A Credible IPR Strategy Reassures Investors
(IPRinfo 2/2010)
Matti Remes
Translated by Andrew Lightfoot
For growth companies, it pays to invest time in drawing up an IPR strategy that suits their particular business. Venture capital investors also require this of the companies they invest in.
Hitlantis is an online music service that launched in the fall of 2009 for listening to tracks uploaded to the site by bands. The service is designed for artists who don’t have recording contracts. They get free publicity for their music and profile.
Listening to the music is also free for users of the service, and downloading costs less than one euro per track. The band receives 90 per cent of the price of the track.
Petri Kotro, one of the founders of Hitlantis, says that intellectual property rights have been a high priority right from the start.
”This is one of the things that growth companies need to devote considerable amounts of brain power to. Venture capitalists also require due attention to be paid to IPR aspects. Investors possibly even stress the need for intellectual property rights more than the developers of such services.”
A flexible IPR strategy is appropriate in online business
In Kotro’s view, a business like Hitlantis is best served by a flexible IPR strategy that adapts to the needs of the business.
”The main element that sets us apart is the service interface, which differs from other similar ones. We realized that the features we’d designed might contain patentable innovations. Nonetheless in our initial strategy we went for nimble software development with interim versions of the service being published rapidly.”
Kotro points out that international patenting and defending patents is an expensive business. In online services the cheapest and fastest way to manage IPR matters is often to be the first to launch an online service open to all.
”This at least ensures that no-one else can patent things that we have developed on the interface.”
According to Kotro, one of the benefits of an open environment is that the service can be developed efficiently based on user feedback, and new versions of the interface can be published continually. The downside is that it might be copied.
”To be successful we need to be developing our own service continually and be more agile than those who come along after us.”
Americans apply for patents
Internet service developers can apply for patents on a process, interface or algorithms used. According to Kotro, companies in the sector are doing this to some extent, especially in the United States.
”An IPR strategy of this type makes particular sense when approaching American venture capitalists. In that case it is definitely wise to have a couple of patents pending in the United States.”
Patent applications may also be on the agenda for Hitlantis in the future. Then Kotro says he would to turn to the experts.
”The language of patents has become so obscure that even highly intelligent people with a technical background cannot produce it themselves. Even if developers were to spot a patentable innovation, it is not worth their while filing the application themselves. They should march into a patent office and accept the costs involved.”
Hitlantis has also had to consider IPR aspects from the point of view of the music on offer on the service.
”We made a clear decision to only accept music on the site to which the artist holds all the rights. For example, covers and tracks in the domain of Teosto, the Finnish Composers’ Copyright Society, are not admissible.”
IPR aspects are clearly worded in the music distribution contracts that Hitlantis concludes with bands. Kotro says that bands belonging to Teosto or similar composers’ copyright organizations would also like to join the service.
”Negotiations have been held with Teosto to resolve this matter.”
Security system for elderly people
Ecotec Oy of Tampere has also given careful consideration to IPR matters ever since the company’s inception. A family firm founded in 2008, Ecotec has developed its SmartCare security system, potential users of which include elderly people, homebound persons with mental handicaps and schoolchildren travelling to school alone.
Ecotec’s system makes use of mobile technology. The activated user handset can be a security bracelet or a GPS-enabled mobile phone. The service also includes the company’s internet-based management and reporting tool which can be used from any computer connected to the internet.
Jouni Mäkipää, Ecotec’s managing director, says that the company has not yet applied for patents for the processes it has developed. But this may become relevant as the company expands. The plan is to expand into international markets as well as in Finland.
”We will likely be looking into applying for patents already this year”, Mäkipää comments.
IPR is an overall approach
So far we have been looking at IPR largely from the perspective of copyright on software innovations. Ecotec outsources much of its work to subcontractors.
”That means that careful project planning becomes important. Tasks need to be thoroughly documented and properly described. In that way there’s no comeback later on.”
Generally the developer retains the copyright on software, but Ecotec acquires parallel rights. In Mäkipää’s view the key thing is to divide up the production chain in such a way as to have firm control of the overall system.
”We only outsource elements that incorporate other software. For Ecotec, the IPR essentially consists of the overall system. Users require accreditation, which they get from us.”
Mäkipää thinks that when the company enters international markets it is bound to come up against competitors copying its operating model. On the other hand, he considers increased competition to be a good thing.
”It means that there is demand in the marketplace. At the same time, however, you need to keep up on top of developments yourself. Success under competition depends on your own products and insights into improving the service.”
LINKS:
The web site of Hitlantis: http://www.hitlantis.com/
The web site of Ecotec Oy http://www.ecotec.fi/
