Protecting the Business of Your Business

We're going to take a short break from fighting with Congress about the damaging things being done to SBIR, and talk about something that will be a bit more uplifting. But if you really came here to find out about the sneaky and underhanded SBIR lockout from the NIH's Stimulus money, click HERE to see that SBIR Coach's Blog posting. But promise to come back later and read this one -- it's important!

Recently, my friend, Charles Moster, invited me to contribute a guest column about SBIR on his Springboard Blog - Create Momentum. Since the February SBIR Coach's Newsletter (and a subsequent update to it) discussed protection of SBIR Data Rights, and, since Charles is, among other things, a respected IP attorney, I invited him to stay on theme, and do one for us on the importance of looking at protection of intellectual property from the perspective of its contribution to your business model...

Protecting the Business of your Business

Imagine that you just stepped off the elevator having traveled 30 floors talking to the CEO at your top prospect. You gave the most stirring elevator speech in the history of elevator speeches, and captured her imagination with your tale of cutting-edge technologies and memorable branding.

Much to your surprise, the CEO gets off the elevator and calls her friend at a company across town and now you have a new competitor. Have you protected what makes you so unique? Have you protected the business of your business?

This may sound like lawyer-speak or the turning of a phrase which would be the nightmare of any fifth grade English teacher. However, I have been a lawyer for over 22 years and have represented clients including Uncle Sam, huge corporations, small startups and 100’s of emerging businesses in nearly every industry from technology to trucking. I have found that all too often companies fail to understand and appreciate the critical importance of protecting their intellectual property rights – the business of their business.

By “intellectual property” I mean the creative products of your imagination. I’m a lawyer but I’m also an inventor, playwright and composer so I understand the intrinsic value of creating something that never existed before. However, I also know that you need to take steps to protect your novel idea, brand, technology before you can translate that value into sustainable revenue.

When talking with our clients we first define what intellectual property is and what they can and cannot legally protect. Patents, copyrights, trademarks and tradesecrets are all in the mix. Then we discuss the role the IP will have in their business model and how it will affect their ability to create revenue. It is important that we scale their level of protection and legal investment based on their current needs and growth plans because not every company needs everything filed at once.

Having secured your IP rights allows you to work both offensively and defensively. Sadly, some people are born with what I call “perforated halos”. Their business model is to steal your technology and employees, trade off the goodwill your brand creates in the market, and essentially grab whatever they can.

Don’t let them get away with it! Protecting your IP allows you to be offensive in your pursuits of infringers. I’m not advocating suing everyone who comes along because litigation is very rarely the best option, but if you haven’t taken the steps to protect your assets your position of strength is diminished. Plus, not every dispute ends in lengthy and expensive litigation. Many companies strike win-win licensing deals with former infringers and create new revenue streams.

Protecting your IP rights also lets you be offensive in your pursuit of business and strategic/channel partners, licensees, investors, and acquirers. Anyone who has talked with a potential partner, licensee, investor, and acquirer knows that whether or not you have protected your IP is always an initial question, if not the very first one. Your ability to garner interest from these groups and negotiate a higher price, royalty, valuation goes part in parcel with the investment you’ve made in your patents, copyrights and trademarks. If your technology isn’t camera ready, have you considered a provisional patent and the “Patent Pending” label you can use? If your product launch isn’t for several months would an Intent to Use trademark application ease your concern about losing the name in the interim?

Intellectual property is also a tremendous competitive advantage. Novel, patented technology can create high barriers to entry, and if you combine it with a strong, trademarked brand you can intensify customer loyalty and improve your ability to charge price premiums.

Our firm is focused on being a positive force and avoiding the focus on fear – there’s plenty of that to go around already. However, the defensive value of IP is just as important to help you avoid costly and sometimes catastrophic issues.

For example, before you invest the time, emotion and thousands of dollars into a new brand and marketing campaign consider a trademark search and filing. Unfortunately, on several occasions clients have come to us with a growing business (great news) but also a nasty cease and desist letter from a lawyer halfway across the country threatening our client with infringement (not so great news). Sometimes we can prevail but sometimes the client has to completely scrap their name – along with the untold value of the brand they’ve worked so hard to create! Uggh.

