Qi3 – Quality, Insight, Integrity & Innovation - UNITING TECHNOLOGY & MARKETING

Tag: Intellectual Property

Leave those NDAs alone!

Some people seem to miss the touchy-feely part of engagement between entrepreneur and investor. They insert the dark menace of a Non-Disclosure Agreement (NDA) in the space between the first handshake and a cup of coffee.  Just when you want to attract an investor, you raise his hackles.

From the entrepreneur’s perspective, it’s important to protect yourself from the risks of disclosing the ‘crown jewels’ of your technology.  This particularly applies where you meet people who are previously unknown to you.  Disclosure to people other than lawyers and patent attorneys unless within the terms of an NDA may also prevent you from later securing a patent.

Some people have an overdeveloped view of what constitutes confidential information and thus come across as overly secretive and even shifty when asked simple questions.  It’s not a healthy start to a relationship. By putting an NDA in front of a potential investor, you are asking for a legal commitment at a very early stage and risk scaring him off.

Now think about it from an investor’s perspective.  We really don’t want a drawer full of NDAs, especially as we are scouting in a pool of technology investment prospects that may overlap. So we (a) follow a written ethical code, (b) follow professional practices and (c) generally only sign NDAs at Stage 3 (technology and market due diligence) in our investment process.  We really don’t want to know anything secret at these early stages. We’re primarily interested in what makes you stand out from the crowd – the commercial impacts of your whizzy technology rather than the essence of your invention.

So what’s the resolution?  Spend a few minutes considering our evaluation process, and considering what public domain information you can release. This may then be included in the marketing information and business plan.  Confidential information available on exchange of an NDA can be listed in the business plan and released for the purposes of due diligence at a later stage.

This all has a practical effect.  In the past year, I have refused to bring four businesses into our evaluation process simply because the founders wouldn’t provide sufficient detail for a Stage 1 evaluation.

Advice for Entrepreneurs: Part Three – Intellectual Property

Investors and entrepreneurs alike face real problems in the role of Intellectual Property (IP) in technology businesses. IP represents a defence, a barrier to entry and source of sustainable competitive advantage if competitors find it hard to copy or work around your IP. But the cost of worldwide filing for a single patent is in the high tens of thousands of pounds. This is hardly money that entrepreneurs have access to in most circumstances.

Very few companies come to us with a portfolio of granted worldwide patents at the stage we meet them. So what’s the acceptable level of preparation required by people like us?

Patents filed without the assistance of a patent lawyer worry us, as it’s easy to make mistakes that narrow or invalidate your claims. We can help you to find a decent, commercially focused patent lawyer, or even better a commercial IP consultancy that can undertake the following:

  • Independent analysis of your IP. This should be presented to us, together with your responses. This should provide some confidence in your approach to date and in your ‘freedom to operate’ without infringing IP held by others.
  • Strategy for developing a strong IP position. This should address (a) filing strategy (scope, territories and likely costs for your business plan), (b) landscape and freedom to operate and (c) likely work-around strategies that could be deployed by competitors.

We tend to take a simple approach:

  • Does the IP provide a fundamental barrier to competitors? This is usually evidenced by simple, fundamental and broad claims that have passed examination and preferably reached PCT stage.
  • Alternatively, does the IP only protect the particular means of producing your product or service? In this case, competitors will use alternative approaches to work around your IP. You will need to demonstrate reasons why you will dominate the market before they catch up.

If you can present this material to us at the outset of stage 2 evaluation, you’ll be giving us confidence in the validity of your approach and in the defensibility of your technology.

I know IP is troublesome and expensive. But it’s essential nowadays, and it shows your professionalism if you take it seriously at an early stage. There’s also no reason to go overboard – you need to do enough to convince your investors, not more.

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