Friday, August 26, 2011

Googlerola emphasizes importance of strong patent portfolios

Google's $12.5 billion bid for Motorola Mobility, at a 63% premium, is generally thought to be about using Motorola's large patent portfolio to help protect Android and Google's other mobile communications interests.  The deal has renewed debate on the weaknesses of our patent system and generated some interesting discussion about Google's plans.  It also emphasizes the reality that today, meaningful patent portfolios are still critical to business.

One would think that Google would have developed a much larger portfolio of its own.  The company has generally had a long term view, is indeed very innovative and has plenty of talented engineers, product managers and lawyers to write patent applications.  The reality, however, is that creating in-house patent development programs is challenging.  There are many reasons for this but a primary issue is simple - since time spent on patents doesn't necessarily turn into extra revenue until years later, patent work can be hard for young companies to prioritize.

So how does a company start a serious patent program that increases its valuation?  There are a few simple steps most any company can take.

All company stakeholders need to recognize the value of intellectual property and regularly review metrics.  Examples of such metrics include number of applications filed per quarter and competitor comparisons. Patents are probably the most objective measure of technological innovation, and yet often take a back seat at many board meetings to a deep dive on short term financials and sales data.  Management, board members and shareholders of technology companies, having seen the valuation premium paid for Motorola's portfolio, should all expect measurable productivity from their teams in this regard.

In addition, have one point person ultimately responsible for developing a patent strategy.  Whether this person is the company's Chief Technology Officer, VP Marketing, General Counsel or has some other role such as a VP of Intellectual Property, having one owner is much more likely to create accountability, clear goals and success.  Committees can be helpful, but identifying a leader will help tremendously.

Finally, create company-wide incentives for, and recognition of, inventors. Simple incentives such as cash bonuses are a sure way to increase productivity in patent programs.   Give, as an example, $1,500 per named inventor for granted patents and watch the number of patent applications increase rapidly.  I also like awarding plaques and certificates to inventors as recognition for their innovation.

These building blocks can help you establish your own successful patent program.  And developing a deep patent portfolio can help a technology company create significant enterprise value while protecting core assets.       

Thursday, August 18, 2011

America’s Trickiest Laws, Vol. I – The Foreign Corrupt Practices Act.

Our nation may be one of laws, but our laws don’t necessarily make compliance easy.  In this series, I will try to highlight “tricky” laws, or those that corporations and professionals often find confusing, inconsistently enforced or impractical given various business conditions.  In my view, these laws deserve extra attention from corporate America because they often create great uncertainty.

The Foreign Corrupt Practices Act (FCPA) is an increasingly prominent example, as the Department of Justice has been both aggressive and successful in prosecuting FCPA cases of late, including another win earlier this month in the ongoing Haiti Teleco scheme.  

On the surface, the FCPA seems pretty basic.  It has an anti-bribery provision that prohibits corruptly paying or offering to pay anything of value to a foreign official to secure an improper advantage or influence him in his official capacity.

Where the FCPA gets tricky is in five different practical areas.

First, local custom is less important than compliance with law.  The rallying cry that, “We must pay bribes in country X because others do” is not a defense.  In reality, it’s an FCPA violation waiting to happen.

Second, and occasionally at odds with the first, the FCPA has exceptions that some commentators believe are not really exceptions at all.  Grease payments made to expedite or secure routine government action are permitted.  Wait, what?  Some bribes are OK if we call them “facilitating payments”?

Third, FCPA involves “successor liability,” meaning that a company is liable for the FCPA violations of the other companies that it has acquired.  Mergers and acquisitions activity is complicated enough.  With the FCPA, compliant, ethical companies have an additional risk to address – what is the FCPA profile of the target company?

Fourth, the FCPA includes a record keeping provision, requiring careful accounting of all transactions.  This includes records relating to facilitating payments.  So, if the company’s judgment about whether those payments were compliant proves incorrect, the documentation of the violation will be in black and white.

Fifth, most companies probably do not have adequate full time staff proactively managing FCPA compliance.   While significant SEC filing requirements (e.g., 10-Ks, proxies) lead corporate legal and finance departments to staff up to regularly prepare these documents, there is no tidy equivalent in the FCPA world.

When doing business internationally, keep an eye on the FCPA.  It’s one of our “tricky” laws.

Thursday, August 11, 2011

Facebook didn’t steal your stuff. And don’t click “agree” next time.

Worries over Facebook’s privacy policies continue.  Upon closer examination, the concerns are more broad than Facebook’s specific policies.

The latest episode involves a fairly straightforward practice.  Using the Facebook mobile apps will sync your friends’ contact information between Facebook and your phone.  Only you can see it and you clicked “I agree” in setting up the connection between Facebook and your phone.  But, this alarmed some users when it was “reported.” 

General web usage habits are implicated by this concern.  How many times do we speed through a web-site, clicking “I Agree” multiple times without reading the fine print?  Too often.  Even if Facebook wanted to eat our first born, many would sign right up for it and click “I Agree.  You can have the second one too.”

Some of Mark Zuckerberg’s past cavalier statements about privacy certainly haven’t helped, such as when he reportedly expressed surprise early on that people would so willingly share personal information.  “People just submitted it.  I don’t know why.  They ‘trust me.’  Dumb [expletive].”

But, more than anything, I think folks are reacting to broad concerns over the increasingly public lives we live through our Internet identities.  We subconsciously recognize that we are not reading the license agreements and don’t fully understand the privacy policies.  We hear about people sharing too much in their news feeds.  I don’t believe any of those issues are ultimately Facebook’s fault.

Perhaps it’s time to consider this kind of privacy policy first and foremost…

Friday, August 5, 2011

Thank goodness for volunteerism.

I spent much of last week as a volunteer scorekeeper at the Bank of the West Classic, a professional tennis tournament held every summer at Stanford University.  I was one of about two hundred unpaid tennis lovers who acted as ushers, sold programs, directed fans around the grounds and, as in my case, logged extensive data on each ball struck by the players.  Add to that hundreds of ball kids who were also volunteering.  It was great fun and I had the privilege of meeting several of the players, including Maria Kirilenko (career high singles ranking of 18).

Meeting Maria Kirilenko at Stanford.
Among the many parts of this experience that fascinated me was how many of the volunteers had a deep knowledge of players who are hardly household names.  As I watched Sharon Fichman, I understood why.  Like the volunteers, she toils in anonymity, rewarded mainly by her own love of the game.  She practiced hard, played hard and gave it everything – but failed to qualify for the main draw in singles.

Sharon Fichman brought her spirited game and 289 Twitter followers (Serena Williams has over 2.1 million) to Stanford.
More important than the tennis was the reminder that volunteerism is the backbone of many American systems we sometimes take for granted. estimates that there are over 60 million volunteers per year in America.  Underfunded schools rely on parent volunteers.  Volunteers staff soup kitchens, homeless shelters and YMCA tutoring programs.  Our entire system of democracy counts on volunteers at the voting stations!

The whole experience made me thankful that there are so many opportunities to get involved and so many passionate people who do just that.