FounderSuite Worth a Look for Saving Time On Your New Startup

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, Founder Story, Legal Issues, Tools for Startups

There are a number of forms packages now available for entrepreneurs that provide templates for incorporation, investment term sheets, hiring employees and contractors, etc.. And there are several business model canvas tools that are designed to facilitate useful discussions among founders and advisors (and potential investors) about a new startup. But Nathan Beckord‘s Foundersuite is the first to offer not only forms but facilitate workflows and communication among founders, advisors, prospects, investors, and other interested parties.

I used the idea validation module for the BeamWise planning and launch and found it helpful. Nathan is a friend but I am not an investor or otherwise affiliated with Foundersuite. I think it can make you think and save you time if you are in the early market exploration stages of your new startup.

“In the spring of 2009 I started on ‘Startup: An Owner’s Manual’ a how-to instructional guide for building new companies.”
Nathan Beckord (@startupventures) “Foundersuite Origin Story Part Deux

Don’t Miss “Capturing Intellectual Property” Silicon Valley Workshop Oct-19-2013

Written by Sean Murphy. Posted in Events, Legal Issues, skmurphy, Workshop

Register for  “How to Invent” for free Udemy course at http://www.udemy.com/how-to-invent/

“How To Invent” is a step-by-step guide for non-inventors to start inventing. It is organized as  screencast lectures, practice sessions, and quizzes. It  offers process for capturing on paper key ideas in your head that you want to document as intellectual property and possibly protect as inventions by patenting them. This on-line workshop is a great way to learn more about Bill Meade insights and teaching style.

Don’t Miss Bill Meade’s Hands On Silicon Valley Workshop

He is also offering a live workshop “Capturing Intellectual Property” in Sunnyvale, CA on Sat-October-19-2013. Bill normally only offers private workshops for larger firms but this one is open to anyone with ideas that they want to document. This hands-on workshop will cover:

  • What is intellectual property (IP)
  • The forms and functions of legal IP protections
  • The IP system and its functioning (on one slide)
  • Capturing an invention
  • Checking the invention for enablement
  • How to capture invention if you work in a big company

Who should attend:

  1. Engineers who have never filled out an invention disclosure form.
  2. Section managers/Scrum Masters who are interested in learning what types and quantities of IP they should be seeing from their product development efforts.
  3. Patent agents and attorneys who are not “seeing enough” IP from their project teams and would like to capture more.

Bill Meade is an intellectual property consultant at BasicIP.   In addition to capturing inventions, Bill has substantial experience in disclosure evaluation, IP portfolio management, business side of litigating patents, and licensing patents. He is the former patent portfolio manger for HP’s LaserJet group, has run over 200 invention workshops across US and around world. Bill has a Ph.D. in marketing and has taught college courses since 1990.

Register NowSaturday, October 19, 2013
9:00 AM to 12:00 PM (PDT)
Sunnyvale, CA

I interviewed Bill on “Inventors and IP Management” in 2010 for the EE Times “Entrepreneurial Engineer” column.

Capturing Intellectual Property Workshop: Saturday Oct-19-2013

Written by Theresa Shafer. Posted in First Office, Legal Issues

Every once in awhile we find great workshops that are open to all size companies.  Bill Meade’s “Capturing Intellectual Property” is one such workshop.  His hands-on workshop will cover:

  • What is intellectual property (IP)
  • The forms and functions of legal IP protections
  • The IP system and its functioning (on one slide)
  • Capturing an invention
  • Checking the invention for enablement
  • How to capture invention if you work in a big company

Who should attend:

  1. Engineers who have never filled out an invention disclosure form.
  2. Section managers/Scrum Masters who are interested in learning what types and quantities of IP they should be seeing from their product development efforts.
  3. Patent agents and attorneys who are not “seeing enough” IP from their project teams and would like to capture more.

Bill Meade is an intellectual property consultant at BasicIP.   In addition to capturing inventions, Bill has substantial experience in disclosure evaluation, IP portfolio management, business side of litigating patents, and licensing patents.

