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Monday, 28 February 2011

The system's fine, but where's the money?

Much loved by innovative SMEs:
the Loan Arranger
In a thoughtful and much-commented piece hosted by the IPKat on Friday ("Pioneers, Pirates and Parvenus – IP v Innovation", here), Gwilym Roberts -- who attended one of the Hargreaves Review meetings last week -- made some valuable observations about the "problem" of the IP system being not so much the system itself but the failure of funding to back innovative projects. To this, Mary Ellen Field adds some highly pertinent comments of her own:
"It is very sad that there was little input from SMEs at the meeting last week, but not at all surprising. SMEs are trying to keep their heads above water when the banks won't lend and they are often fighting off attacks on their IP from counterfeiters and larger well funded companies with clever aggressive lawyers. They are in my opinion effectively excluded from the Hargreaves report by virtue of the makeup of the panel and the language used. It might also be because they think IP Law in the UK is fine and that they don't have the time nor the money to navel-gaze

I tried very hard to be allowed to attend that session this week and I believe I had a lot to offer. I am not a lawyer or an academic but I have been successfully managing, protecting and exploiting my clients' IP from a commercial perspective for thirty years, working with lawyers throughout the world. I wrote to my MP, to the IPO and to Prof Hargreaves himself but had no luck despite my MP writing to Baroness Wilcox on my behalf [The IPKat would love to see more involvement from MPs in general -- the All Party Parliamentary IP Group seems to have gone to ground again -- and from the IP Minister Baroness Wilcox]. I have finally managed to get a slot on Monday afternoon [today!] at the IP Review Surgery Event

The fact is that SMEs are not usually populated by lawyers and academics, the wording in the review document suggests that unless you are a lawyer or an academic, your opinions count for nothing. Professor Hargreaves states that the submissions must be "evidential", this word alone would put any hard working SME off. Perhaps as an academic Professor Hargreaves does not want case studies from SMEs who may well be able to shed great light on this issue. Perhaps SMEs are intimidated by the language of the Review document. Surely if the government or the panel wanted to know the problems facing innovators, they would have put an innovator on the panel. At least he or she would have spoken the same language as the SMEs, also I don't think there are any women on the panel

There are three major problems facing innovative individuals and SMEs in the UK and IP framework is not one of them.

1. The lack of people willing to invest in startups. Our banks won't consider lending to you and the turnover you need to attract Private Equity investors grows each year. Added to this is the fact that investors in this country usually require 100% security over the innovator's IP, and too often the founder finds himself removed from his creation if things don't move as fast as the investors require. As the banks have done away with the concept of bank managers who took it upon themselves to understand their client's business, there is no one to talk to at our banks who knows what you are talking about. If you doubt me, trying explaining the concept of a royalty stream to your local Barclays business branch [The IPKat entirely endorses this. He has been hearing it from small innovative businesses since the 1980s].

2. The catastrophic consequences of financial failure in the UK. Our laws relating to financial failure are so draconian that a failure when young can prevent you ever being able to raise funds in the future and even if you manage to start up again and be successful, whenever you are mentioned in the media no matter how successful you are even decades later you will be referred to as "Bill Smith the former bankrupt" In the United States failure is regarded as a part of the learning curve unless you have intentionally defrauded people. That is seen as capitalism in action [Strange how, at the bottom level, banks are so reluctant to take even the smallest of risks, while they seem to throw caution to the winds when it comes to buying subprime mortgage portfolios and investing in financial paper of which they have manifestly little understanding]

3. Predatory behaviour by larger British firms, particularly retailers with very scary lawyers. The costs to an SME to take on a large company that the SME believes has infringed his IP rights are simply out of the question for most SMEs. It is possible of course to arrange IP litigation insurance but that requires an opinion from counsel before the insurance company will commit. The cost of this can be prohibitive to a small company or individual. Even if you can force the big company to back down enforcement can become a full time job [If evidence is needed here, Hargreaves can speak to ACID, which can provide some real examples]

