25. February 2008 by Martin Suter.

Last summer, at contract renewal time, I migrated from a Blackberry to a Windows Mobile Smart Phone (AT&T 8525 made by HTC). It had gotten good reviews, and I liked the slide out QWERTY keypad, so I took the plunge.

Besides the dismal battery life, the move has been mostly a bust, and today I’m dusting off my "old" Blackberry and taking a step forward by taking a step backwards.

"Why?", you might ask…

To make a long story short, complexity.

Short on device memory, I have spent (literally) hours on-line trying to figure out how to free up memory. I want to move a single file (PIM.vol) from my local memory to the SD card, and to then have the sync engine sync with it in its new location…Did I say that I’ve spent hours trying to find out how to do this?

The "solution" is to download a 3rd-party Registry Editor, and to then find and change several registry entries, re-boot a couple of times and then cross your fingers. Now I consider myself to be fairly technical, but why is this my problem? Why should I be mucking around in low-level registry entries to hack a fix when I should be able to open up Windows Explorer and drag the PIM.vol file from one place to another and then have the applications figure it out.

I’m not the only guy with this issue. I came across hundreds of entries from people with the same problem. How many of them will still be Windows Mobile device customers or Google Mobile customers is anybody’s guess, but I’m betting that people won’t have to hack their registry with a Google device.

Smart is not designing something that only engineers can figure out, smart is designing something that everyone can figure out.

C’mon Microsoft, you can do better…No, you NEED to do better. What’s the old maxim about it costing 10X to get a new customer than to keep existing ones? If you lose/alienate your early adopters, it will be very difficult, and maybe impossible, to gain back this market share.

That’s my .02!

Martin

(martin.suter@iplicensing.net)

Posted in Blackberry, Microsoft, Google | Print | No Comments »

21. February 2008 by Martin Suter.

Earlier this morning, Microsoft brought out all the big guns to make a major announcement around, what it called, "Strategic Changes in Technology and Business Practices to Expand Interoperability". Its 3 guiding interoperability principles are:

• Open connections
• Standards support
• Data portability

Now I’ve often felt that Microsoft has never been given (nor taken) enough credit for its interoperability efforts and its support for standards. With its entree into the enterprise in the late 90’s, Microsoft acknowledged implicitly and explicitly that IT is, by its very nature, heterogeneous. Active Directory uses LDAP and Kerberos. Office 2007 has moved to XML as a standard file format. Even in consumer applications like Windows Media Player, where Microsoft supports its own proprietary media formats, it does an equally good job of playing .mp3 or .avi files as well.

Notwithstanding all that, today’s announcement is an important one, if only to further assuage the EU and the Open Source community that Microsoft continues to increase its transparency.

As I spent time digesting this announcement on Microsoft.com, I came across a free download - Windows Live Writer, a very cool, free, blogging application that allows me to do WYSIWYG blog authouring and save it offline. No more creating Word docs on planes and then cutting and pasting to the web. What’s even more impressive, is that it seamlessly integrates with WordPress, my Linux-based hosted blog. The set-up process scanned my site, uploaded all the relevant formatting and gives me a far richer, more flexible authouring platform. It has optional Plug-Ins, which are downloadable from the Windows Live site. To date, there are 80 3rd-party plug-ins, including plug-ins for Firefox, RealPlayer, Flickr, Picassa and even Google functionality.

So just to get this straight, I can create an XML blog article on my Windows laptop, insert Google capabilities (if I so chose), save it to NTFS locally and publish it to a Linux server. Who knew?!?

Interoperability in action. It rocks.

That’s my .02!

Martin Suter
(martin.suter@iplicensing.net)

Posted in Microsoft, Google, Linux | Print | No Comments »

18. February 2008 by Martin Suter.

TheStreet.com reported today that a $2b investment from Intel may revive the Sprint-Clearwire WiMAX joint venture.

Can you say déjà vu all over again?

