Puerto Rico Innovation and Technology

Don't File for That Patent Yet (Entrepreneur.com)

2010-02-14T16:05:00.000-08:00

Instead of a utility patent, a provisional patent or a trademark could be a better first step.

By Tamara Monosoff | February 08, 2010

Two great tools for inventors that won't break your bank account: provisional patent applications and trademarks.
Successfully licensing an invention or taking a product to market requires research and the ability to talk to people about your invention. It is impossible for a manufacturer or retail buyer to commit to a product without seeing it.
For good reason, many inventors are reluctant to share their invention with people they don't know. Further, once an invention is shared publicly, international patent rights can be lost, and the one-year timeline within which a U.S. patent application must be filed generally has begun to tick. For this reason, many inventors rush out and file a full-blown, utility patent application. That addresses the uncertainties and also enables inventors to alert people that their invention is "patent pending."
However, this approach has several downsides. First, utility patents and even patent applications can cost many thousands of dollars. In the end, an inventor may find that the expense outweighs the benefit. Second, in the early stages, most invention designs are still evolving. Filing a patent too early could mean that it doesn't actually reflect the most evolved designs and drawings. Third--and most important, in my opinion--this investment has been made before an inventor has conducted real market research to validate marketability of the product.
Two solutions that many inventors--myself included--use are to file provisional patent applications and trademark applications for the invention and product name or logo.
These applications provide the best of both worlds. At a fraction of the cost of a utility patent application, a provisional patent application is not actually a patent. It never will convert to a patent or become public, unless further action is taken. A provisional patent application is a like a place holder. In essence, you are laying claim to the filing date of the provisional patent application if and when you elect to file for a full utility patent up to one year from the time you file your provisional patent application. So if you choose to file a provisional patent application on March 1, 2010, and you then choose to file a utility patent application eleven months later on February 1, 2011, the priority date for your utility patent application would be considered to be March 1, 2010, for all material substantively disclosed and enabled in your provisional application.
What does this mean?
From the date you file your provisional patent application, you have the legal right to write "patent pending" on your prototype and show it to whomever you wish. In the process, you will not lose your international patent rights and can still elect to file your utility patent application. But it gives you one year to develop your product and gain market information before you actually must make the final decision on whether to file utility and/or international patent applications.
So, how do you do this?
While technically you can write and file this application yourself, I recommend that you do it with some guidance and, at the least, a review by a registered patent attorney or agent.
There are three things to be careful about when writing a provisional patent application, according to intellectual property attorney Stuart West, founding partner of West & Associates:

Ensure that the application meets the written description and enablement requirements of 35 U.S.C. 112, by adequately describing not only the components of your invention and their connections, but also the operation of the invention.
Avoid using limiting or restrictive language in your written description, such as "must," "necessary," "essential" or other similar phrases.
Be accurate but broad with your descriptions. For example, if a nail is holding together two pieces of wood, an accurate but broader description of the nail would be a "fastener," or you may simply state that one piece of wood is coupled with the second piece of wood.

The second best--and still underutilized--legal tool for inventors, in my opinion, is the federal and various state trademark registration systems. Here's why:
Every product has a name, or it should. Once you begin using the name with prospective licensees and customers, the invention actually becomes synonymous with the name. I have seen this happen over and over. And there are only so many names an item could take that meet the criteria of being both catchy and able to be registered.
So give as much thought to names for your product as possible, and include questions about the name in your market research. Once you settle on your preferred name, trademark the name. Then when you speak with prospective licensees, use the name. (Note: I did not say you should tell them you are hooked on the name). But if they become accustomed to your product's name, they will see your trademark as another valuable asset you are bringing to the table. Plus it may further limit potential encroachment from likely competitors or knockoff products.

West says there are two things to understand about trademark use:

The underpinnings of trademark law are founded on the principle of first in use, first in right. Filing of a trademark application typically constitutes use, but so does simply using the trademark. In fact, in some states you must use the trademark publicly before filing a trademark application, and in the federal trademark system, a trademark must be used in interstate commerce before it can register. Therefore, use your trademark.
Once you've settled on and adopted your trademark you should identify it as a trademark by using either TM or ® as appropriate. Check your local state laws regarding the use of TM.

In most states, trademark rights can be asserted regionally for free, simply by applying the ™ to a product (done by typing the letters "t" and "m" between two parentheses. The writing program automatically shrinks and raises it to have the ™ appearance.)
Second, a trademark can be registered with the U.S. Patent and Trademark office and overseas. This is a faster process, taking only 10 to 14 months. Once it is registered as a U.S. federally registered trademark, use the ® (also typed by inserting the "r" between parentheses).
I have always said that intellectual property, patents, trademarks and copyrights are just tools in your inventing tool box. Using the right tool can be extremely valuable. The nicest thing about a provisional patent application is that it can buy you time to figure out which other tools may be necessary. Likewise, trademarks are a valuable tool inventors overlook.
Tamara Monosoff is the founder and CEO of mominvented.com, where entrepreneurs get information and inspiration to turn their ideas into successful businesses. Tamara is the author of The Mom Inventors Handbook, Secrets of Millionaire Moms and co-author of The One Page Business Plan for Women in Business.

Corporate Backing for Research? Get Over It (NYT)

2010-01-26T18:39:00.001-08:00

By JOHN TIERNEY

I find myself in the unfamiliar position of defending Al Gore and his fellow Nobel laureate, Rajendra K. Pachauri.
When they won the prize in 2007, they were hailed for their selfless efforts to protect the planet from the ravages of greedy fossil fuel industries. Since then, though, their selflessness has been questioned. Journalists started by looking at the money going to companies and nonprofit groups associated with Mr. Gore, and now they have turned their attention to Dr. Pauchauri, the chairman of the United Nations Intergovernmental Panel on Climate Change.
The I.P.C.C., which is supposed to be the gold standard of peer-reviewed climate science, in 2007 warned of a “very high” likelihood that global warming would cause the Himalayan glaciers to disappear by 2035. When the Indian government subsequently published a paper concluding there was no solid evidence of Himalayan glaciers shrinking because of global warming, Dr. Pachauri initially dismissed it as “voodoo science” beneath the I.P.C.C.’s standards.
But then it came out that the I.P.C.C.’s projection was based not on the latest peer-reviewed evidence, but on speculative comments made a decade ago in a magazine interview by Syed Hasnain, a glaciologist who now works in an Indian research group led by Dr. Pachauri.
Last week, the I.P.C.C apologized for the mistake, which was embarrassing enough for Dr. Pachauri. But he also had to contend with accusations of conflict of interest. The Telegraph of London reported that he had a “worldwide portfolio of business interests,” which included relationships with carbon-trading companies and his research group, the Energy and Resources Institute.
Dr. Pachauri responded with a defense of his ethics, saying that he had not profited personally and that he had directed all revenues to his nonprofit institute. He denounced his critics’ tactics: “You can’t attack the science, so attack the chair of the I.P.C.C.”
I can’t defend that entire sentiment, because you obviously can attack some of the science in the I.P.C.C. report, not to mention other dire warnings in Dr. Pachauri’s speeches.
But I do agree with his basic insight: Conflict-of-interest accusations have become the simplest strategy for avoiding a substantive debate. The growing obsession with following the money too often leads to nothing but cheap ad hominem attacks.
Sure, money matters to everyone; the more fears that Dr. Pachauri and Mr. Gore stoke about climate change, the more money is liable to flow to them and the companies and institutions they are affiliated with. Given all the accusations they have made about the financial motives of climate change “deniers,” there is a certain justice in having their own finances investigated.
But I don’t doubt that Mr. Gore and Dr. Pachauri would be preaching against fossil fuels even if there were no money in it for them, just as I don’t doubt that skeptics would be opposing them for no pay. Why are journalists and ethics boards so quick to assume that money, particularly corporate money, is the first factor to look at when evaluating someone’s work?
One reason is laziness. It is simpler to note a corporate connection than to analyze all the other factors that can bias researchers’ work: their background and ideology, their yearnings for publicity and prestige and power, the politics of their profession, the agendas of the public agencies and foundations and grant committees that finance so much scientific work.
Another reason is a snobbery akin to the old British aristocracy’s disdain for people “in trade.” Many scientists, journal editors and journalists see themselves as a sort of priestly class untainted by commerce, even when they work at institutions that regularly collect money from corporations in the form of research grants and advertising.
We trust our judgments to be uncorrupted by lucre — and we would be appalled if, say, a national commission to study the publishing industry were composed only of people who had never made any money in the business. (How dare those amateurs tell us how to run our profession!) But we insist that others avoid even “the appearance of impropriety.”
This snobbery was codified by The Journal of the American Medical Association in 2005, when it essentially required chaperones for any researchers receiving corporate money. Citing “concerns about misleading reporting of industry-sponsored research,” the journal refused to publish such work unless there was at least one author with no ties to the industry who would formally vouch for the data.
That policy was called “manifestly unfair” by BMJ (formerly The British Medical Journal), which criticized JAMA for creating a “hierarchy of purity among authors.” The hierarchy looked especially dubious after a team of academic researchers (not financed by industry) analyzed dozens of large-scale clinical trials in previous decades and reported that industry-sponsored ones met significantly higher standards than the nonindustry ones.
The new fetish for disclosing “conflicts” has led some of the best medical researchers to shun drug company money altogether — not because they think it leads to bad research, but because they are tired of that fact being highlighted every time they are identified in a news story, as if that were the most important thing to know about their work.
There are, of course, notorious cases of corporate money buying predetermined conclusions, like the reports once put out by the Tobacco Institute to rebut concerns about smoking and cancer. But there has also been dubious work promoted by government agencies and foundations eager to generate publicity and advance their own agendas.
It’s naïve to caricature scientific disputes as battles between “industry” and the “public interest,” as if bureaucrats and activists didn’t have their own selfish interests (and wealthy, powerful allies like trial lawyers). Too often, corporate conflict-of-interest accusations have been used as smear tactics to silence scientists who ended up being correct. (Go to nytimes.com/tierneylab for examples.)
Instead of stigmatizing certain kinds of research grants, perhaps we should consider the bigger picture. If scientists listed all their public and private donors on their Web pages, journalists could simply link to that page and let readers decide which ones are potentially corrupting. Instead of following rigid rules to report “conflicts,” journalists could use their judgment and report only the ones that seem relevant.
Sometimes you can’t understand a debate or a controversy without knowing who is paying whom. But in general, I’m with Dr. Pachauri: follow the science, not the money.

How to encourage big ideas (MIT News)

2010-01-06T00:11:00.001-08:00

Photo - Graphic: Christine Daniloff

A new study suggests certain types of funding — which provide more freedom and focus less on near-term results — lead to more innovative and influential research.

Peter Dizikes, MIT News Office

December 9, 2009

Scientists are much more likely to produce innovative research when using long-term grants that allow them exceptional freedom in the lab, according to a new study co-written by MIT economists.

The work shows that biologists whose funding encourages them to take risks and tolerates initial research failures wind up producing about twice as many highly influential papers as some peers whose funding is dependent upon meeting closely defined, short-term research targets.

“If you want people to branch out in new directions, then it’s important to provide for their long-term horizons, to give them time to experiment and potentially fail,” says Pierre Azoulay, an associate professor at the MIT Sloan School of Management, and an author of the study. “The researcher has to believe that short-term failure will not be punished.”

The results are contained in a working paper released this fall, “Incentives and Creativity: Evidence from the Academic Life Sciences,” by Azoulay, Gustavo Manso, an assistant professor at Sloan, and Joshua Graff Zivin, an associate professor of economics at the University of California, San Diego.

The researchers believe their evidence shows it is possible to manage lab work in a way that increases the chances that scientists will produce breakthrough findings, not just incremental advances within an established paradigm. “You can generate innovation, but the details matter,” says Azoulay. “What you want to provide incentives for is future performance, not performance today.”

The study appears as science funding has recently risen in the United States, in part through the stimulus bill Congress passed in 2009, which provided about $20 billion for research. Not counting stimulus money, President Barack Obama still included a slight increase in federal support for science as part of his proposed 2010 budget, which asks for about $148 billion for research and development. In April, Obama suggested that scientific funding should equal 3 percent of America’s economic production. Azoulay says he and his colleagues would like to instigate a discussion about not only how much money should be spent on research, but how those funds should be managed.

Measuring creativity

Azoulay, Manso, and Graff Zivin arrived at their conclusions after comparing researchers using two distinct types of funding: support from the investigator program of the Howard Hughes Medical Institute (HHMI), the large non-profit biomedical research organization in Maryland, and the R01 grants of the National Institutes of Health (NIH), the federal government’s life-science center in Maryland. The HHMI support lasts five years and is often renewed; the program “urges its researchers to take risks … even if it means uncertainty or the chance of failure.” The HHMI also provides a two-year buffer of support after funding is terminated. The NIH grants last three to five years, have more specific aims, and cease immediately if not renewed.

The researchers identified 73 life scientists given HHMI support in three years — 1993, 1994, and 1995 — and tracked their work through 2006. Because these scientists were quite well-regarded before getting HHMI funding, the study compared them to groups of similarly accomplished scientists receiving NIH grants: one group of 393 scientists who had received early-career prizes, and another group of 92 scientists receiving the NIH’s MERIT funding, awarded to highly promising projects.

Among other things, Azoulay, Manso, and Graff Zivin analyzed how often these scientists published articles that were among the top 5 percent or top 1 percent of the most cited papers in their fields. They also studied “creativity” in lab research by seeing how often the scientists began using new keywords to describe the subjects of their articles.

Their findings show that compared to the early-career prize winners with NIH grants, the HHMI-funded scientists produced twice as many papers in the top 5 percent in terms of citations, and three times as many in the top 1 percent. Compared to the NIH-funded scientists with MERIT grants, the HHMI group produced about the same quantity of papers in the top 5 percent by citation, but 50 percent more papers in the top 1 percent.

The study also found that the HHMI investigators had about 10 percent more variety in the keywords they introduced into their own work than the early-career prizewinners from the NIH, and were cited in a greater range of journals. Additionally, the HHMI-backed scientists mentored more early-career prize-winning scientists themselves (1.13 per person) compared to the NIH-funded group (0.24 per person).

Avice Meehan, vice president for comunications and public affairs at HHMI, says the study reflects the fact that over the last two decades, “HHMI has identified highly creative scientists and given them the freedom to pursue critical medical research, even if it takes them years, and means a change of research direction.”

The view from the NIH

The researchers acknowledge that measures such as keywords are imperfect indicators of creativity, but think such tools are a reasonable way of identifying originality in the lab. “There are as many definitions of creativity as there are people studying creativity,” acknowledges Azoulay. “But ultimately creativity is measured in especially good outcomes.”

Azoulay, Manso, and Graff Zivin also emphasize that their work is not an institutional critique of the NIH. “The conclusion of our paper is not that the NIH should transform itself into a version of the HHMI,” Azoulay adds. Their larger point simply concerns the effects of different types of grants. If major discoveries are not unanticipated events, but influenced by the underlying funding, policy-makers could consider that point when allocating research dollars.

Moreover, the civic value of science often comes not only from an initial breakthrough, but later incremental refinements of it. In those cases, shorter-term, narrower research provides significant social benefits. “It’s an outstanding question what the actual mix of exploration and exploitation we need is,” Azoulay notes.

Don Ralbovsky, an NIH spokesperson, said a staff member in the NIH’s Office of Extramural Research had looked at the paper and described it as “interesting,” but would refrain from further comment until the paper appears in final published form.

In recent years, the NIH has developed multiple types of funding beyond the traditional R01 grants. The Pioneer Award, founded in 2004, is a grant for “highly innovative new research approaches,” to be given to seven scientists in 2010. The New Innovator Award is for 33 early-career investigators in 2010, emphasizing “innovation and potential impact.” And in 2008, the NIH established Transformative Research projects Awards, making $25 million available for “bold and creative investigator–initiated research.” All of these grants last five years, instead of three for the standard R01 grants.

Azoulay agrees that the existence of a variety of types of grants can help science as a whole. “A division of labor might benefit of the entire research ecosystem,” he says. The HHMI’s Meehan concurs: “It’s important for the nation to have a comprehensive research portfolio that encompasses many approaches and mechanisms.” (This research was funded in part by the Kauffman Foundation and the Science of Science Policy Program of the National Science Foundation.)

One long-term goal of Azoulay’s work is “to bring randomized trials to science policy.” By comparing two groups over time, this study attempts to replicate the lab-trial method, albeit with historical data, and shed more empirical light on a subject often discussed anecdotally.

“This is the first word on the topic, not the last,” concludes Azoulay.

James Surowiecki on business, the markets, and the economy (New Yorker)

2009-12-13T13:23:00.000-08:00

Here's an interesting interview that discusses a few of the current problems around innovation: education and incentives (min 16:00).

This is a solution that could/should be further closely examined in both the US and in PR if both countries are serious about continuing (and introducing it in the case of PR) development of innovation in their respective economies.

Summary:

James Surowiecki speaks with Dan Vasella, the chairman and C.E.O. of the pharmaceutical company Novartis AG, about the current state of the industry, the company’s shift away from the traditional model of profitability, and the growing influence of countries such as China, where Novartis plans to open a billion-dollar facility. They met last month at the Harvard Business School.

Recession's latest victim: U.S. innovation (CNN)

2009-12-13T07:33:00.001-08:00

Patent filings fell in 2009 for the first time in 13 years, worrying Silicon Valley that it is losing its place as the leader in global innovation.

By David Goldman, CNNMoney.com staff writer

Last Updated: December 11, 2009: 10:34 AM ET

NEW YORK (CNNMoney.com) -- U.S. innovation slowed this year for the first time in 13 years as the recession cut into budgets, and costs to protect inventions rose.
The number of patent filings in the United States fell 2.3% in 2009 to 485,500 from 496,886 last year, according to a preliminary estimate by the U.S. Patent and Trademark Office. That makes 2009 the first year since 1996 in which businesses and inventors filed fewer patents year over year.
"That's unfortunate because [patent filings] are a reflection of innovation," said David Kappos, director of the Patent Office. "Innovation creates so many jobs and so much opportunity for our country. It is absolutely key to our long-term success in the global economy."
At the same time, U.S. patents issued to inventors and businesses in foreign nations jumped 6.3% for the year. That's a worry for Silicon Valley, which has been a global leader for decades.
Most blame the recession for the drop in U.S. filings. As a result, many companies are opting to hold off on bringing new ideas to market until the economy improves substantially.
"Our patent filings were down 25% this year, and it was a direct macroeconomic issue," said Joe FitzGerald, deputy general counsel for tech security firm Symantec. "The overall company reduced spending, and patent filings are a very controllable expense. We might have filed four patents, but we filed three and made sure they were strategically significant."

Cost constraints

The application, processing and legal fees average about $15,000 per patent, but the cost to defend those patents in court after they've been granted typically runs between $3 million to $6 million, according to Bijal Vakil, partner in White & Case's intellectual property team in Palo Alto, Calif.
"Once you have a patent, you also have to go out and defend your own turf," said Henry Nothhaft, chief executive of Tessera, a San Jose, Calif.-based company that licenses its electronic miniaturization technologies to consumer electronics companies. "That has become more expensive lately due to the complexity of technology and globalization of economy, and it has caused some products not to come to market."
It could also become disruptive to American businesses down the road as filings from abroad pick up.
"We are in a dire economic situation, so its not unreasonable for businesses to have to cut their budgets," said Vakil. "But this trend could spell financial ruin for some U.S. companies. We've lost our competitive edge, and other companies from other countries stand to benefit."
If that trend continues, it could also spell trouble for the American worker, especially given the weak U.S. labor situation. The Obama administration has contended that the economic rebound will rely on innovative U.S. companies to hire workers to develop new technologies and ideas like clean energy and smart transit systems.
"Our top priority is to see jobs get created, and we need patents to get through the patent office to help create those jobs," Kappos said.

The system is broken

Pushing patents through the system is easier said than done: The decline in filings this year has brought to light a number of problems with the antiquated American patent system.
The Patent Office does not receive any taxpayer money. It is completely funded by fees levied on patent filing, processing and awarding. The Patent Office also hasn't changed its fee structure in decades, so it continues to charge a flat rate (roughly $1,000) for patent applications, regardless of the idea's complexity or the amount of work that needs to go into processing the patent.
As filings have dropped off, so too has the Patent Office's revenue, which sank by $200 million in 2009. As a result, the Patent Office has initiated a hiring freeze, stopped all overtime, cancelled a necessary IT upgrade and has lost between 40 and 50 patent examiners every month this year, said Kappos.
That means longer wait times for patent approvals and a growing backlog of filings. Currently, there are 740,000 patents pending, with an average wait time for approval of 40 months. The Patent Office isn't even able to look at applications for three years because of the backlog. That's an eternity for tech inventions, which tend to cycle through product generations in a year or so.
Ultimately, it creates a vicious cycle, since a large lag time only further discourages patent filers.
"People are looking at the system as it is now, and they're saying that waiting 40 months for a patent may not be worth it," said David DiMartino, spokesman for the Coalition for Patent Fairness, a group representing major Silicon Valley companies' desires for patent reform.
Another discouraging trend has been the rise in patent disputes. By June, there were already 15% more "post-grant" patent reviews filed by competitors to the filing company than there were in all of 2008.
Those cases are expensive to defend, and are sometimes used by large companies to delay smaller companies' technologies from coming to market or to prevent them from being released at all, according to Brian Pomper, executive director of the Innovation Alliance, a coalition of mostly small high tech companies in support of strong intellectual property rights.
As a result, the Patent Office, lawyers and companies alike are clamoring for patent reform. Bills in the House and Senate, which are on schedule to be passed in the spring, would give the Patent Office the authority to adjust its patent fee structure and give juries direction on setting awards for patent disputes, among other reforms.
Some advocates argue that the bills are far from perfect, particularly because they could make it easier for big companies to repeatedly bring smaller innovators to court. But for the most part, businesses and government officials are eager for Congress to act.
"The American innovative spirit is stronger than ever. If we're able to get patent reform through, we absolutely can take processing times way down and get innovations through to the marketplace," said Kappos, who estimates that legislation will help reduce the average wait time to as little as one year.

delanceyplace.com 11/20/09 - innovation

2009-12-04T11:58:00.000-08:00

And the question remains, what is Puerto Rico has done and is doing to ride this wave of innovation?

As to what PR has done? Evidently very little as more than 90% of what is consumed in PR is manufactured elsewhere. Additionally, the industry of intellectual property is virtually non-existent in PR.

As to what PR is doing? I haven't heard of any government policies to foster innovation or promote the manufacturing of local products.

As to what can be done? A good place to start could be Jane Jacob's concept of "import replacements" (more information here).

In today's excerpt - historically, 85% of the increase in per capita GDP (gross domestic product or wealth) in the U.S. economy has come from innovation - the
invention of new products and services or the invention of better ways to make existing products and services. It follows that any durable and sustainable
program to create jobs in an economy would focus foremost on innovation:

"Since the 1950s, economists have understood that innovation is critical to economic growth. Our lives are more comfortable and longer than those of our great-grandparents on many dimensions. To cite just three improvements: antibiotics cure once-fatal infections, long-distance communications cost far less, and the burden of household chores is greatly reduced. At the heart of these changes has been the progress of technology and business.

"Economists have documented the strong connection between technological progress and economic prosperity, both across nations and over time. This
insight grew out of studies done by the pioneering student of technological change, Morris Abramowitz. He realized that there are ultimately only two ways of increasing the output of the economy:

(1) increasing the number of inputs that go into the productive process (e.g., by having workers stay employed until the age of sixty-seven, instead of retiring at sixty-two), or

(2) developing new ways to get more output from the same inputs.

Abramowitz measured the growth in the output of the American economy between 1870 and 1950 - the amount of material goods and services produced - and then computed the increase in inputs (especially labor and financial capital) over the same time period.

To be sure, this was an imprecise exercise: he needed to make assumptions about the growth in the economic impact of these input measures. After undertaking this analysis, he discovered that growth of inputs between 1870 and 1950 could account only for about 15 percent of the actual growth in the output of the economy. The remaining 85 percent could not be explained through the growth of inputs. Instead, the increased economic activity stemmed from innovations in getting more stuff from the same inputs.

"Other economists in the late 1950s and 1960s undertook similar exercises. These studies differed in methodologies, economic sectors, and time periods, but the results were similar. Most notably, Robert Solow, who later won a Nobel Prize for this work, identified an almost identical 'residual' of about 85 percent. The results so striking because most economists for the previous 200 years had been
building models in which economic growth was treated as if it was primarily a matter of adding more inputs: if you just had more people and dollars, more
output would invariably result.

"Instead, these studies suggested, the crucial driver of growth was changes in the ways inputs were used. The magnitude of this unexplained growth, and the fact that it was exposed by researchers using widely divergent methodologies, persuaded most economists that innovation was a major force in the growth of output.

"In the decades since the 1950s, economists and policymakers have documented the relationship between innovation - whether new scientific discoveries or incremental changes in the way that factories and service businesses work - and
increases in economic prosperity. Not just identifying an unexplained 'residual,' studies have documented the positive effects of technological progress in areas such as information technology. Thus, an essential question for the economic future of a country is not only what it produces, but how it goes about producing it.

"This relationship between innovation and growth has been recognized by many governments. From the European Union - which has targeted increasing
research spending as a key goal in the next few years - to emerging economies such as China, leaders have embraced the notion that innovation is critical to
growth."

Josh Lerner, Boulevard of Broken Dreams, Princeton, Copyright 2009 by Princeton University Press, pp. 43-45.

Tinkering Makes Comeback Amid Crisis (WSJ)

2009-11-26T00:58:00.000-08:00

By JUSTIN LAHART

The American tradition of tinkering -- the spark for inventions from the telephone to the Apple computer -- is making a comeback, boosted by renewed interest in hands-on work amid the economic crisis and falling prices of high-tech tools and materials.
The modern milling machine, able to shape metal with hairbreadth precision, revolutionized industry. Blake Sessions has one in his dorm room, tucked under the shelf with the peanut butter on it.
The Massachusetts Institute of Technology junior has been using the mill to make prototypes for a bicycle-sprocket business he's planning. He bolts down a piece of aluminum plate, steps to his desk and, from his computer, sets the machine in motion.

Tinkering With Technology

View Slideshow

Alex Welsh for The Wall Street Journal

Jason Euren, an anthropology student at the New School University in Manhattan, worked with a soldering kit at the Brooklyn hackerspace Resistor recently.

