Innovation Process
The development of intellectual property often begins with an idea, or with a clearly defined problem in need of a solution. Bringing these ideas to fruition and solving these problems with practical solutions requires time, energy and innovation. The innovation process, which begins with research and idea generation, and culminates with the commercialization of a product or service that embodies the inventions and technology created and developed during this process, is generally considered in 4 phases:
1. Research and idea generation, which may lead to discoveries and inventions;
2. Market assessment, design and development;
3. Feasibility, pre-production, prototype, and improvements and upgrades; and
4. Commercialization, production and marketing.
Discovery and Invention
During the discovery and invention phase, the most important consideration is whether the underlying invention or technology can be legally protected by a patent, copyright, trademark, trade secret or other intellectual property right While protecting the invention is not without cost, protecting the invention may provide higher value potential during the commercialization phase by providing a competitive edge and an additional intangible monetary value. Moreover, although using the patents to support products is a key method of commercializing them, other methods of monetization, such as sale or licensing, can also generate additional profits. A skilled patent attorney can assist with identifying what is eligible for patent protection and perhaps more importantly, can also assist in weighing the costs and benefits of attempting to patent the invention or technology and assessing the long-term value of the potential patent.
Design and Development
The design and development phase requires a keen understanding of your target market, which can be achieved through, among other things, market research, conferences and industry event participation, and analysis of complementary technologies. At this stage, it is also important to development relationships with venture capitalists and other investors, entrepreneurs, existing companies, city and state governments, and economic development entities. Information and marketing materials presented to these audiences may include short non-confidential profiles, customized communications for targeted companies and industries, and information produced by inventors, such as publications or other presentations.
A Note on Financing
Research and development, and marketing and commercialization, don’t come without a cost and whether the new venture is able to lift itself up and navigate through its early stages often turns on whether it has access to capital throughout this process. Founders that are unable to personally finance or “bootstrap” their early stage activities will need to raise capital from external sources. Because these early stages are so critical to the survival of the venture, entrepreneurs need to ensure that the company is adequately funded, while also choosing the proper entity, recruiting key members of the management and operation teams, and continuing to develop and fine tune the business plan.
Founders often turn to “angel investors,” high net-worth individuals that are willing to lend their expertise and capital to start-up companies, for seed capital. Angels can be family, friends and/or close associates of the entrepreneur. Due to these relations and because they have historically been less organized than the Venture Capital (or VC) community, angel investors can often be easier to negotiate friendlier deal terms with and are typically more hands-off with respect to the day-to-day activities of the business or the evolution of the company’s goals and objectives. More recently, professional angel investors have emerged who seek out and regularly participate in opportunities to help fund and grow early stage companies. Many of these professional angel investors form pools of funds to invest in early stage investment opportunities and similar to more traditional VCs, these investors often engage in hands-on involvement in the daily operations of the company.
The recent passing of the JOBS Act resulted in the relaxation of the securities laws with respect to the use of “general solicitations,” and also included legislation aimed at allowing companies to raise smaller amounts from a larger number of smaller investors using a registered broker-dealer or a “funding portal” through a process commonly referred to as “crowdfunding.” While the relaxed rules around general solicitations have created a more streamlined process that may open additional avenues for raising funds, there are also strict requirements and traps for the unwary involved, so the costs and benefits of engaging in a general solicitation should be examined carefully. The concept of “crowdfunding,” while popular in the media and in certain investment communities, is still in its nascent stages and the Securities and Exchange Commission has yet fully promulgate new or amended regulations regarding the crowdfunding provisions of the JOBS Act. As a result, the potential benefits and opportunities, and the costs and risks associated with crowdfunding, can’t be fully understood or appreciated at this time.
Feasibility
Simultaneously with the design and development phase, it is also important to prove the feasibility of the invention by producing a working prototype. Not only will this be helpful when trying to attract financing and potential customers, it will also allow the idea to be tested before making any additional investment of money and time or other resources.
The phases before commercialization are easy to summarize, but difficult to execute. Only a very small percentage of all inventions (whether or not patentable) reach the commercialization phase of the innovation process. The great percentage of failure is usually not due to the quality of the invention, but rather the result of the influence of other factors, high costs, need of additional R&D work, the manufacturing and technological environment are not yet ripe for such invention, no real market need, etc.