There are countless reasons to protect the business of your business, more so than the word limit on this post. Intellectual property is a complex area of law, but the rationale for pursuing the protection it affords is not.

Charles Moster, Senior Partner
MosterWynne; Austin, TX
www.mosterwynne.com
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Hidden in the Fine Print - SBIR Explicitly Excluded from NIH Stimulus Money

[THIS STORY HAS EVOLVED SINCE THIS POSTING. SENATE TELLS NIH TO FULLY FUND SBIR DESPITE THE EXCLUSION.....READ THE POST OF MARCH 10th FOR THE STORY!]

SBIR's long time friend and advocate Ann Eskesen has alerted us to the fact that hidden (YES HIDDEN) in the new "Stimulus" bill is the provision that the money being provided to the NIH for additional R&D ($7.4 Billion) must NOT be used for SBIR or STTR projects. Huh? What were they thinking? As Ann said in her alert, "Such an exclusion is underhanded and entirely inappropriate." There's the understatement of the year (so far)!

Entirely inappropriate for sure. Does it make sense for the NIH to not seek additional innovative solutions from our small businesses -- a sector hailed by President Obama himself as being the most likely one to create the jobs that we so desperately need? 2.5% +0.3% of $7.4B is $207.2M that's been inappropriately withheld from our small businesses. That could be used to create a whole bunch of jobs!

And underhanded to boot! They snuck the wording into the fine print in "code" so we wouldn't spot it. A search for "SBIR" or "STTR" won't turn anything up. Here's the relevant section from page 62 of the Stimulus Bill - H.R. 1 (rub your eyes, it's hard to read):

National Institutes of Health / national center for research resources ...... For an additional amount for `Office of the Director', $8,200,000,000: Provided, That $7,400,000,000 shall be transferred to the Institutes and Centers of the National Institutes of Health (`NIH') and to the Common Fund established under section 402A(c)(1) of the Public Health Service Act in proportion to the appropriations otherwise made to such Institutes, Centers, and Common Fund for fiscal year 2009: Provided further, That these funds shall be used to support additional scientific research and shall be merged with and be available for the same purposes as the appropriation or fund to which transferred: Provided further, That this transfer authority is in addition to any other transfer authority available to the NIH: Provided further, That none of these funds may be transferred to `National Institutes of Health--Buildings and Facilities', the Center for Scientific Review, the Center for Information Technology, the Clinical Center, or the Global Fund for HIV/AIDS, Tuberculosis and Malaria: Provided further, That the funds provided in this Act to the NIH shall not be subject to the provisions of 15 U.S.C. 638(f)(1) and 15 U.S.C. 638(n)(1): Provided further, That $400,000,000 may be used to carry out section 215 of division G of Public Law 110-161....

Spot the coded reference to SBIR and STTR? No? Not even with the "clue" I gave you? Well, you probably didn't know that 15 U.S.C. 638(f)(1) and 15 U.S.C. 638(n)(1) are those parts of the law which address the funding of SBIR and STTR. Yes, the "code" was citing the US Code of Law references without annotation. I agree, Ann, that was underhanded.

Getting steamed? Want to know who put this language in the bill? Ann says that it evidently was included at the initiative of Senator Arlen Specter (R-PA). Why? We don't know. We'd love to find out why he would have allowed such an overtly hostile act against small businesses to have been perpetrated out of his office. If you're in a position to query Senator Specter's office, please do so, and let me know what you find out.

Nothing short of a special bill repealing that exclusion provision can be done about this now -- the bill is law. Maybe we should mount a campaign to promote that. {Senator Kerry - you voted for the Stimulus bill - did you know that provision was in it? If not, please sponsor a bill repealing it!} All you folks from Massachusetts - put some pressure on!

As Ann says, "[This] Sets a strong and dangerous precedent. Once in place, such a provision sets the precedent for every other agency to adopt a similar approach at best to limit, at worst to destroy, the SBIR program." The SBIR Coach joins Ann, and others who advocate on behalf of SBIR, to do everything we can to prevent this from happening.

So, please send everyone you know who's an SBIR supporter a link to this Blog posting (http://sbircoach.blogspot.com/2009/02/hidden-in-fine-print-sbir-explicitly.html) so that they'll be informed of this outrage. Encourage them to be vigilant, and please please please, don't be silent!