"It's kind of a ridiculous thing to have," says Mr. Sessions, 20 years old. But "in today's marketplace you can't only offer a technical aptitude. You have to be able to provide something more."
Occupying a space somewhere between shop class and the computer lab, the new tinkerers are making everything from devices that Twitter how much beer is left in a keg to robots that assist doctors. The experimentation is even creating companies. With innovation a prime factor in driving economic growth, and corporate research and development spending tepid, the marriage of brains and brawn offers one hopeful glimmer.
Engineering schools across the country report students are showing an enthusiasm for hands-on work that hasn't been seen in years. Workshops for people to share tools and ideas -- called "hackerspaces" -- are popping up all over the country; there are 124 hackerspaces in the U.S., according to a member-run group that keeps track, up from a handful at the start of last year. SparkFun Electronics Inc., which sells electronic parts to tinkerers, expects sales of about $10 million this year, up from $6 million in 2008. "Make" magazine, with articles on building items such as solar hot tubs and autopilots for robots, has grown from 22,000 subscribers in 2005 to more than 100,000 now. Its annual "Maker Faire" in San Mateo, Calif., attracted 75,000 people this year.
"We've had this merging of DIY [do it yourself] with technology," says Bre Pettis, co-founder of NYC Resistor, one of the first hackerspaces, in Brooklyn. "I'm calling it Industrial Revolution 2."

Journal Community

discuss

“ Maybe it's time to bring my old white board out of retirement, and rethink some of those old projects. ”

— Richard Tomalewicz

The financial crisis played a role in taking a nascent trend and giving it increased urgency, says Michael Cima, an MIT engineering professor. "I've been here 23 years and I definitely see this trend back to hands-on," he says. "A lot of people are pretty disappointed with an image of a career in finance and they're looking for a career that's real."
Access to the tools to tinker is getting easier. "Computer numerical controlled," or CNC, tools -- which cut metal and other materials into whatever design is plugged into the computer attached to them -- now cost as little as a tenth of what they did a decade ago. Mr. Sessions, the MIT student, says he first looked at such mills on a lark, assuming the price would be well out of his reach. But his mill cost about $7,000 to buy and set up.
He sees the bike-sprocket business as a springboard for developing more complex products, such as a device to increase mobility for arthritis sufferers or an energy-efficient car transmission. He thinks his interest in tinkering will give him an advantage in a global marketplace.

"If it doesn't have that creative aspect to it, it may not be worth doing, because your job can be outsourced," he says.
Innovation in the U.S. is peppered with examples of tinkerers who started out small, but came up with big ideas, says Naomi Lamoreaux, an economic historian at the University of California, Los Angeles. "The really dynamic times in our history are times when you have lots of ordinary people who think they have a chance to make a difference."
Through much of the past century, however, developing new products required increasingly complex and expensive tools that were out of reach of most individuals -- the Wright brothers built an airplane in their bicycle shop, but the first jet-powered aircraft were built at well-funded corporate and government labs. As a result, large firms came to dominate innovation.
That trend was disrupted in the 1990s when low-cost computers allowed Internet and software start-ups to compete with giants. But when it came to developing innovative physical products, high prices kept high-tech machine tools and materials out of most tinkerers' reach.
"There have always been hobbyists, but it was really hard to go from being a hobbyist who built hot rods to becoming a car company," says Erik Kauppi, a member of at A2 Mech Shop, an Ann Arbor, Mich., workshop where tinkerers pool tools they own. "But now, all of a sudden a guy or a couple of guys have a lot more leverage."
The electric scooter that Mr. Kauppi, who is 49, developed at the workshop is now in production. His business, Current Motor Co. in Scio Township, Mich., plans to begin shipping its scooter, with a starting price of $5,500, this month.
At engineering schools, the drop in costs is putting tools once accessible only to senior researchers into the hands of undergraduates. The Hobby Shop at MIT, once mainly a wood shop, has been accumulating advanced equipment, some castoffs from MIT laboratories, some bought.
"Now you can build sophisticated robots and things like that with all these new pieces of equipment they have," says Greg Schroll, 23, a 2008 MIT engineering graduate.
He hopes to eventually start a company around a spherical robot he built at the MIT shop, which he sees being used to gather information in places too hazardous for humans. Projects made by MIT students in the Hobby Shop now in commercial production include a LED system to create lighting effects for film and a machine to salt the rim of a margarita glass.
Hands-on is catching on at other schools. There were 27% more undergraduates who earned mechanical-engineering degrees in 2008 than in 2003, according to the American Association of Engineering Societies. Over the same period, the number of computer-engineering graduates slipped by 31%.
Students at Carnegie Mellon University asked to stay at school for a week after exams last spring so they could hang out and build things. Ed Schlesinger, a professor there, says that after a long period where theoretical work dominated at engineering schools, "when students talk to each other now, it's 'So, what cool project are you working on?' It's not enough to say I took these classes and got an A." Stanford University's Product Realization Laboratory, where students learn machining, welding and other hands-on skills, has seen membership jump to 750 from 450 over the past five years.
As a junior at Stanford in 2004, Carly Geehr thought she was headed for medical school. Then she took a course on manufacturing and design at the Stanford workshop.
"I'd never held a drill in my life, but working with the milling machine -- I was just blown away," says Ms. Geehr, who is 24. She changed her major to engineering and, as a doctoral candidate in engineering, is now a teaching assistant for the course that gave her the bug to build. On a recent day, she cheered students on as they prepared molds for sand-casting bronze, occasionally donning a protective fire suit to skim red-hot dross from the crucible before pouring molten metal into the molds.
Giulio Gratta, a senior in Stanford's engineering school, has been using the workshop to build a panoramic camera. Even though Stanford is in the heart of Silicon Valley, he says software and Internet development don't hold as much interest as before. "It's no longer the thing to do," says Mr. Gratta, who is 21. "People have to figure out something else. Maybe...physical things."

From hacker spaces to profitable businesses, tinkering is experiencing a renaissance. WSJ's Andy Jordan explores some of the "stuff" people are making with new devices that encourage hacking and creativity.

Until the 1950s, economists thought how fast the economy grew was mostly a matter of how much money was spent and how much work was getting done. But in a 1957 paper that helped him later earn a Nobel Prize, MIT economist Robert Solow showed capital and labor only accounted for about half of growth. The remaining half he attributed to innovation -- an area where the U.S. has long had an advantage.
In recent years, however, U.S. spending on research and development has led some economists to worry that innovation will no longer provide the boost it once did. Corporate R&D spending grew an average of 2.6% annually from 2000 to 2007, down from an average of 6% in the 1980s and 1990s, according to the most recent figures from the National Science Foundation. Chief financial officers surveyed in September by Duke University's Fuqua School of Business and CFO Magazine said they expected their companies' R&D spending to grow by just 0.4% over the next year.
Tinkering represents innovation outside such figures. TechShop in Menlo Park, Calif., for example, is a for-profit workshop and operates like a gym, except that the members who pay $100 a month are milling iron rather than pumping it.
Founder Jim Newton tallied a list of all the tools he could imagine needing. Now TechShop, opened in 2006, has $500,000 worth of lathes, laser cutters and other equipment.
There are 600 members at TechShop's original location, up from 300 a year ago, and it has opened workshops in Durham, N.C., and Beaverton, Ore. Projects under way include a liquid-cooling device for computer servers and an electric two-wheeled car.
NYC Resistor, the hackerspace in Brooklyn, is funded by members and fees from classes it offers. It opens to visitors every Thursday. Recently, a group gathered around Ben Combee, who demonstrated the laser cutter. He put a piece of Plexiglas into place, started the air compressor, pushed a button and shouted, "Fire the laser!"
At a table strewn with laptops, wires and circuit boards, Eric Skiff showed off a robotic arm that twitches when a hand is passed near it. In a corner is the Barbot, a robot that, when it works, pours and stirs an absinthe cocktail called a Sazerac.
Such projects -- not to mention a giant Lite-Brite and a toy piano that plays Philip Glass's "Modern Love Waltz" -- may seem frivolous. But Zach Hoeken Smith, a NYC Resistor cofounder, thinks something important is going on. The computer kits sold by companies such as Apple in the 1970s were demeaned as toys, he says, but ended up launching the personal computer revolution.
Mr. Smith, 25, studied computer science at the University of Iowa, and worked as a Web developer. But a few years ago, he started playing with an "Arduino" -- an open-source microcontroller. These are used as the "electric brains" for everything from wall-avoiding robots to a hat that pokes the wearer's heads if the person stops smiling. "I was hooked," he recalls.
Intrigued by the idea of making a machine than can build its own parts, Mr. Smith got interested in "rapid prototyping machines" -- 3D printers that lay down layers of materials like plastic to form objects. The technology is used by manufacturers to make prototypes, with industrial machines typically costing tens of thousands of dollars.
Mr. Smith's NYC Resistor friends Mr. Pettis and Adam Mayer joined the project. Using off-the-shelf electronics and parts, along with a laser cutter, they came up with a machine. Now they're selling kits to make 3D printers.
Their company, MakerBot Industries, has shipped 350 of the $750 kits so far. They hired two employees, started paying themselves, and are building another 150 kits for their next shipment.
Adam Elkins and members of a hackerspace in Philadelphia, called Hive 76, bought one kit and built the machine. Mr. Elkins, a 28-year-old system administrator for a software company, says he doesn't have access to a lot of space, so he goes to the hackerspace to build. "There's no man-cave I can go to and do things."
The first thing he made on the 3D printer was a black plastic ring topped off with white plastic jewel. Last month, he presented it to his girlfriend, along with a marriage proposal. She said yes.
Write to Justin Lahart at justin.lahart@wsj.com

Everybody in the Pool of Green Innovation (NYT)

2009-11-01T10:38:00.001-08:00

By MARY TRIPSAS

A POPULAR children’s song has a refrain — “the more we get together the happier we’ll be” — that may sound like a simplistic formula for solving the complex challenges of climate change and sustainability. But if any area is ripe for sharing and collaboration among organizations, it’s green innovation.
“We all want to save the planet, and the problems are bigger than any one firm, sector or country,” says Dr. Sarah Slaughter, coordinator of the M.I.T. Sloan Sustainability Initiative. In that spirit, several major corporations have taken inspiration from the open-source software movement and are experimenting with forums for sharing environmentally friendly innovations and building communities around them. The first such effort, the Eco-Patent Commons, was started in January 2008 by I.B.M., Nokia, Pitney Bowes and Sony in collaboration with the World Business Council for Sustainable Development.
The concept is straightforward: Companies pledge environmental patents to the commons, and anyone can use them — free.
Many patented environmental technologies are not strategic, so sharing maximizes the social benefit without sacrificing competitive advantage, says Wayne Balta, vice president of corporate environmental affairs and product safety at I.B.M. For instance, I.B.M. contributed a recyclable cardboard packaging insert that requires less fossil fuel to create and transport than the foam inserts that are now commonly used.
Other examples include a DuPont method for better detecting pollution in soil, air or water by using a microorganism that produces light when exposed to a pollutant. There are also methods from Xerox for removing toxic waste from contaminated groundwater, as well as a cleaning technique for semiconductor wafers from I.B.M. that uses ozone gas and eliminates chemical contaminants that result from other processes.
By assembling these patents in one easily accessible location — anyone can search through them on the council’s Web site — the hope is to encourage their widespread adoption, particularly in the developing world. Since its start, the commons has grown to 100 patents from 31, with 11 companies now participating.
Although there are no formal mechanisms for tracking who has used the commons, participating companies are sometimes contacted by users. For instance, Mr. Balta said that Yale had put into effect an I.B.M. method for decreasing the use of hazardous solvents in its quantum computing device research.
The Creative Commons, a nonprofit organization that previously developed licensing programs to help in sharing creative and scientific content, is also planning to branch out into the environmental arena.
In collaboration with Nike and Best Buy, it plans to start a sharing initiative, the Green Xchange, in early 2010. The program will include both patented technologies and forums for continuing exchange of innovations such as Best Buy’s system for rating the sustainability of a supply chain. Companies that contribute patents to the Green Xchange will have the option of charging users a fixed annual licensing fee and can also restrict any licensing by rivals or for competitive use. In addition, even if no annual fee is charged, patent users must register so there is a record of who is using what technology.
Though more complex than that of Eco-Patent Commons, the structure of Green Xchange will yield greater numbers of high-quality inventions, says John Wilbanks, GreenXchange coordinator and vice president for science at Creative Commons.
“We don’t depend on altruism,” Mr. Wilbanks says. “This system helps the environment while enabling a firm to make money from patents in applications outside its core business.”
For instance, Nike’s air-bag patent for cushioning shoes is crucial to its core shoe business, but may have environmental benefits in other industries — perhaps in prolonging the useful life of tires. Green Xchange could enable Nike to license the air-bag technology selectively to noncompeting companies.
ACCORDING to Kelly Lauber, a global director in Nike’s Sustainable Business and Innovation Lab, sharing technology can have tremendous environmental impact. By sharing its water-based adhesive technology and working with footwear makers, Ms. Lauber estimates that average levels of environmentally harmful solvents used by Nike’s suppliers have decreased to less than 15 grams per pair of shoes from 350 in 1997.
Perhaps the biggest upside of Green Xchange may come from the development of communities that collaborate in innovation and the exchange of ideas. To encourage that kind of interaction, Salesforce.com will provide a search engine, making it easy to find patents. And collaboration platforms from companies like 2degrees and nGenera should make it easy to identify companies with common interests.
Despite the obvious advantages, sharing patents isn’t as easy as it might sound.
“Numerous features of the intellectual property system, particularly the ability of companies to claim large swaths of technology through patents, play havoc with collaborative efforts,” says Josh Lerner, a professor at Harvard Business School.
Henry Chesbrough, the executive director of the Center for Open Innovation at the University of California, Berkeley, says it is surprisingly hard to give away technologies. “If it is not done carefully,” he said, “the companies that use a donated technology might find themselves liable for infringement of another company’s patent.”
Both the Eco-Patent Commons and the Green Xchange pose organizational challenges for participating companies.
“Deciding which patents to pledge or license to a commons,” says Andrew King, a professor at the Tuck School of Business at Dartmouth, “requires that the legal counsel, R.& D. staff, business unit and corporate sustainability groups all work together, and most organizations just aren’t set up for that.”
Weaving corporate togetherness, it seems, isn’t so easy — though green innovations offer many more reasons to try.

Mary Tripsas is an associate professor in the entrepreneurial management unit at the Harvard Business School.

Ingenio de goma (Endi.com)

2009-11-01T10:32:00.000-08:00

Tecnología ambiental patentada por un boricua tiene buena acogida en el Oriente Medio

Valentín comenzó en1998 a desarrollar la tecnología que serviría de base para crear Sofscape.

Por Marie Custodio Collazo / mcustodio@elnuevodia.com

Una tecnología inventada por un boricua está ofreciendo una solución creativa a la acumulación de neumáticos desechados en Oriente Medio. Lo irónico es que Puerto Rico tiene el mismo problema, pero Sofscape no ha logrado ser profeta en su tierra.
José Valentín, presidente de Sofscape, comenzó en el 1998 a desarrollar una máquina que convierte neumáticos triturados en coloridos adoquines. En el 2006 instaló la tecnología ya terminada y comenzó la producción en una fábrica en Vega Baja.
“Desarrollamos una tecnología que produce 500 adoquines por hora, y eso nadie en el mundo lo puede igualar”, asegura el empresario.
Valentín estudió un bachillerato en ingeniería de plásticos y polímeros de la Universidad de Detroit, en Michigan, luego de lo cual trabajó en varias empresas en Puerto Rico.

La experiencia que adquirió con procesos de moldeo por inyección en Harvey Hubell Caribe, en Vega Baja, y en Microsoft Puerto Rico, en Humacao, alimentó su idea de desarrollar tecnología ambiental eficiente, específicamente de reciclaje de neumáticos.
En ese tiempo, Valentín se dedicó a investigar maquinaria existente, y se encontró con Moses Glick, un empresario amish de Pennsylvania, que tenía el concepto para masificar la producción de adoquines de goma triturada, usando un proceso de moldeo dinámico, en lugar del estático que sólo permite hacer una pieza a la vez.
Fe en una idea
El sanjuanero le propuso un negocio difícil de rechazar, trabajaría gratis aportando su conocimiento técnico y químico para dar con la fórmula correcta para los adoquines y la máquina más indicada. A cambio, si la empresa tenía éxito, Glick le daría los derechos del producto para Puerto Rico, el Caribe y Florida.
“Llevaba mucho tiempo planeando esa aventura, y ahorré mucho dinero, en preparación. Vivía con mis padres y ahorraba todo lo que me ganaba. Asumí que necesitaba estar como dos años sin trabajar para dedicarme a desarrollar la tecnología, pero tomó mucho más”, cuenta el ex gerente de ingeniería para Microsoft en la Isla.
Según los informes de gastos que lleva cuidadosamente, invirtió $129,000, todos sus ahorros, más tres años y medio de su tiempo.
Valentín relata que el negocio de Glick tenía dos problemas, la formulación química y la comercialización.
En el aspecto químico, dice, Sofscape mezcla los neumáticos triturados con resina, para obtener piezas compactas que no se afecten con el agua ni el calor. El problema radicaba en que “hay miles de resinas, y debíamos saber cuál usar y en qué cantidad”.
Eso le requirió mucha investigación y pruebas, ya que las teorías científicas sobre los materiales no siempre resultaban en el escenario real.
Una vez tenía la formulación correcta, Valentín se enfocó en realizar las pruebas correspondientes para que los adoquines de goma recibieran las certificaciones de amortiguamiento de caídas, entre otras. Contar con dichos reconocimientos, señala, facilita el mercadeo para proyectos específicos, como parques infantiles.
Realiza el sueño
Pero la aventura de Valentín no concluyó cuando consiguió perfeccionar la fórmula y la máquina de los adoquines de goma. Conseguir el financiamiento para establecer la fábrica en Puerto Rico le tomó otros 4 años y medio.
“Hice mi plan de negocios solo y fui a reunirme con cerca de 20 inversionistas y nada. También les presenté el plan a los grupos de capital de riesgo y, ¡olvídate!”, relata sobre su búsqueda de financiamiento, mayormente en Puerto Rico.
Finalmente, Spectrum Group, que agrupa a 12 angel inverstors, se interesó en el proyecto, lo analizaron y pensaron que era mejor comenzar importando el producto que fabricaba Glick en Pennsylvania, para auscultar el mercado.
Así, Valentín consiguió un capital inicial de $200,000 en el 2004, y un año más tarde el grupo invirtió otros $800,000 para iniciar la operación de la fábrica.
A través de un préstamo del Banco de Desarrollo Económico (BDE), el empresario consiguió los $1.2 millones que le faltaban para completar los $2 millones necesarios para realizar su sueño.
“Desde el principio, el BDE ha visto el potencial de exportación mundial que tiene Sofscape, lo que no ha visto Pridco (Compañía de Fomento Industrial, en español) ni la Autoridad de Desperdicios Sólidos. Tengo una deuda de por vida con el equipo del banco”, asegura el empresario.
En el 2006, comenzó a operar Sofscape Caribe en Vega Baja, con la primera máquina comercial patentada por Valentín y Glick.
“Nosotros tenemos la patente y los planos, pero no la capacidad para hacerla, así es que contratamos una empresa que construye máquinas industriales”, cuenta Valentín.
Sofscape se estableció finalmente en un edificio industrial privado, ya que le indicaron que las propiedades de Pridco no estaban disponibles para actividades de reciclaje.
Obstáculos para crecer
Una vez estableció la empresa, el camino ha sido difícil. Para empezar, el área en la que se encuentra la fábrica en Vega Baja, no tiene instalación eléctrica, por lo que Sofscape funciona con un generador.
Además, cada vez es más difícil conseguir los neumáticos triturados, que constituyen la materia prima para los adoquines. Tras el incendio que quemó en agosto la empresa Rubber Recycling and Manufacturing (REMA), en Caguas, Valentín se quedó prácticamente sin un suplidor local.
A pesar de que en Puerto Rico se desechan alrededor de 6 millones de neumáticos al año, Sofscape está importando el material para cumplir con los pedidos que tiene.
En el 2008 comenzó una crisis por la acumulación de neumáticos desechados, cuando el Gobierno dejó acumular una deuda de $6 millones con los gomeros y las empresas que se dedican al reciclaje de gomas. Actualmente, en Puerto Rico se cobra un impuesto de $1.65 por cada cambio de neumático. En la distribución del dinero, 15 centavos son para el Gobierno, 50 centavos le tocan al transportista, 72 centavos van dirigidos a la fábrica que tritura los neumáticos, al final, el que recicla el material para convertirlo en un producto nuevo carga con 28 centavos.
Al cierre de esta edición no fue posible contactar a la Autoridad de Desperdicios Sólidos para que indicara qué ocurrirá con las gomas usadas, ahora que REMA, única empresa que realizaba la tarea no está operando para triturarlas.
La fábrica local tiene capacidad para fabricar 1 millón de pies cuadrados de adoquines, el equivalente a 800,000 neumáticos reciclados. Sin embargo, la limitación eléctrica y la falta de materia prima la tienen produciendo el 25% de su capacidad total.
“Por la falta de electricidad, no podemos operar tres turnos. Lo más que he tenido son dos, pero ahora sólo tengo uno por la falta de materia”, explica el ingeniero de polímeros.
Esto también limita la capacidad de la empresa para generar empleos. Actualmente sólo hay 12 empleados.
Incluso, durante la visita de Negocios a las instalaciones de Sofscape, la máquina estaba detenida, en espera de los neumáticos que ahora le compran a una empresa de reciclaje en Florida. Los empleados del único turno de producción estaban instalando los adoquines en un proyecto en la zona sur del país.
“Como también saben instalar, los estoy ocupando en eso para no despedirlos”, indica Valentín.
Reconocimiento afuera
En el 2007, Valentín adquirió todos los derechos sobre la patente y los productos de Sofscape, lo cual le abrió múltiples oportunidades alrededor del mundo.
Los adoquines de goma de la empresa son reconocidos en Estados Unidos por lo innovador del proceso de producción y el diseño. Aparte de que se consideran más seguros para parques infantiles.
El empresario explica que el grosor de su producto evita que se levanten las esquinas, como ocurre con las losas de goma tradicionales, y que pueden causar accidentes. Además, la superficie se seca bastante rápido, gracias a un sistema de drenaje que permite que el agua fluya por unos canales en la base del adoquín. También está certificado para amortiguar caídas de hasta cuatro pies de alto.
Los adoquines de Sofscape tienen una certificación ADA (American with Disabilities Act), porque permiten la accesibilidad de personas con impedimentos físicos, a diferencia de otros productos amortiguadores que se usan en los parques infantiles, como la arena.
Esta característica motivó a Miracle League, una liga de béisbol para niños con impedimentos, a recomendar los productos de Sofscape para los parques especiales en los que se celebran sus juegos. Al presente hay 10 de estos parques en EE.UU. y uno en Puerto Rico.
Además de Vega Baja, la empresa tiene oficinas de ventas en los estados de Florida y Pennsylvania.
Noches árabes
El prestigio que ha ido ganando Sofscape la puso en el ojo de la empresa canadiense Tactical Connections, que ganó un contrato para desarrollar un programa amplio de reciclaje en el emirato árabe de Sharjah. Como parte del componente para atender el problema de disposición de los neumáticos, la máquina inventada por el equipo de Sofscape fue instalada en un enorme edificio, donde procesarán el material y fabricarán múltiples productos con aplicación comercial e industrial.
Sólo el programa de neumáticos requirió una inversión de $18 millones, de los cuales cerca de $2 millones fueron a la compra de la tecnología de Sofscape.
“Cuando en Puerto Rico el reciclaje de neumáticos no arranca por falta de compromiso formal del Gobierno, en Sharjah la solución gubernamental ha sido una alianza público-privada para el manejo, procesamiento, y reciclaje de los neumáticos desechados”, señala Valentín, y añade que el vertedero de neumáticos en el que se instaló la máquina tiene alrededor de 7 millones de gomas, un millón más de las que produce la Isla en un año.
Durante cuatro semanas, él y otros dos técnicos de su equipo estuvieron en Sharjah para instalar la máquina. Fue una tarea ardua debido al choque cultural, a las condiciones ambientales y a que sólo habían armado una máquina antes, la que está en Vega Baja.
“Requerí seis vagones para transportar toda la tecnología de Sofscape. Todo el tiempo fue un proceso de aprendizaje”, relata Valentín sobre el inicio de la odisea.
Al llegar a Sharjah se dio cuenta de que el calor intenso hacía difícil trabajar ocho horas, y mucho menos durante el día. Así es que el equipo de dos boricuas y un estadounidense laboraba de 4 a.m. a 11:30 a.m.
Luego estuvo el factor de que el terreno era arenoso, por lo que los vehículos se quedaban estancados y en lo que conseguían moverlos se atrasaba el proceso.
“Tenemos que regresar para probar la máquina porque todavía no tenían electricidad cuando terminamos”, cuenta.
La inauguración del proyecto será en diciembre y se espera que los jeques de los demás emiratos árabes asistan. Valentín confía en que eso le abrirá las puertas para aumentar las ventas de la tecnología de Sofscape.
Actualmente, indica, ya tiene una posibilidad fuerte en Qatar -otro de los emiratos-, y en Colombia. En el país suramericano le pidieron que Sofscape maneje todo el proyecto de reciclaje de neumáticos, en lugar de sólo vender e instalar la tecnología.
“En otros países admiran tu tecnología, y aquí te ignoran”, dice frustrado, “es increíble que una isla con un desastre ambiental esté exportando tecnología ambiental al resto del mundo”.

The New Rules of Angel Investing (NYT)

2009-10-28T17:25:00.000-07:00

The New Rules of Angel Investing

By KERMIT PATTISON

Angels still have wings, but they aren’t flying quite so high.

The rules of the game of angel investing have changed in the post-crisis world. The average deal size shrank by 31 percent in the first half of this year, according to a recent study by the Center for Venture Research at the University of New Hampshire. The study shows that total angel investments fell to $9.1 billion in the first half of 2009, a 27 percent decline from the same period last year, but the number of companies getting venture investments actually increased by 6 percent, to 24,500.

Angels are still financing deals, but at lower valuations and with more specific milestones. They have grown more picky and less tolerant of risk. “What you’re seeing now is a real flight to quality,” said David S. Rose, chairman of New York Angels. “If you are the real deal, you can get funded.”

What’s the real deal? Angels are looking for companies with more modest capital requirements. They seek companies that bootstrap, beat quicker paths to profitability and have proven management teams. “The most striking change is angel investors are way more discerning about where they deploy their capital,” said Bruce Cerullo, a Boston-based angel investor who specializes in health care. “Now groups like ours are looking for more fully baked ideas that are much closer to revenue generation.”

Do It Yourself

There has been a sea change in risk sensitivity; the more self-sufficiency a company demonstrates, the less risky it appears. “Bootstrap it as long as you possibly can to validate your business model and to get some traction,” Mr. Cerullo said. “The more traction you have, the more leverage you are going to have in a valuation negotiation with an angel or private equity investor.”

Entrepreneurs should find ways to finance their own growth: working without salary, moonlighting, seeking grants, running lean operations and focusing on an aspect of the business that can generate revenue.

