Copyright 2013 Jack M. Kaplan & Anthony C. Warren Special Topic 2 Patterns of Entrepreneurship...

Copyright 2013 Jack M. Kaplan & Anthony C. Warren

Special Topic 2

Patterns of Entrepreneurship Management4th Edition, Chapter 8

Technology EntrepreneurshipChapter

8Definition

Scope

Issues

Social Media

Business Models

Inverse Commons


Presentation Outline

• Definition of Technology Entrepreneurship• Constraints

- Path Dependency with Examples- Network Effects- Technology Road-Maps- Standards and Compatibilities

• Timing and Market Segmentation Topics- Long-Tail- Gartner Hype Cycle- Technology Adoption Cycle- Cooperative

• Intellectual Property

- Patents and Patenting Process - Trademarks- Copyright- Trade Secrets

Chapter 8

Definition

Scope

Issues

Social Media

Business Models

Inverse Commons


“What distinguishes technology entrepreneurship from other entrepreneurship types such as:

− social entrepreneurship− small business management− and self-employment

is the collaborative experimentation and production of new products/services, assets, and their attributes, which are intricately related to advances in scientific and technological knowledge and the firm’s asset ownership rights”.

Definition

Prof. Tony Bailetti, Carleton University, Ottawa, Feb. 2012

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

The best technology does not always prevail – new innovations have to fit with existing infrastructure and history which can be highly constraining. For example:

Path Dependency is the tendency of a past or traditional practice or preference to continue even if better alternatives are available.

Also related to so-called Lock-in or Legacy Effects.

“You can’t always start from here!”

Path Dependency

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

Path Dependency Example: Alternate

Keyboards

The original QWERTY keyboard designed for mechanical typewritershas not been replaced by later, supposedly better, innovations.


Still Dominant after nearly 150 years!

A network effect (also called network externality) is the effect that a single new user of a good or service has on the value of that product to other people. When a network effect is present, the value, V, of a product or service increases as the Number, N, of people using it according to

Metcalf’s Law V=N2

For example, the introduction of the FAX machine had no value to the first user; a network needed to be in place for Metcalf’s Law to be effective. How can this be achieved?

Related Topics – Inverse Commons, Tipping Point, Viral Marketing, Lock-in Standards

Network Effects

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Network Effects – Value Gap Created by a Fast Leader

An entrepreneur can claim a large part of a market if they can take advantage of network effects. But if a competitor has already been a “fast leader” then trying to take away market share is difficult and risky…………

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Network Effects – Loss of Value by a Weaker Follower

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

PropertyExamples of winners/losers: Netflix/Blockbuster; Facebook/Myspace, VHS/Betamax etc.


Technology Road-Maps

A technology roadmap is a plan that matches short-term and long-term goals with specific technology solutions to help meet those goals. It is a plan that applies to a new product or process, or to an emerging technology.

Roadmaps are important for:

a) Spotting when a number of unconnected innovations reach practicality and together create something new and valuable

b) Searching for possible threats to an innovation as new technologies mature create obsolescence

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Example - Video Recorder

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

Technology does not evolve linearly or synchronously. Commercial application may involve many unrelated developments coming together at the right market timing.


Example of Poor Roadmapping – Iridium Satellite Phone System

-

-

• Conceived by Motorola in 1985 – a mobile phone to work anywhere• Phones communicate via network of 66 satellites in stationary orbits•$5 billion spent on R&D, deployment and marketing•Service launched in 1996 and failed to gain any market share•Phones cost $3000, weighed 1lb., low battery life, high call charges•Long transmission paths led to delay between caller and receiver•The company filed for bankruptcy in 1999•The system is still operable and used by reporters and the military only.

The engineers failed to undertake a future technology road map covering emergence of hig-speed digital networks, programmable phones, GPS enhancements, battery technology, memory costs, etc. etc.

The technology used was obsolete the day that the product came on sale!

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Compatibility, Standards and Regulations

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


New technology innovations may have to fit products and systems that are already in existence. This usually requires compatibility, and meeting existing standards and satisfying government regulations.

Examples:

Compatibility: Apple requires any application written for its products are compatible with their operating systems. Mobile networks require any device that communicates with them to be compatible with the network protocols. Gasoline blends must be compatible with the specifications laid out by the automobile manufacturers.