UPDATE - Sunday, February 22, 2009: I sent out a FLASH Newsletter to my 250+ subscribers today with some additional information on this. See a copy of it (and other back issues) on my SBIR Coach's Newsletter webpage.

UPDATE - Tuesday, February 24, 2009: My friend Rick Shindell issued an SBIR Insider letter last night that provides some more clues for solving our SBIR Stimulus Exclusion whodunit. You may not like the light it sheds. He also provides some good information to help you support our getting that Continuing Resolution (CR) to keep SBIR alive. Please read it!

UPDATE - Thursday, February 26, 2009: I have crafted a letter requesting repeal of the NIH Stimulus exclusion provision that I will be sending to all of the members of the Small Business Committees in the Senate and the House, as well as to the Leadership of both houses of Congress, my Representative and Senators, and other selected influential legislators. I have posted it on my website in template form. Click HERE to see it. Copy and paste it into your word processor, tailor it as you wish, print it on your letterhead and let 'er fly! Remember, faxing it to the attention of the legislator's "Policy Advisor for Small Business Issues" is the most effective way to get their attention. We can do this.
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Clean & Renewable Energy SBIRs - From the NIH!

I expect Clean and Green SBIR topics from the DOE and the EPA, and even from the DOD, but today's email from the NIH was a real surprise. The NIH is looking for clean and renewable energy SBIR and STTR proposals for projects in a wide variety of applications. This could be a great economic stimulus for small businesses who never considered applying for an NIH grant before. Here's a partial list:

• Technologies to optimize battery usage and/or energy consumption by medical devices (e.g., hearing aids, dental hand-pieces, chairs, lights), imaging technology (e.g., dental X-ray technology, magnetic resonance imaging systems), radiation therapy equipment (e.g., accelerators for proton radiotherapy), or chair/bed-side information technology (computers and displays).
• Technologies to optimize energy consumption during production and delivery of medical radioisotopes and radiopharmaceuticals.
• Development of batteries with increased storage capacity and/or increased number of charge/discharge cycles.
• Patient monitoring technology that decreases transportation to medical facilities.
• Remote diagnostics and medical care.
• Technology development for manufacture of medical device power sources, such as increased energy density, increased number of charge/discharge cycles before battery failure, solar cells, kinetic to electrical current conversion, and fuel cells.
• Circulatory support systems: Implantable rechargeable batteries and alternate power sources and transcutaneous energy transmission systems
• Compact Implantable Defibrillators
• Respiratory support systems (e.g., artificial lungs, ventilators, CPAP machines): Implantable rechargeable batteries and alternate power sources
• More portable oxygen delivery systems with alternative energy sources
• Robotics and computer assisted surgery
• Mathematical and computer modeling of biological systems
• Information systems to coordinate patient management
• Bioinformatics and interactive databases

And that's only about half of the list! Here's the links to the announcement with the full list:

SBIR: http://grants.nih.gov/grants/guide/pa-files/PA-09-100.html

STTR: http://grants.nih.gov/grants/guide/pa-files/PA-09-101.html

As you can see, this opens up the NIH funding opportunity to a whole new array of technology companies. It's not just bio-tech and pharma anymore! NIH SBIR and STTR proposals are due by April 6th, so don't delay getting started on this. You'll have to download special Grants.gov templates for preparing proposals for these topics. Use the PA numbers in the URLs in the FON block of Basic Search to do it. Confused? You know who to call for help!

My friend Rich Hendel at Boeing sent me their interest list for the DOD's 2009.A STTR round today. Proposals for that are due by March 25th. Send me an email if you'd like a copy of the Boeing list.

I sent out the SBIR Coach's Newsletter for February yesterday. The Special Topic is "How to Protect Your SBIR Data Rights". Copy is downloadable from the website's Newsletter page.

And, finally, please don't forget to send those Legislator Letters on SBIR Reauthorization. Template letter is on the website. As they say at Nike: JUST DO IT!
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Small Business/University Tech-Transfer Matchmaking - Just in time for Valentine's Day!

This idea could produce a match made in heaven -- well at least in Tech-Transfer heaven! Small technology businesses who are looking to win Small Business Technology Transfer (STTR) grants now have a way to solve a heretofore tough problem -- how to find universities or other research institutions with the appropriate capabilities to partner with.