One word: Cometa.

The vaunted joint venture, founded in late 2002 and backed by Intel, AT&T and IBM, with venture backing from Apax and 3i, Cometa had grand plans to roll out 20,000 Wi-Fi hotspots by 2004, so that people nationwide would be no more than a five minute walk from one.

In a Wi-Fi Planet article, one of the founders is quoted as saying: “If we knew all about where demand for wireless broadband access is going to end up, it would be too late to start the company. Clearly, there’s a leap of faith required here.”

In a stunningly prescient comment later in the article, Marcos Lara, founder and managing director of Public Internet Project, points to the failure of wireless Internet access provider Ricochet as a cautionary tale: “My point is, the model for Ricochet was no different.”

Eighteen months later, despite the backing of 3 heavyweights, Cometa quietly fizzled out, closing its doors in May 2004.

But here we are again, with Intel, Clearwire and Sprint trying to drag WiMAX, kicking and screaming, up the technology hype curve to the peak of inflated expectations. But like Groundhog Day, we’ve already lived through this twice already. Maybe the third times the charm, but I wouldn’t bet on it.

It’s not a question of technology, it’s a function of business model.

That’s my .02!

Martin

(martin.suter@iplicensing.net)

Posted in Wireless, WiMAX, Intel | Print | 1 Comment »

18. February 2008 by Martin Suter.

It’s only 849 miles from Redmond to Palo Alto, but that might as well be light years.

An article in today’s New York Times asserts that the biggest hurdle in the integration of Microsoft & Yahoo will be the clash of cultures. I think they’re being politically correct. It’s bigger than that. It’s a religious war.

During the mid-90’s, I was fortunate to have a front row seat as the Internet took off. Whether it was sitting in meetings with Mark Andreesen and Jim Barksdale or sharing a stage with Scott McNeely in front of thousands of fans, it was heady stuff. I spent 1995-97 within the “ABM” alliance (Anything but Microsoft), and bought into the standard Valley exhortations that Redmond represented “the dark side”.

But in late-1997, things changed for me. I joined another early-stage start-up (FastLane), was given a blank sheet of paper, and the vague task of creating a strategic alliance with Microsoft. My first visit to Redmond was in October 1997, and I will admit that the hair stood up on the back of my neck. I felt like an impostor and wondered whether I had really crossed over to the dark side.

As we took the company from zero to Active Directory poster child over the next 3 years, I spent between 2-3 weeks/month on campus, working across the organization. By the time FastLane was acquired in Q3/2000, I was as deeply embedded in the Redmond culture as I had been in the Valley’s just a few years previous. I was able to expound on Microsoft’s position on the DOJ anti-trust lawsuit and its .NET strategy in great detail. I had drank the Microsoft Kool-Aid. Perhaps I had been assimilated.

So what of the Yahoo takeover?

The average Yahoo employee has gotten out of bed every day believing that Redmond equates to the dark side. Their peers, with whom they drink at Gordon Biersch or against whom they play Ultimate, all believe the same thing. They have spent their careers trying to disprove that “Resistance is Futile”. So how do you convert someone for whom the battle has taken on quasi-religious overtones? A more fundamental question is “Should you?”

As I have stated in previous posts (“The Open Source Red Herring”), I have a ton of respect for Microsoft and that many in the Valley hide their motives behind the pseudo-altruistic cloak of “open source”. However, I would also suggest that, perhaps, Microsoft has met its match with the Internet. It’s been difficult to watch from the sidelines, as Microsoft has touted web architectures and web services (.NET) for a decade now. But there has been a tremendous disconnect between its words and its actions in this regard. It’s easy to see why, as the Web is potentially disruptive to its 2 most profitable franchises: Windows and Office.