Standards:All electronic devices must meet certain standards with regard to radio-frequency emissions, insulation, drop resistance etc. All building components must meet standards defined by the building industry and its codes.

Regulations: All medical products sold in the US for therapeutic use must be approved by the FDA. All new cars sold in the US must meet emission standards stated by the Federal Government.

•Regulations can vary from country to country, state to state and even county to county

• FDA can be a major hurdle in getting new foods, pharmaceuticals and medical devices into the market. Sometimes overseas market entry are a means to overcome stringent US regulations

•FTC Regulations on electronic products can be a major hurdle. Issues like bandwidth availability, RF emissions, interference, safety etc. must be met

•Regulations often do not keep up with technology advancements and being a pioneer to get new technologies past regulators can take a long time and a lot of funding

Some Regulatory Issues

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Gartner’s Hype Cycle

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

PropertyAn exciting “breakthrough” technology often creates a lot of interest, fueled by the media. New companies are formed and attract investment. Rarely do the promises come true. Gartner describes this “bubble” as a “Hype Cycle”.


Stage 1: Technology trigger. A breakthrough, public demonstration, product launch or other event that generates significant press and industry interest.

Stage 2: Peak of inflated expectations. A phase of over-enthusiasm and unrealistic projections during which a flurry of publicized activity by technology leaders results in some successes but more failures as the technology is pushed to its limits. The only enterprises making money at this stage are conference organizers and magazine publishers.

Stage 3: Trough of disillusionment. The technology becomes unfashionable and the press abandons the topic, because it did not live up to its overinflated expectations.

Gartner’s Hype Cycle – Definitions - 1


Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

Stage 4: Slope of enlightenment. Focused experimentation and solid hard work by an increasingly diverse range of organizations lead to a true understanding of the technology's applicability, risks and benefits. Commercial off-the-shelf methodologies and tools become available to ease the development process.

Stage 5: Plateau of productivity. The real-world benefits of the technology are demonstrated and accepted. Tools and methodologies are increasingly stable as they enter their second and third generation. The final height of the plateau varies according to whether the technology is broadly applicable or only benefits a niche market.


Gartner’s Hype Cycle – Definitions - 2

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

Gartner Hype Cycle: Example 2009


Where are they now?Chapter

8Definition

Constraints

Timing

Markets

Intellectual

Property


Rogers’ Bell-Curve – Technology Adoption Patterns

Roger’s curve describing market entry strategy applies particularly strongly to new technology products and services where the innovators and early adopters can be avid early customers.

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

The Long-Tail Phenomenon

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

Anderson introduced the concept of “the long-tail” to illustrate that a large number of niche products can add-up to a large market. Search engine capability, and web-marketing can enable a small company to find customers for a new technology product by focusing on the long-tail initially.

50% demarcation line



Intellectual Property Is Property

• IP is usually a key asset of a technology based venture.

• IP has value• It can be sold or licensed• It can be stolen• It can and should be protected• It is subject to much of property and contract law as well as to specialized IP law

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Patent Classifications

• Design patents are issued to individuals who have created a novel ornamental design. These are often of limited value as they are easy to get around.

• Plant patents are issued to individuals who have invented or discovered a novel type of plant and who have been able to reproduce that plant asexually.

• Utility patents are issued to individuals who have invented novel processes, machines, and compositions of concern matter, or improvements. These are by far the most common forms of patents.

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Patentable inventions must have:

• Utility: Any useful machine, process, or improvement may be patented provided is not disclosed in prior art

• Novelty: requires that the invention predates public knowledge and the use or sale within the U.S. or any foreign country

• Non-obvious: if the invention is judged to have been obvious to any person in the field relating to the invention, it may be barred from receiving patent approval

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


The Patent Process

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

Prepare

Document

Disclosuree

Patent

Search

Patent

Application

PatentExamination

Patent

Grant

Provisional Filing

to establish priority date at

patent office

Preliminary search

of patent records

declarations, and

required fees

Inventor files

formal written

application with

drawings claims, declarations, and

required fees

Patent Office

makes thorough

search and patent

examination, and

specifies claims

allowed

Patent Office

documents

new patent

grant

Recorded as “patent Pending

Final patent

recorded and

sent to inventorletters patent


Article I, Section 8:

Congress shall have the power...to promote the progress of Science and useful Arts by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and discoveries.

(This “right” is granted to an inventor in exchange for fully disclosing the invention and how it may be executed.)