Register NowSaturday, October 19, 2013
9:00 AM to 12:00 PM (PDT)
Sunnyvale, CA

The Limits of Legal Self-Help

Written by Sean Murphy. Posted in 2 Open for Business Stage, Legal Issues, skmurphy

Every bootstrapper has a limited budget for attorney’s fees. Attorneys can help you foresee problems and craft contract language, which looks remarkably similar to English but is in fact code that is executed by the legal system. Use them to protect valuable assets–intellectual property, source code, revenue streams–not create them.

A small digression

If you have no experience whatsoever with software licensing issues this can be very dangerous.

True story: we had one client–briefly in 2007–who had downloaded three contracts from different websites and created a Frankenstein out of the piece parts. The problem was that one of the contracts explicitly specified that their development efforts on the software product were “work for hire” which meant that they had transferred ownership of their technology to their first client.

The client was alas somewhat unscrupulous and happily signed the contract very quickly and with a minimum of negotiation. They felt great…for a while.

They engaged us to help them find more customers and as a part of our due diligence (and in assisting ongoing negotiations with their original client) we discovered that they had a serious problem and that their first client intended to wring maximum advantage from the contract. We helped them find a startup friendly attorney but the business negotiations with the original client ultimately foreclosed a market segment for that client’s exclusive use of the technology in exchange for giving them ownership back of their technology.

This was an “own goal” that some first time entrepreneurs are at risk for:  contracts may look like they are in English but they are not. You should at least take your English language “meeting of the minds” deal points and pay an attorney for an hour or two to review the basics. If you have a first customer, a clear scope of work or datasheet for the product, agreement on value/price, you should be able to find an attorney that would be willing to defer an hour or two of time to help prevent basic mistakes.

We routinely recommend that bootstrappers talk to Robert Dang or Joey Tran at FortisGC in Redwood Shores or George Grellas in Cupertino. All three have experience helping bootstrapping startups, are highly knowledgeable, and a pleasure to work with.

Collecting Unpaid Bills

Written by Sean Murphy. Posted in 3 Early Customer Stage, Consulting Business, Legal Issues, Rules of Thumb, skmurphy

In 1995 I did some work for one of the early web startups in Palo Alto. They had delivered a number of database driven websites using a proprietary software technology that they had developed, and had sold the technology to several firms. But they had a problem collecting unpaid bills: they had not been paid for a number of the technology sales and they were running out of cash.

I asked the CEO, “What do they say when you call them?”

He said, “We haven’t called them.”

I said, “Do you have their phone numbers? Do you mind if I try calling them?”

So I called them and asked “I am calling to check on your use of the XYZ web generator. Are you happy with the product?”

If they said no I would try and determine if it was something we could address. If they said yes I would say “according to our records we have not received your payment yet, can you please put a check for the $5,000 you owe us for the software in the mail today?”

Most of the firms using the product paid.

The Check Is Not In The Mail

CheckNOTInMail

I was reminded of this reading  Len Sklar‘s chapter on “Debt recovery – Do You Hate To Ask For Your Money?” in “The Check is Not in the Mail

Many business people not only feel uncomfortable about asking for the money they have so deservedly earned from providing their product or service, they handle their discomfort by simply not getting on the phone and asking or else by doing it clumsily – with unacceptable results.  And, asking in person can be even more discomfiting.

Len’s book “The Check Is Not In the Mail” covers credit policies and collections and is required reading for bootstrappers. He came to our March 7 breakfast and facilitated some very well received interactive exercises: several bootstrappers in turn took the role of a delinquent customer and Len demonstrated a variety of low key techniques to move beyond a current deadlock.

See also “Len Sklar: Be Clear About Payment Terms and Consequences” [Video]

Inventors & IP Management: Bill Meade Interview

Written by Sean Murphy. Posted in Legal Issues, skmurphy

I was delighted when Bill Meade, President of Basic IP Management, Inc. agreed to an interview about managing innovation and intellectual property (IP) to maximize profits. Bill served as Intellectual Property Manager and Future Products Manager at Hewlett-Packard, where he “lit the fire” that moved HP from #18 in US patenting to #3. He has run over 200 invention workshops around the world to help major corporations with IP management.

Q: What are some of the surprising things you have learned about inventors?

A: My three biggest surprises have been about prolific inventors.