Bear in mind that the worst of times for the economy can be the best of times for starting a company. Labor is cheap and plentiful. The costs of starting an Internet-based company have fallen sharply thanks to cheaper technology, including open-source software. “Work hard to figure out if there’s a business plan you can pursue where your capital requirements are zero,” said Ian Sobieski, founder and managing director of the Silicon Valley-based Band of Angels Fund. “The easiest way to raise money is to not absolutely have to raise money.”

Angels are looking for companies that can get to break even on the angel investment. In return, they are willing to be more patient, Mr. Rose said. In the old days, angels invested with the idea that they would finance the company at an early stage, then venture capitalists would step in with a large injection of cash that allowed it to blast off on a hockey-stick growth trajectory.

“Now we’re prepared to give up the immediate hockey stick in exchange for you being able to reliably get to break even on our cash while building value for the company,” Mr. Rose said. “The minute the market comes back, we can inject V.C. cash — and then you have the hockey stick.”

Be Realistic About Valuations

Valuations have fallen sharply — as much as 40 percent, Mr. Rose estimates. The upside is that the costs of starting a company have fallen, too.

Yet some entrepreneurs still cling to over-inflated valuations. They get hung up on achieving the highest valuation without regard to how it may undermine their long-term prospects.

“The biggest error they make, in my experience, is they focus solely on this round and take money based solely on whether they can fill out the round at the absolute highest valuation,” said John Huston, who invests with Ohio TechAngels and is chairman of the Angel Capital Association. “They do not select investors who know the market and are willing to write follow-on checks.”

Unrealistic valuations will make serious investors roll their eyes. Even if entrepreneurs can get above-market valuations, they run the risk of getting a lower valuation on a subsequent round, a phenomenon known as the “deadly down round.” Mr. Huston said inflated valuations are a sign that the company picked the wrong investor and “took money from neophytes who were only attuned to this round and the promises of grandiose success.”

Lay Out Milestones

Mr. Huston warns that entrepreneurs should beware of “one-check Willy” — the angel who finances just one round. Instead, entrepreneurs should look for angels who are willing to discuss long-term plans with milestones and follow-on investments that guide the company “from here to liquidity.”

The exit market has changed drastically because of a decline in mergers, acquisitions and initial public offerings. As a result, venture capital firms increasingly are concentrating on their existing portfolios and forcing angels to support start-ups for longer.

Many angels now expect to write checks for follow-on rounds because they can no longer count on V.C. money being available down the road. John Morris, chairman emeritus of Tech Coast Angels in Southern California, said that angels were now keeping reserves of 200 to 300 percent — up from zero a few years ago.

“That’s probably the single biggest difference in angel land,” said Mr. Morris. “Angels are learning about reserves and the need to parse out the money in a series of tranches, keeping some dry powder for the next round.”

Practice Your Pitch

Get good at pitching the same way major leaguers do: practice, practice, practice. Entrepreneurs should be ready to present a full business plan, a 20-minute PowerPoint, an executive summary and a two-minute elevator pitch (which is what gets you in the door in the first place). Rehearse with anybody who can offer good advice. Go to industry events. Many angel groups hold quick-pitch events where entrepreneurs are invited to make brief presentations.

Susan Preston, general partner of CalCEF, a clean-energy angel fund in San Francisco and author of two books on angel investing, said entrepreneurs might have to pitch to 50 or 100 investors before they got venture funds: “In tight times, only the absolute stars rise to the top to receive funding. If they want to have a chance, they’ve got to be well prepared.”

Know Where to Look

Angels often don’t advertise themselves because they don’t want to be deluged by suitors. And lists or directories have their limits (although this one from the Angel Capital Education Association can help you get started). “Look farther, network a little harder,” said Jeff Sohl, director of the Center for Venture Research. “Turn over those rocks like you should have been doing all along, rather than taking the easy route of Googling and looking at the first 10 hits. That might have worked in the go-go times of 2000, but it doesn’t even get you close now.”

Consider both lone-wolf angels and organized groups. Angels tend to focus on regional companies but increasingly are specializing in niches like medical devices, technology and clean energy.

One classic mistake is to look at angels solely as sources of cash. Ms. Preston considers money to be an angel’s third most important contribution after expertise and networking. She urges entrepreneurs to scrutinize potential investors: What expertise can they provide? How do their strengths complement your weaknesses? Who can they introduce you to?

Coached by an Angel

Murat Ozsu weathered the recent sea change in angel investing — and survived to tell about it.

Mr. Ozsu had spent more than two years bootstrapping his Long Island-based start-up, innRoad, an online platform that helps independent hotels manage guest bookings. He had moved to a smaller house, borrowed from family and friends, worked out of his son’s bedroom and spent many nights laboring into the wee hours so he could coordinate with his software development team in India. He pitched to hundreds of angels before he attracted the interest of a few investors who began coaching him. Just when he had built up a base of customers and was poised to get financing, his plans hit a major snag: the financial collapse of 2008.

Mr. Ozsu took his plan and ripped it apart. On the advice of his angels, he recalibrated for leaner times and cut his capital requirements in half. “These are all guys who have run their own companies,” he said, “and they’ve all been through this before. I’d much rather learn from other people’s mistakes. I’m going to make my own mistakes, so why make theirs?”

Ultimately, innRoad won the backing of 15 angels and a New York State investment program and raised $1.2 million — twice its goal and, surprisingly, the same amount it had planned to seek before the crisis. InnRoad recently did a second investment round of $300,000, which Mr. Ozsu said would sustain the company until it reached breakeven next summer.

Along the way, he said he learned to think like an investor — often a difficult step for entrepreneurs who have poured their souls into their companies. “Trying to raise money is not the goal,” Mr. Ozsu said. “The goal is a business plan that makes sense on its own merits. Money is just one of the tools that you need.”

Bootstrap as long as you can. Finding early ways to get revenue.
Get to break even quickly and remember that VC financing has gotten harder to obtain.
Be realistic about valuations. Be coachable.
Practice pitching and be prepared to make your case to dozens or hundreds of angels.
Look for angels who complement your strengths and can help you with more than money.

An overview of angel investing and a list of resources from Angel Capital Education Foundation.
What Entrepreneurs Should Know About Angels from the Angel Capital Education Foundation.(pdf)
A directory of angel investors from the Angel Capital Education Association.

Patent Auctions Offer Protections to Inventors (NYT)

2009-09-23T06:54:00.001-07:00

Patent Auctions Offer Protections to Inventors

By STEVE LOHR

The world can be a rough place for independent inventors. They can often find themselves in court, battling big corporations, spending piles of money on lawyers and leaving it up to judges and juries to determine the value of their hard-won patents.

That could be changing. Wrangling over patents is beginning to move out of the courtroom and into the marketplace. A flurry of new companies and investment groups has sprung up to buy, sell, broker, license and auction patents. And venture capital and private equity is starting to pour into the field.

The arrival of these new business-minded players, according to patent experts and economists, could lead to a robust marketplace for patents, where value is determined not so much by court judgments but by buyers and sellers, perhaps, someday, like eBay.

And patents, after all, are ideas. Any market mechanisms that speed up the process of figuring out what a patent is worth should hasten the flow of ideas into the economy, accelerating the pace of innovation, policy experts say.

“What you want is a market that can promote innovation and reduce the huge costs of litigation,” said Robert P. Merges, a professor at the University of California, Berkeley and a director of the Berkeley Center for Law and Technology. “And that market is starting to take shape.”

A classic small-inventor firm, Zoltar Satellite Alarm Systems, is planning to sample that market by auctioning off its patents next month. Professor Merges and other patent experts point to it as an intriguing case to watch.

To date, the Zoltar story has been one of innovation, persistence and litigation. One founder of the company, Dr. Daniel Schlager, got his inspiration nearly two decades ago, crouched in medevac helicopters flying over Northern California. Locating people in distress was often difficult and costly, in time and lives. What was needed, he figured, was some sort of personal alarm device that transmitted a person’s location.

He sought out an old high-school classmate, William Baringer, a computer scientist and telecommunications expert. Using global positioning technology seemed promising, even though it was clunky and expensive at the time. They came up with a solution, and filed their first patent application in 1994 for a “personal alarm” device that used GPS technology. A year later, Zoltar was founded, and it filed for a patent on personal alarms with navigational receivers in cellphones that was granted in 1997.

Zoltar’s prospects got a lift after the Federal Communications Commission in 1996 required most wireless phones to be able to identify their location during 911 calls by 2001. The move opened a large potential market for Zoltar.

The two men designed and built prototypes, hired a patent licensing expert and showed their technology to cellphone equipment makers in the late 1990s in the hopes of licensing it. “It’s an industry with huge companies who crosslicense patents with each other and tell little guys to take a hike,” said Robert Megantz, a former general manager of licensing for Dolby and the consultant who worked with Zoltar in the late 1990s.

Eventually, Zoltar’s founders say, their ideas and designs started to turn up in big companies’ products. They raised money, mostly from friends and family, hired lawyers and went to court.

In 2001, Zoltar sued Qualcomm, the cellphone chip-set maker. After three years, a jury found that Zoltar’s patents were valid, but that Qualcomm was not infringing on them. The two sides settled in 2006.

In 2005, Zoltar sued several handset makers including Motorola, LG and Samsung, and settlements were reached with all of them by 2007.

By now, Zoltar has spent millions in legal fees, and collected millions in settlements. The company is ahead financially, Dr. Schlager said, but some of its 60 investors have not been paid back. Mr. Baringer remains a full-time consultant engineer, and Dr. Schlager is still an emergency-room physician, though he does not practice full time.

Today, the fast-growing makers of smartphones like Research in Motion, Apple, HTC and Nokia have no agreements with Zoltar. Dr. Schlager said he did not plan to sue them. Instead Zoltar will sell its patents in an auction, hoping for a faster, simpler and less risky payoff.

“We felt this was the way to go,” Dr. Schlager said. “It’s an option that wasn’t available a few years ago.”

The auction will be run by Pluritas, a patent broker based in San Francisco. Robert Aronoff, its managing director, says Zoltar has strong, court-tested patents that apply to a huge industry, at a time when there is an increasingly brisk market for intellectual property. “They are entering into this vastly changed marketplace with a hot property,” he said.

Whether the patents will prove to be a hot property is not clear. “They were certainly innovative over the years, but I do think there is a question here if the industry and technology has passed them by,” said Professor Merges of Berkeley.

Mr. Baringer insists this is not the case. “We continue to see our designs and concepts implemented every day” in smartphones, he said.

In an auction, of course, the patents’ value will be judged by bidders, which could be handset makers, but also patent-buying groups like Intellectual Ventures and Rational Patent Exchange and Allied Security Trust, a nonprofit organization.

Other players in the emerging patent marketplace are specialized investment banks, brokers and licensing companies including Acacia Technologies, Altitude Capital Partners, Intertrust, IPotential, Ocean Tomo, Rembrandt IP Management and Thinkfire. Venture capitalists are also interested in this field — Kleiner Perkins Caufield & Byers, for example, is backing Rational Patent Exchange, a company that buys reservoirs of patents in crucial fields and charges fees to corporate “members,” who participate as a defensive tactic to limit potential patent litigation costs.

The long-term vision at Rational, said Randy Komisar, a partner at Kleiner, is to become a marketplace or clearinghouse, perhaps the way Ascap is for copyrighted music, collecting fees and distributing payments to artists.

“The goal is to be a place where the patentholder is fairly compensated, but the corporate users have access to technology with minimal transaction costs,” Mr. Komisar said. “It has the potential to make innovation more efficient and less risky for both sides.”

But some patent experts question how far the marketplace model can be extended to patents. They note that patents are typically trickier to value than financial investments like stocks or bonds.

“Yes, you can move in the direction of trading markets for patents, but these are complicated assets that are individualized and hard to value,” said Josh Lerner, an economist at the Harvard business school. “They are more like works of art than stocks.”

Biotech Tries to Shrug Off Setbacks (NYT)

2009-09-17T09:07:00.001-07:00

Biotech Tries to Shrug Off Setbacks

By JAMES FLANIGAN

FROM one perspective, the life sciences industry — the biotechnology companies that develop drugs and treatments to combat disease and the biomedical firms that create medical devices — is a picture of expanding horizons and confidence.

Young companies are taking advantage of advances in medical and computing sciences to develop new ways of dealing with intractable health problems.

One new company has developed a disposable device with software that would help surgeons to perform knee replacements with greater accuracy. Another has a microscopic device implantable in the eye that would continuously release medicines to alleviate glaucoma or macular degeneration.

Other companies have developed potential vaccines against staphylococcus infections and drugs to preserve cardiac function after a heart attack. Indeed, the biotech industry is spreading globally to India and China, where capital is abundant and research is increasing.

But even as the industry seems to be making progress, its biggest benefactors are pulling back. The traditional providers of venture capital in the United States are university endowments and pension funds, whose assets have been reduced sharply over the last year in the collapse of financial markets.

Even a successful investor in the life sciences industry sees danger now. Domain Associates, a company based in Princeton, N.J., and San Diego, raised $500 million for a new venture fund in August. It is the eighth such fund Domain has started in 24 years, and in that time, it has backed more than 200 life sciences companies. But few other venture funds were able to raise money, said James C. Blair, a Domain partner.

The people investing “in our area are hurting, and this will have long-term implications for venture capital in general,” he said. Without new communities of capital, he said, “we worry about where we will find other investors to participate in our best opportunities in two to three years.”

He is not alone in worrying. The PricewaterhouseCoopers MoneyTree survey of venture capital recently reported a surge in financing for life sciences in the second quarter of this year. Yet the firm also reported that venture fund assets were down to levels of the mid-1990s, before the last decade’s financial expansion.

The Southern California Biomedical Council, an organization of 240 companies in life sciences in the Los Angeles area, has set “ways to cope with the current drought of capital” as the agenda for its annual investors conference starting Thursday. So is the outlook bright or gloomy? Most companies, even those that have had difficulties, say it is still bright. “We’re seeing the coming together of information technology and medical science,” said Sharon Stevenson, a co-founder of Okapi Venture Capital, a three-year-old company in Laguna Beach, Calif.

Okapi this year backed OrthAlign Inc., a company founded in 2008 that is awaiting approval from the Food and Drug Administration for a palm-size disposable device that attaches to instruments used in knee replacements to help surgeons do more precise cutting of the bone to improve the fit with the joint replacement.

“There are about 550,000 knee replacements every year in the United States, and that is expected to grow to 3.5 million by 2025,” said Pieter Wolters, president of OrthAlign. More people, he said, want an active lifestyle into late age and “technology allows longer lasting function of knee replacements.” OrthAlign has received $7.2 million in venture financing from Research Corporation Technologies of Tucson and Okapi Venture Capital.

Replenish Inc. of Pasadena, Calif., was founded in 2007 on technology developed at the Keck School of Medicine and Viterbi School of Engineering at the University of Southern California as well as the California Institute of Technology. Replenish plans to enter trials for F.D.A. approval next year for a refillable and programmable pump that would be implanted in the eye to feed medicine for glaucoma or for age-related macular degeneration.

The Replenish device can last more than five years before replacement, much longer than current treatments, said Dr. Sean Caffey, chief executive of the company. Replenish is backed by a $10 million investment from a large pharmaceutical company, Dr. Caffey said, and the Stevens Institute for Innovation at the University of Southern California and Caltech have acquired small equity ownerships for their licenses.

In 2005, six scientists from the University of California, Los Angeles, who were working at LA BioMed, a nonprofit research institute, founded NovaDigm Therapeutics. There, they have developed a vaccine that could prevent infections acquired in hospitals, including candida and staph infections, said Fred Haney, a venture capital investor and chairman of NovaDigm.

The company will begin its initial clinical trials for F.D.A. approval next year. It is backed by $18 million in venture investments from Domain Associates and has received grants from the National Institutes of Health and the United States Army to support its research.

Clinical trials extend over three phases and can take years, making investments in life science companies prohibitively long term. “But, in reality it is not so long,” Mr. Haney said. “If we can demonstrate safety and strong immune responses in phase one or two, we could then enter a partnership or merger with a large pharmaceutical company and obtain long-term financing.”

In a possible sign of major things to come, the Zensun Science & Technology Company, based in Shanghai, has raised $30 million to perfect a treatment to strengthen cardiac structure after a heart attack. Zensun is backed by Morningside Investments of Hong Kong and the Shanghai city government, said Jack Z. Chen, chairman of the Transworld Capital Group, a consulting firm based in Arcadia Calif., with offices in Beijing and Shanghai.

Zensun was founded in 2000 by Dr. Mingdong Zhou, who earned a doctorate at the State University of New York, and Dr. Xifu Liu, whose doctorate is from the Genetics Institute at the China Academy of Sciences. Its heart treatment is now in phase two F.D.A. trials, which measure effectiveness.

Such trials are demanding and sometimes treatments do not win approval. The Orqis Medical Corporation spent nine years perfecting a system of increasing blood flow to help damaged hearts but did not receive F.D.A. approval. So backers decided last year not to invest fresh capital. The company is for sale to any firm that would continue development and try again for F.D.A. approval.

The president of Orqis, Kenneth Charhut, said he regretted the setback but remained positive about the industry outlook. “Given advances in technology and growing needs of aging populations,” he said, “this is a time to invest in life sciences.”

This column about small-business trends in California and the West appears on the third Thursday of every month. E-mail:
jamesflanigan@nytimes.com.

Priced to Sell (New Yorker)

2009-09-09T13:20:00.000-07:00

Priced to Sell
Is free the future?
by Malcolm Gladwell July 6, 2009

At a hearing on Capitol Hill in May, James Moroney, the publisher of the Dallas Morning News, told Congress about negotiations he’d just had with the online retailer Amazon. The idea was to license his newspaper’s content to the Kindle, Amazon’s new electronic reader. “They want seventy per cent of the subscription revenue,” Moroney testified. “I get thirty per cent, they get seventy per cent. On top of that, they have said we get the right to republish your intellectual property to any portable device.” The idea was that if a Kindle subscription to the Dallas Morning News cost ten dollars a month, seven dollars of that belonged to Amazon, the provider of the gadget on which the news was read, and just three dollars belonged to the newspaper, the provider of an expensive and ever-changing variety of editorial content. The people at Amazon valued the newspaper’s contribution so little, in fact, that they felt they ought then to be able to license it to anyone else they wanted. Another witness at the hearing, Arianna Huffington, of the Huffington Post, said that she thought the Kindle could provide a business model to save the beleaguered newspaper industry. Moroney disagreed. “I get thirty per cent and they get the right to license my content to any portable device—not just ones made by Amazon?” He was incredulous. “That, to me, is not a model.”

Had James Moroney read Chris Anderson’s new book, “Free: The Future of a Radical Price” (Hyperion; $26.99), Amazon’s offer might not have seemed quite so surprising. Anderson is the editor of Wired and the author of the 2006 best-seller “The Long Tail,” and “Free” is essentially an extended elaboration of Stewart Brand’s famous declaration that “information wants to be free.” The digital age, Anderson argues, is exerting an inexorable downward pressure on the prices of all things “made of ideas.” Anderson does not consider this a passing trend. Rather, he seems to think of it as an iron law: “In the digital realm you can try to keep Free at bay with laws and locks, but eventually the force of economic gravity will win.” To musicians who believe that their music is being pirated, Anderson is blunt. They should stop complaining, and capitalize on the added exposure that piracy provides by making money through touring, merchandise sales, and “yes, the sale of some of [their] music to people who still want CDs or prefer to buy their music online.” To the Dallas Morning News, he would say the same thing. Newspapers need to accept that content is never again going to be worth what they want it to be worth, and reinvent their business. “Out of the bloodbath will come a new role for professional journalists,” he predicts, and he goes on:

There may be more of them, not fewer, as the ability to participate in journalism extends beyond the credentialed halls of traditional media. But they may be paid far less, and for many it won’t be a full time job at all. Journalism as a profession will share the stage with journalism as an avocation. Meanwhile, others may use their skills to teach and organize amateurs to do a better job covering their own communities, becoming more editor/coach than writer. If so, leveraging the Free—paying people to get other people to write for non-monetary rewards—may not be the enemy of professional journalists. Instead, it may be their salvation.

Anderson is very good at paragraphs like this—with its reassuring arc from “bloodbath” to “salvation.” His advice is pithy, his tone uncompromising, and his subject matter perfectly timed for a moment when old-line content providers are desperate for answers. That said, it is not entirely clear what distinction is being marked between “paying people to get other people to write” and paying people to write. If you can afford to pay someone to get other people to write, why can’t you pay people to write? It would be nice to know, as well, just how a business goes about reorganizing itself around getting people to work for “non-monetary rewards.” Does he mean that the New York Times should be staffed by volunteers, like Meals on Wheels? Anderson’s reference to people who “prefer to buy their music online” carries the faint suggestion that refraining from theft should be considered a mere preference. And then there is his insistence that the relentless downward pressure on prices represents an iron law of the digital economy. Why is it a law? Free is just another price, and prices are set by individual actors, in accordance with the aggregated particulars of marketplace power. “Information wants to be free,” Anderson tells us, “in the same way that life wants to spread and water wants to run downhill.” But information can’t actually want anything, can it? Amazon wants the information in the Dallas paper to be free, because that way Amazon makes more money. Why are the self-interested motives of powerful companies being elevated to a philosophical principle? But we are getting ahead of ourselves.

Anderson’s argument begins with a technological trend. The cost of the building blocks of all electronic activity—storage, processing, and bandwidth—has fallen so far that it is now approaching zero. In 1961, Anderson says, a single transistor was ten dollars. In 1963, it was five dollars. By 1968, it was one dollar. Today, Intel will sell you two billion transistors for eleven hundred dollars—meaning that the cost of a single transistor is now about .000055 cents.

Anderson’s second point is that when prices hit zero extraordinary things happen. Anderson describes an experiment conducted by the M.I.T. behavioral economist Dan Ariely, the author of “Predictably Irrational.” Ariely offered a group of subjects a choice between two kinds of chocolate—Hershey’s Kisses, for one cent, and Lindt truffles, for fifteen cents. Three-quarters of the subjects chose the truffles. Then he redid the experiment, reducing the price of both chocolates by one cent. The Kisses were now free. What happened? The order of preference was reversed. Sixty-nine per cent of the subjects chose the Kisses. The price difference between the two chocolates was exactly the same, but that magic word “free” has the power to create a consumer stampede. Amazon has had the same experience with its offer of free shipping for orders over twenty-five dollars. The idea is to induce you to buy a second book, if your first book comes in at less than the twenty-five-dollar threshold. And that’s exactly what it does. In France, however, the offer was mistakenly set at the equivalent of twenty cents—and consumers didn’t buy the second book. “From the consumer’s perspective, there is a huge difference between cheap and free,” Anderson writes. “Give a product away, and it can go viral. Charge a single cent for it and you’re in an entirely different business. . . . The truth is that zero is one market and any other price is another.”

Since the falling costs of digital technology let you make as much stuff as you want, Anderson argues, and the magic of the word “free” creates instant demand among consumers, then Free (Anderson honors it with a capital) represents an enormous business opportunity. Companies ought to be able to make huge amounts of money “around” the thing being given away—as Google gives away its search and e-mail and makes its money on advertising.

Anderson cautions that this philosophy of embracing the Free involves moving from a “scarcity” mind-set to an “abundance” mind-set. Giving something away means that a lot of it will be wasted. But because it costs almost nothing to make things, digitally, we can afford to be wasteful. The elaborate mechanisms we set up to monitor and judge the quality of content are, Anderson thinks, artifacts of an era of scarcity: we had to worry about how to allocate scarce resources like newsprint and shelf space and broadcast time. Not anymore. Look at YouTube, he says, the free video archive owned by Google. YouTube lets anyone post a video to its site free, and lets anyone watch a video on its site free, and it doesn’t have to pass judgment on the quality of the videos it archives. “Nobody is deciding whether a video is good enough to justify the scarce channel space it takes, because there is no scarce channel space,” he writes, and goes on:

Distribution is now close enough to free to round down. Today, it costs about $0.25 to stream one hour of video to one person. Next year, it will be $0.15. A year later it will be less than a dime. Which is why YouTube’s founders decided to give it away. . . . The result is both messy and runs counter to every instinct of a television professional, but this is what abundance both requires and demands.

There are four strands of argument here: a technological claim (digital infrastructure is effectively Free), a psychological claim (consumers love Free), a procedural claim (Free means never having to make a judgment), and a commercial claim (the market created by the technological Free and the psychological Free can make you a lot of money). The only problem is that in the middle of laying out what he sees as the new business model of the digital age Anderson is forced to admit that one of his main case studies, YouTube, “has so far failed to make any money for Google.”

Why is that? Because of the very principles of Free that Anderson so energetically celebrates. When you let people upload and download as many videos as they want, lots of them will take you up on the offer. That’s the magic of Free psychology: an estimated seventy-five billion videos will be served up by YouTube this year. Although the magic of Free technology means that the cost of serving up each video is “close enough to free to round down,” “close enough to free” multiplied by seventy-five billion is still a very large number. A recent report by Credit Suisse estimates that YouTube’s bandwidth costs in 2009 will be three hundred and sixty million dollars. In the case of YouTube, the effects of technological Free and psychological Free work against each other.

So how does YouTube bring in revenue? Well, it tries to sell advertisements alongside its videos. The problem is that the videos attracted by psychological Free—pirated material, cat videos, and other forms of user-generated content—are not the sort of thing that advertisers want to be associated with. In order to sell advertising, YouTube has had to buy the rights to professionally produced content, such as television shows and movies. Credit Suisse put the cost of those licenses in 2009 at roughly two hundred and sixty million dollars. For Anderson, YouTube illustrates the principle that Free removes the necessity of aesthetic judgment. (As he puts it, YouTube proves that “crap is in the eye of the beholder.”) But, in order to make money, YouTube has been obliged to pay for programs that aren’t crap. To recap: YouTube is a great example of Free, except that Free technology ends up not being Free because of the way consumers respond to Free, fatally compromising YouTube’s ability to make money around Free, and forcing it to retreat from the “abundance thinking” that lies at the heart of Free. Credit Suisse estimates that YouTube will lose close to half a billion dollars this year. If it were a bank, it would be eligible for TARP funds.

Anderson begins the second part of his book by quoting Lewis Strauss, the former head of the Atomic Energy Commission, who famously predicted in the mid-nineteen-fifties that “our children will enjoy in their homes electrical energy too cheap to meter.”

“What if Strauss had been right?” Anderson wonders, and then diligently sorts through the implications: as much fresh water as you could want, no reliance on fossil fuels, no global warming, abundant agricultural production. Anderson wants to take “too cheap to meter” seriously, because he believes that we are on the cusp of our own “too cheap to meter” revolution with computer processing, storage, and bandwidth. But here is the second and broader problem with Anderson’s argument: he is asking the wrong question. It is pointless to wonder what would have happened if Strauss’s prediction had come true while rushing past the reasons that it could not have come true.