The United States Constitution

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Statutory Requirements for a US Patent

• Allowable scope?– Cannot be a Law of nature

• Novelty– Is there any Prior Art?

• Utility–Good for something?–Must be “operable”

• Non-obviousness–To one of ordinary skill in the art

• Full disclosure of knowledge• Reduction to practice not necessary

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


A Patent Only Enables You to Do One Thing

• You can prevent someone else -- anyone else -- from practicing what you have claimed in a jurisdiction (country) where you have a valid patent - This is a legal monopoly - But antitrust law and legal precedents can prevent you from exercising if you have “market power” - Or, you can license others to practice your invention

• You may nevertheless not be able to practice your own invention without licenses to patents owned by other parties which may cover part of your requirements to practice

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Patents - Key Points

• A patent is an exclusionary monopoly• The monopoly is defined by the claims• Patent value is arrived at from a business case• A patent is virtually worthless if no one else wants

to practice the invention• Lawyers are not optional• Filing a full patent and maintaining especially

overseas is very expensive• Therefore it is important to evaluate whether it is

worth patenting an invention

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Criteria for Filing a Patent Application

• Size of market affected by invention• Novelty of the technical field covered• How central is the invention to expected products• Scope of broadest claims• Portfolio needs in the area of the invention• How easily can use of the invention be detected• How easy is it to avoid using the invention• What percentage of companies in the field may use the

invention• Any value to current or anticipated alliance activity• Any value to current or anticipated technology transfer

activity• Likely enhancement of your (or your organization’s)

prestige and ability to raise capital

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Typical Patent Legal Costs

Service Description

Attorney Agent

Initial Consultation Free Free

Hourly Rate $500 $350

Preparation and Submission

$15,000 $7,500

Expected Total Costs $15 – $25K $7,500 – 10,000

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Kinds of Claims

• Structure• Process• Method• Use• Combination• Form of matter• Software• Form of life (gene, plant...)• A single patent can have many claims, of

different types• Broken into primary and dependent claims• May be different in different countries

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Software Patents

• Currently are being (very!) freely granted• Critical difference from copyright:

- Copyright protects form of presentation- Patent protects essential idea

• Software patent must meet same statutory requirements as any other patent- Useful- Novel- Non-obvious

• Value still being established• It’s a jungle and the rules are not clearly

established• Essential to seek legal advice

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Patents on Business Models

• Can make incredibly powerful patents• Need very little "technical" substance• Emerging and important trend

- Particularly financial instruments- E-commerce, Internet, “web 2.0” methods etc.

• Opportunity for clever "inventors" to stake out huge claim- Need to meet statutory requirements- "Obviousness" seems less a problem

• Various examples- Freeny: Delivery of goods mediated by network

• Often, Patent Examiner lets a questionable one through- Only courts can remedy- See USPTO White Paper: www.uspto.gov/web/menu/busmethp

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


• Just because it's there, it may not be free• Internet creators advertise they are free spirits

- Intellectual property is free as the air• Downloading software or content creates big

exposures, such as- Use of the material infringes a patent- The material is copyright- The license terms are restrictive- The protected material will be inadvertently incorporated in a product- Posting material may limit owner's rights- Posting material may reveal owner's missteps

IP,the Internet and e-Commerce

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Example: The “Single Click” Claim

A method of placing an order for an item comprising: • under control of a client system, • displaying information identifying the item; and• in response to only a single action being performed, sending a

request to order the item along with an identifier of a purchaser of the item to a server system;

• under control of a single-action ordering component of the server system,

• receiving the request;• retrieving additional information previously stored for the

purchaser identified by the identifier in the received request; and

• generating an order to purchase the requested item for the purchaser identified by the identifier in the received request using the retrieved additional information; and

• fulfilling the generated order to complete purchase of the item • whereby the item is ordered without using a shopping cart

ordering model.

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Examples of Legal Actions

• Amazon.com sued Barnesandnoble.com for infringing its "single click" patent.

• Priceline.com (Jay Walker’s flagship company) sued Expedia.com (a.k.a. Microsoft) for infringing its "on-line auction" patent.

• Tom Woolston (a.k.a. MercExchange) filed to have Priceline's patent declared invalid, claiming he invented it first.

• Sightsound.com sued MP3.com and CDNow.com for infringing its patent, claiming it holds the patent on the entire concept of downloading music.

• Audiohighway.com says their patent covers Internet music.