  1. Nobody knows who they are.
    Example: Last workshop we ran, the top inventor turned in over 30 complete invention disclosures.  The IP attorneys had never seen him before.  The way you find them is by asking everyone to invent.
  2. They are as motivated by peer pressure as by incentives, you don’t need to motivate them directly.
    Example: One prolific inventor went from 12 disclosures per year to 200 per year after we started running invention workshops at his company, but he never went to a workshop.  Just increasing awareness of the amount of inventing in the environment motivates prolific inventors.
  3. Prolific inventors are contagious.
    Example: Another prolific inventor at HP became an on-ramp for the IP department finding inventing talent by bringing groups of not-yet-inventors to weekly invention office hours to learn how to complete disclosures.

Q: How do you define Intellectual Property (IP)?

A: We define IP as products of the human mind that have commercial value and are legally defensible. This includes patents, trade secrets, and copyright material. It also includes the defensive publication of ideas, which prevent their use as patents by competitors. If you look at managing IP at a company like IBM, they actively manage all four of these forms of intellectual property.

Q: Based on your experience, how do VPs of R&D/Engineering look at the managing IP?

A: In my experience R&D management tends to under value IP creation and management because they are not measured on it directly. It’s hard to measure: the effects of a strong or weak approach can take years to manifest. Invention disclosures, patent filings, and patents granted are all lagging indicators and are still only a poor proxy for patents successfully litigated or licensed.

Q: What are the aspects of developing and managing IP that get underestimated?

A: One of the biggest is how much more intellectual property their people can document and allow the corporation to protect if properly encouraged. This latent and often untapped potential for additional IP can be encouraged and directed toward the strategic objectives of the corporation. Many companies pay bonuses for invention disclosures and patents, but they underestimate the value of allocating blocks of time to writing invention disclosures and simplifying both the disclosure forms and the evaluation process so that they are much less of a burden on the potential inventor.

Q: What drives IP strategy?

A: Most IP strategy is developed in response to an IP crisis, for example being sued unexpectedly. Once an IP crisis happens, the company will start climbing the IP management learning curve, with management, lawyers, outside consultants, all hands scrambling.

The only good thing about an IP crisis is that the need for additional IP to manage the situation becomes crystal clear.

The biggest problem with managing IP by crisis is that very little long-term learning happens from crises.  The litigators declare victory and move on to the next crisis.  The managers are just happy to have the situation closed.  Corporate counsel is left burned out and un-thanked.  IP portfolio managers having survived litigation often leave their position, and often, their company.

Q: OK, so what should drive IP strategy?

A: We think there are perhaps a half dozen good answers:

  • Protect sales & product differentiation
  • Stop competitor formation
  • Buy oligopoly membership
  • Solve patent crises
  • Reduced litigation
  • License revenue

Q: What are some better practices you have seen at the engineering leadership level?

A: Several best practices for creating business value by defining and implementing an IP strategy:

  • Target the inventing you want
  • Tell your inventors what you want them to invent and why
  • Train your inventors and transfuse them with enthusiasm for inventing.
  • Measure using an objective rating process and provide quantitative feedback from idea rating.
  • Provide infrastructure for closed loop feedback between IP team and inventors.

More background on Bill Meade

Bill Meade is President of Basic IP Management, Inc. Prior to Basic IP, Bill served as Intellectual Property Manager and Future Products Manager at Hewlett-Packard with responsibilities including managing the business side of patent litigation, implementing IP strategy, damages estimation, increasing the strategic alignment of IP to LaserJet businesses, IP business process development including a world-wide invention incentive payment system.  Bill “lit the fire” that moved HP from #18 in US patenting to #3, running over 200 invention workshops for HP across the US and around the world. Bill has also served as Assistant Professor of Marketing at University of Missouri, where he moderated internet discussion lists for Geoffrey Moore and Guy Kawasaki. Bill holds a BA in Finance, an MBA in marketing, and a Ph.D. in marketing with minors in evolutionary ecology, econometrics, statistics, and electrical engineering, all from Michigan State University – The Eli Broad Graduate School of Management.

George Grellas on Insightful vs. “Window Dressing” Advisory Boards

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, Legal Issues, skmurphy

George Grellas is an attorney in Cupertino whose firm has specialized in business and corporate law for more than 25 years. He has a number of excellent articles on startup legal issues “Startup Law 101 Series” including “Ten Essential Legal Tips for a Startup Team in Formation” that any team of two or more entrepreneurs should read.