Strauss’s optimism was driven by the fuel cost of nuclear energy—which was so low compared with its fossil-fuel counterparts that he considered it (to borrow Anderson’s phrase) close enough to free to round down. Generating and distributing electricity, however, requires a vast and expensive infrastructure of transmission lines and power plants—and it is this infrastructure that accounts for most of the cost of electricity. Fuel prices are only a small part of that. As Gordon Dean, Strauss’s predecessor at the A.E.C., wrote, “Even if coal were mined and distributed free to electric generating plants today, the reduction in your monthly electricity bill would amount to but twenty per cent, so great is the cost of the plant itself and the distribution system.”

This is the kind of error that technological utopians make. They assume that their particular scientific revolution will wipe away all traces of its predecessors—that if you change the fuel you change the whole system. Strauss went on to forecast “an age of peace,” jumping from atoms to human hearts. “As the world of chips and glass fibers and wireless waves goes, so goes the rest of the world,” Kevin Kelly, another Wired visionary, proclaimed at the start of his 1998 digital manifesto, “New Rules for the New Economy,” offering up the same non sequitur. And now comes Anderson. “The more products are made of ideas, rather than stuff, the faster they can get cheap,” he writes, and we know what’s coming next: “However, this is not limited to digital products.” Just look at the pharmaceutical industry, he says. Genetic engineering means that drug development is poised to follow the same learning curve of the digital world, to “accelerate in performance while it drops in price.”

But, like Strauss, he’s forgotten about the plants and the power lines. The expensive part of making drugs has never been what happens in the laboratory. It’s what happens after the laboratory, like the clinical testing, which can take years and cost hundreds of millions of dollars. In the pharmaceutical world, what’s more, companies have chosen to use the potential of new technology to do something very different from their counterparts in Silicon Valley. They’ve been trying to find a way to serve smaller and smaller markets—to create medicines tailored to very specific subpopulations and strains of diseases—and smaller markets often mean higher prices. The biotechnology company Genzyme spent five hundred million dollars developing the drug Myozyme, which is intended for a condition, Pompe disease, that afflicts fewer than ten thousand people worldwide. That’s the quintessential modern drug: a high-tech, targeted remedy that took a very long and costly path to market. Myozyme is priced at three hundred thousand dollars a year. Genzyme isn’t a mining company: its real assets are intellectual property—information, not stuff. But, in this case, information does not want to be free. It wants to be really, really expensive.

And there’s plenty of other information out there that has chosen to run in the opposite direction from Free. The Times gives away its content on its Web site. But the Wall Street Journal has found that more than a million subscribers are quite happy to pay for the privilege of reading online. Broadcast television—the original practitioner of Free—is struggling. But premium cable, with its stiff monthly charges for specialty content, is doing just fine. Apple may soon make more money selling iPhone downloads (ideas) than it does from the iPhone itself (stuff). The company could one day give away the iPhone to boost downloads; it could give away the downloads to boost iPhone sales; or it could continue to do what it does now, and charge for both. Who knows? The only iron law here is the one too obvious to write a book about, which is that the digital age has so transformed the ways in which things are made and sold that there are no iron laws.

A Small-Business Guide to Intellectual Property (NYT)

2009-08-05T15:27:00.000-07:00

A Small-Business Guide to Intellectual Property

By DARREN DAHL

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From Mark Blaxill and Ralph Eckhardt, founders of 3LP Advisors, an intellectual property consulting company in Boston, and co-authors of a guide to I.P., "The Invisible Edge" (Portfolio, 2009).

Securing your intellectual property involves more than patents. Trademarks, trade dress and even Web site addresses are all part of I.P.
Think strategically when it comes to international rights. Start with countries where you might sell.
Don't sit on unused I.P. Use it to open additional revenue streams or bring about new partnerships through licensing.

The U.S. Patent and Trademark Office , for more information about I.P. for small business.
The World Intellectual Property Organization , for more about international I.P. rights.
An easy-to-use online global directory for I.P. resources.
Use Google's patent site to perform your patent search. You can also search here and here.
Patently-O by Dennis Crouch is one of the most popular blogs on the subject of I.P. law.

The two most precious resources for any small-business owner are time and money. That’s why when the subject of intellectual property comes up, many owners run in the other direction. They see images of expensive lawyers and use that as an excuse to ignore the topic, reasoning that it is a problem for big companies to worry about.

The trouble is, with the rise of competition through the Internet and on the global market, understanding intellectual property is more critical than ever for small-business owners. Let’s explore some of the common fallacies:

1. For small-business owners, it’s not worth the time or effort to secure intellectual property rights.

Daniel Lubetzky, chief executive of New York City-based Kind Snacks, had high hopes when he and his company attended the Natural Products Expo West in Anaheim, Calif., in March. And who could blame him, since his Kind Plus bars had been named the best new product at the Natural Products Expo East last October?

But it didn’t take long before Mr. Lubetzky knew something had gone wrong: He kept hearing how one of his competitors had copied the packaging, look and feel of his bars.

Fortunately for Mr. Lubetzky, he had secured crucial components of intellectual property like trademarks, trade dress (the look and feel of a product) and Web addresses after founding his company. Unlike a patent, which can cost up to $25,000 to secure, trademarks and Web addresses can be obtained relatively cheaply and without the aid of a lawyer.

With the legal documentation to back up his intellectual property rights, Mr. Lubetzky sent the offending company a cease-and-desist letter, which achieved the desired result. “Too many entrepreneurs forget there is more to I.P. than just patents,” said Mr. Lubetzky, who happens to be a lawyer.

2. Once I get a trademark, my brand is safe.

It may be. But consider what happened to Tracey Deschaine, who runs a restaurant called Dixie Picnic in Ocean City, N.J.

When Ms. Deschaine opened her business in 2006, she secured trademarks on her business name and logo and on the name of her signature item, “upcakes,” which are upside-down frosted cupcakes. The problem, she says, was that even though she had obtained the trademarks, someone monitoring the activity on the United States Patent and Trademark Office’s Web site had spotted her application and secured upcakes.com as the Web address, or U.R.L., before she could.

“I had no idea that even though I have a trademark, someone else could just go register the U.R.L.,” she said. “I wish I had planned ahead and bought the site before I did that.”

3. Having a patent gives me the right to produce something.

This is a very fundamental misunderstanding. Actually, what a patent does is give you the right to prevent someone else from producing what your patent covers. “Having a strong I.P. position helps ensure that other people pay you for your innovation like they would a toll on a road,” Mr. Kocher said.

But even if you do have a patent, there’s no guarantee that someone won’t try to get around it. There’s also no guarantee that you will win if you fight that person. But if you have your I.P. ducks in a row and a commitment to do whatever you can to defend those rights, you do have a fighting chance — even in a fight against a much larger company.

Consider the example of Cryptography Research, a 20-employee technology firm in San Francisco that specializes in data security. Beginning in 2004, the company made the decision to pursue litigation against the credit card giant Visa, which Cryptography asserted was infringing on its patents covering smart cards. To pursue the case against Visa, however, Cryptography’s founder, Paul Kocher, knew he needed a serious war chest in addition to his patent portfolio.

That’s why he decided to sell off another piece of his business, patents covering technology that protects Blu-ray discs from piracy, to Macrovision, which is now known as Rovi, in 2007 for $45 million. “All of a sudden we became a formidable opponent for someone who thought we couldn’t fight,” Mr. Kocher said. In the end, the gamble paid off, as the two companies settled out of court, with Visa’s agreeing to license the technology from Cryptography.

4. If I have a patent or trademark in the United States, I don’t need to worry about the rest of the world.

It depends on your business model. Intellectual property rights, which also include country-specific U.R.L.’s, need to be obtained country by country, some of which protect them better than others. The cost can vary, too.

In Japan, for example, it is notoriously expensive to acquire patents. In addition, the annual fees required to maintain the patents there are often prohibitively expensive for small businesses, said Gary Johnson, chief executive of Blue Spark Technologies, a manufacturer based in West Lake, Ohio, that makes small, flexible batteries used in things like radio frequency identification tags.

“What we have done is to develop a strategy to go after I.P. protection in a limited number of countries that we think we are most likely to sell or manufacture in, like the U.S. and China,” he said. “A lot of the choice comes down to what your business plan tells you.” To decide what your international I.P. strategy should be, consult a lawyer and conduct some cost-benefit analysis to see if expanding your I.P. rights makes sense.

5. People who collect patents but don’t actually make anything are “patent trolls,” parasites who can make money only by filing lawsuits against real businesses.

The term “patent troll” was coined in the wake of the epic lawsuit fought between NTP, a small holding company, and Research in Motion, which makes the hugely popular BlackBerry. The focal point of the dispute was a patent for wireless e-mail delivery held by NTP — something that R.I.M. eventually would pay millions of dollars to license. But what most people remember about the story is the lawsuits and the notion that NTP was somehow in the wrong for trying to enforce its patent, mostly because it didn’t make any products itself.

But consider that many inventors never set out to build a company, only to partner with someone who would bring their products to life. Thomas Edison, for instance, received more than 1,000 patents — many of which he licensed to other companies. “He created what we might consider the first innovation factory,” says Mark Blaxill a co-founder of 3LP Advisors, an intellectual property consulting company based in Boston.

A more recent example is Trident Design, a company founded by an inventor, Chris Hawker, which patented and then licensed the design for the PowerSquid. Like Edison, Mr. Hawker’s company invents products, builds an intellectual-property wall around them and then licenses them to other companies.

The PowerSquid is now manufactured by a division of Phillips Electronics and sold by a spinoff of Trident called Flexity. “Our entire business model is leveraging our I.P.,” Mr. Hawker said.

The Crowd Is Wise (When It’s Focused) (NYT)

2009-07-21T11:13:00.001-07:00

The Crowd Is Wise (When It’s Focused)

By STEVE LOHR

FEW concepts in business have been as popular and appealing in recent years as the emerging discipline of “open innovation.” It is variously described as crowdsourcing, the wisdom of crowds, collective intelligence and peer production — and these terms apply to a range of practices.

The overarching notion is that the Internet opens the door to a new world of democratic idea generation and collaborative production. Early triumphs like the Linux operating system and the Wikipedia Web encyclopedia are seen as harbingers.

In the new model, innovation is often portrayed as a numbers game. The more heads, the better — all weighing in, commenting, offering ideas. Collective knowledge prevails, as if a force of egalitarian inevitability.

But a look at recent cases and new research suggests that open-innovation models succeed only when carefully designed for a particular task and when the incentives are tailored to attract the most effective collaborators. “There is this misconception that you can sprinkle crowd wisdom on something and things will turn out for the best,” said Thomas W. Malone, director of the Center for Collective Intelligence at the Massachusetts Institute of Technology. “That’s not true. It’s not magic.”

The Netflix Prize is a stellar example of crowdsourcing. In October 2006, Netflix, the movie rental company, announced that it would pay $1 million to the contestant who could improve the movie recommendations made by Netflix’s internal software, Cinematch, by at least 10 percent. In other words, the company wanted recommendations that were at least 10 percent closer to the preferences of its customers, as measured by their own ratings.

(Cinematch analyzes each customer’s film-viewing habits and recommends other movies that the customer might enjoy. More accurate recommendations increase Netflix’s appeal to its audience.)

The contest will end next week because a contestant finally surpassed the 10 percent hurdle on June 26, and, according to the rules of the competition, rivals have 30 days from that date to try to beat the leader. The frontrunner is a seven-person team, and its members are statisticians, machine learning experts and computer engineers from the United States, Austria, Canada and Israel. It is led by statisticians at AT&T Research.

The leading team is a very elite crowd, indeed, but it is also one that was made possible by the Internet. The original three AT&T researchers (one has since joined Yahoo Research, but remains on the contest team) made good strides in the first year of the contest. But to make further progress, they went looking for people with other skills and perspectives. So they reached out eventually to a pair of two-person teams, who were among the leaders in the rankings posted on the contest Web site.

“The leader board was right there,” said Chris Volinsky, director of statistics research at AT&T. “It was pretty obvious who the top teams were.”

Though leading, his team may not win. But the teams in close pursuit are similar collaborations of skilled researchers and engineers.

The Netflix contest has lured experts worldwide not only because of the prize money but also because it offered a daunting challenge. The contestants’ algorithms must find patterns nestled in a collection of more than 100 million movie ratings. What is learned in tackling such a large-scale data analysis and predictive-modeling problem could well be applied in many industries, like Web commerce or telecommunications. “It made sense for us both from the perspective of AT&T and scientific research,” Mr. Volinsky explained.

In the Netflix contest, the winning idea is simply the one with the highest score. But often, companies rely on a contributing crowd for ideas, though management then chooses. I.B.M., for example, conducts online brainstorming sessions it calls Jams — 13 over the last seven years.

I.B.M. used one session to guide its strategy for investing in new growth fields, starting in 2006. An estimated 150,000 employees, clients, business partners and academics participated. Management sifted through the ideas and committed $100 million to invest in several opportunities to apply technology innovations to energy saving, health care and smart electricity grids.

“It starts out as crowdsourcing and it is culled to a set of action items,” said Jeffrey T. Kreulen, a researcher at the I.B.M. Almaden Research Center in San Jose, Calif.

Open-innovation models are adopted to overcome the constraints of corporate hierarchies. But successful projects are typically hybrids of ideas flowing from a decentralized crowd and a hierarchy winnowing and making decisions. In Linux’s case, anyone can submit code, but Linus Torvalds and a few lieutenants decide what code will be included in the operating system, noted Mr. Malone of M.I.T. Even Wikipedia — produced by collaborating clusters of contributors focused on particular areas of interest — relies on administrators to make final judgments on whether to delete a challenged article, he added.

“Most of the interesting examples of collective intelligence contain many different design patterns,” Mr. Malone said.

In a recent paper, “Harnessing Crowds: Mapping the Genome of Collective Intelligence,” Mr. Malone and his two co-authors, Robert Laubacher, a research scientist at M.I.T., and Chrysanthos Dellarocas, a professor at the University of Maryland, use a biological analogy in calling the design patterns of collective intelligence systems “genes.” They studied the genelike building blocks in more than 250 examples of collective intelligence enabled by the Web. The intent, they write, is to provide a systematic framework for thinking about collective intelligence, so “managers can do more than just look at examples and hope for inspiration.”

OPENING the corporate doors to ideas and inspiration from the collective crowd holds great potential, but there are pitfalls, warns Henry Chesbrough, executive director of the Center for Open Innovation at the University of California, Berkeley. To succeed, Mr. Chesbrough said, a company must have a culture open to outside ideas and a system for vetting and acting on them.

“In business, it’s not how many ideas you have,” he observed. “What matters is how many ideas you translate into products and services.”

Collaborating for Profits in Nanotechnology (NYT)

2009-07-19T11:40:00.001-07:00

Collaborating for Profits in Nanotechnology

By JAMES FLANIGAN

THE economic news in California has been pretty bleak lately. Its businesses, small and large, are becalmed by the recession. The state has taken to issuing i.o.u.’s in the wake of political wrangling over how to resolve a $26 billion budget deficit. Most ominous, the state’s once-great public universities and its community colleges and local schools face budget cuts that amount to critical surgery.

Yet in the midst of all that, there is a promise for the future in the collaboration by California’s university research centers, small companies and venture finance firms in an emerging area called nanotechnology.

Working with materials that are a thousandth the diameter of a human hair, nanotechnology companies do not produce finished products in any one industry. Rather, nano particles improve performance and open new possibilities in activities as varied as water purification, biomedicine, battery power, environmental repair and agriculture.

The universities have been essential in this development process. In some cases, they make direct equity investments in start-up companies. Other times, universities grant licenses to their research and give small companies access to expensive laboratory equipment in return for user fees. And some universities have set up incubators where small companies develop technological products and processes.

Why are universities investing scarce budget cash in start-up companies? “Partnerships with private industry are a way of making this new technology available for public benefit,” said Leonard H. Rome, interim director of the California NanoSystems Institute at the University of California, Los Angeles. Also, in times of strained budgets, such partnerships bring needed funds. The NanoSystems Institute, Mr. Rome said, “has attracted more than $350 million in research and development grants from industry.”

Moreover, the new nanotechnology industry demands interdisciplinary collaboration. “The medical school needs to be collaborating with the engineering school,” said Mr. Rome, who is also senior associate dean of research at the university’s School of Medicine. In fact, the institute was first authorized in 2000 as part of a $100 million grant from the state of California to spur university research.

Examples from several universities and fledgling companies demonstrate the potential. NanoH2O Inc., for instance, uses nano materials to improve the performance of reverse osmosis membranes in making dirty water clean or in desalination. Two years ago, the company licensed the membrane research of Eric Hoek, a professor of environmental engineering at U.C.L.A. Then it leased lab space in the NanoSystems Institute, which opened in 2007, because being at U.C.L.A. allowed the company to use expensive electron microscopes and other equipment.

“Being able to use the core facilities of the university couldn’t help but accelerate our progress,” said Jeff Green, chief executive of NanoH2O. It also helped attract $20 million in venture capital from Oak Investment Partners and Khosla Ventures. Now, NanoH2O is moving to a factory where it can manufacture membranes composed partly of nano-size elements of alumina and silicon. The membranes filter out salts and impurities yet allow water to flow faster, thus saving energy in desalination or water reuse processes.

Matrix Sensors Inc. is a new tenant at the NanoSystems Institute. The company is developing nano membranes that are so sensitive to resonance they can detect molecules of bacteria as well as proteins and DNA and thus diagnose early stages of illness. Matrix Sensors is working on licensed research of three professors, James K. Gimzewski of U.C.L.A., and Calvin F. Quate and Butros T. Khuri-Yakub of Stanford University. U.C.L.A. and Stanford have invested in the company, along with Miramar Venture Partners of San Diego, which has put in $1 million. That is a sign, said Michael Cable, chief executive of Matrix, that investors, even in the recession, are supporting nanotechnology.

QuantumSphere Inc., in Santa Ana, Calif., is approaching nanotechnology on a broad scale by making an array of catalysts that allow batteries to operate for longer periods, electronic displays to be manufactured at lower costs and ammonia fertilizers to be produced using less energy while also generating less carbon dioxide.

“It’s not a question of making nano materials alone but what applications are you using nano for,” said Kevin D. Maloney, president of QuantumSphere, a seven-year-old company that got its start with $100,000 investment from two angel investors: Jon Faiz Kayyem, a trustee of California Institute of Technology, and Marc H. Goroff, who has a doctorate from Caltech and is the founder of several companies.

The reason infinitesimal nano particles can give batteries more power is, paradoxically, “that at the nano stage there are more atoms available on the surface of a molecule proportionate to its volume, so there are more active atoms to store and release electricity,” said Douglas Carpenter, co-founder and senior science adviser of QuantumSphere. Mr. Carpenter designed rocket fuel for aerospace companies for many years and helped invent Quantum’s nano catalysts.

“At the nano level, elements change their properties,” Mr. Carpenter explained. Aluminum, for instance, cannot burn at micron levels, or one millionth of a meter, but burns and gives off an intensely glowing light at nano levels, or one billionth of a meter. QuantumSphere gets to do research on powerful microscopes and other equipment at the University of California, Irvine, paying fees to the university for each use. It has raised $17 million from private equity and venture funds, including $2 million from OM Group Inc., a specialty chemicals company based in Cleveland.

In an example of global collaboration, Rachid Yazami, research director of France’s National Center for Scientific Research, has done his work on battery technology since 2000 at Caltech. He is co-founder along with a Caltech professor, Robert H. Grubbs, of CFX Battery Inc., of Azusa, Calif., which makes lithium ion batteries that can power electric cars, medical devices, mobile phones and computers. The technology transfer office at Caltech invested in CFX and helped raise $15 million to get the company started.

“But lithium is expensive and coming into short supply,” Mr. Yazami said. So he is trying to develop a battery powered by nano particles of sodium and water. “You know the work of Jules Verne,” Mr. Yazami asked, referring to “20,000 Leagues Under the Sea.” “He wrote of using seawater as a battery.”

Find Funding in Your Backyard (Entrepreneur.com)

2009-07-14T10:42:00.000-07:00

Find Funding in Your Backyard

Local, state and regional funds aim to keep local economies going strong.

By Lydia Dishman | July 13, 2009

URL: http://www.entrepreneur.com/startingabusiness/gettingfinancing/article202608.html

Creating a must-have product for a hot market is every entrepreneur's dream. Frank Greer had it. The president and CEO of Zipit Wireless developed a nifty little device with embedded technology to allow users to communicate via SMS texting without using a cell phone or a computer. Teens and tweens no longer needed to compete for time on the family computer to IM friends, nor did their parents have to worry about spilling over the texting limits of their cell phone plans.

There was one little problem. Greer needed funding.

Though initial response was strong, Greer's patents were expiring, just when he was ready to finesse a second-generation product. He was also ready to spin Zipit out from under its then-parent company's umbrella and resources. So he hit the road.

"I went to every venture capital firm and angel investor in the state of South Carolina," Greer says, adding that the doors he knocked on remained tightly closed.

A fortuitous networking encounter led Greer to the South Carolina Research Authority and, subsequently, to its funding initiative for startups, SC Launch. SC Launch's mission to provide seed money and business resources to new companies to facilitate applied research, product development and commercialization programs in South Carolina was just what Zipit Wireless needed to get to the next level.

"Without the $200,000 from SC Launch, we would not exist," Greer says, noting that the money helped Zipit obtain its patents, complete product development and seek manufacturing in Asia. In one year, "It got us over the hump and to market," he says.

Who Are the Funders?
As venture capital dwindles and angel investors continue to hold their purses tightly, local, state and regional research and economic development organizations continue to fund startups to keep the economic engines running in their backyards and beyond.

The unique, hybrid organizations that provide this kind of funding vary greatly in size and scope. For example, the Battelle Memorial Institute is the world's largest nonprofit independent research and development organization. Kef Kasdin, a general partner with Battelle Ventures, says the firm is an independent early-stage venture-capital fund that works closely with Battelle and the National Labs to commercialize technologies and resources, either by creating companies or accelerating growth of the fund's portfolio companies.

The Southern Appalachian Fund is one of six New Markets Venture Capital companies in the U.S. Formed to provide equity capital and operational assistance to qualifying businesses in Tennessee, Kentucky and the Appalachian counties of Georgia, Alabama and Mississippi, it promotes economic development and job opportunities in low-income areas.

The Southwest Michigan First Life Science Fund is allowed geographical concentration to make a big impact on a relatively small area. Managing director Patrick Morand says it has made 10 strategic investments in early-stage life science companies.

"The region is rich in life-science talent in therapeutics, devices and diagnostics, providing a robust environment in which companies can develop their technologies and value," Morand says, adding that Southwest Michigan First's portfolio companies operate in a range of life-science-related industries, representing a mix of homegrown firms and companies that have relocated to Kalamazoo, Mich.

What's Available?
Bill Mahoney, CEO of SCRA, says that SC Launch guidelines cap initial investments to individual companies at $200,000. "We are not intending to replace venture capital," Mahoney explains. Funding in the form of grants, loans and equity investments is available to qualified companies. Grants can help defray legal, financial, marketing and intellectual property protection costs as well as further applied research and development efforts for future growth and fundraising.

Entrepreneurs in the area funded by the SAF can tap into that organization's $12.5 million venture capital fund. Battelle Ventures has $220 million under management. Kasdin says, "The amount that we invest in a company is determined by its stage of development--seed, early stage, expansion--and a thorough evaluation covering numerous criteria. We could provide an initial investment as small as $100,000 and could invest up to $10 million in a company over its life."

Who's Most Likely to Get Funded?
This is the tricky part. Each of these organizations, and others like them, are looking at a company's growth potential. But there's more to it than that. Entrepreneurs seeking funding must apply and meet specific guidelines.

When Frank Greer applied for SC Launch seed money, he says the third-party firm hired to do due diligence put him through the paces. "Even if we hadn't gotten funding," Greer says, "We came out of it with a better business plan."

The reason Zipit Wireless made the cut, according to Mahoney, is because, "They had a proprietary technology that is protectable as intellectual property, in addition to potential for high growth." That, and the fact that Zipit's headquarters is located in-state.

Ditto for SWMF Life Science Fund. Locating facilities in Kalamazoo is critical, and life sciences are a must. Morand says the fund is "rather agnostic" about defining life sciences and has already funded therapeutic technologies, medical devices, health-IT, diagnostic and bio companies.

Who Won't Get Funded?
No matter how good the idea, Kasdin points out, "A startup that does not meet our criteria would not get funded." Mahoney concurs: "We've seen marvelous entrepreneurial ventures, but not in our sweet spot," which for SC Launch includes advance materials, nanosystems and alternative energy.

The take-away lesson for entrepreneurs: Do your homework. Research the funding source thoroughly, and make sure you fall within its guidelines.

How to Find Them
Both Kasdin and Morand say most entrepreneurs find them through word of mouth. "The fund's general partner, Southwest Michigan First, is a rich source of referral due to its efforts in attraction with companies and regions around the globe," Morand says.

Kasdin notes, "Battelle Ventures has a website that those searching for VCs would find, and we are also listed in various directories."

The International Economic Development Council is a nonprofit membership organization dedicated to helping economic developers and has a wealth of information about funding initiatives across the globe.

Home Field Advantage
After getting SC Launch funding, Frank Greer went on to raise more than $4 million for Zipit Wireless, including investments from venture capital firms. But he's quick to point out that organizations such as SC Launch have something of a home-field advantage. "A typical VC sees thousands of applications. A home state organization provides encouragement and resources, and is not purely looking at returns. They are more invested in fostering local economic development."

Despite Odds, Cities Race to Bet on Biotech (NYT)

2009-06-11T11:02:00.000-07:00

Here's a sobering news piece for our yet-to-be biotech industry. Bottomline: PR cannot and should NOT compete in this field. Money already programmed for this purpose (if any) would be better used in creating sustainable local industries to help PR replace some of the most expensive imports and maybe some day begin exporting.

Despite Odds, Cities Race to Bet on Biotech

By SHAILA DEWAN

KANNAPOLIS, N.C. — Where a textile mill once drove the economy of this blue-collar town northeast of Charlotte, an imposing neoclassical complex is rising, filled with fine art, Italian marble and multimillion-dollar laboratory equipment. Three buildings, one topped by a giant dome, form the beginnings of what has been nicknamed the Biopolis, a research campus dedicated to biotechnology.

At $500 million and counting, the Biopolis, officially called the North Carolina Research Campus, is a product of a national race to attract the biotechnology industry, a current grail of economic development.

Cities like Shreveport, La., and Huntsville, Ala., are also gambling millions in taxpayer dollars on if-we-build-it-they-will-come research parks and wet laboratories, which hold the promise of low-pollution workplaces and high salaries.

At a recent global biotech convention in Atlanta, 27 states, including Hawaii and Oklahoma, paid as much as $100,000 each to entice companies on the exhibition floor. All this for a highly risky industry that has turned a profit only one year in the past four decades.

