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Startups Party at the Patent OfficePhotograph by Image Source/Getty Images

Startups Party at the Patent Office

By on May 03, 2012

Software startups have traditionally avoided patenting their innovations, viewing it as an unneeded expense that can eat up $15,000 or so. “We thought about it, because there’s definitely some patentable stuff,” says Brett Martin, the chief executive officer of New York’s Sonar, which makes an app that helps people connect with strangers. “But we’re busy trying to build a business.”

Yet many who aspire to build the next Facebook are learning from the mistakes of their guru, Mark Zuckerberg. His company was unprepared for the battle that erupted when Yahoo! (YHOO) sued in March for infringing 10 patents. Soon after, Facebook purchased 750 patents from IBM (IBM) and spent an additional half-billion dollars on part of the AOL (AOL) patent portfolio recently bought by Microsoft (MSFT). Meanwhile, Apple (AAPL), Google (GOOG), Oracle (ORCL), and other tech giants are locked in patent lawsuits.

Which is why more entrepreneurs are thinking like Oliver Cameron. His new iPhone app, Everyme, is a social network similar to Facebook. Behind the scenes, though, algorithms perform some fancy operations, such as grouping a user’s friends on other networks according to criteria such as geography or workplace. Before the app’s launch in April, Cameron, the CEO of the Menlo Park (Calif.) startup, made sure to file his patent paperwork. “We’re not really patent whores,” he says. “We’re just proud of what we’ve built.”

“The Valley in general seems to be getting more litigious,” says Travis Katz, a former Myspace executive who co-founded travel startup Gogobot. “Big companies can sue small companies out of existence, even with a baseless claim.” Katz has had his lawyers begin reviewing Gogobot technologies that could be patented. Path, a mobile social network started two years ago, has filed for 13 patents. Karma, which makes a gift-buying app, has filed for three patents covering technologies related to commerce, notifications, and social networking.

Chris Tolles, an investor and the CEO at local news site Topix, says startups should invest in patents before pool tables and Aeron chairs—the typical accoutrements of hip young companies. “I wouldn’t do it Day One. But you’re a year in, you have some funding, then yeah, get some patents,” he says. The patent process can take as long as five years, according to Mark Radcliffe, a partner at law firm DLA Piper.

While small tech companies are learning to play the patent game, at least one larger one is trying to change the rules altogether. On April 17, Twitter announced all its patents will be governed by its Innovator’s Patent Agreement. Under it, the person whose name is on a patent—usually an engineer or scientist—retains control over how the patent is used, even if the patent is sold to another company. Patent owners must ask the innovator’s permission before suing over the patent, although there are exceptions for companies that use patents defensively.

Everyme’s Cameron and his co-founder Vibhu Norby want to support the IPA. Their first three apps were already with the U.S. Patent and Trademark Office by the time IPA was available, though, and they don’t plan to refile them. “There are bigger things to worry about,” says Cameron. “Like launching,” says Norby.

The bottom line: While startups get serious about intellectual-property law, Twitter pioneers a type of patent friendly to engineers.

Milian is a reporter for Bloomberg News in San Francisco.

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Here is an interresting read from BusinessWeek.

For the mergers-and-acquisitions market, there is no doubt 2009 is ending better than it began. The year is winding up with a “sigh of relief,” says Morton Pierce, chairman of the M&A practice at law firm Dewey & LeBoeuf.

In the past month the M&A market has built up some momentum. According to Bloomberg, deals in North America were valued at $115.6 billion in November, the most since September 2008. Compare that with late 2008 and early 2009, when dealmaking either wasn’t happening at all or was centered in areas where deals absolutely needed to happen, such as failing financial institutions that needed buyers at any price. Deal volume in November was five times February’s volume of $22.5 billion.

Investors looking ahead to 2010 are wondering if this uptick in M&A can continue and where it will occur. Acquirers almost always buy at a premium, so traders can profit from correctly betting which industries will attract the most bidding activity.

Small Tech Deals

In 2009, Internet stocks, the investment and financial services industries, software, and oil and gas production were among the most active, according to Bloomberg data. Expect more dealmaking among technology stocks, say M&A experts. Oracle Corp. (ORCL) is battling European regulators to finish its $7.4 billion acquisition of Sun Microsystems (JAVA).