Perhaps it is because I am Australian but I get extremely annoyed when the British do whatever the Americans tell them to do. It drives me nuts. Who cares what Google wants? They don't care about innovation in the UK, they just want it made easier for them to make money here. This UK has never been short of innovators and it isn't now, it's just extremely bad at supporting its innovators, forcing many to move abroad or giving up their innovations for next to nothing because it's not polite to fight back. I have several innovative British SMEs as clients, they export throughout the world they use the Internet as an integral part of their businesses. Sadly most of them could not raise funds here and have raised them abroad from foreign investors who take a long term view".
The IPKat applauds not just the message but the manner of its delivery.  Members of the Hargreaves Review, please take note!

10 comments:

Tom Broadhurst said...

Mary's comments are well founded and very valuable. I agree that the Hargreaves Review team really should pay careful attention and respect to them. Sadly, all but #3 (the influence of aggressive rights owners' with scary lawyers) probably fall outside the remit of their Review.

Graham Barker said...

Mary's comments are spot on but I don't see how they justify the headline statement 'The system's fine'. From the point of view of SMEs, inventors, designers and other solo innovators, the system is rotten. And if Hargreaves is the best the government can come up with, it will stay rotten. His report seems likely to be a complete waste of our money. Doubtless he'll tell us plenty about how Californians do things - having felt obliged to spend time there on our behalf - but he seems to have made no effort to find out how Mary's item #3 affects UK SMEs.

Anonymous said...

I agree with most points raised, in particular that we ahouldn't be pandering to the demands of Google, though many are are not relevant to the review. The problem with raising funds for a business is a known problem, but not directly related to the IP issues at hand. The connection many SME commentators make seems to be about the cost of IP, something which has bee raised in the review. So when SMEs say they can't get funds and IP costs are too high, what are they getting at? My conclusion is they want to have government funding for their IP needs. The fact that the early stages of the patent system in the UK, at least, is heavily subsidised already appears to be lost on them.

I disagree that SMEs are not being given a chance to get their point across. From the scarcity of comments I have seen after representatives of such businesses have been made aware of the 'call for evidence', there is a large degree of apathy from this community. This isn't surprising bearing in mind how little UK business make use of the IP system compared to elsewhere. Most responses just have a rant about costs and being bullied by big business (e.g. this post, those on the Hargreaves blog and also on the Linkedin website).

A typical rant is that of Chris Coles on the Hargreaves blog. He suggests people read his free book, which I skimmed though, and while he is clearly a very innovative individual (and I'm not talking double-headed brushes), his failures are mainly down to his own lack of commitment to a project. At one point he complained about the EPO not allowing him to delay (open-ended) payment of a fee, because he couldn't obtain funding. Unfortunately for the EPO examiner, he submitted a 170 page document explaining all the efforts he had taken to obtain funding. Oddly enough, he could afford to prosecute his US and JP applications (maybe he translated his application himself).

And in what way would use of the word 'evidence' put off a 'hard-working SME'? The review makes clear that any and all evidence is welcomed, so there is no need to commission an expensive academic report from a leading think-tank.

"IP litigation insurance but that requires an opinion from counsel before the insurance company will commit"

..And we can't expect someone to pay for a professional opinion can we?

Anonymous said...

When I said, I agree with most of the points, I was referring to Mary's and certainly not Graham's. If you want a lob-sided, scare-mongering opinion of the patent system then Graham is your go-to guy.

Anonymous said...

As the banks have done away with the concept of bank managers who took it upon themselves to understand their client's business, there is no one to talk to at our banks who knows what you are talking about. If you doubt me, trying explaining the concept of a royalty stream to your local Barclays business branch.

Was this really ever the case? I remember my father having to patiently educate every new branch manager about his particular line of business (quite removed from IP), explaining why the data demanded from him and the numbers derived therefrom were not applicable. OK, you can argue that there was indeed a local manager to educate, instead of a central computer model.

Banker and knowledge (first three minutes).