Skeptics cite two major problems with the race for biotech. First, the industry is highly concentrated in established epicenters like Boston, San Diego and San Francisco, which offer not just scientific talent but also executives who know how to steer drugs through the arduous approval process.

“Most of these states probably don’t stand much of a chance to develop a viable biotech industry,” said Gary P. Pisano, a Harvard Business School professor and the author of “Science Business: The Promise, the Reality and the Future of Biotech.”

“You can always get a few top people,” Mr. Pisano said, “but you need a lot of critical mass.”

Second, biotech is a relatively tiny industry with a lengthy product-development process, and even in its largest clusters offers only a fraction of the jobs of traditional manufacturing. In the United States, only 43 biotechnology companies employ more than 1,000 people, according to BioAbility, a consulting firm in the Research Triangle Park in North Carolina.

There is no guarantee that if a blockbuster drug materialized, it would be manufactured and marketed in the same place it was developed and tested.

Joseph Cortright, an economist who has studied biotechnology clusters, gave the example of a promising anti-leukemia compound developed at Oregon Health Sciences University in Portland, where Mr. Cortright is based. “The economic impact in the Portland area is zero because the rights to manufacture and market this drug were owned already by Novartis,” Mr. Cortright said.

But the race continues.

The state of Florida and Palm Beach County used $510 million as bait for a research institute that will employ 545 people (and, officials project, spur the creation of 46,000 more jobs over 15 years). New York City has invested more than $45 million in bioscience infrastructure, and Kentucky matches federal research grants dollar for dollar.

Cities like Shreveport, where public and private money have built the InterTech Science Park, remain steadfastly optimistic, though a biotechnology manufacturing center at the park was occupied for only six months in 2001 before the tenant went under.

The building remains an asset, said Dennis Lower, the park director. The private sector’s willingness to invest in it helped persuade the state to invest $15 million in a second building. “Right now we have four companies that are interested in that building,” Mr. Lower said. “Three times in the last three years we have almost had a tenant in that building.”

Some economic development officials say the value of a biotech cluster cannot be calculated in dollars alone.

Larry Pelton, president of the Economic Development Council of St. Lucie County, Fla., said the millions that the state spent attracting the Scripps Research Institute to Palm Beach County started a chain reaction that brought a branch of the Torrey Pines Institute for Molecular Studies to Port St. Lucie.

The institute received state and local incentives worth $32 million, plus a building and land. That helped St. Lucie County, which has grown quickly and needed more hospital beds, persuade Martin Memorial Health Systems to build a 300-bed hospital, Mr. Pelton said.

The county’s research institutes have also enhanced science and math education and spurred creation of a charter school, he said.

To build a viable biotech cluster, some areas have expanded the traditional definition of the industry beyond genetics to biofuels, agriculture, medical devices — even bioterrorism research.

A good strategy capitalizes on a city’s existing strength, said Patrick Kelly, the vice president of state government relations for the Biotechnology Industry Organization, whether it is the presence of the Centers for Disease Control and Prevention in Atlanta, a highly educated work force in Huntsville, or experience running clinical trials in the Research Triangle.

In Kannapolis, the focus is on food and nutrition, not because of any expertise, but because of David H. Murdock, the health-obsessed billionaire who first envisioned the Biopolis.

To attract seven of the state’s universities, including Duke and the University of North Carolina, Mr. Murdock, a real estate developer and owner of the Dole Food Company, persuaded the state to invest almost $30 million a year in rent and operating expenses. Local officials approved the sale of $168 million in bonds to pay for infrastructure improvements around the 350-acre campus — up considerably from an original estimate of $7 million, said John D. Day, the Cabarrus County manager.

Mr. Murdock says he has spent half a billion so far on buildings, recruiting scientists, and equipment that includes the most powerful nuclear magnetic resonance spectrometer in the United States, which can help to study molecules.

Though the buildings are still half-empty and construction is slower than anticipated, the campus has attracted senior scientists like Mary Ann Lila, who left the University of Illinois to head the Plants for Human Health Institute, a North Carolina State University effort. Dr. Lila says she has had inquiries from scientists worldwide.

But some critics say the Biopolis is largely a real estate venture that can only increase the value of hundreds of additional acres Mr. Murdock owns in the area.

“It’s a single large developer, with substantial deep pockets, with a very specific agenda that doesn’t necessarily align with the interests of the state,” said Doug Baker, the chief executive officer of Kryosphere, a Research Triangle company that stores biological specimens.

Mr. Baker, whose company is considering expanding to Kannapolis, said the Biopolis could end up as an attractive, saleable asset for Mr. Murdock at the expense of other biotechnology clusters across the state.

“It’s a very large mall,” Mr. Baker said. “I don’t see the organic qualities.”

In Pitching to Angel Investors, Preparation Tops Zeal (NYT)

2009-06-11T11:00:00.001-07:00

In Pitching to Angel Investors, Preparation Tops Zeal
By BRENT BOWERS

FOR entrepreneurs hoping to land start-up capital from angel investors, here’s what two recent studies found: Don’t get carried away when you pitch your product because the investors may lose interest faster than you can say “almost unlimited market.”

And one misstep — like stammering a vague reply instead of saying you do not know the answer — can also kill a deal, the authors of the studies say.

Angel investors are generally wealthy people seeking promising start-ups that are too small to attract the attention of venture capitalists. The estimated 260,500 active angels in the United States are the largest source of seed and start-up capital for entrepreneurs (not counting their own savings or money from family and friends), according to Jeffrey Sohl, the director of the Center for Venture Research at the University of New Hampshire.

Even last year, as the recession gathered force, these angels spent $19.2 billion on more than 55,000 ventures, he said, though that was down from $26 billion in 2007. The average investment for each deal last year was $346,500.

By contrast, venture capitalists made only 440 investments in start-ups last year, putting the bulk of their money in later stages of a company’s growth in deals that averaged $7.5 million, Mr. Sohl said. “Angels provide the seed and start-up funding that turns acorns into trees like Starbucks, FedEx, Amazon and Google,” Mr. Sohl said.

Typically, entrepreneurs make their initial pitch to angels in an informal session. If their idea is judged to have promise, they may be invited to give a PowerPoint presentation followed by a question-and-answer session.

With time at a premium, it is imperative for entrepreneurs to come prepared to both meetings with solid arguments about their product’s marketability and with evidence of their commitment to their company in the form of sweat equity and their own investment, experts say.

But enthusiasm is a different matter, according to a study that was presented last week at an entrepreneurship conference at Babson College outside Boston.

“That is the trickiest part,” said Richard Sudek, an angel investor and assistant professor of entrepreneurship at Chapman University in Orange, Calif., and one of the three authors of that study. “We like you to show some excitement, but don’t force it. Being authentic is much more important. There is such a thing as quiet passion. Anything that comes across as slickness is a negative.”

Cheryl Mitteness, a doctoral candidate in entrepreneurial studies at the University of Louisville and one of Mr. Sudek’s co-authors, was even more emphatic. “Show your passion,” she said, “but don’t try to be somebody that you’re not. Angels are very leery of too much enthusiasm.”

Another research paper, by Xiao-Ping Chen and Suresh Kotha of the University of Washington and Xin Yao of Wichita State University and published in The Academy of Management Journal in February, came to much the same conclusion. The effects of perceived passion, defined as cues like facial expressions, tone of voice and hand gestures, “were statistically insignificant,” the article said.

Ms. Chen, a professor at her university’s business school, called the findings “surprising,” especially since she and her colleagues often rely on such signals in their hiring decisions. “You can show your passion through preparedness, how well you’ve thought out your business plan,” she said. “But the style of your presentation doesn’t matter.”

What angels are looking for, authors of both reports said, is evidence of a market opportunity with growth potential, a strong management team and an exit strategy, including a list of possible acquirers, since the eventual sale of the companies they invest in is how they make money.

“Also, angels put a high value on trustworthiness,” said Mr. Sudek of Chapman, a former entrepreneur himself and the chairman-elect of Tech Coast Angels, the largest angel group in the United States. “If you don’t know the answer to a question, say so, and promise to get back to them. Don’t fake it.”

In fact, acknowledging gaps in your knowledge and other weaknesses, and letting angels know you need their help, can add to your credibility, he said.

Here are some other tips from the researchers:

¶Memorize an “elevator pitch” for your product and its potential in 90 seconds or less. It will bolster your confidence, and you can recycle it to win over customers, vendors and employees.

¶Consider hiring a speech coach, but only one familiar with angel investors’ thinking.

¶Attend “pitching contests” that many business schools and angel groups sponsor.

¶In presentations, be upbeat but realistic in your profit and revenue projections. Better yet, draw up optimistic, middle-ground and pessimistic projections to show how carefully you have thought them through.

Ted Ray, founder of Ted’s Tinctures Inc. in Mountain View, Calif., has some advice for fellow entrepreneurs, even though he is only now starting a quest for $500,000 in angel financing.

First, he said, have a product on the market. “Nothing speaks more loudly than revenue coming in,” he said. His two-year-old company, which makes an herbal remedy called FlyRight Jet Lag Formula, had sales last year of $25,000 and is on track to increase that by tenfold this year.

Second, do not ask other people for money unless you have spent your own. He has put $105,000 of his savings into his firm and raised $185,000 from family and friends.

Third, the business plan you show to potential investors should be concise. He suggested using software on Angelsoft.net.

Fourth, seek angels with a record of investing in your field — in his case, consumer products.

And finally, he says, explore every angle. “If an angel says no, ask him for the names of four other angels who might say yes,” Mr. Ray said. “My goal is to get 100 introductions to get 10 meetings to get three presentations to close one deal.”

Who Says Innovation Belongs to the Small? (NYT)

2009-05-24T10:00:00.000-07:00

This read further highlights the importance of the creation of a deliberate network and innovation infrastructure to nurture this kind of change (whether public or private) - it simply does NOT happen in a vacuum.

An essential element for it to flourish is that the innovators and inventors MUST be close enough to the technology and systems they're trying to innovate so that the resulting innovation is relevant and not the case of a "solution looking for a problem".

Who Says Innovation Belongs to the Small?

By STEVE LOHR

FOR more than a decade, the prevailing view of innovation has been that little guys had the edge. Innovation bubbled up from the bottom, from upstarts and insurgents. Big companies didn’t innovate, and government got in the way. In the dominant innovation narrative, venture-backed start-up companies were cast as the nimble winners and large corporations as the sluggish losers.

There was a rich vein of business-school research supporting the notion that innovation comes most naturally from small-scale outsiders. That was the headline point that a generation of business people, venture investors and policy makers took away from Clayton M. Christensen’s 1997 classic, “The Innovator’s Dilemma,” which examined the process of disruptive change.

But a shift in thinking is under way, driven by altered circumstances. In the United States and abroad, the biggest economic and social challenges — and potential business opportunities — are problems in multifaceted fields like the environment, energy and health care that rely on complex systems.

Solutions won’t come from the next new gadget or clever software, though such innovations will help. Instead, they must plug into a larger network of change shaped by economics, regulation and policy. Progress, experts say, will depend on people in a wide range of disciplines, and collaboration across the public and private sectors.

“These days, more than ever, size matters in the innovation game,” said John Kao, a former professor at the Harvard business school and an innovation consultant to governments and corporations.In its economic recovery package, the Obama administration is financing programs to generate innovation with technology in health care and energy. The government will spend billions to accelerate the adoption of electronic patient records to help improve care and curb costs, and billions more to spur the installation of so-called smart grids that use sensors and computerized meters to reduce electricity consumption.

In other developed nations, where energy costs are higher than in the United States, government and corporate projects to cut fuel use and reduce carbon emissions are further along. But the Obama administration is pushing environmental and energy conservation policy more in the direction of Europe and Japan. The change will bolster demand for more efficient and more environmentally friendly systems for managing commuter traffic, food distribution, electric grids and waterways.

These systems are animated by inexpensive sensors and ever-increasing computing power but also require the skills to analyze, model and optimize complex networks, factoring in things as diverse as weather patterns and human behavior.

Big companies like General Electric and I.B.M. that employ scientists in many disciplines typically have the skills and scale to tackle such projects. Their advantage is in “being able to integrate innovations across these complex systems,” said James E. Spohrer, a scientist at I.B.M.’s Almaden Research Center in San Jose, Calif.

Technology trends also contribute to the rising role of large companies. The lone inventor will never be extinct, but W. Brian Arthur, an economist at the Palo Alto Research Center, says that as digital technology evolves, step-by-step innovations are less important than linking all the sensors, software and data centers in systems.

Today, Mr. Arthur said, the unfolding “digitization of the economy” is in some ways a modern rerun of past technology waves, from steam power to electricity. “It’s not individual inventions that matter so much, but when large bodies of technology come together and have an impact across the economy,” he said. “That’s what we’re seeing now.”

In computing, some technological frontiers require size and deep pockets. To be competitive in Internet search and some other Web services, which cater to hundreds of millions of users worldwide, a company must build data centers of gargantuan size, and only a handful of companies can design and afford them, led by Google and Microsoft.

“There are just a few companies in a position to do computing and process data in a way never done before,” observed Richard F. Rashid, Microsoft’s senior vice president for research.

The innovation tilt toward big companies, to be sure, is a rebalancing. There is still plenty of bottom-up innovation, including promising start-ups in the environmental and energy businesses. At the individual level, tinkering users have made significant contributions in fields as diverse as software and sporting goods.

STILL, the pendulum of thinking on innovation does seem to be swinging toward the big guys. In health care, institutions that have done best in improving the health of patients with chronic conditions like heart disease and diabetes have been larger, integrated systems like Kaiser Permanente in California, Intermountain Healthcare in Utah and the Geisinger Health System in Pennsylvania. They have the scale and incentives to invest in things like wellness programs and electronic health records.

In a new book on health care, “The Innovator’s Prescription,” Mr. Christensen and the co-authors, Dr. Jerome H. Grossman and Dr. Jason Hwang, say that such large integrated systems “have the scope to create within themselves a new disruptive value network.”

In an e-mail message last week, Mr. Christensen, a professor at the Harvard Business School, said that big companies do tend to resist disruptive innovation but that size need not spell failure. “The good news is that, once they recognize the benefits of disruptive thinking,” he wrote, “the big companies have all the resources necessary to induce change.”

Counting Down to the End of Moore’s Law (NYT)

2009-05-22T10:32:00.001-07:00

Counting Down to the End of Moore’s Law

By Saul Hansell

“We’re looking at a brick wall five years down the road,” Eli Harari, the chief executive of SanDisk, said to me earlier this week.

Brendan McDermid/Reuters Eli Harari

In 1990, when SanDisk, which he founded, shipped its first generation of flash memory — the sort that can remember information even after you turn off the power — each chip stored four million bits of information. Today, the biggest chip SanDisk makes holds 64 billion bits.

In other words, the capacity of flash chips has doubled 14 times in 19 years. That’s faster, Mr. Harari boasted, than Moore’s Law — the observation by Gordon Moore, the co-founder of Intel, that the capacity of semiconductors doubles roughly every two years.

Normally, when I’ve talked to chip executives about the limits of Moore’s Law, they are confident, in a vague sort of way, that they will be able to continue to increase the capacity of their chips one way or another.

Mr. Harari was a great deal more precise about the brick wall his company is heading toward: “We are running out of electrons.”

“When we started out we had about one million electrons per cell,” or locations where information is stored on a chip, he said. “We are now down to a few hundred.” This simply can’t go on forever, he noted: “We can’t get below one.”

SanDisk and other flash memory makers have figured out how to cram even more information into that tiny cell. Until a few years ago, each of those cells worked the way most computer memory does — it represented either a zero or a one. Now the chip can actually count how many electrons are in a cell, and depending on the number it can write and read up to 16 states (recording a number between zero and 15, or four bits to a computer).

Let’s stop for a second to take stock of the wonder of all this. The last flash memory card I bought for my camera held two gigabytes (16 billion bits). It cost me $6. And somewhere inside it is something that is counting electrons 40 at a time. An electron, in case you forgot your high-school physics, has a radius of 2.8179 × 10−15 meters. In layman’s terms it is pretty much the smallest thing you could ever count.

The problem here is that the way current flash technology stores those electrons, they don’t always follow instructions, especially as the memory card gets older.

“When you have a billion cells, you cannot uniformly control them to one electron,” Mr. Harari said. “If I want 40 electrons, plus or minus two electrons, I can do that when the device is new. But seven years out, it will start to smear.” In other words, the electron count will start to vary from one cell to the next.

SanDisk, to steal a line from a bigger Silicon Valley company, has an app for that. The controllers on each of its chips keep track of these errors and compensate for them.

There is still some more engineering to do. The company can try to make cells smaller, get more bits per cell and improve the controllers.

But at the end of the day, Mr. Harari said, it probably can double the capacity of its chips only two more times. Once the industry goes from its current 64-billion-bit chip to a 256-billion-bit chip (that’s 32 gigabytes), it will hit that brick wall.

Then what?

Your camera and music player will certainly be able to store a lot of files. But you won’t be able to count on next year’s iPhone having double the capacity at the same price.

He may be heading for a brick wall, but Mr. Harari has a plan: Head up.

“When Manhattan ran out of space, they built skyscrapers,” Mr. Harari said. “It’s the same for us.”

Right now semiconductors are all based on the particular properties of circuitry etched onto a flat piece of silicon. Four years ago, SanDisk bought Matrix Semiconductor, a company that was trying to develop a way to stack multiple layers of very tiny memory cells on top of one another.

(SanDisk is far from the only company trying to explore the third dimension in flash memory. Bill Watkins, the former chief executive of Seagate, recently joined the board of a company, Vertical Circuits, that uses a silver ooze to stack memory chips.)

So far, Mr. Harari said, the company has been able to build chips with four or eight layers. That’s the good news. The bad news is that they can write information to those chips only one time. That might be all right for distributing software or video games, but most flash memory is sold for use in devices like cameras, which need memory that can be erased and rewritten.

Mr. Harari said the company’s engineers were making good progress. But he didn’t have the Pollyanna view of some chip executives that Moore’s Law will apply forever.

“When you have a new material, all bets are off,” he said. “Until you have it, you don’t have anything.”

In Innovation, U.S. Said to Be Losing Competitive Edge (NYT)

2009-05-22T10:03:00.000-07:00

The question to ask is, assuming PR wants to play this field (and everything points that it intends to...however misled) what is PR doing to counter this effect?

In my opinion, the answer ought to be EDUCATION. But this is exactly what PR has NOT been doing. Most of the education in PR has been virtually privatized to the point that over two thirds of admissions to the public system of higher education comes from private schools.

It's no secret that, similar to the US, the public education in PR has failed to prepare the next generation of technology workers and as a result setting both countries decades behind the current leaders in this industry.

To be able to compete in the international arena of technology both the US and PR must engage in an aggressive push for education - even if this strategy will show results in 10 years.

PR cannot afford to lose more than one generation in getting ready its technology aspirations. The next 5 years will be critical in making such changes.

In Innovation, U.S. Said to Be Losing Competitive Edge

By STEVE LOHR

The competitive edge of the United States economy has eroded sharply over the last decade, according to a new study by a nonpartisan research group.

The report by the Information Technology and Innovation Foundation found that the United States ranked sixth among 40 countries and regions, based on 16 indicators of innovation and competitiveness. They included venture capital investment, scientific researchers, spending on research and educational achievement.

But the American economy placed last in terms of progress made over the last decade. “The trend is very troubling,” said Robert D. Atkinson, president of the foundation.

Measuring national competitiveness and the capacity for innovation is tricky. Definitions and methods differ, and so do the outcomes. For example, the World Economic Forum’s recent global competitiveness report ranked the United States first. Much of the forum’s report is based on opinion surveys.

A report last year by the Rand Corporation concluded that the United States was in “no imminent danger” of losing its competitive advantage in science and technology.

The new report, published on Wednesday, offers a more pessimistic portrait. Its assessment is in line with a landmark study in late 2005, “Rising Above the Gathering Storm,” by the National Academies, the nation’s leading science advisory group. It warned that America’s lead in science and technology was “eroding at a time when many other nations are gathering strength.”

President Obama has often said that in the future, international prosperity will depend on the United States becoming an “innovation economy.” The administration’s economic recovery package includes added spending for areas favored by innovation policy advocates, including higher research and development spending and funds for high-technology fields like electronic health records. But the administration has no coordinated innovation agenda.

Some countries, including Singapore, Taiwan, Finland and China, are pursuing policies that are explicitly designed to spur innovation. These policies typically try to nurture a broader “ecology of innovation,” which often includes education, training, intellectual property protection and immigration. This is in contrast to the industrial policy of the 1980s in which governments helped pick winners among domestic industries.

The foundation study, according to John Kao, a former professor at the Harvard business school and an innovation consultant to governments and corporations, is an ambitious effort at measurement. He called its conclusions “a wake-up call.”

In the foundation report, unlike some competitiveness studies, results were adjusted for the size of each economy and its population. Consequently, the United States ranked sixth in venture capital investment (Sweden was first); fifth in corporate research and development spending (Japan led); and fourth in science and technology researchers (again, Sweden was first).

Over all, the most innovatively competitive nation was Singapore, which embarked on a national innovation strategy years ago, investing heavily and recruiting leading scientists and technologists from around the world.

Mr. Atkinson of the foundation said the United States should act more like the individual states had been doing for some time. They have government programs to attract investment and talent and improve work force skills of local people.

The study’s specific recommendations include federal incentives for American companies to innovate at home, ranging from research tax incentives to work force development tax credits. Public investments and regulatory incentives can accelerate the use of information technology in health care, energy systems, transportation, government and education.

You Can Still Find an Angel Investor (Entrepreneur.com)

2009-05-22T09:45:00.000-07:00

You Can Still Find an Angel Investor

There will always be angel investors, in good times and bad.

By Asheesh Advani | Entrepreneur Magazine - May 2009

URL: http://www.entrepreneur.com/magazine/entrepreneur/2009/may/201232.html

I can’t read any more articles about how angel investors are supposedly abandoning entrepreneurs during this recession. In my view, it’s neither true nor what I have observed, despite the media hype. There will always be angel investors, and there will always be entrepreneurs--in good times and bad. The main difference is that it takes much longer to raise money in recessionary times. Entrepreneurs have to deal with rejection more often and expand their pipeline of investor leads. Here are three keys to finding your own angel.

Resilience is rewarded. Dealing with rejection is nothing new for most entrepreneurs. When I raised money from angel investors in the last recession, I was turned down twice as often as I was encouraged to have a second meeting with an investor.
Persistence is rewarded. It’s also important to have a systematic approach for dealing with investor objections. For example, the most common form of objection in today’s market environment is some variation of “I don’t want to liquidate my stock market investments to invest in something new,” or, “This is not a good time for me to make investments.” A good response would be, “Are you convinced each of your stock market investments will outperform an investment in my startup?”
Patience is rewarded. Building your investor pipeline over several months is critical to raising money under these conditions. Many entrepreneurs don’t like to raise money, and they don’t think about it like prospecting for new clients. The truth is that it’s very similar. You need to make a prospect list, manage it with a contact management database and send periodic updates to investors to deepen the relationship over a period of months. It takes time to raise money, and entrepreneurs are usually in a rush.

In 2007, angel investors were interested in hearing a pitch about revenue growth, and the decision to invest involved some amount of fear of losing the opportunity. In 2009, angel investors want to hear you tell them about earnings growth, and the decision to invest is based on how much affinity they have for the business concept and the principal owners. But no matter the year, the goal of your first meeting with an investor is to get a second meeting. Resilience, persistence and patience will ensure you get enough first meetings and second meetings to meet your fundraising goals.

Asheesh Advani is president of Virgin Money USA, author of Investors in Your Backyard and founder of CircleLending, which pioneered the business of managing person-to-person loans and mortgages and was acquired by the Virgin Group.

Biotech Can Survive the Recession, But It Won’t Be Easy (Wired.com)

2009-05-22T08:58:00.000-07:00

Puerto Rico needs a strategy that is both sustainable and touch with reality. Having biotech high in its investment purse puts PR in direct competition with powerhouses like United States, Singapore, India, and China.

Moreover PR lacks both the infrastructure and the human capital to engage such industry and therefore placing over 10yrs behind industry players...which translates into probably twice as many years in such a fast moving arena.

Biotech Can Survive the Recession, But It Won’t Be Easy

ATLANTA, Georgia — There’s plenty of money available for biotech researchers with big ideas, but that funding is harder to get than ever before, and some of it may come from strange places.

Stem cell companies could be running on bailout money, and gene therapy firms may be fueled by cash from the Russian government. Only the strongest startups will pry funds out of American investment firms.

“I think that there is money available for new companies, but they have to come with a perfect business plan, perfect area to innovate in and a very strong management team,” says Karl Handelsman, a managing director at CMEA Capital.

Long gone is the golden age of biotech research, when venture capital firms would give any biologist with a business plan carte blanche in exchange for a small stake in their company. In 2007, venture investors poured more than $5 billion into the sector, according to PricewaterhouseCoopers, including $1.5 billion in the first quarter of that year. Nowadays, investors are clinging to their money. Over the first three months of 2009, biotech firms only grabbed $576 million, the worst quarter since fall 2001, after the September 11 terrorist attacks. But even in the midst of a recession, some emerging technologies shine so bright that investors can’t resist. You can do a lot of research with $576 million.

Handelsman is cautiously optimistic about next-generation vaccines and is thrilled about the long-range potential of synthetic biology. He gushed over Intellikine, a San Diego startup that is taking advantage of some very intense biological research to find new drugs for cancer, autoimmune disorders and inflammation.

That sort of enthusiasm may be rare right now. Even the most promising businesses will find that venture capital is coming at a remarkably high price.

“I’ll get 90 percent of your company for $5 million,” said Steven Burrill, an investor who has started countless biotech companies. “I used to be able to get 10 or 20 percent of your company for $5 million. So power is clearly on the side of the people with capital, against the side of people without it.”

In a packed auditorium at the Biotech Industry Association convention in Atlanta, he explained that entrepreneurs can’t do things the way they’ve been doing them for the past 30 years. If someone tried to start a company today, using the same tactics that made Genentech a drug-discovery powerhouse, they would fail.

Burrill added that it’s much easier to commercialize drugs outside the United States, so his home country will be getting new medical technology far later than other parts of the world.

“I think a lot of people, today, are writing the obituary for our industry, talking about how tough it is” said Burrill, before explaining why he has a brighter outlook.

Smart companies will adapt to the dark financial climate, he says. They will find unusual sources of funding, like government money and foreign investors, and eventually the biotech industry will be stronger than ever.

Who Owns Your Great Idea? (NYT)

2009-01-08T08:30:00.000-08:00

Who Owns Your Great Idea?

