Patents

Startups' New Creed: Patent First, Prototype Later


Patent lawyer Jeffrey Schox sometimes invests in the startups he takes on as clients

Photograph by Tyler Gourley for Bloomberg Businessweek

Patent lawyer Jeffrey Schox sometimes invests in the startups he takes on as clients

Craig Ciesla set out five years ago to do something ridiculous and wonderful. He wanted to develop technology that would cause buttons to rise up out of the normally flat screens found on smartphones, tablets, TVs, and other devices when they were needed, and to disappear when they weren’t. Go to type an e-mail on a tablet and a keyboard appears as if by magic, only to vanish moments later and leave behind a nice, smooth screen.

Ciesla, a physicist, had a name for his company: Tactus Technology. But before he began bringing his invention to life, Ciesla decided to sit down and hammer out a patent application, spending much of his company’s early days playing lawyer rather than inventor. “We filed 20 applications before even doing our first round of outside funding,” Ciesla says. “Our main office was my dining room table.”

Across Silicon Valley, desks strewn with patent applications compete with gritty garages as the standard birthplace of new products. Startups no longer race headlong to develop prototypes as fast as possible. Instead, they must first protect them with bulletproof intellectual property portfolios that can take years to build. This is the fallout of an increasingly vicious patent war, where giants like Apple (AAPL), Samsung, and Google (GOOG) clobber each other in court over smartphone designs, and patent trolls pounce on the rights to popular features.

Little firms like Tactus have begun turning to intellectual property coaches for help. In 2008, Ciesla hired Jeffrey Schox, an attorney in San Francisco whose practice is tailored to startups struggling to survive in a litigious era. Unlike most large Silicon Valley law firms, Schox Patent Group charges clients a flat $15,000 fee per patent application, rather than by the billable hour. That means Schox doesn’t charge for things like e-mails or brain-storming sessions, making him more like a partner to his clients. Law firms typically charge an average of $40,000 to get a patent approved, says Schox. He’s also found a way to tap into a steady stream of clients. Schox teaches a pair of courses at Stanford University and attends angel investing clubs to build his Rolodex and learn how to identify promising companies. He often plucks employees out of the Institute of Design at Stanford because of their ability to think imaginatively about a product’s uses and permutations. “This type of thinking can be outside of an engineer’s training,” Schox says. “So, you want people that have a multidisciplinary approach and can think creatively.” Today, Schox Patent Group has dozens of clients in the mobile, medical, and Web areas, and will sometimes take an equity stake in the companies.

The Schox method revolves around teaching startups to view intellectual property as a weapon. How might a rival get around those patents? What features might they think of? Schox often asks engineers who haven’t even built their first prototype to conceptualize unusual extensions of the technology, so that these ideas can be protected just in case. It’s well worth the trouble. Schox says the going rate for a hot patent now is about $1 million. “Decades ago a machine might have five or 10 patents,” says Schox. “Today, the phone in your pocket has about 5,000. It’s just a much different landscape to think about.”

At Tactus, Ciesla and his co-founders spent years working in a makeshift lab. They devised a technique for creating patterns of tiny channels inside a film that could be filled with a proprietary liquid. Using a miniature pump, they could add pressure to make the area above the channels expand and form a button, and then release the pressure to make it go down. The first prototypes were shoebox-size contraptions that got affixed to smartphones and tablets. Over the years, they shrunk the technology so that it’s now a 1 mm film that gets its power right from the device.

The technology should appear on consumer devices next year. Tactus says TV makers have expressed interest in creating buttons that rise from the side of a TV screen when someone is nearby, then recede when you move to the couch. Tablets and smartphones could follow. Ciesla notes that Tactus tried to keep its technology a secret for as long as possible. Following Schox’s advice, the company avoided looking for new investors even during the lean times out of fear that its ideas would be exposed. “We made a choice to go with the intellectual property,” Ciesla says. “Now that choice is paying off.”

The bottom line: The going rate for hot new patents is about $1 million, making them as valuable to startups as the products they protect.

Vance_190
Vance is a technology writer for Bloomberg Businessweek in Palo Alto, Calif. Follow him on Twitter @valleyhack.

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