He posts on Hacker News from time to time and in response to a question “Should Your Startup Have an Advisory Board” posted a very cogent set of tips that have yet to make it to his website. So that his answer is not lost to bit rot I am including it here.

I have worked extensively with startups in Silicon Valley since 1984 and have seen every shade of advisory board, ranging from those set up for pure window dressing to those used extensively by founders for insightful continuing advice.

The latter usually arise from pre-existing relationships between one or more of the founders and the advisors. Normally, the advisor is someone who wants to assist the founders and whom the founders accordingly want to reward by small equity grants via the advisory director role. These types of advisory boards, in my experience, tend to be of significant value to early-stage startups and are well worth the small equity grants involved (which, by the way, tend on average to be more like .1%/yr of service rather than the higher number suggested by the author of this piece). The informal nature of the relationship also avoids many of the hassles associated with trying to have such an advisory board meet from time to time in some formal manner. In essence, what you have with such boards is a healthy working relationship from which all parties benefit.

The “window dressing” variety of advisory board is often as phony as an undersized glass eye that spins randomly with every blink. This often involves the so-called industry luminaries used to make the startup look much more impressive than it really is. In essence, such advisors hire out their names (and, yes, they will insist upon larger equity grants and often for some form of cash compensation as well, as for example for every meeting attended). While one can never say categorically that such advisors do not add value to a startup, their primary function is to add name-value and hence the value of their contributions apart from name value tends to be limited. There are exceptions but, in my experience, not many. In general, these types of advisors are a clear mis-match for most early-stage startups, though they often help later-stage ones needing “company profile” dressing for IPO, etc.

By the way, founders still occasionally confuse the role of advisory director with that of a board director. There is no connection whatever between the two roles. The former is basically an outside consultant only and has no management-level authority; the latter, of course, has tremendous management authority (and corresponding liability risks as well, which the advisory director does not).

Here are some blog posts where I talk about the value and appropriate use of an advisory board or kitchen cabinet:

  • Nov-23-2008 “Unfamiliar Pain
    If you don’t have a kitchen cabinet or board of advisers that you are accountable to, I would encourage you to create some mechanism for independent outside advice from folks with relevant experience. I have several other independent consultants that I compare notes with, we also take turns kicking each other in the ass encouraging each other to make hard decisions and do the things we know we need to do that are getting neglected. We having a meeting with all of our partners together for the first time in early December. I hope to use this as both a joint planning and joint accountability mechanism.
  • Jul-16-2008 “Common Questions About Advisory Boards
  • Jan-21-2008 “Forming an Advisory Board

VentureHacks has three relevant posts from 2008 that, while they are more focused on VC related issues than bootstrapping, are still worth reviewing:

Eleven Work Weeks–Or Less–Left in 2009

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, Legal Issues, skmurphy

I blogged about end of year issues last November in “6 Work Weeks or Less in 2008” and I thought I would issue the “Warning Dates in Calendar are Closer Than They Appear” a little earlier this year because a lot of new businesses need to take action in the next few weeks to get ready for 2010. Depending upon how you count it there are only about seven real work weeks left in the year.

  1. Oct-19: normal work week, but what the heck, take a weekday off and join us Sat-Oct-24 for “Getting More Customers.” [Full Week]
  2. Oct-26: it’s still possible to make sales calls that will lead to revenue this year. [Full Week]
  3. Nov-2: accountants are not that busy–compared to say next March when business taxes are due–if you don’t have one, schedule some appointments. [Full Week]
  4. Nov-9: If you have not incorporated, now is the time to get your paperwork in order. [Full Week]
  5. Nov-16: the last full week before Thanksgiving, if you are trying to close business it can get much harder between Thanksgiving and New Years Day [Full Week]
  6. Nov-23: a half week at best. We will have a Bootstrapper Breakfast Friday morning after Thanksgiving. [Half-Week]
  7. Nov-30: normally a good week, if you are not chasing opportunities this can be a good week to look back at 2009 and extract some lessons learned. [Full Week]
  8. Dec-7: normally a good week, if you have taken a look back at 2009 this can be a good week to look forward to 2010 and do some planning before the holiday spirit gathers full force. [Full Week]
  9. Dec-14: unless you are chasing end of year budget this is can be a very slow. But there will be at least one Bootstrapper Breakfast this week (Tuesday in Sunnyvale, and perhaps Friday in SF). [Slow Week]
  10. Dec-21: normally a good time to reconnect with friends and family; we will not hold a  Bootstrapper Breakfast on Christmas Morning. [Full Week only for hermits]
  11. Dec-28: last chance to file paperwork with a 2000 deadline; and surprisingly we will not hold a Bootstrapper Breakfast on New Years Day. [Full Week only for hermits]