By SAMANTHA STAINBURN

Peter Zummo, a senior double-majoring in design and mechanical engineering at Rensselaer Polytechnic Institute, is used to explaining the products he thinks up for his studio-class assignments. But last spring, he found himself answering questions of a different kind in a conference room at Rensselaer’s office of technology commercialization, which tracks and patents inventions made on campus.

Mr. Zummo and his classmate Matthew Naples, who was attending the meeting via speakerphone, had designed a water bottle that could be filled with sand and reused as a brick to build housing in developing countries. The director of the office, Charles Rancourt, sitting across the table from Mr. Zummo, wanted to know: When had they come up with their design? Had they held brainstorming sessions on campus or off? What equipment had they used to produce their prototypes?

Colleges and universities own the ideas and technologies invented by the people who work for them, including professors and graduate students who are paid to do research. Most universities also own inventions created by students using a significant amount of their resources, even if the inventors are undergraduates like Mr. Zummo and Mr. Naples, both 21.

The question of whether the two students or R.P.I. owned their invention was a tricky one. They had first designed plastic bottles that snapped together, Lego style, with two other students for a freshman design class project that challenged them to solve a social problem. Their idea was to keep the billions of water bottles that people in developing nations throw away each year out of landfills while providing the poor with free building materials. They presented a paper and a prototype in class, but “it was a crude concept, and we never really hit our goals with our first rendition,” Mr. Naples says.

As juniors, he and Mr. Zummo decided to tinker with the design again on their own (the rest of the original group didn’t want to join them), brainstorming off the Troy, N.Y., campus and interviewing bottle manufacturers about the molding process and materials. They developed a new design that was cheaper to manufacture and could withstand more types of stresses than the first.

With entrepreneurship booming, especially in courses that mix M.B.A. candidates with budding physicians or engineers, more and younger students are coming up with ideas that have commercial potential. While formal programs offer classes in managing intellectual property, plenty of students develop their ideas with little knowledge of how ownership is determined or the pros and cons of involving the university.

“Universities want to get whatever revenue streams come out of inventions so they can build more labs, have more research going on and hire more professors,” says David Schwartz, executive editor of Technology Transfer Tactics, a newsletter for people working in the field. Lisa Rooney, director of Ohio University’s tech transfer office, notes another interest: “Most universities have a broader economic mission to help out their communities and states, and licensing or starting new companies is a way to do that.”

Colleges and universities obtained fewer than 250 patents a year before 1980, when the Bayh-Dole Act gave them ownership of inventions developed through federally financed research. Now they acquire about 3,000 a year, according to the Association of University Technology Managers, whose members work in tech transfer offices. In 2006, association members made $45 billion from licensing fees and equity in spinoff companies; research powerhouses like Stanford and New York University made $61 million and $157 million, respectively.

University help can be a boon for student inventors, too. A third to half of the money generated by a product is typically assigned to the student, with the rest split between the student’s department and the university. That’s a better deal than the zero percent collected by scientists working for corporations. And universities cover the legal fees involved in obtaining patents on inventions they own, which can easily total $15,000 a patent.

“You can imagine a 20-year-old who develops something isn’t going to have access to venture capital money or the expertise to patent it,” Mr. Schwartz says. “The tech transfer office can find the resources to move it forward.”

Of course, the offices negotiate deals that are best for the university, notes Peter Corless, a partner at the law firm Edwards Angell Palmer & Dodge in Boston. He specializes in protecting biotech and medical device inventions at academic institutions. “If they can, they’re going to give some deference to the inventor, but their first allegiance is to do something for the university,” he says.

Erez Lieberman, a 28-year-old graduate student doing federally financed research at the Harvard-M.I.T. division of health sciences and technology, discovered this tendency after the Massachusetts Institute of Technology pushed through a patent on a technology he created as an intern at NASA in the summer of 2007. His algorithm detects whether a person is standing correctly or is off balance, and Mr. Lieberman, currently in the sixth year of his Ph.D. program, has started a company called iShoe to develop products using the technology, including insoles that can help prevent elderly people from falling. Because M.I.T. is co-owner of the invention with Harvard and NASA, Mr. Lieberman knew he would have to negotiate a licensing agreement that would give his company exclusive rights to the technology, but he was taken aback by M.I.T.’s tough negotiating stance.

“I wasn’t aware of the fact that more or less the day after the patent was filed, I would be facing a conversation like, ‘We take a substantial royalty and $75,000 now, and it’s all yours,’ ” he says. “That was a surprise.”

Jack Turner, associate director of M.I.T.’s tech licensing office, says: “We endeavor to get what we think is a fair deal for M.I.T. and the inventors and for the companies we’re licensing. At the same time we don’t want to license something exclusively to someone who’s going to end up not doing anything. We write into the agreement those elements of the business plan that we consider essential for the technology to find its way into use. If they can’t do that, we can get the technology back and find another home for it.”

Ultimately, Mr. Lieberman says, the fact that M.I.T. doesn’t automatically kick the license to an inventor is for the best. “It enforces discipline on you,” he says. “The process has been valuable for us in terms of thinking hard about what needs to happen, how do we raise money and what kinds of milestones make sense.”

He’s hopeful that he can raise funds for the license through angel investors or a joint venture with a hospital. But now that he knows how expensive and complicated the licensing process is (not to mention having to check in in the future to show he’s on track), Mr. Lieberman is avoiding using university resources as he develops the technology further. Last summer he paid an engineer and a computer programmer through iShoe to work off campus to improve the design of his insole and write software that lets it communicate with wireless devices. Using $25,000 worth of legal services he won in April in a business plan competition for space-derived technologies, he has filed for two additional patents, owned by iShoe, based on their work.

If a student has money to develop and protect an invention on his own, should he? It depends. Turning the job of commercializing a product over to a university is a better bet if you have no interest in business or if finishing school is a priority. “The mission of a student is to research, get their degree, and move on with their life, and if you start fooling around with this stuff too much, it’s a total distraction,” says Peter Corless, the intellectual-property lawyer. But if retaining control over an idea is important — say, you don’t want your technology licensed to a company that pollutes oceans — the expense and hassle of doing it yourself might be worth it.

Lone-wolf inventors should get a written statement from their university confirming they own their idea, Mr. Corless advises. “You want to get these things cleared up when there hasn’t been a lot of value recognized,” he says. “If you try to clear things up later, people’s memories change.”

R.P.I. determined that the bottle design belonged to Mr. Zummo and Mr. Naples. The university offered to patent the bottles and get them into the market if they transferred ownership of the design to the university. The students chose to go it alone, deciding that the standard slice of royalties R.P.I. gives to inventors, 35 percent, was too low. An intellectual property lawyer who’s a friend of Mr. Zummo’s family waived his fees to help them file a provisional patent, and the students started looking for ways to raise $18,000 to mold several hundred actual bottles they can test and show to companies interested in licensing the technology from them.

They’re not flying entirely solo, though. Last month, the university determined that while the students own the design, R.P.I. owns the idea for the bottles. The students must license it from them, at a cost of about $250 a year and 25 percent of the profits generated by the idea. That, though, comes to only 0.5 percent — an “idea” being worth less than the “design.”

“What we’re giving up is obviously nothing, and if someone infringes on our rights, now it’s R.P.I. against them,” Mr. Naples says.

The bottle negotiations helped convince R.P.I. to rethink its royalty-sharing policies for students in studio courses: it’s now 75 percent for the inventors, 25 percent for the university. For one, the university recognizes the distinction between the ideas coming out of undergraduate design classes and those coming out of a research center or lab, Mr. Rancourt of R.P.I. says.

“Given the early stage of development, a significant amount of work needs to happen to prove the idea,” he says. “At the same time, they have real potential, and our goal is to encourage them.

Samantha Stainburn writes about higher education and entrepreneurship for Crain’s Chicago Business.

What Business Owners Should Know About Patenting (WSJ)

2008-12-29T18:37:00.001-08:00

What Business Owners Should Know About Patenting

By STUART WEINBERG

Thomas Edison once said, "To invent, you need a good imagination and a pile of junk." He might have added a third ingredient: a patent. Without one, inventors can't sell, license or protect their creations. Edison understood that very well: He held 1,093 patents, still a record for an American.

For many small businesses, knowing when and how to obtain patents can be confusing. So, too, can be knowing what to claim in the patent and when to sue over infringement and --when not to.

To help clarify these matters, we spoke to James McDonough, an intellectual-property attorney at Fish & Richardson P.C. who specializes in advising start-ups and small companies on intellectual-property strategy and technology commercialization. Mr. McDonough talks about the current climate for patents and looks at the perils companies face and what steps they should take to protect themselves.

WSJ: Is it more difficult to obtain patents than it was five or 10 years ago?
Mr. McDonough: It is getting harder to a certain degree. The [U.S. Patent and Trademark Office] appears to be rejecting claims at a greater rate the first time through. I think that reflects a backlash in response to some of the problems we've seen with the issuance of poor-quality patents and how they are being misused by patent trolls [a derogatory term for a company whose only business is to buy patents to collect license fees or court-awarded-infringement damages].

WSJ: What does it cost and how long does it take to secure a patent?

Mr. McDonough: It's hard to say with certainty how long it will take, but, depending on the technology that's being patented, it can take anywhere from two to five years for a patent to issue. As far as costs, expect to spend anywhere from $10,000 to as high as $30,000 for highly complex technologies. Patentability searches account for up to a thousand of that, application fees can add up to another couple thousand, and the rest is attorney fees for patentability opinions, initial patent drafting, and [Patent and Trademark Office] action responses and appeals.

WSJ: Who doesn't really need to hire an attorney? Who really should and at what point?

Mr. McDonough: The only time I would not advise an inventor to seek counsel from an attorney is if the act of patent drafting is itself a hobby to the inventor and he has no intention of selling the invention. If there is even a remote chance that the inventor will commercialize the technology, he should get an experienced attorney involved as early as possible in the process.

WSJ: Where do most companies go wrong when they're trying to get a patent?
Mr. McDonough: First, a small company may want to start patenting without thinking through its long-term [intellectual-property] management strategy. Before patenting, you should work with a skilled intellectual-property attorney to develop a plan for building your IP portfolio. A common problem we see is a portfolio that is driven purely by research. A good IP portfolio should be designed in a way that accurately covers the business objectives of the company while protecting the technologies around which the company is built and exploiting niches of the technology field that are not yet patented.

WSJ: What's another mistake companies often make?
Mr. McDonough: An inventor may want to apply for a patent at the wrong time. For instance, it may be too early if the invention is not yet developed to a point that it can be sufficiently described in the patent. It is too late if, for example, the inventor publicly used or sold the invention more than a year ago. If it is too early, an attorney might advise the inventor to spend more time researching and developing the invention before patenting, but if it is too late, the invention may no longer be protectable.

WSJ: I've heard some inventors may claim too little or too much in the patent.
Mr. McDonough: Often, an inventor's instinct is to describe his invention by describing its specific parts, which can result in inadvertently limiting the scope of the patent. As a general rule of thumb, the claims should include all possible versions of the invention, which can be accomplished by using broad, functional language in the patent. The inventor and attorney will work together to refine the scope of the patent to ensure it is as broad as possible while still being able to withstand a lawsuit.

WSJ: Is patent infringement more common than it was five or 10 years ago?
Mr. McDonough: I don't know if there's more infringement, I just think that there's more patenting going on. Also, the value of a lot of large companies nowadays is based on their IP.…So now you're seeing companies actively seeking to protect their assets.

WSJ: If a small company believes a large company is infringing on its patents, should it sue?
Mr. McDonough: That's a difficult choice for a small company. It's become a little easier lately because a lot of law firms out there will take on a plaintiff-side patent case on a contingency-fee basis if they think it's a good case. But generally it's pretty difficult to bring an infringement suit against a really large company because of the amount of resources available to large companies as compared to small companies. It is generally accepted in the industry, that a patent-infringement suit can cost $2 million to $4 million in legal fees. So, it's often not ideal for a small company to try to sue a really large company.

WSJ: What are some alternatives to suing for infringement?
Mr. McDonough: You might approach the larger company and offer a license, or attempt to establish a partnership. If a company doesn't have the means to sue now, it might choose to temporarily ignore the infringement and try to get its product to market first to generate sales. Sometimes you have no choice but to bring an infringement suit.

Invention Home: Should I Pursue an Invention

2008-10-17T11:54:00.000-07:00

Invention Home: Should I Pursue an Invention

From Wired How-To Wiki

You have been thinking about an idea for months or maybe years. You feel like you have a good idea, your family and friends have told you that you have a good idea and you are passionate and optimistic about the success possibilities. Regardless of your excitement, you would still like to know if your idea is really going to succeed in the marketplace. You would like to at least gain some reassurance that success will happen so that you don’t have to go through the work of inventing if your idea isn’t going to make it. What should you do?

For most entrepreneurs and inventors, passion, optimism and a strong belief in their ideas are key ingredients that drive them to succeed and overcome odds. However, when it comes to making a decision on whether to pursue an idea or invention, inventors should not rely on passion and optimism alone. For an inventor, there is no substitute for taking the time to do research on the idea and to plan for its success. In the long run, making research-based decisions rather than emotional-based decisions can yield more favorable results.

As much as inventors want to know if their inventions will ultimately succeed in the marketplace, it is almost impossible to predict with certainty. Many good inventions have failed on the market while many seemingly not-so-good ideas have gone on to see big success. I suppose the inventors of those not-so-good ideas would argue that their ideas were in fact the good ones considering that they are the ones that succeeded in the market and who can blame them?

The point to consider is that just like the weather, the process of predicting if an idea is going to succeed is a difficult task that more often than not produces inaccurate results. Big companies spend lots of time and effort trying to figure out if a product will succeed before launching it to market. Oftentimes, they can weed products out but it’s never a guarantee that a launched product will succeed.

However, what an inventor should focus on is doing enough research to determine if the invention is unlikely to succeed based on their research and then make a decision how much time and money they are willing to invest based on that research.

Keep in mind that the research process usually doesn’t happen all at once. It is ongoing and occurs in stages as you progress with the idea. If your ultimate goal is to license your invention for royalties as opposed to manufacturing and marketing your invention on your own, consider doing at least some basic research (Please see the Innovator’s Dilemma in the February issue of Inventors Digest Magazine for more on licensing). While manufacturing research will not be discussed in this article, please note that if you are an entrepreneur determined to manufacture and market on your own, you should consider doing far more due diligence and research before you pull the trigger on financing the development and manufacturing of your invention.

If your goal is to license your invention for royalties, you will more than likely be able to pass off the manufacturing and marketing expenses to the company who licenses your invention. Therefore, your financial risks are substantially reduced. While the amount of development needed can vary from invention to invention, you will still have to develop your idea far enough to convince a company that it’s worth licensing. Even though your risk may be less than that of someone who wants to self-manufacture and market their invention, there is still some level of time and expense that must be invested in your invention to reach the point of licensing.

Typically, these efforts and expenses include such things as market research, patent research, patent application and design or prototype development. Although many inventors want to see their idea succeed with a minimal amount of personal expense, it is unlikely that you would be able to license a conceptual idea without having some form of protection and/or design or development. There are two forms of research that all inventors should consider performing before making a decision to pursue an invention: Basic Market and Patent Research.

Basic Market Research

Before you spend any time or money developing your idea, including meeting with a patent attorney, take some time to conduct your own informal market research. For starters, ask yourself some basic questions to ascertain whether your invention really fills a need and if there is a substantial customer base that would purchase your invention. Some inventors may solve a problem that is unique to them, but when they look at the market overall, they may realize that although it’s a good idea, only a limited number of people share their problem, thereby limiting the market opportunity.

Remember that most companies will be reluctant to spend tens of thousands of dollars developing, manufacturing and marketing an invention if at the end of the day there is a very limited market for the product. Gary Sullivan, Director of Merchandising for Allstar Marketing, a direct response marketing company, reiterates this fact when he explains his company’s procedures.

“Our company works within very strict guidelines before we invest in any project,” Sullivan says, “We take the time to research the strength and history of the product category as well as researching the costs to produce the product and the development time and demonstrability of the products for TV. We do our due diligence before we invest in a product.”

After asking yourself some basic questions, you should also consider visiting some local retailers such as Wal-Mart, Home Depot, Office Depot or Target to see if any similar products are already on the market. Search the Internet, and if you don’t have access to the Internet, take a trip to a local library or ask a friend to use their computer. I know this sounds obvious to experienced inventors, but many new inventors skip this step and move right into the patent application or development process. If you have an idea for a new and improved “widget,” find out if there are other widgets like yours already on the market. You may be surprised to find that there are others just like yours sitting on store shelves. If so, do not immediately become discouraged, rather, examine if your invention has benefits or features that differ from the existing product. For example, suppose you invented a terrific new way of catching mice (i.e., a mousetrap), surely you would find many other mousetraps already on the market. This does not mean that there is no place in the market for your trap, you just need to identify if or how your solution is different or better than the others. It could be easier to setup, more humane or an easier configuration of parts that would result in lower cost production—any of which could make it a valuable addition to the marketplace.

In addition to scouring the marketplace for existing products, research whether any of the similar products are patented. Just because a product is on the market doesn’t mean that it has received patent protection from the USPTO or even that a patent has been filed. If you decide to pursue patent protection, you should review these similar products with your patent attorney. However, after completing this research you may decide not to pursue your invention, thereby saving yourself the time and money associated with taking it further.

Patent Research

If you are still feeling passionate and optimistic about your invention after conducting some basic market research, you may now want to consider arranging for patent research to be performed on your idea. I would suggest that you consult with a registered patent attorney or patent search firm to perform and discuss the search with you. Although you can perform a preliminary patent search on your own, utilizing a professional skilled in this area should yield better results.

A patent search is performed for the purpose of finding the issued patents that are most relevant to your invention. Typically conducted in the early stages of the application process, these search results are referred to as prior art. Although, a positive result from a patent search does not predict with certainty whether an invention is or is not patentable, this information can be used as a guide to whether further action is likely to be worthwhile.

After conducting your basic market and patent research, you will be much more educated on whether to continue to pursue your invention into the application filing, design and development stages. Your decision to move forward will be based on research rather than emotions and you will not be rushed into the next steps in the process.

It is this research-based approach to the invention process that can lead to the feeling of reassurance needed to pursue your idea. And remember, as valuable as their feedback is, the fact that your family and friends would buy your invention if it were on the market should not be the extent of your research, since it does not necessarily mean success.

Russell Williams is President and Co-founder of Invention Home a company creating the first nationally recognized marketplace for connecting inventors with companies looking for innovative, new inventions available for license (www.inventionhome.com). He holds a Masters in Management degree from Carnegie Mellon University and a Bachelor of Science degree from West Virginia University.

Invention Home Patent vs Non Provisional Patent (Wired)

2008-10-17T11:48:00.000-07:00

Invention Home Patent vs Non Provisional Patent

From Wired How-To Wiki

This is part one of a two part series

Idea, invention, innovation and patents are all commonly utilized terms in the rapidly expanding world of inventing. In the past few years, the process of inventing and the prospect of creating new and innovative products have become more popular than ever, with people from all walks of life striving for the next big idea or product improvement. Even popular media has embraced the idea of the inventor and his or her invention, which is illustrated by the creation of TV programs including American Inventor, Fore Inventors Only and Everyday Edisons. Daytime talk show host Ellen Degeneres is known for her love of kid-inventors, and even Oprah Winfrey implemented an invention contest. For many inventors the initial excitement of a new invention idea is inevitably followed by the concern or question of “how to protect the idea.” After the light bulb goes on, it is important to figure out how to best protect the idea, but it is at this stage were one of several inventor dilemmas first occur. After researching the invention, conducting a prior art search and discussing patent options, it is common for inventors to ask the question: Which type of patent should I file, provisional or non-provisional? What’s interesting about this question is that the answer will often vary depending upon whom you ask. Over the years, I have heard a wide variety of opinions from business professionals, inventors and patent attorneys. While some believe that an inventor is better off moving directly into filing a non-provisional patent application, because it is typically more detailed and exhaustive in capturing the embodiment of the invention, others believe that starting with the provisional application is a better way to go, due to the expense and unknown marketing factors that can be associated with the non-provisional patent.

Just as the invention itself is unique, so is the answer to this patenting question. While the decision should be based on individual circumstance and personal preference, it should be made with a clear understanding of the options. The correct choice depends on what works best for the inventor’s particular situation, taking into account financial condition, stage of development, risk tolerance or marketing progress. And, whenever possible, options should be discussed with a registered patent attorney.

“Looking back on the process, I knew that I wanted to file a utility patent right away, but when the time came, I filed a provisional patent because it was much cheaper and I wanted to delay the expense of the utility patent until I was a little more sure of the idea. If cost wasn’t an issue, I probably would have filed the utility right away,” explained inventor Lisa Shaefer.

To begin to understand the answer to this question, one must first look at the question itself, which is somewhat of a misconception. The question “which type of patent should I file: provisional or non-provisional?” seems to imply a belief that each is an independent patent option where one or the other application would be filed. However, in reality, this is not the way the applications work.

When considering the two types of patent applications, don’t think of them as a choice between two, independent types of patents, like choosing between whether to order coffee or tea with dessert. The provisional patent application is not a substitute for filing a non-provisional patent application. It’s important to understand that even if you file a provisional patent application, you will still need to file a non-provisional application down the road to receive patent protection. Think of the provisional patent application as a possible step in the patent process, but not the final step.

To figure out which direction is right for you, it is important to examine the differences between the provisional and non-provisional patent applications. The non-provisional patent is commonly known as a “utility” patent application. Filing this application establishes the filing date and begins the United States Patent and Trademark Office (USPTO)’s patent review process, which can take 18 months or more to complete. Alternately, the provisional patent application establishes the filing date but does not start the USPTO review process. The provisional patent application provides a measure of protection for 12 months from the filing date and expires unless you file a utility patent application before the 12 months are up. A good way to think of this is that the provisional reserves the filing date for you and allows you to claim the original provisional filing date when you file a utility patent application. But, be aware that the provisional patent application does not apply to a design patent, which means you would not file a provisional patent application if you were planning on filing a design patent for your invention.

Digital Designers Rediscover Their Hands (NYT)

2008-08-21T08:28:00.000-07:00

Digital Designers Rediscover Their Hands

By G. PASCAL ZACHARY

GEVER TULLEY has only one qualification for training software designers how to become more creative. He teaches children how to build objects like gravity-powered wooden roller coasters with their hands, at his Tinkering School in Montara, Calif., south of San Francisco.

Now Mr. Tulley does the same thing for dozens of adults who are in the front ranks of software design at Adobe, the big software supplier based in San Jose, Calif. In daylong workshops, about 100 Adobe designers wrestle with plastic beads, small electronic displays, Ikea water glasses and tiny sensors to create wacky motion games. Usually, about the only thing these folks touch on the job is a computer mouse.

“Some people thought we were crazy to do this,” says Michael Gough, a vice president for design at Adobe. “But for others, the experience has started to inform how they work,” giving them a better appreciation of how customers experience Adobe’s programs.

“So we’re going to keep pushing it,” Mr. Gough says.

Mr. Tulley’s transformation highlights a little-noticed movement in the world of professional design and engineering: a renewed appreciation for manual labor, or innovating with the aid of human hands.

“A lot of people get lost in the world of computer simulation,” says Bill Burnett, executive director of the product design program at Stanford. “You can’t simulate everything.”

Using computers to model the physical world has become increasingly common; products as diverse as cars and planes, pharmaceuticals and cellphones are almost entirely conceived, specified and designed on a computer screen. Typically, only when these creations are nearly ready for mass manufacturing are prototypes made — and often not by the people who designed them.

Creative designers and engineers are rebelling against their alienation from the physical world. “The hands-on part is for me a critical aspect of understanding how to design,” said Michael Kuniavsky , a consultant in San Francisco who for three years has convened a summer gathering of leading designers, called “Sketching in Hardware.”

At last month’s session, at the Rhode Island School of Design, attendees broke into small groups, wielding soldering irons and materials their grandfathers probably knew more about.

Such experiences hone instinct and intuition as opposed to logic and cognition, advocates say, and bring the designer closer to art than science.

“I’m not sure employers are recognizing the importance of hands-on,” Mr. Kuniavsky says.

Mr. Gough began to appreciate the possibilities of Mr. Tulley’s “learn by making” idea for Adobe only after his own children attended the Tinkering School.

Part of corporate resistance to experimenting with hands-on activities comes from the difficulty of measuring the value of paying employees to, say, build a go-cart or a radio set while in the office. Yet educators say the benefits, even if intangible, are clear. “All your intelligence isn’t in your brain,” Mr. Burnett says. “You learn through your hands.”

At Stanford, the rediscovery of human hands arose partly from the frustration of engineering, architecture and design professors who realized that their best students had never taken apart a bicycle or built a model airplane. For much the same reason, the Massachusetts Institute of Technology offers a class, “How to Make (Almost) Anything,” which emphasizes learning to use physical tools effectively.

“Students are desperate for hands-on experience,” says Neil Gershenfeld, who teaches the course.

Paradoxically, yearnings to pick up a hammer — or an oscilloscope — may deepen even as young people immerse themselves in simulated worlds. “People spend so much time in digital worlds that it creates an appetite for the physical world,” says Dale Dougherty, an executive at O’Reilly Media, which is based in Sebastopol, Calif., He manages a magazine, Make, that is devoted to building digital-era gear.

Fifty years ago, tinkering with gadgets was routine for people drawn to engineering and invention. When personal computers became widespread starting in the 1980s, “we tended to forget the importance of physical senses,” says Richard Sennett, a sociologist at the London School of Economics.

Making refinements with your own hands — rather than automatically, as often happens with a computer — means “you have to be extremely self-critical,” says Mr. Sennett, whose book “The Craftsman” (Yale University Press, 2008), examines the importance of “skilled manual labor,” which he believes includes computer programming.

EVEN in highly abstract fields, like the design of next-generation electronic circuits, some people believe that hands-on experiences can enhance creativity. “You need your hands to verify experimentally a technology that doesn’t exist,” says Mario Paniccia, director of Intel’s photonics technology lab in Santa Clara, Calif. Building optical switches in silicon materials, for example, requires engineers to test the experimental switches themselves, and to build test equipment, too.

Bringing human hands back into the world of digital designers may have profound long-term consequences. Designs could become safer, more user-friendly and even more durable.

At the very least, the process of creating things could become a happier one. While working in simulated computer worlds has undeniable appeal, Mr. Tulley says, “the physical act of making things helps the whole person.”

G. Pascal Zachary writes about technology and economic development. E-mail: gzach@nytimes.com.

3 Secrets to a Site that Sells (Entrepreneur.com)

2008-08-15T20:17:00.001-07:00

3 Secrets to a Site that Sells

Put these tips in place to turn browsers into buyers.

By Derek Gehl | August 15, 2008

URL: http://www.entrepreneur.com/ebusiness/ebusinesscolumnist/article196480.html

So, you've got your site up. Now what? You need to drive traffic, grow your opt-in list, make sales and work on your SEO. The list seems endless.