• Ebay has been sued by Network Engineering Software for infringing their patent covering an “automated on-line information service and directory, particularly for the Web”

• Ebay has sued Bidders Edge for violating their copyrights, among other assertions, for posting listings taken from the ebay site.

• NTP, a so-called Patent Troll group sued and won a major case against RIM , the manufacturers of the Blackberry portable device.

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Courts Have Ruled that...

• Software patents are valid

• Business method patents (“ways of doing”) are valid

• Algorithm Patents (“ways of calculating”) are valid

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


• The exclusive privilege of an author or proprietor to make multiple copies of literary, artistic or intellectual productions and license others to do so–The right to copy

• Protects the form, not the underlying idea• The work must be original -- but may be a derivative

work• It is created -- and therefore subject to copyright --

when it is fixed so it may be perceived, reproduced or otherwise communicated

• Notice optional• Registration optional -- necessary for statutory

damages–Otherwise, only actual damages

Copyright Definitions

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


• Copyrights give you full rights to –Reproduce–Prepare derivative works–Distribute copies–Perform–Display–Each can be assigned separately

• Fair use allows some exceptions

• First sale allows subsequent transfer

• Proof of infringement is not always easy–Infringers may insert bogus elements, lines of code, addresses, etc.

Copyright Issues - 1

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


• First strategy for protecting computer programs if Patent Office refused patent protection

• Copyright easy and inexpensive– Shrink wrap or online license protects copyright

• Limited protection from infringement– Modifications– Proof needed

• Only in recent years has USPTO made software patents easier to get

– Still difficult to enforce– S/W culture negative– Discovery a challenge

• Many (most) programs are not patentable

Copyright Issues - 2

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Elements of US Copyright Law

• "Original" works of authorship– Not necessarily "novel"

• "fixed in a tangible medium"– Such as film, tape, disk...– An unrecorded game or performance is not

protected• "...of expression"

– Limits protection to "expression", not "idea"– Separation of "expression" from "idea" no

easy matter• How much change is necessary to create a "new"

work? Usually not much

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Trademark Definitions

• Trademarks are tools employed to distinguish a company’s product from its competitors

• Can take the form of: a name, symbol, motto, jingle, etc.

• Also of the Trademark family: Service mark—applies to services rather than

products Collective mark—used by orgs. to denote

membership Certification mark—used when someone, other

than the owner, is using the trademark

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Trademark Value

• The value of a trademark is in its potential to create a positive impression on consumers which will spur them to buy your product

• Trademarks will also allow you to differentiate your product or service clearly from competitors

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


Trademark Process

Process to Register

1. Consult an attorney; ensure uniqueness of proposal

2. Decide on Use vs. Intent-to-Use Application

3. Amendment to allege use vs. statement of use

4. Registration confirmation (usually 1 year after submission)

5. Must remain in use to maintain rights of registration

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


...A secret formula or process, unpatented, known to a limited number of individuals who use it, to competitive advantage, in the manufacture of an article of trade having commercial value..."

Relevant factors–How widely known–How protected–How valuable–How hard to develop independently–Owner has demonstrable evidence that they intend to protect the secrets..e,g restricted entrance, shredded documents, need-to-know policies etc.

Can only be disclosed under confidential agreement Do not exist without a contract Can be licensed as IP Lasts forever -- unless no longer secret May be preferable to patent in some cases – especially for process

know-how which is difficult to detect in final product.

Trade Secrets - Definition and Issues

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property


• Cost of a patent: Think “$thousands”, usually less than fifty

• Cost of suing to protect your patent: Think “$million”, at least one, perhaps ten- A decision will take years- If you’re lucky, you might get an injunction- Expect to settle -- everyone tries to

• Time to get a patent: About two years from file date- It’s a secret while in the USPTO for first 18 months- But you have no other protection until it issues

• Life of a patent: Twenty years from date of filing• Life of a copyright: Life of creator plus 75 years• Life of a trade secret: As long as it stays secret

Miscellaneous Points on IP

Chapter 8

Definition

Constraints

Timing

Markets

Intellectual

Property

Copyright 2013 Jack M. Kaplan & Anthony C. Warren Special Topic 2 Patterns of Entrepreneurship...

Documents

Transcript of Copyright 2013 Jack M. Kaplan & Anthony C. Warren Special Topic 2 Patterns of Entrepreneurship...