But unfortunately, when Microsoft takes a close look in the mirror, it must admit to itself that it still struggles to “get” the web. Salesforce.com got the web and the power of SaaS. Google got the web and the power of advertising. Yahoo got the web and the stickiness of subscriptions. Add in Facebook, YouTube, and most of Web 2.0, and Microsoft doesn’t even earn “fast follower” status.

Perhaps its failure, to truly lead on the Web, is cultural and, ultimately, intractable. Perhaps the gravitational pull of the web in the Valley is too strong, even for Microsoft, to try and move it into its Redmond orbit.  Spinning out its Internet properties with some cash, and merging with Yahoo rather than trying to assimilate it into Redmond, may be Microsoft’s wormhole through cyberspace.

The answer may lie, not in bringing the Valley to Redmond, but in carving out a piece of Redmond, and letting it leave home and move to the Valley.

That’s my .02 for today!

Martin

(martin.suter@iplicensing.net)

Posted in Yahoo, Internet, Microsoft | Print | No Comments »

12. February 2008 by Martin Suter.

Allen Kupetz, Executive-in-Residence, Crummer Graduate School of Business at Rollins College, is the kind of professor that was exceedingly rare when I was in university. Allen wants his MBA students to gain a deeper appreciation for the “real” business world, and is not shy about bringing in local subject matter experts to share their insights with his class. I’m very fortunate to be Allen’s “go-to” guy on the topic of licensing.

Tomorrow, I have the opportunity to speak with his “Technology Entrepreneurship” class about IP Licensing, both as a catalyst to start a company as well as a means of commercializing early-stage technology. If they’re like me, there’s little chance that they’ll be filing patents on their own inventions, so I’m hopeful that introducing them to sources of IP and describing what it takes to get a deal done will be interesting. My goal for the talk is to expose them to the world of licensing, as a means of harnessing their entrepreneurial aspirations…stuff that you’ll never find in a textbook.

The academic world needs more guys like Allen and fewer textbooks.

That’s my .02!

Martin

(martin.suter@iplicensing.net)

Posted in Education, Licensing, Start-ups | Print | 1 Comment »

7. February 2008 by Martin Suter.

One of the most contentious areas in licensing negotiations is in the area of ownership of derivative IP. The most effective articulation of the issue that I have seen was by Jill Riola, a highly capable licensing attorney working at Akerman Senterfitt in Orlando. During negotiations with a team of attorneys from a Fortune 500 firm that was licensing our IP, she brought it back to first principles:

·         We own our IP (blue Play-Doh)

·         You own your IP (red Play-Doh)

·         We are granting you the right to create purple Play-Doh, using our blue in combination with your red

·         But you do not own purple Play-Doh, because by definition, purple must contain some blue.

Furthermore, when viewed this way, all of the terms contained within the licensing agreement, including restrictions on Field of Use, royalty rates, etc., apply for all shades of purple Play-Doh.

We could get down in the weeds and occasionally lose sight of the issue, so it was amusing to watch how Jill would bring it back to first principles. “If it’s blue Play-Doh it’s ours…You own all of the red you can develop, but if it’s purple, you don’t own it, and you owe us if you sell any.”

Agree on who owns what Play-Doh upfront, and the specifics of the agreement will be much easier to draft later.

That’s my .02!

Martin

(martin.suter@iplicensing.net)

Play-Doh is a registered trademark of Hasbro, Inc. Its use herein is strictly to illustrate a legal concept. No endorsement by Hasbro is expressed or implied.

Posted in License Terms, Licensing, Derivative Work, IP | Print | No Comments »

5. February 2008 by Martin Suter.

In May 1988, scant weeks after graduating with an undergraduate business degree, I had the chance to spend 3 weeks touring around China. Deng Xiaoping, the octogenarian leader, appeared to have recognised the need to open up to the west, but equally importantly, to loosen the internal controls imposed by a centralized, State-driven economy. In 1988, “free markets” were in their infancy within the country, giving farmers, traders and entrepreneurs the ability to freely trade, and profit, from their efforts. Using US fast food as a barometer for development, it was very early days. Beijing had but one KFC and Pizza Hut, and bicycles still ruled the capital. Pudong, across the river from Shanghai, was a vision, but ground hadn’t yet been broken. It was a time of general optimism in the country.