Step back for a minute and realize it's not possible to do everything at once. Once you've built your website, the first thing you should do is make your sales process watertight.

There's no point spending a ton of cash on pay-per-click ads to drive targeted traffic to your site if none of those visitors buy anything.

Follow this three-point sales action plan before you spend a bundle on attracting visitors.

1. Get your sales copy in top shape
You've got less than five seconds to convince people to stay on your website, so your headline has to grab them and compel them to read on. The best headlines tell visitors they've found exactly what they're searching for and make them curious enough to keep reading.

But don't let your readers slip through your fingers once you've grabbed their attention with a hot headline.

Sales copy is what turns visitors into customers. So make sure it guides people through a streamlined process that:

Identifies with their problem and builds your credibility
Engages them--and explains why you can help
Tells them how they'll benefit from your product
Overcomes any objections they may have
Compels them to take action--and tells them exactly what to do

Good sales copy funnels your readers through a tight sales process and doesn't give them a reason to click away. Take a look at your own and see if all the elements are in place, and if not, give it more of the attention it deserves. (Here's a more detailed article on sales copy.)

2. Collect testimonials
What's more trustworthy than a personal recommendation? A good testimonial can persuade even the most skeptical potential customer to buy from you.

Testimonials prove that your product really works--that it does exactly what you promise. And if you run a small business and haven't built your reputation, testimonials are indispensable.

Here's how to gather quality testimonials and benefit from them immediately:

If you don't have any customers yet, give your product away to a group of people in your target market in exchange for their feedback.
If you have some positive feedback from customers, contact them and ask permission to use their comments on your site.
Don't be afraid to ask for testimonials. Invite customers to give you their vote of confidence with an e-mail link that says, "Click here to tell us what you think!"
E-mail your buyers after they've purchased your product to ask them how they're enjoying it.

Try to get testimonials that are full of concrete benefits. How much money did someone save? How much time would they have spent without your product? How much better did they perform than before?

Let your visitors know these are real people. A first name, last name and location will prove it. A photo's great. And don't forget video.

You'll find dozens of opportunities to use testimonials throughout your site: on your homepage, within your sales copy, on a special testimonial page, on relevant product pages or in relevant product listings, so don't hesitate to use them where you can.

3. Make it easy to buy
I'm always amazed how many sites make it difficult for you to buy from them. According to market research from the Gartner Group, more than 50 percent of web sales are lost because visitors can't find what they're looking for. Don't make that mistake.

Name your navigation buttons clearly so it's obvious what people will find when they click on them.
Keep your navigation simple and consistent throughout your site, so people don't have to click any more than necessary. Ideally, someone should be able to buy from you in two clicks at most.
Use "Buy Now" buttons that link to your shopping cart or order page every time a product is shown--especially if you have a catalog site.
And when people click to your sales page, make things easy for them.
Provide a range of payment options. Accepting credit cards is an absolute must, but PayPal, Google Checkout or even a downloadable mail-in form make it possible for anyone to complete a transaction.
On your order form, ask only for the information you need. For example, if you sell an e-book, it's unlikely you'll need a home address. The less information people have to give you, the better they like it.
Don't underestimate the power of including a phone number people can call if they have any questions.

Sales copy, testimonials, shopping cart. Once you've got these three crucial elements of your sales process shipshape you can confidently drive targeted traffic to your site--and know it'll convert!

Derek Gehl is Entrepreneur.com's e-business columnistand the CEO of the Internet Marketing Center. He has just released the completely updated 2008 edition of his comprehensive internet marketing guide,The Insider Secrets to Marketing Your Business on the Internet.

First phase of $100 million Guanajibo high-tech industrial park all set (CBW)

2008-08-15T09:30:00.000-07:00

First phase of $100 million Guanajibo high-tech industrial park all set

By : LAWSON D. THURSTON

lawson@casiano.com

Edition: August 14, 2008 | Volume: 36 | No: 32

TechnoEconomic Corridor facilitating development of ‘knowledge economy’ in western region; total $360 million investment over 10 years projected

The first phase of the $100 million redevelopment of the Guanajibo Research & Innovation Park (GRIP) in Mayagüez is all set to be inaugurated next month. The facility, a conversion of an existing industrial park which now includes a brand-new bioprocessing development & training complex, will become the first high-tech industrial park to be inaugurated in Puerto Rico. Its aim is to attract local technology entrepreneurs and small to midsize international projects in aerospace and life sciences.

“GRIP is in the first of a three-phase development process that up until now has seen an investment of $20 million. The second phase will involve an investment of $50 million, and the third phase should be approximately $30 million, rounding out the total investment projected for GRIP at $100 million. This is a 10-year project in which the park’s transformation should be completed sometime in 2017 or 2018,” said Nelson Perea, Puerto Rico TechnoEconomic Corridor (PRTEC) executive director.

Meanwhile, development is under way for Las Américas Technology Park in Moca which, unlike GRIP, isn’t a conversion of an existing park, but a brand-new, world-class technology park geared toward international projects in computers & information technology (C&IT) and aerospace.

Las Américas is a first-of-its-kind joint, public/private collaboration between the Puerto Rico Industrial Development Co. (Pridco) and Hewlett-Packard (HP), which involves a custom-made concept, or constructing buildings to clients’ specifications. “So far, $30 million have been invested and/or committed to the project. Las Américas Technology Park will be for larger projects (clients), and the first phase of this park should be completed sometime in 2012 or 2013.”

PRTEC, is a nonprofit organization geared to the economic development of Puerto Rico’s western region, with a focus on innovation and high-tech industries through collaboration among private companies, government entities and academia.

According to Perea, his organization is focused on three main areas: the development of infrastructure initiatives and the business environment; innovation and entrepreneurship; and talent and development of the work force.

In addition, PRTEC oversaw the administration of two incubators in the region (ViTEC and ViTEC2), which have proven to be quite successful, recently promoting two technology startups (Crawlability Inc. and renewable Solutions Engineering) through the incubation program.

Established in 1999, ViTEC is the only high-tech business incubator in Puerto Rico. ViTEC2 focuses on helping tenants commercialize their products and/or technologies as well as providing a network of specialized resources, including access to seed funding. Near the University of Puerto Rico (UPR) Mayagüez campus, the incubators will move to the GRIP location within one year to 18 months.

“Total investment and economic impact on the western region once the projects are completed is estimated at $360 million, which consists of $100 million in infrastructure development—including the two technology parks (GRIP and Las Americas) and improvements to the Aguadilla airport; $110 million in Research & Development (R&D), more than 90% of which is by the University of Puerto Rico (UPR); and $150 million in private-sector investment and net payroll of new companies that recently established in the region or expanded operations,” concluded Perea.

Court says copyrights apply even for free software (AP)

2008-08-15T08:05:00.000-07:00

Court says copyrights apply even for free software

By JORDAN ROBERTSON
AP Technology Writer

SAN FRANCISCO (AP) -- In a crucial win for the free software movement, a federal appeals court has ruled that even software developers who give away the programming code for their works can sue for copyright infringement if someone misappropriates that material.

The decision by the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., helps clarify a murky area of the law concerning how much control programmers can exert over their intellectual property once it's been released for free into the so-called "open source" software community.

People are free to use that material in their own products, but they must credit the original authors of the programming code and release their modifications into the wild as well, a cycle that's critical for free software to continue improving.

Because the code was given away for free, thorny questions emerge when a violation has been discovered and someone is found to have shoved the code into their own for-profit products without giving anything back, in the form of attribution and disclosure of the alterations they made.

In the latest case, which involved a computer application that model-train enthusiasts use to program the chips that control their trains, the U.S. District Court in San Francisco ruled that the plaintiff could sue for breach of contract but not copyright infringement.

The distinction is important because it's easier to recover monetary damages in a copyright-infringement case.

Robert Jacobsen, who manages an open source software group that created an application he claims was infringed, sought an injunction against KAM Industries, which makes a competing product. The lower court denied Jacobsen's motion. The appeals court vacated that ruling Wednesday and returned the case to the district court.

"Traditionally, copyright owners sold their copyrighted material in exchange for money," the court said. "The lack of money changing hands in open source licensing should not be presumed to mean that there is no economic consideration, however."

It's Time to Rethink the Business Plan Outline (Entrepreneur.com)

2008-08-11T07:07:00.001-07:00

It's Time to Rethink the Business Plan Outline

Use these tips as a guide to help you make the most of your time when creating a business plan.

By Tim Berry | August 08, 2008

URL: http://www.entrepreneur.com/startingabusiness/businessplans/businessplancoachtimberry/article196334.html

Last week I answered an e-mail from a woman who wanted to know what to include as a "fulfillment and delivery" category in a business plan for a gym. Her problem was that she didn't see how that general topic--fulfillment and delivery--applied to a gym business.

I gave her two specific answers to that question:

Don't include it. It doesn't apply to your business. Delete that topic from the outline you're working on and go from there.
Fulfillment of a service in a gym business is about: hours that it's open; equipment; services like massage, physical therapy and personal training; locker rooms; laundry and other facilities.

I like the first answer better, frankly, because it helps debunk the myth of a standard business plan outline. That's particularly sensitive to me because of my involvement with Palo Alto Software, which I founded, and Business Plan Pro, which I actively support. I've said before that the most common mistake made by business plan software users is accepting the standard outline and its content as a rigid checklist.

Whatever business plan outline, tool or format you start with--Business Plan Pro, Microsoft Office, a book, magazine article, website recommendation or whatever--is going to be more useful to you if it's recognized as a tool, a guideline and a set of recommendations rather than a checklist.

Every business and every step in its history is unique, so a good business plan should also be unique. It matches what your business needs, not what the standard says.

For example, take the management summary that's almost always included in the standard business plan outline and business plan contents. It describes your management team including key members, their functions, their professional backgrounds and their accomplishments.

However standard as that piece of the plan might seem, it's often completely irrelevant. While every company should manage itself and steer its growth with planning, not every company needs a formal business plan document with a carefully prescribed outline and a complete list of standard contents. If you're running a business that doesn't need to find investors or borrow money from a bank, then you probably don't need to describe yourself (that is, your management team) to yourself, so that chapter is a waste of time. And if it's a waste of time, don't include it.

I could cite a lot of other examples, but I'll settle for two more. First, although most standard outlines include a company summary with history and ownership and such, that's silly when the plan is for your internal management and growth, not for outside readers. Second, although most standard outlines don't include the exit strategy, a business plan for investors needs to have an exit strategy because without it investors aren't interested.

I've dealt with this myth a lot in my 20-plus years involved in the business plan software industry. People think that business plan software imposes a standard outline or standard content--because a lot of bad business plan software does. But it shouldn't. Good business plan software suggests an outline and some standard contents, then fades into the background and lets you decide.

In fact, if there's one most common error in the use of business plan software, it's using the standard default outline without considering what does and doesn't apply to your business.

Tim Berry is the "Business Plans" coach at Entrepreneur.com and is president of Palo Alto Software Inc., which produces the industry's leading business planning software, Business Plan Pro, as well as other popular planning applications for businesses. He is the author ofThe Plan-As-You-Go Business Plan published by Entrepreneur Press.

How Patent Law Changes Could Hurt Small Inventors (Entrepreneur.com)

2008-08-11T07:03:00.001-07:00

How Patent Law Changes Could Hurt Small Inventors

A new bill currently being considered in the House brings changes that no longer look out for the little guy.

By Tamara Monosoff | August 08, 2008

URL: http://www.entrepreneur.com/startingabusiness/inventing/inventionscolumnisttamaramonosoff/article196328.html

Regular readers of this column know I encourage new inventors to spend less time focusing on patents and more time concentrating on the business aspects of their inventions. Most of the time, this advice rings true. But because there's a debate currently raging on Capitol Hill about amending the existing patent law--changes that could potentially negatively impact smaller, independent inventors--I felt it important to put this issue front and center in this month's column.

Over the past several months, Congress has been discussing numerous changes to existing patent law. While certain elements of the legislation will bring the U.S. patent system in line with much of the rest of the world by potentially simplifying the process of filing, granting and disputing patents, my concern is that the direction and consequences of this new legislative effort will unfairly impact smaller inventors, who may face increased financial and administrative burdens throughout the patenting process.

The best information I found on the proposed changes was shared with me and best summed up by Stuart West, the founder and a principal attorney with West & Associates. Here's what you need to know:

Proposed Major Changes
There are two very similar bills currently in process--one in the House (H.R. 1908) and one in the Senate Bill (S. 1145). In May, the Senate removed their bill from consideration from this session (although it could easily reemerge). The bill in the House was passed--with a fairly close vote of 222 to 175--on September 7, 2007, and while it has several more hurdles to clear, including passage by the Senate, it's the furthest along, so let's focus on this one.

There are six major changes proposed by the House bill that could negatively impact the small inventor:

A switch from a first-to-invent system to a first-to-file system
Substantial changes to patent infringement damages
Introduction of a post-grant review/objection period
Permission granted to third parties to submit art directly to examiners, providing them the ability to impact patent prosecution
Substantial limitations on the selection of courts for patent litigation
Early appeals in litigation matters

Let me review these one by one.

1. Switching to a first-to-file system. Under current patent law, when two patent applications are filed for the same invention by different inventors, the inventor who can prove he or she was the first person to invent it is legally entitled to the resulting patent. Presently, these conflicts are resolved within the U.S. Patent and Trademark Office (USPTO) through interference proceedings. Under the proposed Patent Reform Act, however, our current "first to invent" system would be replaced with a "first to file" system, which would award patents to the party that was "first off the blocks" to file the patent.

While this new process would bring our system into synch with the rest of the world, it also gives the advantage to the person with the largest wallet and existing infrastructure. For instance, let's say Inventor A has an idea and has begun working on it but lacks the resources to file for a patent. Along comes Large Company B, which independently developed the same idea and is able to file for a patent right away because they have the resources available. In this example, it doesn't matter who had the idea first; it only matters who could afford to file for the patent. Score: Large Company B = 1. Small Inventor A = 0.

2. Extensively changing the law that affects patent infringement damages. Current U.S. patent law says that a patent holder is entitled to damages adequate to compensate for the patent infringement, but in no event can the damages be less than a "reasonable royalty." That means if the patent holder has actually manufactured the product that's been infringed upon by someone, then the patent holder is entitled to lost profits. Additionally under current law, if the patented item is only a component of a sold product, the patent holder is entitled to damages based on the value of the complete item.

Under the new rule, the amount of the "reasonable royalty" would be based solely on the value added to the item by the inclusion of the patented component. This would limit an individual inventor's clout, as the payment for damages would most likely decrease under the new law.

The bill also limits the potential situations where the court could determine a willful infringement (and thereby enhanced/treble damages) to situations where the patent owner establishes, by clear and convincing evidence, that 1) the infringer continued to infringe after receiving a specific written notice from the patentee; 2) the infringer intentionally copied the patented invention with knowledge that it was patented; or 3) after having been found by a court to have infringed on a patent, the infringer infringed the same patent again.

More damaging to small inventors, though, is that the new bill creates a "good faith belief" defense, which can be raised by showing that the defendant had an "informed good faith belief that the patent in question was invalid or unenforceable, or would not be infringed by the conduct later shown to constitute infringement of the patent." While the U.S. Supreme Court recently established a similar exception, this codification increases the burden on the original patent holder, who would need to show that the infringement was intentional and that the infringer had a "good faith belief" that he wasn't actually infringing. In my judgment, this once again plays to the benefit of those with greater legal resources. Score: Large Company B = 2. Small Inventor A = 0.

3. Introducing a post-grant review. Presently, once a patent is granted by the USPTO, it is presumed valid and cannot, for the most part, be challenged except through legal proceedings. Under the proposed bill, however, the USPTO would now allow petitions to be filed for the administrative cancellation of an issued patent within 12 months of the patent's issue ("first window"). During this first window of review, there would be no presumption of the validity of the patent in question.

During the review window, the burden to establish invalidity is by "a preponderance of the evidence," a lesser burden of proof than the "clear and convincing" standard currently in use (which would remain the standard required to invalidate a patent in court). What would all this mean for patent holders? That for the first 12 months after its issue, a patent may not be as secure as it is today. Score: Large Company B = 3. Small Inventor A = 0.

4. Third-party interference in patent prosecution. Under existing U.S. patent law, third parties are essentially excluded from the patent prosecution process; the process involves just the filer and the patent examiner. As currently proposed in the House bill, however, third parties would now be permitted to submit patents, published applications or other printed publications to the patent examiner, thus potentially interfering with, complicating or preventing issuance of the inventor's patent. Score: Large Company B = 4. Small Inventor A = 0.

5. Limiting patent litigation locations. Patent infringement suits may currently be brought to court in any district where the defendant is subject to personal jurisdiction. In practice, this has allowed for a patent suit to be brought wherever the product accused of infringement is sold.

Under the proposed law, however, plaintiffs could only bring suit 1) where a defendant has its principal place of business or is incorporated; 2) where the defendant has committed substantial acts of infringement and has a regular and established physical facility that constitutes a substantial portion of its operations; and, 3) under certain limited circumstances, where the plaintiff resides.

When an inventor can file a claim in his or her home town, they are much more likely to be able to afford to defend their patent than if they have to file in the home state of the offender. Again, this proposed change clearly falls to the advantage of those entities with greater resources. Score: Large Company B = 5. Small Inventor A = 0.

6. Early litigation appeals. Under current U.S. law, appeals are only permitted from a final judgment--a ruling that ends the litigation. The new laws, however, permit a party to appeal a district court's claim construction order before a final judgment has been made on the merits.

This option could create substantial delays in the determination of a patent litigation. Right now, you basically have to win or lose before you can appeal. Under the new system, you can begin the appeal process (and therefore stall the underlying base litigation) at several points throughout the base litigation. In other words, the case can conceivably be passed back and forth several times between the District Court and the Federal Circuit Court of Appeals before a first judgment is even rendered. Then, after all these interlocutory appeals, the case could still be appealed to the Federal Circuit Court of Appeals. Again, this is a costly process that plays to the advantage of large companies. Final Score: Large Company B = 6. Small Inventor A = 0.

It's Your Move
If these potential legislative changes concern you, contact your own members of Congress (www.house.gov, www.senate.gov) and ask them to look out for the interests of independent inventors.

Tamara Monosoff is Entrepreneur.com's "Inventions" columnist and the founder and CEO of Mom Inventors Inc., a product development and manufacturing company. She's also the author of The Mom Inventors Handbook: How to Turn Your Great Idea Into the Next Big Thing and Secrets of Millionaire Moms.

The Permission Problem (New Yorker)

2008-08-07T08:33:00.001-07:00

In the second decade of the twentieth century, it was almost impossible to build an airplane in the United States. That was the result of a chaotic legal battle among the dozens of companies—including one owned by Orville Wright—that held patents on the various components that made a plane go. No one could manufacture aircraft without fear of being hauled into court. The First World War got the industry started again, because Congress realized that something needed to be done to get planes in the air. It created a “patent pool,” putting all the aircraft patents under the control of a new association and letting manufacturers license them for a fee. Had Congress not stepped in, we might still be flying around in blimps.

The situation that grounded the U.S. aircraft industry is an example of what the Columbia law professor Michael Heller, in his new book, “The Gridlock Economy,” calls the “anticommons.” We hear a lot about the “tragedy of the commons”: if a valuable asset (a grazing field, say) is held in common, each individual will try to exploit as much of it as possible. Villagers will send all their cows out to graze at the same time, and soon the field will be useless. When there’s no ownership, the pursuit of individual self-interest can make everyone worse off. But Heller shows that having too much ownership creates its own problems. If too many people own individual parts of a valuable asset, it’s easy to end up with gridlock, since any one person can simply veto the use of the asset.

The commons leads to overuse and destruction; the anticommons leads to underuse and waste. In the cultural sphere, ever tighter restrictions on copyright and fair use limit artists’ abilities to sample and build on older works of art. In biotechnology, the explosion of patenting over the past twenty-five years—particularly efforts to patent things like gene fragments—may be retarding drug development, by making it hard to create a new drug without licensing myriad previous patents. Even divided land ownership can have unforeseen consequences. Wind power, for instance, could reliably supply up to twenty per cent of America’s energy needs—but only if new transmission lines were built, allowing the efficient movement of power from the places where it’s generated to the places where it’s consumed. Don’t count on that happening anytime soon. Most of the land that the grid would pass through is owned by individuals, and nobody wants power lines running through his back yard.

The point isn’t that private property is a bad thing, or that the state should be able to run roughshod over the rights of individual owners. Property rights (including patents) are essential to economic growth, providing incentives to innovate and invest. But property rights need to be limited to be effective. The more we divide common resources like science and culture into small, fenced-off lots, Heller shows, the more difficult we make it for people to do business and to build something new. Innovation, investment, and growth end up being stifled.

Opportunities forgone aren’t always easy to see. The effects of overuse are generally unmistakable—you can’t miss the empty nets of fishing boats working overfished oceans, or the scrub that covers an overgrazed field. But the effects of underuse created by too much ownership are often invisible. They’re mainly things that don’t happen: inventions that don’t get made, useful drugs that never get to market.

In theory, one should be able to break a gridlock by striking a deal that would leave all sides better off. Sometimes that happens. Just the other week, for instance, Nokia and Qualcomm settled a three-year-long patent battle, which could accelerate the spread of third-generation cell-phone technology here and in Europe. In a less contentious fashion, products like the DVD player quickly became mainstream and affordable because many companies worked together to form patent pools. Even the fact that there’s music on the radio is the result of songwriters’ collectively allowing two main groups, ASCAP and BMI, to handle the licensing of their songs to radio stations.

One reason deals founder is that there are simply too many interested parties. If, in order to create a new drug, you have to strike bargains with thirty or forty other companies, it’s easy to decide that the price is too high. But often things go awry because owners won’t make a deal at a reasonable price, as with America’s nascent aircraft industry. Or take a problem that bedevils the oil-and-gas industry. When different companies own adjacent patches of an oil field, each will be tempted not only to drill its own patch but also to try to suck out the resources of its neighbor’s patch. For geological reasons, overdrilling actually reduces the total amount of oil you can get out of the field—all sides end up worse off. An obvious solution is to have one company do the drilling and share the revenues with the other players. But, as the economics professor Gary Libecap has shown in a historical analysis, such agreements are often reached only belatedly, if ever.

Recent experimental work by the psychologist Sven Vanneste and the legal scholar Ben Depoorter helps explain why. When something you own is necessary to the success of a venture, even if its contribution is small, you’ll tend to ask for an amount close to the full value of the venture. And since everyone in your position also thinks he deserves a huge sum, the venture quickly becomes unviable. So the next time we start handing out new ownership rights—whether via patents or copyright or privatization schemes—we’d better try to weigh all the good things that won’t happen as a result. Otherwise, we won’t know what we’ve been missing.

The Patent Office Can’t Do It All Alone: Public Participation Is Key to Ensuring Patent Quality (EFF)

2008-08-04T09:32:00.000-07:00

The Patent Office Can’t Do It All Alone: Public Participation Is Key to Ensuring Patent Quality

Posted by Emily Berger

It’s not news that there are patents out there that never should have been granted. Whether it’s the “invention” of entertaining a cat with a laser pointer, combining two well-known car features in a manner that offers no unexpected new outcome, or selling CDs of a live concert immediately after the show, the patent office allows some bad patents.

Our Patent Busting Project takes this problem on by asking the patent office to “reexamine” patents – that is, to consider again whether those patents should have been issued in the first place in light of prior art (ideas that existed before the patents) that we’ve located and brought to the patent office’s attention.

And in March, while the Patent Reform Act was still on the Senate’s schedule, we commented on the value of one form of reexamination known as an “ex parte” reexam (the only form of reexamination available for older patents) and provided some statistics. Dennis Crouch, who maintains a blog on patent law read by much of the patent law community, also recently evaluated ex parte reexaminations and provided some nice demonstrative graphs.

The data shows that in over three-fourths of ex parte reexaminations, the patent examiners narrow or cancel the patent claims in question, meaning that the prior art introduced during reexam usually has a dramatic effect on the scope of the patent. On inter partes reexamination (a newer type of reexamination in which the party seeking reexamination is allowed to play a greater role), many of the patents end up completely obliterated -- 64% of all such reexamination requests resulted in canceling the claims altogether. When patent claims that aren’t actually novel are canceled, the patent owner can no longer exclude others from making, using, or selling something that he never invented. And when patents do teach novel ideas but were written with too broad of a scope, narrowing those claims can prevent meritless claims of patent infringement.

EFF is releasing a report finding that there are at least three ways to work toward improving patent quality, including through reexamination:

1. Encourage Organized Efforts to Have a More Thorough Review of Patent Applications

Increase third party efforts to improve prior art searches and to facilitate a stronger understanding of the world of prior art.

2. Support Organized Efforts After Patents Have Been Issued

Reexaminations should be limitless in time and with no financial harm limitations (in many countries, public interest organizations like EFF are only allowed to challenge issued patents for a short period of time after they have issued, even though often a patent’s threat to innovations may not be immediately obvious).

Don't Streamline. Maintain a variety of options for reexamination requesters.

3. Increase Access to Information in the Patent Office

Update information in the patent office’s online databases regularly.

Conduct and publish regular evaluations of effectiveness and performance within the Patent Office.

In addition to providing an organized effort through the Patent Busting Project in furtherance of the second goal, EFF is working in conjunction with Mozilla, Yahoo, and the Internet Archive to create a database that will work to achieve the first goal. This Prior Art project is still under development.

You Bought It, But You Don't Own It (EFF)

2008-08-04T09:30:00.001-07:00

You Bought It, But You Don't Own It

Posted by Corynne McSherry

In a devastating blow to user rights, an Arizona federal court has ruled that consumers can be guilty of copyright infringement if they violate the end user license agreement ("EULA") that comes with the software--even where the so-called "violation" is specifically excluded from copyright liability. Why? Because those protections only apply if you own the software you buy--not if you license it. Stunningly, this means that "cheating" while playing a computer game can expose you to potentially huge statutory damages for copyright infringement.

As we noted back in May, Blizzard Entertainment, the company that makes the hugely popular massively multi-player online role-playing game World of Warcraft, sued Michael Donnelly, the developer of Glider, a program that helps WoW users raise their character level to 70 by "playing" for the user. Blizzard said that because the license agreement forbids using Glider with WoW, Glider users are committing copyright infringement when they load copies of WoW into RAM in order to play the game, and Donnelly is illegally contributing to that infringement.

As Public Knowledge explained in its brief, Blizzard's theory confuses a copyright holder's intellectual property rights in the software it develops with a buyer's rights in the actual copy of the software. An owner of software has a right to copy it if that copy is essential to the customer's use of the software. (See Section 117 of the Copyright Act.) This rule helps balance the rights of the copyright holder to manage and benefit from its expressive work, and the rights of the public to use and build on that work.