1. Research and idea generation, which may lead to discoveries and inventions;
2. Market assessment, design and development;
3. Feasibility, pre-production, prototype, and improvements and upgrades; and
4. Commercialization, production and marketing.
Discovery and Invention
During the discovery and invention phase, the most important consideration is whether the underlying invention or technology can be legally protected by a patent, copyright, trademark, trade secret or other intellectual property right While protecting the invention is not without cost, protecting the invention may provide higher value potential during the commercialization phase by providing a competitive edge and an additional intangible monetary value. Moreover, although using the patents to support products is a key method of commercializing them, other methods of monetization, such as sale or licensing, can also generate additional profits. A skilled patent attorney can assist with identifying what is eligible for patent protection and perhaps more importantly, can also assist in weighing the costs and benefits of attempting to patent the invention or technology and assessing the long-term value of the potential patent.
Design and Development
The design and development phase requires a keen understanding of your target market, which can be achieved through, among other things, market research, conferences and industry event participation, and analysis of complementary technologies. At this stage, it is also important to development relationships with venture capitalists and other investors, entrepreneurs, existing companies, city and state governments, and economic development entities. Information and marketing materials presented to these audiences may include short non-confidential profiles, customized communications for targeted companies and industries, and information produced by inventors, such as publications or other presentations.
A Note on Financing
Research and development, and marketing and commercialization, don’t come without a cost and whether the new venture is able to lift itself up and navigate through its early stages often turns on whether it has access to capital throughout this process. Founders that are unable to personally finance or “bootstrap” their early stage activities will need to raise capital from external sources. Because these early stages are so critical to the survival of the venture, entrepreneurs need to ensure that the company is adequately funded, while also choosing the proper entity, recruiting key members of the management and operation teams, and continuing to develop and fine tune the business plan.
Founders often turn to “angel investors,” high net-worth individuals that are willing to lend their expertise and capital to start-up companies, for seed capital. Angels can be family, friends and/or close associates of the entrepreneur. Due to these relations and because they have historically been less organized than the Venture Capital (or VC) community, angel investors can often be easier to negotiate friendlier deal terms with and are typically more hands-off with respect to the day-to-day activities of the business or the evolution of the company’s goals and objectives. More recently, professional angel investors have emerged who seek out and regularly participate in opportunities to help fund and grow early stage companies. Many of these professional angel investors form pools of funds to invest in early stage investment opportunities and similar to more traditional VCs, these investors often engage in hands-on involvement in the daily operations of the company.
The recent passing of the JOBS Act resulted in the relaxation of the securities laws with respect to the use of “general solicitations,” and also included legislation aimed at allowing companies to raise smaller amounts from a larger number of smaller investors using a registered broker-dealer or a “funding portal” through a process commonly referred to as “crowdfunding.” While the relaxed rules around general solicitations have created a more streamlined process that may open additional avenues for raising funds, there are also strict requirements and traps for the unwary involved, so the costs and benefits of engaging in a general solicitation should be examined carefully. The concept of “crowdfunding,” while popular in the media and in certain investment communities, is still in its nascent stages and the Securities and Exchange Commission has yet fully promulgate new or amended regulations regarding the crowdfunding provisions of the JOBS Act. As a result, the potential benefits and opportunities, and the costs and risks associated with crowdfunding, can’t be fully understood or appreciated at this time.
Feasibility
Simultaneously with the design and development phase, it is also important to prove the feasibility of the invention by producing a working prototype. Not only will this be helpful when trying to attract financing and potential customers, it will also allow the idea to be tested before making any additional investment of money and time or other resources.
The phases before commercialization are easy to summarize, but difficult to execute. Only a very small percentage of all inventions (whether or not patentable) reach the commercialization phase of the innovation process. The great percentage of failure is usually not due to the quality of the invention, but rather the result of the influence of other factors, high costs, need of additional R&D work, the manufacturing and technological environment are not yet ripe for such invention, no real market need, etc.