Innovation, Startups and Intellectual Property Management: a book review and some ideas for the post-COVID era
Why should entrepreneurs care about IP management? This was our starting point to analyze the role of intellectual property management in new business ventures. With particular reference to the innovative potential of small firms in Latin America, we addressed several aspects of IP strategy for ventures in the book Innovation, Startups and Intellectual Property Management.
The book was written during 2016 and published the next year. In 2019, Letizia Tomada (University of Augsburg & EIPIN Innovation Society) and Niccolò Innocenti (Università degli Studi di Firenze) published a book review in the Journal of Small Business and Entrepreneurship. I would refer the reader to this review for specific details.
Most topics of this book are still relevant and alive for the IP manager nowadays. However, given the intrinsic dynamic nature of the global IP system and the abrupt recent changes of startups ecosystems, new ideas ought to be extended and updated to the content of the book.
Venture Finance and IP management
After writing this book, I embarked in several technology and IP-related ventures. I realized that the venture finance cycle is strongly dependent on the optimal IP strategy, and on the ability of the startup team to manage their intellectual assets efficiently. This relationship has increased after the pandemic, since more venture capital investors have raised their interests in the returns of “patent-intensive” ventures in areas such as green technologies, healthcare, or digitalization.
In particular, IP management is now essential in the funding process with early-stage finance (3Fs, angel financing and other early-stage investors including crowdfunding), but also for venture valuation, dilution and mechanics of ownership, or the use of IP assets as milestones for stage financing.
IP management in the era of blockchain and AI
Back in 2016, several Latin-American startups were flourishing under the Open Innovation paradigm. Companies such as NotCo, whose founders were developing proprietary algorithms of AI to launch plant-based food (today backed by Jeff Bezos), managed their IP outside the patent system.
One year after the book was published, China’s Supreme Court recognized blockchain evidence as legally binding, opening the door to immutable proofs of authenticity to protect trade secrets. Furthermore, only a few days ago, LG Energy Solutions prevailed over SK Innovation in a multi-billion trade secret theft decision. It is the largest IP lawsuit entirely based on trade secrets, an otherwise considered “poor” form of intellectual asset protection.
Today’s blockchain and AI applications allow IP managers a whole new spectrum of strategies to protect and commercialize their intellectual assets, including prior use defense litigation or trade secrets licensing. As an example, just a few months ago, WIPO launched its own blockchain-based zero-knowledge architecture system to register trade secrets and use it as proof of authenticity: WIPO proof.
How do these trends relate to the book?
Throughout this book, we guide the reader through the main factors conditioning an IP commercial strategy: such as the contractual clauses or the advantages and risks of patent trading and brokerage. This IP assets analysis was highly relevant for ventures operating under the effervescence of the Open Innovation paradigm, while we acknowledged the struggles that startups have to bear due to limited resources (venture funding).
Furthermore, using extensive empirical evidence, we supported the argument that startups avoid litigation, knowing the high risks and costs related to it. We empirically explored the effects of certain cognitive limitations of entrepreneurs on optimizing their IP strategy: the awareness of market participants, and how cultural factors influence the degree of awareness, which in turn, defines the size of the market (cognitive bias effect).
As we argued almost five years ago, these ventures undervalue their intellectual assets and refrain from prosecution of legal rights. The existence of new forms of inexpensive and effective protection (e.g. WIPO proof) may increase this awareness.
About the book authors:
Jose Fernandez Donoso holds a PhD in Economics from Georgetown University. He is currently CEO of Energy Innovation Systems Limited, a green technology venture based in Hong Kong.
Ignacio De Leon holds a PhD in Law from University College London. He is currently Senior Advisor at Interlink Capital Strategies and Entrepreneur in Residence at FedTech in Washington DC.
After publishing this book, both authors co-founded IP Passport LLC in Northern Virginia, a tech startup that developed blockchain solutions for intellectual property.