Claire Lazenby said...

I entirely agree with the views in your email of this morning that the “problem” being not so much the IP system itself but the failure of funding to back innovative projects.

I have been in private practice as a sole trader for nine years, from early 2002. About half of my practice is comprised of young start-ups and SMEs and it is hard to understand why in the 21st century the chief source of funding for quite a few of these innovative entrepreneurs is still the source most common from the 19th Victorian age, of family money.

Mary-Ellen Field said...

My MP Justine Greening is probably the only MP with an real knowledge of IP. A PWC accountant she worked for Glaxo, British Gas and The AA

She is now Economic Secretary to the Treasury and is taking a great interest in this review and has written to Baroness Wilcox about it

We should not forget that the PM sleeps with a branding expert.
Sam Cameron was creative director at that classic British Brand long before he was an MP. She has totally revitalised a tired brand and taken it international

We definitely need more politicians involved. Sadly IP is voter neutral, it doesn't win or lose votes.

TMS said...

From Graham's better mousetrap website- "the patent system milks you every inch of the way."

No Graham, it doesn't. The system provides substantial provisional protection and detailed information on the patentability of an invention for a very low initial outlay, which is heavily subsidised.

"Patents backlog – symptom of a failing system"

"Cake and eat it" springs to mind. Actually, Graham, it is a sign that the fees are too low, so there are not enough examiners to process all applications efficiently.

Raise the fees so that every stage of the process is fully paid for by the applicants. If that means those who like to complain about the 'cost and complexity' (i.e. mainly British businesses) are further disenfranchised then so be it. The system should be improved for the benefit of those who make full use of it.

Anonymous said...

The starting point of the Review is that the wealth creating part of the UK economy that could or should use IP is hampered by the IP system.

Wrong! Wrong! Wrong!

It’s not the system. It’s not expensive. It’s not even complicated, at least for those outside of our borders. The focus on complexity and cost in the review is just to pander to the perceived needs of a largely ignorant and ambivalent market. Someone managed to convince someone else that this was the key issue for the review. It’s not; it’s a side issue

Everywhere you turn in the UK the absolute costs of the IP process seem to be the primary issue for most stakeholders. Mostly they are talking rubbish. Even the UK IPO is massively cost focused. When it comes to IP I’m afraid that we are a nation that knows the cost of everything and the value of absolutely nothing. That’s the key issue. Why, as a nation, are we totally useless and clueless at creating sustainable commercial advantage from IP?

It’s not cost, it’s not complexity its ignorance and frankly a paucity of entrepreneurial and innovative flair. The ignorance about the commercial relevance of IP at CEO level in the UK is a very sad joke. We are reasonably good with creating new ideas but even that is on the wane.

It is also NOT a lack of investment. Everyone is feeling the pinch now. But when times were good and early stage VCs were a plenty we still did a rubbish job at investing in and creating value from IP in the UK.

"It is very sad that there was little input from SMEs at the meeting last week, but not at all surprising”. Because? Apart from the fact that there is a paucity of relevant SMEs in the UK it’s probably one of the following reasons:

1. Never heard of it.
2. Never heard of it and even if we had we don’t care.
3. Heard of it but don’t care. What’s IP?
4. Heard of it care somewhat about IP but can’t be bothered.
5. Heard of it care about IP but what good will my contribution make?
6. Heard of it care a lot about IP but can’t contribute as I don’t have “evidence” just a relevant opinion. Sorry need to crack on making money.
7. Heard of it care a lot about IP and its value but don’t see the point of the Review as the IP system works perfectly fine for me. I know how to use it.

Anonymous said...

Don't you just love the perochial view? "Predatory behaviour by larger British firms..".

IP is global. The predators are everywhere most are not UK based as the UK does not have many global companies anymore. There is masses of innovation outside of the UK in countries where their IP systems, largely similar to our own, do not seem to be a barrier/problem.

One area where we are world class. Wringing our hands whilst gazing at our navels.

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