Blizzard argued that players aren't owners but merely software licensees, so Section 117 doesn't apply. But the question of whether a user is an owner for purposes of Section 117 depends the substance of the transaction, not just how one party wants to describe it. For example, if you buy the software, keep it on your own computer and don't have to return it when you are done, you probably own it.

Sadly, the court in this case found otherwise. It held that because Blizzard says the software is licensed, and because it imposes restrictions on use (including such standard restrictions as a requirement that a user who transfers her copy of the software to another must delete all copies from her computer). And that means that users who violate the EULA could be on the hook for copyright damages--including statutory damages, which start at $750 and rise to as high as $150,000 per infringed work. Most disappointing, the court gave short shrift to the absurd policy consequences of treating users who violate a contract as copyright infringers. The logical implication of the holding is that any time you buy software, be it film editing software, accounting software, iTunes, Skype, etc., software owners can always use license agreements to prevent you from ever having full control over your software and taking advantage of standard copyright limitations (such as the right to sell your copy [Section 109 of the Copyright Act] or the right to make copies necessary for use of the software [Section 117]). You can buy it, but you can’t own it.

But this decision is not the whole story: this is the third holding on the issue by district courts in the Ninth Circuit in the past three months. Given that the recent decisions vary considerably, it’s likely the appellate court will address the issue in the near term.

There's one bright light on the horizon: the court found that WoW Glider does not violate the DMCA anticircumvention provisions by allowing users to evade "Warden," which scans games players' computers for unauthorized software. The DMCA prohibits the manufacture and sale of technology that allows the circumvention of technological measures that control access to a work. The court correctly held that Warden doesn't "control access" to the WoW software already loaded on a user's computer, and, therefore, WoWGlider doesn't circumvent that access. (Though the court did leave some aspects of the claim open for exploration at trial).

When the Reese's Peanut Butter Cups Principle Doesn't Apply (EFF)

2008-08-04T09:28:00.001-07:00

When the Reese's Peanut Butter Cups Principle Doesn't Apply

Posted by Michael Kwun

When I was a kid, it seemed that every third commercial I saw was for Reese's Peanut Butter Cups. In these commercials, a chocoholic would collide with a peanut butter lover, quickly followed by the memorable exchange of "you got peanut butter in my chocolate" and "you got chocolate in my peanut butter." But then something amazing happened. Each of them sampled the combined treats, and their faces lit up with delight as they unexpectedly discovered "two great tastes that taste great together."

The converse is also true: When you combine previously known concepts and the result is utterly mundane, that's not a new invention. Moving peanut butter from glass jars to plastic tubs, for instance; it may be a new combination (peanut butter and plastic, hooray!) but it’s not a novel end product. A year ago, in the case KSR International Co. v. Teleflex Inc., the Supreme Court reminded everyone of just this fact. As the Court explained, "The combination of familiar elements according to known methods is likely to be obvious [and thus unpatentable] when it does no more than yield predictable results." At the time, a lot of people wondered whether this spelled the end for many lame patents that did little more than claim well-known business models recast as novel inventions by requiring that they be done on the Internet.

Less than two weeks after the KSR decision, the Federal Circuit picked up on the Supreme Court's hint in Leapfrog Enterprises, Inc. v. Fisher-Price, Inc. [PDF], invalidating as obvious a patent that simply applied modern electronics to old fashioned devices.

Earlier this month, the Federal Circuit directly applied this principle to the Internet. In Muniauction, Inc. v. Thompson Corporation [PDF], the court invalidated as obvious several claims of a patent describing a particular method of auctioning certain financial instruments on the Internet. These patent claims added nothing new to the prior art except that the patent claims required the use of a web browser, while an earlier system had used a proprietary computer network with specially designed client software.

The Federal Circuit noted that web browsers long predated the patent application's filing in 1998, and indeed that using web browsers in online auctions was well-known at the time. Recalling its prior reasoning in the Leapfrog case, the court concluded that "adapting existing electronic processes to incorporate modern internet and web browser technology" has been obvious for a long time.

The notion that one can obtain a patent on simply doing on the Internet what many did before without the Internet has seemed silly to many for a long time. Thankfully, the Federal Circuit agrees. Anyone want to celebrate with a Reeses?

Paper Catalog + Computer Database = Patent? Um, No. (EFF)

2008-08-04T09:25:00.000-07:00

Paper Catalog + Computer Database = Patent? Um, No.

Posted by Michael Kwun

Last week, the patent office agreed to reexamine a patent it granted in 1994 on a "Computer-assisted parts sales method." Orion IP (later renamed Clear with Computers) has filed many, many lawsuits asserting infringement of this and related patents by many, many defendants. Although EFF didn't file this request for reexamination, at one time the patent was owned by Firepond, just like one of the patents on our Patent Busting Project's Ten Most Wanted list.

So just what is this wonderful sales method? In a nutshell, the patent claims ownership over the idea of finding out what a customer wants, electronically finding out what you have that matches that customer's needs, electronically collecting information about the stuff you have to offer the customer, and putting that information into a pitch to the customer.

If you're thinking to yourself, "why that's no different than just looking things up in a catalog," you're not alone; while seeking a closely related patent, the very same applicant told the patent office, "The system essentially computerizes a parts book, with the exception that the system adds the unique element of customer benefits." (I tried, and failed, to figure out what the "unique element of customer benefits" refers to.)

Indeed, if you remove the word "electronically," the patent covers exactly what sales people have been doing for customers for ages. Unfortunately for the patent owner (and fortunately for the rest of us), saying "do it with a computer" does not an invention make.

(For those who want to look into this further, the patent being reexamined is Patent No. 5,367,627 and the control number for the reexamination is 90/010,185. And if you're curious what happens next in the reeexamination, take a look at the handy chart that appears as Appendix A to our white paper on improving patent quality via reexaminations.)

Senators Announce New Intellectual Property Enforcement Bill (EFF)

2008-08-04T08:21:00.000-07:00

Senators Announce New Intellectual Property Enforcement Bill

Posted by Richard Esguerra

Last week, members of the Senate Judiciary Committee introduced S. 3325, the "Enforcement of Intellectual Property Rights Act of 2008," a bill that proposes a number of alarming changes to copyright law. The bill is the Senate's gift to big content owners, creating new and powerful tools -- many of which will be paid for by your tax dollars -- for the entertainment industry to go after infringers. But it doesn’t offer a lick of protection for legitimate innovators and technology users that may be buried by the copyright juggernaut.

One of the bill's most disturbing changes would give the Attorney General new powers to sue individuals on behalf of rightsholders like the MPAA and the RIAA. Bill proponents claim that these new powers, which would allow the AG to bring "milder" civil as well as criminal actions, are necessary because some offenses don’t rise to the level of criminal conduct. This justification just doesn’t make sense. If it’s a low-level offense, why should our top cops pursue it? Traditionally, those types of offenses can and will be pursued by the parties who believe they have actually been harmed, namely the copyright owners. The real "problem" may be that some so-called "offenses" can’t be proven beyond a reasonable doubt, the standard for any crime. This new provision would allow the AG to sidestep that high burden of proof -- a burden that gives the average citizen an important measure of protection from the overwhelming power of the government.

The Attorney General of the United States surely has better things to do than serving as muscle for the entertainment industry, especially when that industry is clearly well-capable of enforcing its copyrights on its own.

The bill also seeks to create an Intellectual Property Enforcement Coordinator position in the Executive Office, with an advisory committee consisting of members from various government departments and agencies. Given the extraordinary budget pressures lawmakers now face, it is shocking that they would consider funding a new layer of federal bureaucracy. In fact, the DoJ itself has spoken out against similar Congressional efforts to rearrange its priorities with bureaucratic meddling.

There's more: another provision creates new categories of infringement at the border, suggesting that individuals need the permission of copyright holders to bring copies of music or movies with them overseas or even through the United States. If the bill is passed, something as simple as taking your iPod to Mexico could be considered an infringement of the copyright owners’ distribution right. The bill also proposes to lengthen the list of items that can be impounded as part of a civil copyright infringement suit, while broadening the list of articles that can be seized and destroyed by the government. (Meanwhile, the Anti-Counterfeiting Trade Agreement (ACTA) is being negotiated in secret by a number of countries, pairing this unprecedented public threat with a potentially catastrophic secret one.)

Whether or not you believe the entertainment industry’s claims about the extent of the piracy problem, there is no reason the American taxpayer should be picking up Hollywood’s legal costs while movie studios are celebrating record box office returns and record-breaking single-title revenues.

Fórmula para retener científicos (END)

2008-07-24T09:39:00.001-07:00

Fórmula para retener científicos

Ley 101 da exención contributiva hasta salarios de $195,000.

La Ley 101, que otorga una exención contributiva a los investigadores adscritos a las universidades del País, puede ser una herramienta efectiva contra la fuga de valiosas mentes científicas, que se trasladan con sus proyectos a centros de investigación con salarios y condiciones más atractivas.

La medida exime a los investigadores de tributar sobre ingresos de hasta $195,000.

Aunque el Departamento de Hacienda aún no tiene listos los criterios de elegibilidad, el objetivo -según el director ejecutivo del Fideicomiso de Ciencia, Tecnología e Investigación, Luis Enrique Rodríguez-, es que la exención aplique a investigadores de alto calibre.

Rodríguez ofreció como ejemplo la categoría “R-01” de los Institutos Nacionales de la Salud (NIH, por sus siglas en inglés), que otorga financiamiento millonario a los proyectos más sobresalientes en Estados Unidos.

En la Isla hay seis investigadores con fondos R-01. Cuatro de ellos están en recintos de la Universidad de Puerto Rico (UPR) -dos en Ciencias Médicas y los otros dos en Río Piedras-; mientras que hay una en la Escuela de Medicina de Ponce y otra en la Universidad Central del Caribe en Bayamón.

El doctor Nelson Varas Díaz es uno de los académicos que cuenta con una beca millonaria para su proyecto, adscrito a la Escuela Graduada de Trabajo Social de la UPR en Río Piedras.

Hace un año, Varas Díaz y un equipo de 10 personas prueban diferentes técnicas para que los profesionales de la salud manejen sus prejuicios cuando tratan ciertos tipos de pacientes.

El profesor opinó que la Ley 101 es un buen primer paso, pero que se debe continuar fomentando la cultura de investigación.

“Esto es un beneficio una vez tienes el ‘grant’ (beca)”, dijo, “pero la universidad debe continuar apoyando a los que están en el proceso de conseguir el ‘grant’”.

Varas Díaz elogió además a la UPR por fomentar que sus investigadores compitan por los fondos de organizaciones tan prestigiosas como la NIH, la Fundación Nacional de Ciencia (NSF, por sus siglas en inglés) y otras.

“Traer un proyecto de estos a la UPR no sólo posiciona al País en un escenario competitivo en el desarrollo de conocimiento, sino que genera empleos y adiestra estudiantes. En mi proyecto hay cinco estudiantes doctorales que generan sus propios proyectos, artículos y presentaciones con fondos de la propuesta”, puntualizó.

El presidente de la UPR, Antonio García Padilla, señaló que la Ley 101 le permite a la institución incentivar a sus propios científicos y profesores y a la próxima generación, además de ser una herramienta para retener investigadores locales y atraer extranjeros.

“Esta es una redirección de los viejos mecanismos de incentivos que había usado Puerto Rico para impulsar la economía industrial, y ahora servirá para incentivar la economía de la innovación y el conocimiento”, dijo García Padilla.

“Los proyectos que reciben esta beca son de máxima calidad... se está hablando de los científicos más destacados del mundo. Para obtener estas becas tienen que tener un peritaje que sirve de imán para otros investigadores que quieren trabajar con ellos para aprender”, dijo el ejecutivo del Fideicomiso de Ciencia, y añadió que estas becas se utilizan para comprar equipos que benefician a la institución educativa en general, no sólo al proyecto específico.

If You Have a Problem, Ask Everyone (NYT)

2008-07-23T07:51:00.001-07:00

If You Have a Problem, Ask Everyone

By CORNELIA DEAN

John Davis, a chemist in Bloomington, Ill., knows about concrete. For example, he knows that if you keep concrete vibrating it won’t set up before you can use it. It will still pour like a liquid.

Now he has applied that knowledge to a seemingly unrelated problem thousands of miles away. He figured out that devices that keep concrete vibrating can be adapted to keep oil in Alaskan storage tanks from freezing. The Oil Spill Recovery Institute of Cordova, Alaska, paid him $20,000 for his idea.

The chemist and the institute came together through InnoCentive, a company that links organizations (seekers) with problems (challenges) to people all over the world (solvers) who win cash prizes for resolving them. The company gets a posting fee and, if the problem is solved, a “finders fee” equal to about 40 percent of the prize.

The process, according to John Seely Brown, a theorist of information technology and former director of the Xerox Palo Alto Research Center, reflects “a huge shift in popular culture, from consuming to participating” enabled by the interactivity so characteristic of the Internet. It is sometimes called open-source science, taking the name from open-source software in which the source code, or original programming, is made public to encourage others to work on improving it.

The approach is catching on. Today, would-be innovators can sign up online to compete for prizes for feats as diverse as landing on the Moon (space.xprize.org/lunar-lander-challenge) and inventing artificial meat (www.peta.org/feat_in_vitro_contest.asp).

This year, researchers at the Howard Hughes Medical Institute and the University of Washington began recruiting computer gamers to an online competition, named Foldit, aimed at unraveling one of the knottiest problems of biology — how proteins fold (http://fold.it).

And in a report last year, a panel appointed by the National Research Council recommended that the National Science Foundation, the major government financing agency for physical science research, offer prizes of $200,000 to $2 million “in diverse areas” as a first step in a major program “to encourage more complex innovations” addressing economic, social and other challenges. (The report is available at http://www.nap.edu/catalog.php?record_id=11816).

Senator John McCain of Arizona, the presumptive Republican nominee for president, has proposed that the government offer $300 million to whoever invents a battery compact enough, powerful enough and cheap enough to replace fossil fuels.

Offering prizes for scientific achievements is hardly new. “It has been around for centuries,” said Karim R. Lakhani, a professor at Harvard Business School who has studied InnoCentive. One early example was the work of John Harrison, the 18th-century clockmaker who, in response to a prize offered by the British Parliament, solved the problem of determining longitude at sea by inventing a clock that would keep good time even in heavy weather.

But, Dr. Lakhani said, “most laboratories, most R & D endeavors still work on the premise ‘we can accumulate and make sense of all the knowledge that is relevant.’ The open-source models and a model like InnoCentive show that other approaches can help.”

Dwayne Spradlin, president and chief executive of InnoCentive, said in an interview that the company had solved 250 challenges, for prizes typically in the $10,000 to $25,000 range. According to the Web site (www.innocentive.com), the achievements include a compound for skin tanning, a method of preventing snack chip breakage and a mini-extruder in brick-making.

“Odds are one or more products in your home has been innovated in our network,” Mr. Spradlin said. “Procter & Gamble has products that were innovated on the InnoCentive network.”

InnoCentive began in 2000 as e.Lilly, an in-house innovation “incubator” at the pharmaceutical giant Eli Lilly, Mr. Spradlin said, with the company posting problems that its employees had been unable to solve. From the beginning the results were good, he said. “Most of our companies tell us they have a one-third or better solve rate on their problems and that is more cost-effective than anything they could have done internally.”

The company says solvers come from 175 countries. More than a third have doctorates, Mr. Spradlin said, and while motivated by money, they also have a desire to solve “problems that matter.”

The company, with offices in Waltham, Mass., has a staff of scientists who work with seekers and solvers, reviewing challenges to make sure they are clear and detailed, and guiding would-be solvers who may have a solution.

That specificity is crucial to InnoCentive’s operation, people who have studied the company say. “If you say, ‘find me a cure for cancer’ it may not work,” Dr. Lakhani said. But if problems can be “decomposed” into what he called modular questions, like “find me a biomarker for this condition, these questions may be more tractable.”

The idea that solutions can come from anywhere, and from people with seemingly unrelated work, is another key. Dr. Lakhani said his study of InnoCentive found that “the further the problem was from the solver’s expertise, the more likely they were to solve it,” often by applying specialized knowledge or instruments developed for another purpose.

For example, he said, the brain might be thought of as a biological system, but “certain brain problems may not be solvable by taking a biological approach. You may want to cast it as an electrical engineering approach. An electrical engineer will come in and say, ‘Oh, here’s the answer for you.’ They have not thought of themselves as being neuroscientists but now they can approach the problem from the point of view of electrical engineering.”

The oil-flow problem was solved by an outsider, said Scott Pegau, its research program manager. If it could easily have been solved “by people within the industry, it would have been,” he said. Instead, Mr. Davis approached it with knowledge he picked up at a friend’s concrete business.

One critical element is encouraging organizations to take novel innovation approaches in the first place. That was the task that drew the Rockefeller Foundation to the company, said Maria Blair, an associate vice president there.

Ms. Blair said the foundation was nearing the end of an 18-month pilot program after which the success of the partnership would be assessed. Anecdotal evidence so far suggests the arrangement can be useful, she said, citing as an example a challenge to devise a reliable, durable solar-powered light source that could function as a flashlight and as general room illumination.

“The solver ended up being a scientist from New Zealand,” she said, and his light is now being made in China.

“What we want to do,” she added, “is connect the nonprofits to the platform, to InnoCentive.”

The nonprofits get a break on InnoCentive fees, Mr. Spradlin said, and Ms. Blair said the foundation could subsidize access to innovation platforms. But she said many nonprofit organizations had difficulty dealing with intellectual property rights and related issues.

InnoCentive deals with these issues, in part, by requiring winning solvers to transfer intellectual property rights to the seekers, whose identities are secret, before they can claim an award.

Dr. Lakhani said some companies worried that by posting information about their problems they risk giving valuable information to competitors. Another fear, he said, is that a solver will devise a useful solution, but refuse to turn it over for the prize or even patent it to keep it out of the hands of the organization that originally sought it.

“We have not observed yet any of these kinds of games,” Dr. Lakhani said.

By contrast, the Foldit contest is a volunteer effort. It began as Rosetta@home, a project using down-time of computers throughout the world to do the laborious calculations needed to determine the shapes of proteins, strings of amino acid crucial to the cells of every living thing. The way these molecules work depends on how the strings fold, but calculating the folding is, as the Foldit researchers put it, “one of the pre-eminent challenges of biology.”

In Foldit, players will compete online to design proteins, and researchers will test designs to see if they are good candidates for use in drugs. The researchers who worked to design it say results will also be interesting because people’s intuition for protein folding does not seem necessarily to be tied to formal training or laboratory experience.

“Our ultimate goal is to have ordinary people play the game and eventually be candidates for winning the Nobel Prize,” said Zoran Popovic, a computer scientist and engineer at the University of Washington.

Mr. Spradlin’s goal for InnoCentive is at least as ambitious. By 2011, he hopes InnoCentive participants will have answered at least 10,000 challenges.

When companies and organizations have a problem, Mr. Spradlin said, “I want us to be the first place they go.”

Douglas Rushkoff: Innovation from the Inside (KQED)

2008-07-18T17:43:00.001-07:00

Forum talks with author Douglas Rushkoff about how and why businesses should return to encouraging internal innovation.

Douglas Rushkoff, author of "Get Back In The Box: Innovation from the Inside Out," and a regular commentator for NPR's All Things Considered, CBS Sunday Morning, Time Magazine and the New York Times.

Patent Gridlock Suppresses Innovation (WSJ)

2008-07-18T12:45:00.001-07:00

Patent Gridlock Suppresses Innovation

The Founders might have used quill pens, but they would roll their eyes at how, in this supposedly technology-minded era, we're undermining their intention to encourage innovation. The U.S. is stumbling in the transition from their Industrial Age to our Information Age, despite the charge in the Constitution that Congress "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."

For the third year in a row, Congress has just given up on passing a law reforming how patents are awarded and litigated. This despite growing evidence that for most industries, today's patent system causes more harm than good. Litigation costs, driven by uncertainty about who owns what rights, are now so huge that they outweigh the profits earned from patents.

It's true that defining intellectual property is hard at a time when new technologies upset the traditional ways of protecting rights, as debates over digital piracy make clear. But in the case of patents, poorly defined property rights for inventions are leading even the biggest companies to take desperate measures, including banding together to protect themselves against claims of increasingly broad and vague patents.

Companies as diverse as Verizon, Google, Cisco and Hewlett-Packard recently formed the Allied Security Trust to buy patents they may want to use some day and that otherwise could end up in the hands of "patent trolls." These firms buy up old patents not to produce anything, but instead to work the system to extract settlements. A similar group formed against trolls to protect the Linux open-source operating system. A Google executive explained that helping to buy up and license patents is the "legal equivalent of taking a long, deep, relaxing breath." Companies can rest easier, and legitimate inventors get paid for their work.

These corporate trusts seem like odd ways to protect products, but the memory is still fresh of the BlackBerry device almost being forced to shut down. Parent company Research in Motion paid more than $600 million in 2006 to settle a case. But in this and many other cases, companies can't be sure whether or not they are complying with patent law. For example, by one estimate there are more than 4,000 patents that must be reviewed and potentially licensed by firms selling products or services online. The legal abuses arising from uncertainty are legion. More than 100 companies are being sued for alleged patent infringement by using text messaging internationally.

The proposed law in Congress would have reduced potential damages to the value of the technology, not the full value of the completed product. Another uncertainty would have been reduced by moving to the first-inventor-to-file system, instead of our more ambiguous first-to-invent standard. The larger problems would have remained, including the trend of awarding vague patents, coupled with a still-primitive system for notifying others of the existence of patents.

Yet the fault line over patent reform signals the deeper problems. Many pharmaceutical companies lobbied against the proposals, fearful of reduced value in their key intellectual property. In contrast, most technology firms supported the reforms, worried more about uncertainty in the law than about the value of their patents.

Both sides may be right. New empirical research by Boston University law professors James Bessen and Michael Meurer, reported in their book, "Patent Failure," found that the value of pharmaceutical patents outweighed the costs of pharmaceutical-patent litigation. But for all other industries combined, they estimate that since the mid-1990s, the cost of U.S. patent litigation to alleged infringers ($12 billion in legal and business costs in 1999) is greater than the global profits that companies earn from patents (less than $4 billion in 1999). Since the 1980s, patent litigation has tripled and the probability that a particular patent is litigated within four years has more than doubled. Small inventors feel the brunt of the uncertainty costs, since bigger companies only pay for rights they think the system will protect.

These are shocking findings, but they point to the solution. New drugs require great specificity to earn a patent, whereas patents are often granted to broad, thus vague, innovations in software, communications and other technologies. Ironically, the aggregate value of these technology patents is then wiped out through litigation costs.

Our patent system for most innovations has become patently absurd. It's a disincentive at a time when we expect software and other technology companies to be the growth engine of the economy. Imagine how much more productive our information-driven economy would be if the patent system lived up to the intention of the Founders, by encouraging progress instead of suppressing it.

Puerto Rico Innovation and Technology

Don't File for That Patent Yet (Entrepreneur.com)

Corporate Backing for Research? Get Over It (NYT)

How to encourage big ideas (MIT News)

James Surowiecki on business, the markets, and the economy (New Yorker)

Recession's latest victim: U.S. innovation (CNN)

Patent filings fell in 2009 for the first time in 13 years, worrying Silicon Valley that it is losing its place as the leader in global innovation.

delanceyplace.com 11/20/09 - innovation

Tinkering Makes Comeback Amid Crisis (WSJ)

Tinkering With Technology

Journal Community

Everybody in the Pool of Green Innovation (NYT)

Ingenio de goma (Endi.com)

The New Rules of Angel Investing (NYT)

The New Rules of Angel Investing

Quick Tips:

Suggested Readings and Resources:

Patent Auctions Offer Protections to Inventors (NYT)

Patent Auctions Offer Protections to Inventors

Biotech Tries to Shrug Off Setbacks (NYT)

Biotech Tries to Shrug Off Setbacks

Priced to Sell (New Yorker)

A Small-Business Guide to Intellectual Property (NYT)

A Small-Business Guide to Intellectual Property

Quick Tips:

Suggested Reading:

The Crowd Is Wise (When It’s Focused) (NYT)

The Crowd Is Wise (When It’s Focused)

Collaborating for Profits in Nanotechnology (NYT)

Collaborating for Profits in Nanotechnology

Find Funding in Your Backyard (Entrepreneur.com)

Find Funding in Your Backyard

Despite Odds, Cities Race to Bet on Biotech (NYT)

Despite Odds, Cities Race to Bet on Biotech

In Pitching to Angel Investors, Preparation Tops Zeal (NYT)

Who Says Innovation Belongs to the Small? (NYT)

Who Says Innovation Belongs to the Small?

Counting Down to the End of Moore’s Law (NYT)

Counting Down to the End of Moore’s Law

In Innovation, U.S. Said to Be Losing Competitive Edge (NYT)

You Can Still Find an Angel Investor (Entrepreneur.com)

You Can Still Find an Angel Investor

Biotech Can Survive the Recession, But It Won’t Be Easy (Wired.com)

Biotech Can Survive the Recession, But It Won’t Be Easy

Who Owns Your Great Idea? (NYT)

Who Owns Your Great Idea?

What Business Owners Should Know About Patenting (WSJ)

What Business Owners Should Know About Patenting

By STUART WEINBERG

Invention Home: Should I Pursue an Invention

Invention Home: Should I Pursue an Invention

From Wired How-To Wiki

Invention Home Patent vs Non Provisional Patent (Wired)

Invention Home Patent vs Non Provisional Patent

From Wired How-To Wiki

Digital Designers Rediscover Their Hands (NYT)

Digital Designers Rediscover Their Hands

3 Secrets to a Site that Sells (Entrepreneur.com)

3 Secrets to a Site that Sells

First phase of $100 million Guanajibo high-tech industrial park all set (CBW)

First phase of $100 million Guanajibo high-tech industrial park all set

Court says copyrights apply even for free software (AP)

It's Time to Rethink the Business Plan Outline (Entrepreneur.com)

It's Time to Rethink the Business Plan Outline

How Patent Law Changes Could Hurt Small Inventors (Entrepreneur.com)

How Patent Law Changes Could Hurt Small Inventors

The Permission Problem (New Yorker)

The Patent Office Can’t Do It All Alone: Public Participation Is Key to Ensuring Patent Quality (EFF)

You Bought It, But You Don't Own It (EFF)

When the Reese's Peanut Butter Cups Principle Doesn't Apply (EFF)

Paper Catalog + Computer Database = Patent? Um, No. (EFF)

Senators Announce New Intellectual Property Enforcement Bill (EFF)

Fórmula para retener científicos (END)

If You Have a Problem, Ask Everyone (NYT)

If You Have a Problem, Ask Everyone

Douglas Rushkoff: Innovation from the Inside (KQED)

Patent Gridlock Suppresses Innovation (WSJ)

Patent Gridlock Suppresses Innovation