That winter, I moved to Beijing, and became an active observer and participant in the apparent opening up of the country. Not once did I feel threatened or that my actions were controlled in any way. I traveled the country freely, engaged in open discussion with students wherever I went, and watched, without any trepidation, as the student/democracy movement took shape in late spring 1989. When the army rolled into Tian an’Men Square on June 3-4, 1989, I felt betrayed. My naiveté and the western lens through which I had witnessed China’s “opening up”, had prevented me from acknowledging that it remained a tightly controlled, Communist country. The brutal crackdown, and subsequent months of living under martial law, gave me an up close and personal look at how effectively the Party leadership was able to swing the other way – moving from open to closed overnight.

Years have passed. Deng Xiaoping is dead and the torch has been passed to a generation of leaders that is too young to have been on the Long March. Beijing is now a sea of privately owned cars, Pudong glistens, and the world is beating a path to Beijing’s door for this summer’s Olympics.

But as I sit here this morning, I was appalled to see that a Chinese court has just sentenced Lu Gengsong to four years in prison on subversion charges. His crime? He published 19 essays on the Internet about corruption. Now, apparently “corruption” is something the Chinese take seriously. Many bureaucrats, including city mayors, have taken a bullet in the back of the head during periodic crackdowns. But Mr. Lu must have hit a nerve as he will spend the next four years in a Chinese jail. Having been inside of a prison in Shandong, think Midnight Express without the opium to dull the pain.

Is Lu Gengsong’s case an isolated incident? Not according to the article:

“China’s ruling Communist Party is cracking down on human rights activists ahead of the Olympics, and still maintains tight control over all media and the Internet.A leading Chinese dissident, Hu Jia, who chronicled the plight of other dissidents through the Internet, was taken from his home in December and was recently arrested and charged with inciting subversion.The New York-based Committee to Protect Journalists labels China the world’s leading jailer of journalists, saying at least 29 reporters are currently locked up.”

I know what you’re thinking. “This is a blog on intellectual property. So where’s the connection?”

Intellectual property is a fundamental principle in a free market system. Individual rights and freedoms are integral elements, and include freedom of expression. How can a country that represses free speech, controls information access (Great Firewall of China) ever be expected to play within the rules established for the treatment of intellectual property.

US foreign and economic policy is born of convenience. It needs access to vast quantities of oil to preserve the industrial base, so the Saudi’s sponsorship of madrassas throughout the Muslim world was ignored, even though much of the hatred and vitriol directed our way was fomented from within these schools. The US needs access to the Chinese market and knows that a disproportionate amount of its debt is held by the Chinese, and so it conveniently ignores gross breaches of human rights.

The world reacted in horror in 1989, pulled back momentarily, but economics abhors a vacuum. The world feigned shock at the brutal actions of the central government, but on reflection decided that its suppression of the student movement was somehow to have been expected.

China has a different playbook, and while they may appear to play by civilized rules, their actions show otherwise.

That’s my .02 for today.

Martin Suter

(martin.suter@iplicensing.net)

Posted in China, IP | Print | No Comments »

3. February 2008 by Martin Suter.

How many people have considered that Microsoft is, at its core, a licensing company? And the licensing deal that essentially created the entire industry was the non-exclusive license to IBM for DOS in the 80’s. How different a company would Microsoft have been had they signed an exclusive licensing deal? Chances are that it wouldn’t still be around. Bill Gates certainly wouldn’t have become the richest guy in the world. As a licensing guy, I can only speculate on whether it was IBM’s negotiating naivete or Microsoft’s chutzpah that led to the deal being structured as it was.

