous publishers, to their credit. But much of the world really doesn't grasp how powerful publications can be. So why publish?

For one thing, defensive publications that create prior art can protect or even increase the value of your existing patents and applications. They can do this by disclosing numerous potential improvements to reduce the risk that others will get improvement patents on top of your estate. That strengthens your future patent clearance position ("freedom to operate" or "right to practice" are terms that others use). It also reduces the risk that a potential licensee will have to get lots of additional licenses from others to practice the art, thus preserving value in future licensing activity.

Publications can also be used to gain credibility for test methods or other tools that may be useful in your patents.

Publications may be used to reduce the value of competitive investments in certain technology areas, for you may be able to create prior art that reduces the potential patent territory that others can obtain in the future.

Publications can also confuse and distract competitors, as they struggle to understand if a publication from you reflects a serious investment in an area or is related to pending patent activity. To do this well, some of your publications should be based on actual patents you have filed, and others should look as if they are. And some should be anonymous but readily identifiable as your work, while others should disclose your identity.

There are several other things you can do with publications that we may discuss here later.

Where to publish? One venue that I strongly recommend is IP.com. This company has its origins in IBM's aggressive publication efforts, providing an opportunity for others to quickly and inexpensively publish a document that can be electronically searched by the PTO, and that is time stamped and archived with certain proof of its publication date, unlike most resources on the Web. Costs are low and ease of use is very high. It's one of the best ways to get prior art out there.

One of my publications at IP.com was recently cited by a PTO examiner against a case by IBM. Interesting! The PTO is increasingly using this resource.

If you want a holistic, broad approach to intellectual assets, you've got to do more than just file patents. At a minimum, you need to strengthen the patents you are seeking with additional publications. And there is much more you can do with that tool - just one of many tools beyond patents that must be part of a robust intellectual asset strategy.

Innovative Approach for Image Handling

An amazing new technology for resizing images without distortion of important features is presented in a video at TechCrunch.com. By calculating low energy regions in a photo, pixels can be added or removed in those regions without distorting key features of a photo as it is resized. Brilliant!

Now think about how this technology could be deployed disruptively. As an image processing program, incumbents will be motivated to respond head-on. That's their business and expertise. But what about subtle applications in other areas, such as enhancing the display of Google Ads, improving the display of graphics on signs or VR displays, or providing dynamic displays on electric paper? What business models would allow this technology to provide a disruptive competitive advantage? Food for thought. Correct answers will be given in four or five years.

The Problem with Copper and Bird Droppings: Don't Doom Your Innovation Pipeline

Building an innovation pipeline? Great! But before you complete your system, there's a lesson to be learned from a real-world failure of copper pipes discussed in a recent edition of Design News. I refer to "The Case of the Oleaginous Inlet" by Kenneth Russell, Professor Emeritus, MIT, Cambridge, MA (July 16, 2007, p. 118). Here's the problem he faced:

Oils become viscous and hard to pump at low temperatures. In the case at hand, refined mineral oil was being stored in a large tank equipped with a heat exchanger to keep the stuff pumpable. Fairly low temperature steam circulated through an array of ¾-inch copper tubes immersed in the oil and then discharged into a dry well. Several of the tubes broke, which allowed the mineral oil to leak into the dry well and the surrounding ground and finally into Mount Hope (RI) Bay. Local environmentalists and waterfront residents were not pleased by the leak.

I was retained by the operator of the tank to find the cause of the piping fracture. My client, of course, hoped to be exonerated.

The tubing was just plain copper that, for some reason, had broken after only two years of service. Neither refined mineral oil nor clean steam attack copper, so the cause of failure was a mystery.

Scanning electron microscope images of the pipes suggested that the problem was corrosive attack on the outside surfaces of the pipe. This was puzzling because copper is usually inert and does not corrode easily. But ammonia can attack it, and ammonia from bird droppings, dog urine, or other animal sources could have been the cause.

In this case, it appeared that some source of ammonia (bird droppings from above, perhaps) had landed on the copper tubes while they had been in storage, causing weakening of the metal that later resulted in failure of the pipe in use, under cycles of internal pressure and change in temperature.

When it comes to innovation, even a seemingly robust pipelines can actually be surprisingly sensitive to certain waste products from above. Failure to properly shield innovation connections and pipelines can result in an environment where the pipeline can crack under pressure and fail.