Some logistics issues you should take care of now instead of playing catch up in early 2010:

  • If this is your first year in business get your accounting system (in most cases in the US this will be QuickBooks) in order now, schedule a meeting with your accountant (or interview candidates and select one) before December 11. If you are based in Silicon Valley we are huge fans of Ogden Lilly.
  • Take some time to do both a recap of 2009 and a look forward for 2010, assessing what are appropriate goals in light of continued economic difficulties in most industries.
  • If you’ve been working on a startup but haven’t incorporated yet, you may want to get all of your paperwork in order but postpone filing until the first week in January, in some states this will save you paying 2009 annual fees for a few weeks of operation in December and then 2010 annual fees. We like to see teams incorporate sooner rather than later if only because it gives you a vehicle to do business with that’s better than a collection of sole proprietorships.

Bootstrappers Breakfast Is Now a Registered Trademark

Written by Sean Murphy. Posted in Events, Legal Issues, skmurphy

steaming hot coffee and serious conversationBootstrappers Breakfast” was registered June 23, 2009 as a trademark of SKMurphy, Inc. “For education services, namely providing live and on-line seminars, workshops, and mentoring sessions in the field of entrepreneurship.”

No claim is made to the exclusive right to use “breakfast” apart from “Bootstrappers Breakfast.”

Details as they unfold: we will do six breakfasts a month starting in July.

Update Jul-1-09: we wanted to thank Athol Foden of Brighter Naming for his advice on trademark strategy and assistance in navigating the registration process.  We were pleased to retain him and would encourage other startups to do likewise. We filed our application November 7, 2008.

Paul Lippe on an Entrepreneur’s Accountability

Written by Sean Murphy. Posted in Blogging, Legal Issues, skmurphy

Paul Lippe is CEO of Legal OnRamp, a community of practice website for lawyers. He did a guest post on the AmLaw Daily Blog “Welcome to the Future: Leadership, Accountability, and Swimwear” that I enjoyed, in particular his observations on accountability were worth bearing in mind in 2009:

Legal OnRamp strives to simplify innovation and value delivery, primarily for in=house lawyers but also for law firms, both by providing tools to innovate and by sharing examples of success.

We have 7,000 members, probably 3,000 of whom have contributed content or otherwise added value. Perhaps 1,000 have contributed ideas on how to make our service better. Ninety nine percent of the good ideas and 99.9 percent of the work have come from someone other than me. More than 400 law firms and more than 700 companies are participating.

There are at least 100 things that need to go right; there are 200 things that could go wrong. When we started, 80 percent of lawyers thought we were nuts; 14 months later, 80 percent of lawyers think we’re the future. I “control,” in a formal sense, very little of this.

Still, if Legal OnRamp fails, it’s my fault.

There are no words we love to hear more than “it’s not your fault.” Whether from our mother, our friend, our cleric, or our consultant, when something goes wrong, we cherish absolution.

So let’s be clear: if you are running a law firm and it fails, it’s your fault.

The balance of the article is worth reading, he addresses the need to plan for a more competitive environment in 2009. Although his intended audience is managing partners at law firms it’s very applicable to software and consulting firms as well.

How I Avoid Sending E-Mail I Regret

Written by Sean Murphy. Posted in Legal Issues, skmurphy, Tools for Startups

By agreement with my business partners I don’t send any E-mail after 9pm unless it’s very very dull.

If it’s the middle of the day and a misunderstanding is starting to spin out of control my mental guard bands are developed enough that I can say to myself “Enough, pick up the phone.” I have also learned that if I get voicemail when I call I just ask for a call back as casually and politely as I can, a voicemail can suffer from many of the same defects as an e-mail.

