Making Your Robotics Company a More Attractive Investment

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Making Your Robotics Company
a More Attractive Investment

An attorney’s tips on how
intellectual property
protection can promote
your business

By C. Andrew Keisner, Esquire

October 21, 2012
Any robotics business whose value
is being assessed, whether for a
strategic investment, acquisition, IPO, or any other reason, will almost certainly
have their intellectual property reviewed as part of that assessment. While two
companies may appear similar to potential investors at first glance, a robotics
company without intellectual property can appear vulnerable, whereas a
company with the right combination of intellectual property will convey that it is
well-run and a sound investment.

Intellectual property provides the type of
exclusive rights that are necessary to
capitalize on your up-front investment without
others undercutting your success by piggy-
backing on your solution and entering the
market with a competitive product at a lower
price point.
That exclusive quality is what can separate the companies perceived as a great
long term investment from those that are perceived as merely a great idea. But
given that the types of intellectual property are many, as are the differences in
the price tag that can accompany each, what is the right mix of intellectual
property for your robotics company? Picking the right types of intellectual
property to protect will depend on your company’s size, its current competitors
and its likely future competitors.
Any successful company or company’s robot, especially the ones that quickly go
from unknown to widely recognized, will see lots of competitors come out of the
woodwork. For example, robotics manufacturers developing Unmanned Aerial
Vehicles for the defense market and those producing vacuum robots for the
consumer market have each seen their fair share of newcomers.
Competitors in the robotics industry
today can generally be categorized
into two types. On the one hand,
there are competitors who, although
may or may not have seen the need
for a robot to solve a particular
problem before learning of yours,
independently developed their own robot that aims to solve the same problem.
This is the type of competition that exists between Telepresence
heavyweights

InTouch Technologies

and

VGo Communications
, who as it
happens, are currently locked in a lawsuit over their intellectual property.


On the other hand, there are the competitors started by, or aimed at recruiting,
employees who know the trade secrets and the specific technology that was
critical to an original product’s success. This later scenario is what
iRobot
alleged
to have occurred when it sued Robotic FX and its founder, a former
iRobot
employee
, back in 2007.

When facing either type of competition, patents are undoubtedly helpful. Patents
can provide monopoly-like protection for an invention, which generally lasts for
20 years from the date the patent was filed.
Well drafted patents will force
competitors to operate outside of
what your patent covers, and if your
patent portfolio includes patents with
a combination of broad and specific
scopes, it can be extremely difficult
for another company to enter your
particular market.

For a large, successful company in the robotics industry, an extensive patent
portfolio is not only useful, but financially practicable. For smaller companies
weighing the cost of obtaining patents against the company’s budget, however, a
small patent portfolio protecting its key inventions may suffice. This is especially
true if the technology you are considering patenting may not take off for another
fifteen years.
In such cases, you have to consider that you will only have five years of practical
patent enforcement, unless—and obviously in law there is almost always an
exception— you expect to have further iterations and continuations of the original
invention that could extend your control over that technology past your initial
patent’s expiration date.
Still, Intellectual property patents can add value to your company beyond its
ability to exclude others from piggy-backing on your hard work. Your company
may be in a better position to consider the possibility of licensing or cross-
licensing its patents or other intellectual property as a viable alternative to
excluding others altogether.
Licensing patents can provide your company with
an additional revenue stream based on the
success of other companies who may not even be
operating in the same area of the robotics industry
as your company. Last summer, InTouch Health
and iRobot announced that they entered into what
appears to be a
mutually beneficial agreement

that
includes extensive cross-licensing of both
companies’ patent portfolios.