Innovation pipelines - the people and processes behind innovation - need to be treated carefully in order to realize the full returns possible on those investments. Special rules, managerial sponsorship and protection, environments where involvement and creativity is encouraged and expected, and other steps can keep those pipelines healthy and functioning for years to come. But if soiled with normal corporate contamination and fall-out, connections can fail and pipelines can quickly become empty and even sources of extreme waste.

Intellectual Asset Help a la Carte? Forget It!

Back when you didn't know the ins and outs of restaurants, do you ever remember watching plates full of good food being delivered to nearby patrons as you anxiously waited for your order? When it came, perhaps there was just a lonely pork chop on an otherwise empty plate. What, just a pork chop? That's my dinner? And the waiter answered: "I'm sorry. Our meals are a la carte." Order a chop - get a chop. Nothing more. Disappointing! For many of us, the dining experience is incomplete without all the extras. Leave them out and the sizzle is gone.

The side dishes are one reason why Korean restaurants are among my favorites. The meal inevitably includes a spread of numerous side dishes to sample with the main course. Even when I order something inexpensive, the sides are there to make the meal exciting.

I think the same concept applies to consulting firms serving clients, whether it involves intellectual assets, business plans, or any other field. A satisfying experience should include extras to create customer delight.

• Someone wants help with a couple patents? Give them more! Help them consider the digital intellectual assets as well. Look at their portfolio and suggest some trademarks, domain names, even YouTube channels that could help them. In fact, if they like the suggestions, take five minutes during lunch and help them register the domain names on the spot. (Pet peeve: many people wait for months or even years before thinking about the marketing aspects of an invention, sometimes missing opportunities to obtain domain names and other low-cost assets that may have been available earlier. Don't put this off!)


• Someone looking for help in getting a great invention to market? Don't just help with the marketing strategy -- show them how they can use this invention as the first in a series of related products that can lead to a robust pipeline.


• Someone wants help with training their people on the basics of patents? Don't just help them with the training - show them how they can build a community of practice in their company to naturally grow expertise in intellectual assets across their company. A self-sustaining community of practice in intellectual assets is one of the most important things some companies can do for their IA systems - and was one of the most important things that I helped bring to Kimberly-Clark during my years there (with the assistance and support of our Chief Innovation Officer, Cheryl Perkins, who is now the owner of Innovation Edge, the exciting firm where I work now as Director of Solutions Development).

In one recent meeting with a client, we noted that their position potentially could be broader than the concept they were focused on. In fact, we offered a suggested trademark to cover a broader scope. It took five minutes to do the search and see that it might be available. It took another 60 seconds to see if the domain name was available - and it was. We even interrupted our meeting to guide them through the simple domain name registration process and secure the domain name for them on the spot. A nice side dish that added a lot of enjoyment for the client. A la carte services? Forget it! Make sure the side dishes are included.

The Patent Wiki: Peer to Patent

At an IP conference in New York, I recently met Professor Beth Noveck, the brilliant law professor at New York Law School who has been the driving force behind the new Peer to Patent Project and PeerToPatent.org. The concept is to apply the power of the Wiki and communities of experts to help the PTO do its job of finding prior art for pending patent applications. In this program, inventors with pending applications in category 2100 (software-related patents) can volunteer to expose their application to the online community, who will then dig up the best art they can find and provide comments explaining the relevance of the art. The top 10 items of prior art and comments will be sent to the PTO to assist the Examiner.

Why would anyone want to do this? That's the reaction of most IP professionals. Naturally, this process greatly increases the chances that a patent will be gutted by prior art or whittled down to narrow claims. "Even an invalid patent is worth something" - a common statement that refers to the huge expense and risk involved in challenging a patent that stands in your way. But for those interested in having strong valid patents that they intend to license or otherwise use, this system can greatly increase the perceived value of the patent, if it's a good patent in the first place. And it can give the inventors of the surviving patent confidence in their claims.

There is another huge benefit for those who out their patents through the Peer to Patent process: the PTO will expedite prosecution, trimming the normal five+ of prosecution for software patents down to roughly a year. That's for me!

In fact, I have a patent application in the software/security area in category 2100 that I just submitted to the Peer to Patent system. They are selective, limited to only 250 patents in this pilot stage of the system, so I might not make the cut. But if I do, I hope the world will join in the fray to tear my patent apart, because whatever survives will be worth something - and I'll know its worth years sooner than otherwise.