I think it takes synchronous engagement to remind me that there is a person on the other end of the communication.
But after a certain point in the evening it’s too late to call (although skype has allowed me to reach out to folks in Europe and Australia when I am up late and confused by a recent conversation thread that’s gone awry).

But if it’s late I send it to myself with the to: line as the first line in the e-mail (I may copy a partner or two and ask for input). I don’t leave it sitting ready to be sent because once or twice I’ve been overcome by a desire for closure and hit send that I’ve later regretted.

Sending an e-mail to myself seems to trigger the same regret glands secretions that flood my brain after the send button is pressed, provoking an empathetic reaction that encourages me to reconsider what I’ve written in light of the emotional reaction it’s likely to provoke. It also stores the content of the message verbatim and allows me to review it in the cooler light of a new morning.

I do another trick that’s a variation on what the radio call in shows do: I put a “tape delay” into your send button. I have configured Eudora (you can do this with Outlook and Thunderbird and likely whatever client you are using) to send E-mail once every two hours or so. On a statistical basis this affords me some measure of protection and allows me to time to experience l’esprit d’escalier (French for “I wish I had said this instead“) and time to incorporate it.

I would like to develop an equanimity that would remove my the need for all of these auxiliary output buffers but until I do I will continue to “measure twice, cut once” in my outbound E-mail.

For whatever reason, IM/chat doesn’t seem to trigger the same challenges I think because it’s synchronous and you can take longer to answer than you can in a regular conversation.  A pause that would be considered rude or a further provocation is very acceptable in a chat session.

Ole Eichorn wrote “The Tyranny of Email” and “Tyranny Revisited” in March of 2003 and suggested a number of good rules for how to take best advantage of E-Mail. I find his six rules for avoiding problems with E-mail are still very useful:

  1. Turn your email client off.  Pick the moment at which you’ll be interrupted.
  2. Never criticize anyone in email, and avoid technical debates.  Use face-to-face meetings or phone calls instead.
  3. Be judicious in who you send email to, and who you copy on emails.
  4. Observing some formality is important.
  5. Don’t hesitate to review and revise important emails.
  6. Remember that email is a public and permanent record.

I have actually reference Eichorn’s post twice before:

  • In October of 2007 “GABA Panel on Communications Wrap-up”  The panel addressed blogs, wikis, e-mail etiquette and more.
  • in November of 2006 I wrote about my “E-Mail Overload” a challenge that I have made very little progress on as I re-read it today (I have reviewed Merlin Mann’s “Inbox Zero” approach several times but find myself unable to stick with it).

Why NDA’s Are Not On the Startup Maturity Checklist

Written by Sean Murphy. Posted in 2 Open for Business Stage, Legal Issues, skmurphy

What follows is an e-mail thread converted into a blog entry. I got a suggestion on our contact form related to the Startup Maturity Checklist:

Some software companies will require you to sign an NDA before giving a presentation or sharing any other details about the company’s product. You may want to add this to the checklist.

My answer was that we don’t advise that approach. We do believe that employees should sign an invention and patent assignment form to protect internally developed IP but if you can’t give a basic demo w/o an NDA you are probably either giving the wrong demo or overly concerned.  I covered this a little bit in “NuSym De-Cloaks Part 2”  about two years ago:

  • Quiet mode (stealth mode): I am normally in favor of this, but if you are advertising jobs for folks and identifying yourself as associated with the startup in public forums it can’t hurt to to at least talk about the problem you plan to solve. Other opinions on “stealth mode startups”

He replied with some clarifications (link added, some identifying info removed at his request).

Thanks for the reply. I’m at a start-up in Santa Clara. I mentioned adding the NDA to your list, because I had talked to a few companies in the past who were selling ERP software, and they wanted me to sign an NDA prior to demonstrations.

These days as a startup you normally have to sign a larger company’s NDA form which tends to slow down the whole process for talking to a prospect to the point that it’s counterproductive.

Normally you only get into an NDA level presentation if you are discussing product roadmaps or other confidential information that would not be available in a standard datasheet or website briefing. What may be going on here is that they want to make the presentation seem special because it’s “under NDA.”
How did you come across our site?”