Having sat on both sides of the table on various occasions, I have frequently found myself in a position where I’ve been able to help get to consensus because I understand where the conflicts may be and have been able to work through them.

Licensees almost always contend that they require some form of market exclusivity for competitive advantage. “Why would I sign a deal with you today if, tomorrow, my competitors can do the same thing?”

Licensors are thinking the exact opposite, “I can’t put all my eggs in one basket? I want to capture as much of the market opportunity as is possible, not be limited to a fraction of it.”

Perhaps even more importantly, what is the impact on the company’s potential for a liquidity event for its investors? Remember, once you’ve granted exclusive rights to a 3^rd-party, that prevents not only you, but any acquiring company, from pursuing that space. This may take a whole category of company off the list of potential acquirers at a later date. Try explaining that one to your investors!

So how do you reconcile these two positions?

The “need” for market exclusivity can often be a catalyst for M&A discussions, especially if the technology being licensed is the core franchise around which you’ve begun to build the company, or if the breadth of market exclusivity on the table prevents you from extracting value in other markets. But once again, these can be tricky waters to navigate. A technology acquisition requires you to consider valuation through a very realistic lens. The acquiring company will do an estimated build cost (# of person years x fully loaded cost per person year, around $200K per), and then offer a multiple based on their assessment of the value of time-to-market and your IP position, typically 3X-7X. As the inventor/entrepreneur, you need to be very realistic about their ability to get close enough to replicating that which you’ve built. Pride can get in the way, but do you really believe that Microsoft/Qualcomm/Oracle/Cisco engineers couldn’t do it?

If M&A discussions aren’t an option, then, in most cases, non-exclusivity should be the preferred path. One of the things, that the licensee doesn’t want to happen, is to invest its time and resources creating demand for a key feature, only to have a competitor come in and erode their margins selling the same widget at a reduced cost. A concession, that can help address this, is a form of price protection. In this type of clause, the licensor will agree to not license for license in comparable deals. The concept of comparability is key here. The consideration must be for similar product types, in similar quantities over a similar time period. If a subsequent licensee is pays a lesser royalty rate (or other form of consideration), a reduction in royalty rate will be accorded to the original licensee as well.

So, you’ve now heard that M&A is not an option at this time and non-exclusive rights aren’t either. Under what conditions can exclusivity make sense? My answer is twofold: Money solves a lot of problems, and that it is possible to tightly constrain the scope of a license, thus preserving your ability to license to others or for an acquiring company to practice in any field but the restricted field for which you’ve granted exclusivity.

How do you constrain the license grants? By placing boxes around the grants…I’ll explain more next time.

That’s my .02!

Martin Suter

(martin.suter@iplicensing.net)

Posted in M&A, Exclusivity, License Terms, Licensing, Microsoft | Print | No Comments »

1. February 2008 by Martin Suter.

So you’re now thinking that licensing makes sense as a means of accelerating the time-to-market and monetizing your leading-edge technology. You’ve identified the gorilla as well as the chimps in your space, and managed to get the attention of at least one of them. They’ve probably begun posturing and now they’re coming to the table to discuss terms. For most companies, this is a classic “Oh shit!” moment.

As I blogged previously, before you agree to sit down, it is imperative that you have established clear guiding principles. Your internal stakeholders must understand, talk through and agree to a position on the major issues. These are the “non-negotiables”, and can help prevent bad decisions from being made in the heat of a negotiation. Each of these must be taken seriously, as getting them wrong can have a huge impact on valuation and even exit potential.

Issues to lose sleep over

·         Exclusivity vs. non-exclusivity

·         Derivative works

·         Field of Use, Territory

·         Indemnification

·         Consideration (cash flow, NPV, etc.)

Each of these merits its own discussion. As my plane is now on final approach, I’ll have to get to these in future blogs.

That’s my .02!

Martin Suter

(martin.suter@iplicensing,net)

Posted in License Terms, Strategy, Licensing | Print | No Comments »