Thanks to some innovative thinking from Rick Shindell, publisher of The SBIR Gateway, there's now a way for both research institutions and small businesses to register their capabilities and STTR topic interest in a Gateway database, and then use the Gateway's search engine to find that elusive partner.

Starting February 12th, appropriately evolving on Darwin Day, small businesses in search of a DOD STTR research partner are able to query the database and see which research organizations may be interested in partnering on selected topics. It also works the other way - small business can register their interests and research institutions can find them via this matchmaking service.

In announcing this new Gateway service, Rick said:

"Most of us have had some negative consequences due to the economy and/or the investment community. Many universities and colleges have incurred major losses to their endowment funds, and that includes their Science & Technology sector. Entities that previously thought STTR was too small to bother with are now interested in becoming involved.

I've talked with many small and medium sized universities that have said it is hard to find interested and qualified small businesses for partnering in STTR. I also hear from small businesses that they have a hard time finding an interested university or federally funded R&D center (including DOD and DOE National Laboratories) in an STTR project.

As with all of our SBIR Gateway projects, this service is free and is offered in the hope that it will stimulate interest in the STTR program, promote strong partnerships, create and/or preserve jobs, and be of benefit to the sponsoring agency and their mission."

Rick told me that the response he's gotten to this has been exceptionally strong. He's hopeful that this experiment will prove to be a winner. My bet is that we'll see an upsurge in STTR proposals as a result of this initiative. I know for a fact that several of my clients abandoned plans to submit STTR proposals in the past because they just could not find the right university research partner.

See the STTR Matchmaking facility on the SBIR Gateway at: STTR PARTNERING. Proposals in the current DOD STTR round are due March 25th. There's still time to talk to TPOCs, so don't delay in finding that perfect partner!

SBIR Reauthorization Update

The SBIR Coach got back from Washington DC after the Reauthorization Fly-In earlier this week energized to do what it takes to ensure continuance of the SBIR opportunity as the best small business stimulus that this nation has ever implemented. We talked to many House and Senate staffers to carry forth the primary message: PLEASE DON'T LET THE SBIR PROGRAM DIE ON MARCH 20TH.

Thanks to hard work by Jere Glover of the SBTC and Alec Orban of NSBA, we were organized and armed with compelling data, and everyone I talked to seemed to get the message. In a nutshell, it doesn't appear possible that the House and Senate will be able to reach agreement on the issues in the few weeks between now and March 20th, so another Continuing Resolution must be passed to further extend the SBIR expiration deadline and allow us to continue the debate.

This weekend I will compose my letter that I will be sending to our legislators and will post it on my website. You will be able to copy and paste it onto your own letterhead for editing and sending. I'll be sending a FLASH Newsletter to my clients when it's ready. If you'd like to be included in that notice, please subscribe to my Newsletter. We need to alert as many legislators as possible as soon as they return from the Presidents' Day congressional recess.

UPDATE: 2/15/09. The Legislator Letter is posted on my website, and the FLASH Newsletter has been emailed to my clients. Click the links to see them. Please send some letters!
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SBIR is a strategy, not an end game.

We're in the midst of a campaign to get the SBIR Program reauthorized by the Congress. Everyone agrees that the opportunity that SBIR’s early stage high-risk funding gives to emerging technology businesses is unparalleled. SBIR has been a stimulus for such small businesses since it was created in 1982. Nowhere else can a fledgling business get no-strings money for developing new and innovative technology. Much of the current debate is pretty prosaic: it’s mostly about how much money should be made available by the participating Federal agencies, how much can be awarded for the phases of a project, which companies are eligible to compete for it, and how efficient should the funding process be.

But some of the debate is correctly and appropriately centered on whether the SBIR program is being effective in producing results. Some say that should be measured by computing a comparative Return on Investment (ROI) for the Federal agencies that provide funds. Others say that it’s more a matter of how much revenue derives to a company that begins selling products developed with SBIR funding. Gathering data to compute either of these metrics has proven difficult. But, either way, what it comes down to is that SBIR isn’t going to be effective unless companies use SBIR awards as a strategy for effecting business growth, not as an end game.