Although patents are usually the first type of
intellectual property that people in the robotics
industry think of, they are not the only tool – and
certainly not the cheapest tool – that can be
employed to protect your company’s future
success and thereby make it a more attractive
investment today.
Trademarks of your company and robot names,
copyright protection of computer code and tricks
your engineers (not your lawyers) can implement
are other ways of putting your company in a better
position when your robot products or company
transition from hopeful venture to commercial
success. Indeed, trademarks and copyrights are
actually longer lasting than patent protection and
cheaper to apply for.
Obtaining a patent usually requires between $500 and $2,000 in costs to the U.S.
Patent & Trademark Office, which varies, in part, depending on whether your
company qualifies under what the patent office calls a “small entity,” and
potentially another $5,000 to $15,000 in attorney fees depending on the
complexity of the technology being patented and how expensive the lawyer is
that you hire. In contrast to the 20-year lifespan and high costs of obtaining
patents, trademarks have the potential to last indefinitely and can cost a few
thousand dollars to obtain. Similarly, copyrights can also far outlast patents and
cost a few hundred dollars or less.
Trademarks are a useful tool for protecting your success and are important not
just for when the entire robotics industry booms, but when your company in
particular starts to flourish. Trademarks can cover names, slogans and phrases
that designate the origin of goods.
Companies like iRobot,
Aerovironment
and
Precise Path Robotics
each not only have
registered trademarks for their company
names, but also registered trademarks for
one or more of their robots. The more specific
your trademark, the harder it is for a
competitor to enter the market with a similar
name or design with the hope that customers
buy their robot out of confusion.

Moreover, robotics companies have a uniquely heightened need to register their
trademarks with the United States Patent & Trademark Office as early as
possible. First, when successful, robots sell nationally, not just in a single town
like a traditional mom and pop store, so each of your robots needs national
protection.
Second, anyone who is a robotics enthusiast knows that we all usually learn of
new robots before they “hit the shelves” – especially if the robot is cool! Some
robots develop a following very early, who refer to your robot by a certain name,
and you do not want to find out once you are ready to bring that robot to market
that there is a problem with getting a trademark for that name.
Even worse, you do not want to allow another company to file a trademark for
your robot’s name before you, which then allows them to hit you up for money
when you want to bring your robot to market; yes, this does happen, and yes, it
can be costly to resolve.
There are other steps that, even before you talk to a lawyer, can offer your hard
work more protection and add value to your company. If you have copyright
protectable computer code, access to that code should generally be blocked.
Going into the specifics of the law isn’t necessary for this article, but what is
useful for robotics companies to know is that a court decision from 2010 in the
Court of Appeals for the Ninth Circuit entitled MDY Indus. LLC v. Blizzard
Entertainment Inc. determined that merely circumventing an electronic barrier in
order to access copyright protected material can constitute a violation of the
Digital Millennium Copyright Act even if no actual copyright infringement
occurred.
This is a change from what many thought to be the law, which required
infringement as well. Merely circumventing the electronic barrier to take a look at
copyright protected material was previously thought by many to be legally
acceptable as long as there was no infringement.
By simply blocking access to any
copyright protectable code for your
robots, you may have added a claim
against any future competitors if at
some point they try to gain an
advantage by circumventing your
electronic barriers to take a look at
your code. Although the protection
may not be as grand as patent
protection, the costs are minimal,
and it is always a good sign to investors that you are spending money wisely to
protect their investment.

Given that almost every robotics company’s business model involves a
tremendous amount of upfront R&D costs, investors not only want to see the
potential for a great product, but also a business’ capability to “protect its
success.”
In some industries the up front costs of R&D are low, which makes it harder for a
competitor, after seeing the success of your company, to swoop in and piggy
back off that success by entering the market with a lower cost for their product.
That is certainly not the case in the robotics industry. Companies in the robotics
industry are marathon runners, not sprinters. That means if your company is
getting closer to the finish line, you (and your investors) do not want someone
who didn’t run the first twenty five miles of the race to jump in and compete with
you on that last mile. Accordingly, it should be apparent to potential investors that
your company has claimed its area of the robotics industry and can deter
competitors who are intentionally “late” to the party.
To do this, you are going to need to have planned in advance. That planning, as
all business decisions, must balance the cost of obtaining that protection against
when and how you will use it, as well as the cost of using it, and the value it may
add to your company. Savvy investors know these rights need to be secured
early, which is why it can make your company a more attractive investment today
even if you are focusing on building the robots of tomorrow.