People, not patents, make a startup work

An excerpt from Larry's VC View Blog entitled "IP Problems":

An excerpt from Larry's VC View Blog entitled "IP Problems":

A few years back we started a company by licensing some technology from Stanford--actually we did a few of these types of deals and it was always fascinating to work with an enlightened academic institution. Having written a lot of my own patents (because we couldn't afford patent attorney fees) I have a great respect for IP, but also a healthy skepticism--patents are great shields but rarely swords. Now in many places IP is seen as the crown jewels of a company and sometimes it can be but more typically it's just a start. Unfortunately this obsession with IP leads to the fatal "technology leading the market problem."

… Too often in IP deals, there is a focus on the lawyering of the agreements and parties lose sight of the objective, which should be the same for both--i.e. someone needs to commercialize the invention, and both need to profit from it. The vast majority of work will be done post invention and IP owners need to be realistic about this.

Exclusivity is the other issue--patents are legal monopolies for a time, so if the IP owner can pick a winner, it's better to let them run with the IP rather than try to be an arms dealer, and enable 20 competitors to slug it out in the market. As a worst case example think of the memory market and the cross licensing IP mess it is, which is largely at the heart of its distinct lack of profitability.

At the heart of the problem is that IP is a future value to be unlocked by a team of people, often not the inventor (and almost never the IP owner). For that future value to be realized, a team of people is needed--the IP creator needs to work with this team, roll over future inventions and value to that team if they are needed to ensure success, and bet on the success of that team--in the end, it's people, not patents that make startups work.

For the full blog, go to www.optoiq.com and scroll down to blogs.

--Larry Marshall,
Photonics Entrepreneur and
Venture Capitalist

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