Monday, March 3, 2008

Making Money out of Patents

By: Alon Cohen - See me or call me

In general I think patents are a waste of time, specifically for the inventors. A patent is merely the right to sue someone, not a cash register, in fact, until you can actually sue someone it is nothing but a drain on your resources.

Most “business” models around patents involve suing companies that infringe on the patent, or threatening them, or selling the patents to the companies that can sue the people that potentially infringe, or having some legal firm help take the legal cost of suing on some contingency base.

It is all about a long legal fight that an inventor / patent owner has to initiate in case he/she was lucky to invent something useful. It seems what is required from the inventor is to be a lawyer, or at least have some affinity for legal battles.

In my mind a complete waste of time for society, just the opposite of the original idea of patents that were design to compensate and encourage people to invent and share for the good of all mankind. It seems that since the only people enjoying that legal economy are the legal firms, maybe they should encourage people to file patents on their firm’s dime.

During the summer (as I was visiting Israel) I encountered an interesting initiative from Procter and Gamble. The company has Identified Israel as a source of innovation and decided to shorten the process from innovation to market or from innovation to inventor compensation. In fact they opened an office where they encourage people to come up with an innovation and a business model, what ever that might be, and if the concept is good and match the company’s goals, and makes sense business wise, they will pay, and potentially take it to market. This is great news for inventors and for Israeli entrepreneurs since most VCs in Israel do not touch tangible-consumer-goods startups.

I can happily attest to the P&G process. During summer 2007, I entered a P&G contest, where they were in a search of a technological solution for a specific improvement of a popular consumer product. I presented a solution and won the contest, and yes they even paid. In my case one-time fee, as was agreed as part of the contest rules. Few weeks ago, Feb 2008, they opened the model for others to come and bring them ideas. Check P&G’s Israel office, or ask me how.

In many cases, where an individual file for a patent during the course his/her job, the patent legal work is paid for by the company and the patent is assigned to the company and not to the individual. In many cases, companies that are not trigger happy will never sue others for infringement as it may be too distracting for their day to day operation, or simply bad PR.

On my record, I have at least one patent that might be “legally monetized” the patent has to do with network based time shifting of radio and television broadcasts in essence a “network based TIVO”. If you have the time on interest find it here.

As I am really fed up with the patent legal process (and find it boring), I am trying to think of new innovative ways to make money out of innovation which is interesting. In a sense I am looking for a quick way to flush the potential of a patent if such potential exists.

One such way which I am contemplating now, is submitting a provisional patent (very low cost say at LegalZoom), then publishing the patent / idea on a blog, potentially even stating a ball park price, and inviting potential companies by name, to come and read the concept.

Correct me if you think my logic is wrong here. If a company reads this blog and find some innovative idea interesting, they will want to be the first to engage and negotiate out of concern that their competitors will try and grab the patent for its priority date. Since they don’t know if others have approached me they might move even faster. Unless, say Google will cooperate with Microsoft, to NOT buy the patent, for a year, the process seems safe.

Obviously the idea has to hold some merits, if it doesn’t, nothing will happen and the patent will become public domain. The inventor invested not thousands, but rather just few hundreds of dollars; hence the value got flushed early on into the process for the innovator at very low cost. It is also good for the rest of humanity since after a year, if a real patent was not filed, the provisional patent is out there for anyone to use.

Let me know what you think, I am gearing up to try this concept myself on this blog so if the logic is wrong let me know.

As for new patent ideas, if you are Google / Microsoft, or LinkedIn / Xing, stay tuned, I have something coming up for you to fight over.