On the value of ideas and sweat equity

I want to address a fairly common meme that shows up quite often when you deal with inventors and entrepreneurs, especially young ones. The meme is basically "We need to play this one very close to the vest, encrypt all our discussions, get folks to sign NDA's or contracts before we talk to them in any detail, and be very careful who we talk to at all. Because if we are not careful, someone will steal our unique and highly profitable idea."

After the first few patents you file or companies you start you realize a couple of things:

1) The idea itself is at most 10-20% of the insight and sweat equity required to get something off the ground. More commonly 1-5%.
2) Once you start implementing or building something new, usually there are follow on insights developed as a result that are far more important than the original idea.
3) If the idea is easy enough to do that almost anyone could steal and implement it, you should probably try another idea.
4) The kinds of people who are going to put the sweat equity into developing an invention or company most likely will do so on one of *their* ideas, not get all excited about one of yours.
5) Most NDA's dont work. I usually get them signed, but more as part of the process than with the real expectation they will be useful. And only after the negotiations get serious - usually i have disclosed the core of the idea already.
6) Its really not that common to have a 'truly unique' idea. Most likely someone, somewhere has thought about it or something like it, even if it hasn't shown up in the prior art yet.
7) If you are the kind of person who comes up with original ideas, you will have more than you know what to do with. In my experience, folks either come up with 0 or hundreds of good ideas. Not too many come up with between 1 and 10 good ideas.
8) Learning to judge the 'profitability index' and 'effort index' of new ideas is the key to repeated success. If my experience is any guide, you will leave at least 10 good, original, and commercially viable ideas on the shelf for every one you actually pursue. Maybe more like 50 to one.

This blurb was stimulated by a discussion on Slashdot where I posted something fairly similar. Might be worth a full length article at some point, considering how often I hear some variant of this meme.

Contact me if you have any questions about this sort of thing. I am always willing to chat about new ideas and business plans. I even have a very nice bilateral non disclosure agreement that has stood the test of time and can be easily adapted to specific needs.

Patent Gridlock - The Tragedy of the Anticommons

I ran into an interesting post on Slashdot referencing an article from the New Yorker that fairly succinctly describes some of the issues I have been having with the current systems and methods we have for handling intellectual property here in the United States. For these kind of sentiments to show up in the popular media, especially outside of the community of folks actively involved in intellectual property issues, really demonstrates the severity of the problem.

To quickly summarize the article, the author suggests that the current patent system is causing an innovation 'gridlock' by encumbering new products and innovations with multiple claims of partial infringement by different holders of existing patents. Now in some sense, this is actually how the system in supposed to operate - if I develop a product that relies on some technology you have developed I am supposed to compensate you in some way for using your work. Unfortunately, because the USPTO has made a practice in the last twenty years of granting patents with increasingly broad claim coverage and granting rights to technologies that do not exist and cannot be built at the current time, the claims of partial interest are so complicated and numerous that the new innovation is doomed before it can even be brought to market. Thus the tragedy of the anticommons.

This problem is further exacerbated by the 'patent trolls' who file for patents on technologies they never intend to bring to market in the hope of extorting a toll on any company unlucky enough to actually bring a potentially infringing product to the marketplace.

I have a couple of suggestions to address this problem, none of which is likely to ever see the light of day. My skepticism regarding implementation does not prevent me from sharing them, however:

* require a functional prototype before granting a patent
* disallow business method patents
* restrict the scope of allowable claims to those demonstrated by the prototype
* require companies to enforce their claims in a timely fashion - if there is no claim as to infringement within 6 months of a potential violation that specific infringer and that infringer alone cannot be penalized
* restrict copyright to a 7 year term which can be renewed for another 7 years at a significant cost

These changes would go some way towards patching the current system, but it should be clear that some serious thought needs to be done regarding how we can fairly handle intellectual property issues in an environment that is, after all, very different from the one the current system was built to address in 1790.

Are Software Patents On Shaky Ground?

For those of us who work with the US intellectual property system on a regular basis, it is pretty clear that there are some fairly serious systemic problems. Interestingly enough, it seems that the USPTO may be rethinking its position on software patents, specifically as a way to discourage the 'patent trolls'. A patent troll, I might add, is the ancient and hereditary enemy of the intellectual property gnomes.

It looks to me and some others that there may be fewer, higher quality software patents in the USPTO's future, and from my perspective this is a 'good thing' indeed. The system cannot work when choked by an undigestible mass of low quality software patents, so anything to stem the tide should be applauded. It remains to be seen, however, whether these relatively minor adjustments will be enough to save the system. Patents on gene sequences, software patents, 'futurist patents' (patents on inventions no one actually knows how to build now but may be possible later), and more all raise serious questions about how and if a rational, fair, and efficient intellectual property system can be built.

GM Agriculture and Terminator Technologies - Another Blow Against the Third World?

So called 'terminator technologies', at least in the agribusiness world, are essentially those GM or genetic modification technologies that allow seed companies to 'improve' and patent seeds for specific crops. This insures that everytime a farmer wants to plant a new crop, they have to go back to the seed or GM company to get a new supply of seeds. This is partially because most of these GM crops are designed to be sterile in the field, and partially because intellectual property laws preclude unlicenced (non paid) use of any seed products containing one or more of the gene sequences patented by the GM company *even those grown by the farmer themselves*.

Now in the first world agricultural producers have for the most part abandoned the practice of keeping personal stocks of 'seed grain', or grain saved from a previous crop in order to plant a new crop, in favor of purchasing these stocks from commercial suppliers some time ago. So for these customers, the difference between buying GM seeds for the next crop versus buying non-GM seeds is a matter of degree rather than kind.

For farmers in the third world, however, its a different and more disturbing story. Most agricultural producers in the developing world rely on maintaining personal stocks of seed grain in order to minimize the costs associated with planting and harvesting each crop. It turns out that once they buy into the hype associated with genetically modified crops, it is very difficult to reestablish themselves as traditional 'seed grain' producers, and very difficult to make enough of a profit to pay for next years GM seeds. A disturbing prospect, and one reason governments in the third world are pushing modernized versions of traditional methods rather than buying into the capital intensive methods pushed by agribusinesses in the first world.

Is Intellectual Capital More Important than Natural Resources?

It is interesting to contemplate - has intellectual capital become more important to GNP around the globe than the exploitation of natural resources? The claim is really a twofold one. First, that the intellectual capital required to efficiently exploit natural resources tends to be held predominantly by first world countries, and therefore represents a hidden 'tax' on third world countries who require this expertise to take advantage of their own natural resources. Second, that *all* methods of wealth generation will increasingly rely on intellectual property and capital moving forward.

It seems to me that both claims are pretty clear - the first is readily demonstrable now, especially as China has joined the rest of the first world countries who have been doing this since colonial times and begun to make huge strides in using its intellectual capital to exploit the resources of less advantaged countries, specifically in Africa.

The second is less clear - it is fairly apparent that at some point in the future intellectual property, capital, and expertise will take the lead in wealth generation against the commodity markets. I would guess that this has not happened yet, although a study comparing the different contributers to GDP around the world by type would be instructive and might assist in predicting when this crossover point will be reached.

The moral is clear: build and protect intellectual capital and provide a secure environment for this process to take place. This is true on an individual, corporate, and national scale.