IP, an interesting phenomenon : The relevance of patents for the design-led start-up business

Abstract

In their book, ‘The Smart Entrepreneur’, Clarysse and Kiefer claim that ‘Patents are particularly important when your business is not close to market, because the exclusivity afforded by a solid patent can buy you some time by preventing competitors from encroaching on your idea while you develop applications.’ (Clarysse, Kiefer, 2011, p.127) The UK Design Council on the other hand suggests to ‘Approach patenting with caution. Multinational cover is expensive and premature filing can do more harm than good’ (www.designcouncil.org.uk). Clarysse and Kiefer admit that ‘…a patent suit can cost $10-15 million and drag on for several years’ (Clarysse, Kiefer, 2011, p.93). This beckons the question what is the best IP strategy for a design-led start-up. Is a patent an effective means for start-ups to overcome competition? Clarysse, Kiefer also explain how the lack of complimentary assets can hinder an entrepreneur’s market entry, and how “bottlenecks” in the value chain can be by-passed through focusing on niche markets (Clarysse, Kiefer, 2011, p.72ff). Here Clarysse, Kiefer expand on Teece’s understanding of complimentary assets, which are thought of as the “additional resources and capabilities needed to bring a technology product to market” (Clarysse / Kiefer, 2011, p.80). Back in 1986 Teece analysed how these assets can increase or limit a company’s chance to succeed in the industry. David Teece has further defined appropriability as “the environmental factors… that govern an innovator’s ability to capture the profits generated by an innovation.” (Teece, 1986, p.287) He refers to IP as one of the most important factors in relation to appropriability. The paper proposed here seeks to discuss both appropriability and complimentary assets in order to establish a clear understanding of the differences between both, and how complimentary assets relate to a venture’s appropriability regime. This study focuses in particular on small-scale design-led start-up businesses, which have limited access to complimentary assets due to the development stage that they are in. The paper discusses the question to what extent access to exclusive IP may strengthen a company’s appropriability regime and thus compensate for the absence of various complimentary assets. In line with Grounded Theory principles as introduced by Strauss / Corbin, the applicant has conducted a range of qualitative case studies of award winning British designs including the so-called Seaboard, a novel music instrument, which uses an innovative pressure-sensitive touch interface, Cupris, a smartphone-enabled clinical device that transmits data between patients and healthcare practitioners, Yossarian Lives, a metaphor-based database search engine, Arctica, a highly sustainable ventilation system, KwickScreen, a portable, retractable, room divider that provides privacy solutions in hospitals, Squeeze, an inflatable hoodie that can be blown up to give wearers a comforting squeeze when they are feeling anxious, and Concrete Canvas, a flexible cement impregnated fabric that hardens on hydration to form a thin, durable water proof and fire proof concrete layer. Interviews with inventors of these technologies have revealed that designer-entrepreneurs commonly perceive patents and other exclusive IP as a necessary prerequisite for succeeding with their design business development. At the same time the design entrepreneurs have frequently expressed concerns about the costs involved in registering IP, and about the fact that their chances of successfully defending their patents in court may be limited due to the lack of available funds. Teece alongside others has also pointed out the ease, with which established businesses can often circumvent patents. This suggests that secrecy may be preferable over patenting as a means of securing exclusivity. However, a start-up business will always find it difficult to establish credentials, whilst sustaining secrecy about the particulars of the invention involved. How to attract equity investors, for example, if the technological details of an invention cannot be revealed? This paper will introduce an assessment chart that has been designed to map out complimentary assets, which ought to be at the focus of attention of design-led start-up businesses. It will further show how the use of the chart can help to measure a businesses strengths and weaknesses with regards to individual complementary assets, and how the results of the assessment can inform the designer-entrepreneur to what degree filing a patent may or may not be advisable. To critically evaluate the results of the interviews mentioned above, an additional series of interviews has been conducted with subject experts such as business coaches, economists, venture capitalists and other researchers in the field.