I came across your website and saw the section on bootstrapping breakfast gatherings. I would like to attend, but I do not have a software start-up company.

We get a number of technical consultants (some of whom are hoping or planning to add a software offering to their mix) as well as engineers who are considering striking out on their own. But we tend to have serious conversations that are most useful to folks already in a startup or close to starting one. You are welcome to attend if you have an entrepreneurial itch. Each meeting is different because we get different people attending with new information and new challenges.

With your permission I would like to convert this e-mail thread into a blog post (I would not name you or identify you by company, but mention that the startups that are calling on you ask for an NDA first). Thanks very much for your question and follow up, I will use it as an excuse to write a short blog entry if you don’t mind.

Please go ahead, but don’t use my name or company name. Thanks for taking the time to answer my question and for the various links in the email. I’ll check them out.

I welcome comments, questions, or suggestions on our Startup Stages Model or on other challenges you face bootstrapping your startup. Please use the contact form or e-mail me directly.

We Sign NDA’s

Written by Sean Murphy. Posted in Legal Issues, skmurphy

We get asked “Will you sign a Non-Disclosure Agreement?” fairly often, to the point that we are proactive, suggesting that a prospect take a look at our Mutual NDA [PDF] and sign it if it would increase their comfort level.

A Non-Disclosure Agreement (NDA) allows us to have a deeper and more useful discussion. We will normally have an initial conversation where the prospect can simply decline to answer certain questions but we can have a high level exchange of information.

This surprises some entrepreneurs who are used to Angels and VC’s telling them that they won’t sign NDA (and sometimes being counseled that they were stupid for asking). You can ask a VC them to sign an NDA as a part of their Board of Director seat since they now have a clear fiduciary obligation to the company, but the number of business plans that yield you a VC on your board is perhaps one in 200.

But we are neither VC’s or Angels, aspiring instead to be trusted advisers on strategy and business development. And it seems to me if you are going to provide strategic advice, you have to be willing to sign and honor NDA’s. Since the start of the year we’ve signed three, and will sign two to four a month on an ongoing basis. Obviously it takes more than a piece of paper to inspire trust, but it’s a start.

That being said, I believe that execution is far more important than the idea, and that good execution means that you need to continue to evolve your initial idea.

Legal Issues: Q&A with Pete Tormey of Action Patents

Written by Francis Adanza. Posted in Legal Issues, skmurphy

Today I was able to sit down with Pete Tormey, founder of Action Patents. Pete is a registered patent agent who specializes in providing patents for Software, Electronics, Life Science Instrumentation and Business Methods. From blogs to entrepreneurial events, patents are always a controversial topic. This is why I took the opportunity to speak with an expert. Below are the questions and answers from our conversation.

Q: What is the difference between a patent and a trademark?
A patent protects an inventor for the production or sale of a new useful invention. Whereas a trademark is protection for a distinctive name, symbol, motto or emblem that identifies a product.

Q: If I were to hire a patent practitioner, what are three specific things I can include in my description to make your job easier and reduce costs?
The most important thing is to move beyond just the new idea so that you can explain to the patent prosecutor how to make and use the invention. Secondly provide at least one good sketch illustrating the invention, and finally provide a good description of the technical background and need for the invention. This helps the patent practitioner explain the purpose and value to the patent examiner.

Q: Looking beyond the value in a legal action, how else can patents help me?
A patent has marketing value too. For example customers may view patented technology as superior to a competitor’s product which can greatly help your sales process. Also, for startup companies, getting investment capital may be dependent on having an idea that’s patentable. Patents provide your company with the ability to show people what you do that no one else does. That is a significant competitive advantage.

Q: I have heard people say that a patent is only as strong as the dollars you have to back it, what are your thoughts?
Most patents never go through an entire legal challenge. Simply having a patent may be sufficient because your competition does not want an expensive court battle either. If patenting your technology prevents your competitor from attacking you directly in the market, the patent has done its job without the cost of a court battle.

Q: I have also heard people say that the patent is only as strong as the reputation of the patent practitioner who filed it, is this true?

It’s not the reputation that matters, but the technical knowledge and experience in that industry that have the greatest effect. Most inventors are not really aware of the person who actually drafts the patent. Large firms often use technical writers. The practitioner needs to clearly articulate the invention and draft solid claims to it.