In any case, I hope you'll sign up to be a reviewer for the Peer to Patent community review system, a brilliant idea. And if you see an application from me show up sometime, have at it!

To Bring Your Invention to Market, Know the Market and the Market Forces

There are so many great inventions out there in search of a market, addressing problems that people don't really care about. Disruptive innovation needs to solve the problems of real users, often in ways that the mainstream market ignored or couldn't directly address. Sometimes, inventions solve serious problems that users care about deeply, but which cannot be marketed effectively through existing market channels or because of regulatory or legal risks. For instance, products that enhance safety may be difficult to market to consumers by advertising the safety benefit if there is a risk that they will misuse the product and then sue.


An example of the barriers to success for safety innovations comes from Joe Figliuzzi's story of marketing a safe ladder (see US Patent 5,915,498 and 5,791,437). A large company was interested in his ladder (see US Patent, but by focusing on safety in his marketing approach, he set himself up for failure because he did not understand the market and regulatory forces for the ladder business. Had he taken a different marketing approach, his product might have found a home in a distribution channel by emphasizing some other feature, letting users see for themselves the obvious safety benefit. But touting improved safety for a new ladder will scare away the manufacturers who don't want to be sued and who don't want to suggest that their other ladders aren't safe as well.

The disruptive power of an innovation depends on how it is positioned in the marketplace. Positioning it poorly - almost guaranteed if you don't know the turf - can quickly kill and innovation, dooming its disruptive potential. It's not enough for an invention to be cool. To be disruptive, or even to just make a buck, it needs to be positioned for success in the marketplace, and that means you need to understand the needs and pressure felt by manufacturers, distributors, end users, and others. Know the market, find the positioning, and let your product disrupt.

Automated Dispensing of Medications: A Potentially Disruptive Innovation

Parata Systems now offers automated kiosks that can dispense a prescription even after hours when the pharmacy is closed. Nice example of a potentially disruptive innovation that makes life easier for patients.

The KSR Decision: Rich Resource

For those of you interested in exploring the momentous KSR v. Teleflex decision of the US Supreme Court, an extremely valuable resource is the KSR Litigation Papers page prepared by Fried Frank, the firm that represented KSR. The decision was a big victory for KSR, but was it a victory for patent law? By clarifying and lowering the standards for obviousness rejections, there is a risk that patents will be harder to obtain and enforce, and that property rights will suffer.

Supporters of the KSR decision claim that too much obvious trash was being allowed and cluttering the system. My take is that the problem with poor quality patents was not due to poor standards in the area of obviousness, but to poor execution by the US Patent and Trademark Office, which in turn is due to Congressional malfeasance in looting the funds that the PTO receives as an inherent tax on innovation. When patent examiners only 16-20 hours total per case, there isn't time for thorough searches. If Congress would keep their hands of the PTO budget, we'd be a lot better off.

Think Carefully About Repairs

A hot area in IP law is the issue of repair versus reconstruction of medical devices. Repairing a patented object is fine, but if you "reconstruct" it, you may be infringing the patent. See "Reusing Patented Medical Devices" by Don V. Kelly over at IPFrontline.com.

When you are developing a device for commercialization and preparing your patent, it may be wise to carefully consider the issue of repair vs. reconstruction, and to take pains to address business models around repair and aftermarket service. Neglect of those areas can lead to lost profits later on. The business model you pursue may include providing a license for users that stipulates conditions for repairs and replacement of parts. And the patent strategy may wish to consider patenting key parts of the device that are most likely to be replaced.

Contest for Disruptive Innovations in Health Care

The Robert Wood Johnson Foundation is sponsoring a contest for Disruptive Innovations in Health Care: "an open source competition to identify ways in which the health and health care marketplace can offer services, tools and choices that consumers want -- but are currently out of reach because of cost, complexity or because the right idea hasn't come along." Winners get $5,000 cash and a chance to receive further funding up to $5 million.

Contests and other incentives can be great ways to tap into the creative resources of many people in the quest for disruption. Will anything come of this effort? Perhaps. Meanwhile, corporations seeking to protect their future need to regularly examine their systems and incentives. Are there barriers to innovation within the company, or is there a system that welcomes and rewards valuable and potentially disruptive concepts? Talk to your creative people and perhaps you'll find more barriers than you imagined! This is part of the plight of "innovation fatigue" that I'll discuss more in the future.