Only in the past couple of years have any of the agencies focused resources on improving the likelihood that SBIR funded technology ever evolves to something suitable for end use. The recently established DOD’s CPP and the NIH’s CAP Programs, for example, are good starting points but it’s too soon to see if they’ll produce any definitive results. But fact is that these agency “commercialization” programs won’t produce results unless the companies treat their SBIR funding as a strategic infusion of capital to spur technology development and not just revenue.

The agencies won’t help them do this. Why should they? That’s not their responsibility. If the company completes the work that they proposed to do, the agency is satisfied. And, only some of the agencies ever intend to be customers of the final product that evolves from the funded development. To be blunt, since the SBIR agencies (really they’re your investors not yet your customers) have no equity stake in your future, if they’re not interested in buying the end result (and actually becoming customers), they don’t care if you survive beyond the term of your grant!

For many (some would say most) SBIR companies, the top priority is first getting money in the door to pay expenses before the credit cards are maxed out, and if that’s successful, then to continue to submit proposals and win awards to support the lifestyles of the principals until such time as development is done. SBIR is used as a tactic to produce revenue. And being “done” is some nebulous future event that, for many, means, “Now that I’ve built it, someone will buy it”. It wasn’t envisioned to be that way, but it’s what has evolved to be a pervasive SBIR paradigm. Unfortunately, it only rarely produces commercialization success.

I propose that an innovative shift in thinking must take place to change the paradigm. If you win an award, think about the SBIR funds as a grant. (Yes, I know it’s already a grant – but keep reading!) Now think of that grant not as operating revenue, but as capital that you’re investing in developing a marketable product. Only propose SBIR projects that have a chance to actually produce a marketable product to a pulling market. Yes, it means passing on topics that you might be able to win, but have a very limited market to sell to. To do this means thinking strategic. It’s the only way you’re going to maximize your Return on Invested Capital (ROIC) – a metric you can compute and track.

Unfortunately most small businesses are so strapped for cash that they don’t think they can afford to think strategic. And they’re more wrapped up in the thrill of invention than they are on what’s got to be done to move the technology along to market readiness. Indeed many haven’t even assessed whether there actually is a viable market (try and get away with that from an equity investor!). It’s hard for a struggling entrepreneur to face up to over-the-horizon realities. But it doesn’t have to be that way.

As a coach, I’ve helped many of my clients through the strategic thinking exercises that can help improve their SBIR ROIC, but it can be a hard-to-sell engagement. Frankly it takes no less than a culture shift to make the changes in thinking that are necessary. Sometimes the heels drag and the toes dig in. But persistence does pay off, and I’ve enjoyed some true successes.

I’ve been talking for some time about my view of a strategic approach to seeking funding while working informally with the Arlington Technology Incubator (managed by the Arlington Chamber of Commerce), and the University of Texas at Arlington’s Office of Technology Management. I’m proud of how forward thinking both of these entities are, as they have decided to form a unique public/private joint venture to synergistically lead ideas hatched at either venue to marketability.

We formalized our working relationship this week, and I’ve been retained as their Business Coach. See more about this in the official joint Press Release by clicking HERE. (Note that this arrangement is a contract with my Commercialization Funding Coach company, and, lest you think otherwise, The SBIR Coach will continue coaching successful navigation of the SBIR opportunity on the national scene.)

In my Business Coach role, I’ll be working with those who are served by the UT-Arlington's brand new Venture Innovation Partnership and with the client companies of the Arlington Technology Incubator to help them make the appropriate strategic (and tactical) decisions to facilitate business growth and improve the likelihood of success of their fledgling companies. Of course, going after SBIR funding will be one of the possible strategies that will be considered (would you expect the SBIR Coach to do otherwise?), but charting out the path to commercialization and guiding the maximization of the company’s ROIC will be the focus of my coaching from day one.

If all SBIR awardees took this same approach to how they applied SBIR funds, we might just build evidence that a comparative Federal Agency ROI would favorably reflect on SBIR effectiveness, and the companies would be more likely to fulfill the visions of their founders. The potential is there. Let’s reauthorize SBIR, improving it of course, and continue to provide the opportunity for small technology businesses to get their no-strings seed funding. At the same time, let’s also encourage them to always take a strategic approach to the application of SBIR funds, not just think that by winning SBIR awards they’re being “successful”.
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