Q: Who may apply for a U.S. Patent?
A patent may be granted to the inventor or discoverer of any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, or on any distinct and new variety of plant, which is asexually reproduced, or on any new, original, and ornamental design for an article of manufacture.

Q: On what subject matter may a patent not be granted?
A patent may not be granted on a useless device, on printed matter, on an improvement in a device which would be obvious to a person skilled in the art, or on a machine which is not useful such as an alleged perpetual motion machine. A patent may also not be granted for an idea or abstraction such as a mathematical formula.

Q: If one person furnishes the ideas for invention and another person employs him or finances his experimentation, should the patent application be filed by them jointly?
No. The application should be signed by the true inventor and filed in his or her name.

Q: Is there any danger that the Patent and Trademark Office will give others information contained in my application while it is pending?

All patent applications are maintained in the strictest secrecy until the patent is issued or the application is published. Publication is limited to only certain applications. After the patent is issued, however, the file containing the application and all correspondence leading up to issuance of the patent is made available in the files information room for inspection by anyone, and copies of these files may be purchased from the Patent Office.

Q: I have made some changes in my invention after the filing of my patent application documents. May I amend my patent application by adding a description and illustration of these features?
No. The law provides that new matter cannot be introduced into the disclosure of a patent application. However, there is a procedure called “continuation-in-part application” that allows the patent applicant to file a new application which contains new subject matter to replace or supplement the original. You should notify your patent agent immediately of any changes you make in your invention.

Q: While on vacation last summer, I found an article on sale which has not yet been introduced into the U.S. or patented or described in the U.S. May I get a U.S. patent on this invention?
No. According to the law, a U.S. Patent can only be obtained by the true inventor, not by one who learns of the invention of another.

Q: Does the Patent and Trademark Office control the fees charged by patent agents for their services?
No. The Office maintains a roster of registered patent practitioners, but the Office does not control fees, nor will the Office help you select a patent agent.

Q: If I obtain a patent on my invention, will that protect me against claims of others who say that I am infringing their patents?
No. There may be a patent of a more basic nature on which your invention is an improvement. If your invention is a detailed refinement or feature of such a basically protected invention, you may not use it without the consent of the patentee, just as no one will have the right to use your patented improvements without your consent.

Q: What do the terms “patent pending” and “patent applied for” mean?
They are used by a manufacturer or seller of an article to inform the public that an application for patent on that article is on file in the Patent and Trademark Office. The law imposes a fine on those who use these terms falsely to deceive the public.

Q: Can an inventor sell his right to a patent or patent application to someone else?
Yes. The inventor can sell all or any part of his interest in the patent application or the patent.

Q: Does a U.S. patent protect my invention in other countries?
No. The U.S. patent protects your invention only in this country. If you wish to protect your invention in foreign countries, you must file an application in the patent office of each country within the time limit permitted by law. Check with your patent agent about costs before you decide to file in foreign countries.

Pete has a great website with a lot of practical advice. One question we get a lot “is what does a patent cost?” Pete has a great “Patent Fees” section that addresses this directly

Action Patents charges $100 per hour for patent preparation and prosecution. There are additional costs such as filing fees and possibly drawing fees. The cost of a typical patent application generally runs from $3,000 for simple inventions to over $7,000 for complex business methods and software inventions.

The legal fees vary depending upon the technical complexity of the subject matter, the quality of the written description provided by the inventor, and the number of revisions required to accurately describe your invention. If you provide a good written description of the invention, your legal fees are less. Government fees are subject to change.

Once an application is filed, there are other costs incurred while the patent is pending. The United States Patent and Trademark Office will issue an “Office Action” setting forth their findings on patentability and may require the Applicant to file a response. After one or two responses outstanding issues are usually resolved. Each response generally incurs about $1,000 in legal fees. After the patent is allowed there is an issue fee of $700 plus a $200 preparation fee.

Once a patent issues there are maintenance fees at 3 1/2, 7 1/2, and 11 1/2 years. They are presently $450, $1,150 and $1,900 respectively for small entities. The maintenance fees are subject to change by the U.S. Patent and Trademark Office.

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