Tip from a BYU Grad on Saving $ on Textbooks

For those of you heading to college later this year, here's a tip on saving money on your textbooks: shop around. Go to Half.com, Amazon, or other sources of used books online and find your textbooks there for MUCH LESS than you'll pay at the university bookstore. My savvy daughter-in-law, a recent graduate of BYU, found that by shopping around, she could buy many textbooks for less than than the bookstore buy-back price and actually make a little money on textbooks.

I don't want to pick on any particular bookstores, but there are some that appear to have tried to reduce online competition for books by delaying publication of the list of required books until about one week before classes start. (Other excuses are offered, of course, such as the indecisiveness of professors who are always changing their minds, forcing bookstores to delay publication until the last minute - apparently professors were a lot more decisive before Half.com became available.) Never fear! It's usually no problem to receive your textbook a few days after class begins. Many professors are understanding about this, and some of the best ones will specifically choose the penultimate edition so you will be more likely to find it in used form.

Textbook prices are an atrocity (except for any that I may author in the future). I hope you'll be able to avoid some of the gouging through used books.

I kept most of my engineering and math related textbooks. They collect as much dust now as they did the month after I graduated. Only a few were ever of any value, and that was partly because I taught some related courses. Ask professors and others with experience which ones are likely to be classics and gems to keep, and sell back the rest to your bookstore, hopefully for more than your paid online.

Do Less, Win More: True for More than Software

One of America's most interesting companies, 37Signals, has a terrific online book that explains their philosophy and also teaches software developers how to beat the competition. Get Real can be purchased for convenience, but the whole book can be read online. Generous!

The wisdom in Get Real is closely tied to the theories of disruptive innovation from Clayton Christensen and others. Consider this advice from Chapter 2:

Underdo your competition

Conventional wisdom says that to beat your competitors you need to one-up them. If they have four features, you need five (or 15, or 25). If they're spending x, you need to spend xx. If they have 20, you need 30.

This sort of one-upping Cold War mentality is a dead-end. It's an expensive, defensive, and paranoid way of building products. Defensive, paranoid companies can't think ahead, they can only think behind. They don't lead, they follow.

If you want to build a company that follows, you might as well put down this book now.

So what to do then? The answer is less. Do less than your competitors to beat them. Solve the simple problems and leave the hairy, difficult, nasty problems to everyone else. Instead of oneupping, try one-downing. Instead of outdoing, try underdoing.

We'll cover the concept of less throughout this book, but for starters, less means:

* Less features
* Less options/preferences
* Less people and corporate structure
* Less meetings and abstractions
* Less promises

Yes! This makes so much sense to me. I'm sick of bloated software that continually adds more features, more bugs, more slowness and inconvenience, while still not getting even the simplest things right. But the largest corporations seem committed to fueling this trend - because the people who make the corporate decisions do it based on what brings them job security, not what an individual user really needs. Buying the biggest, most-feature laden package that "everyone else" is using seems like a safe move, even though the actual users may scream about all the time they lose trying to navigate a user-hostile interface.

The essence of disruptive innovation theory is focusing on the real job that users are trying to get done, and then finding a better, more convenience, or less costly way to do that job. The software of the future will be focused on getting that job done and making life easier for the users, not more lucrative for the trainers who now can conduct week-long seminars on MegaPackage Basics and still leave users unskilled and in need of further training.

And the message is about more than software. Electronics, tools, cars, utilities - sometimes we need to not engage in hopeless feature wars, and rather just focus on what consumers are really trying to do. Simplify. Do less. But offer more in untouched areas: simplicity, ease, convenience. Master than, and you will dominate your niche.

Welcome to Sharp IP!

My name is Jeff Lindsay. I'm a recovering professor, a researcher, inventor, IP strategist, and new product enthusiast. I'm starting this blog to help others dealing with the challenges of protecting their inventions and dealing with disruptive innovation. This blog will be especially aimed at the following groups:

• New inventors looking to not just protect their invention, but help it flourish in the market place.


• Inventors and patent professionals in Corporate America looking for ways to overcome corporate barriers to innovation and out-of-the-box strategy for growth.


• People wishing to take advantage of the principles of disruptive innovation, especially as applied to intellectual asset strategy.

I have had some great experiences in some of these areas, though I still have plenty to learn. But as we share ideas back and forth, perhaps we can help each other to reach our goals. There is a universe of potential out there, and sound strategy and sharp IP might just help.