Such acquisitions, and especially much smaller deals, are a way of life for tech firms, says Daniel Mitz, a partner at law firm Jones Day who specializes in tech deals. “A lot of the innovation comes from smaller companies,” Mitz says. Dealmaking in tech slowed but didn’t stop during the downturn. There could be significant pent-up demand, Mitz says. “This is an industry that is ripe for M&A.”

One driver of a rebound for M&A in tech will be the strong financial positions of many tech firms, says Nadia Damouni, editor of dealReporter Americas, which tracks the M&A market. Another “cash rich” sector is health care, she says, but here the prospects for an M&A rebound are harder to read. The reason: Uncertainty surrounding the federal overhaul of the U.S.health-care system proposed by President Barack Obama and under discussion in Congress. “They’re at the whim of health-care reform,” Damouni says of the many insurers and health-care services companies that could be M&A targets at some point.

In health care, the key ingredient for dealmaking is “stability,” says Bob Filek, a partner at PricewaterhouseCoopers Transaction Services. If health-care reform passes—or even if it doesn’t—acquirers will want some certainty about what federal policy will mean for health care before making bids. Filek envisions “a couple of scenarios where [the result could be] a lot of M&A activity.”

Read the full article here.

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Oracle, Dell, Xerox and now HP – the high tech world as we knew it is changing fast. Companies that previously stood their ground and was seen as pillars of innovation are know swallowed into mega-companies that will challenge the marketplace with new services, products and offerings. Here is some selected tidbits from BusinessWeek in regards to the deal.

“Through its acquisition of networking gear maker 3Com, Hewlett-Packard will accelerate competition with Cisco Systems (CSCO), especially in China, practically overnight. Then comes the hard part. To make the most of the $2.7 billion deal, HP also needs to revitalize 3Com’s faded brand and persuade Western companies to take a chance on its products, designed largely in Asia.

Analysts were quick to see the logic in the planned acquisition, announced on Nov. 11. HP (HPQ) is attacking Cisco’s dominance of the market for gear that connects computers just as Cisco moves more aggressively into the market for computer systems, where HP is strong. Cisco on Nov. 3 struck a partnership with storage company EMC (EMC) and software company VMware (VMW) aimed atsupplying bundles of computers, storage, networking, and software.”

The article continues…

“HP’s bigger challenge in making the deal a success will be removing the tarnish that remains on the 3Com ‘s brand in the U.S. and Europe as a result of years of mismanagement. While 3Com’s data-center networking gear has about 35% of the Chinese market, it’s practically absent from the largest companies in the U.S. and Europe, analysts say.”

Read the full article here.

Other good resources for this topic include: Barrons, WSJ, 24/7 Wall St., Mashable & Techcrunch.

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SCOTT AUSTIN’S THE WEEK IN VENTURE CAPITAL

Economic gloom hits the VC world

Commentary: Crunch may result in crisis for some fledgling companies

By Scott Austin

 

 

Interesting article regarding VC portfolio companies and market.

 

 

http://www.marketwatch.com/news/story/credit-crunch-may-lead-crisis/story.aspx?guid=%7B6062ADF5%2D287A%2D4F9C%2D9F2B%2D5B3969F2DF42%7D

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linkedin1.jpgLinkedIn will soon release an open API where 3rd party developers will be able to aggregate profile data to enhance the user experience and productivity for LinkedIn’s users with widgets and other enhancing applications.

The company, which was the fastest-growing social network in October, has attracted about 17 million registered users globally and about 5 million unique visitors in the United States in October. Answering to the competition from Facebook and others, LinkedIn will use Google´s OpenSocial structure to open their “made-for-business” service.

 

One example that LinkedIn has crafted is in a partnership with BusinessWeek. Visitors to the BusinessWeek site, who place their mouse pointers over certain keywords will trigger a pop-up box detailing how many of their LinkedIn contacts are related to the company or keyword.

Finally, the Web 2.0 is making its way into productivity and business applications for real. Social Networking has long been a supernova on the horizon and hordes of people are using them. With this entry into business tools like LinkedIn´s network – Web 2.0 will now be available for business users as well.

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