Leading Innovation within the IP Industry
Podcast transcription - 20th february 2019
Alan Cowley: Welcome to another Invested Investor podcast. I'm sat here with Zeev Fisher. Zeev has a varied background. He's now running a company called, Pekama here in Cambridge. Zeev, let's hear a little bit of your background.
Zeev Fisher: I'm an IP lawyer. I came to the legal profession in a slightly different route than most people, I suppose. I was born and raised in Israel. I went to law school. Before I went, I did my military service in Israel, which I did as a defence attorney. I was representing AWOLs and drug offences during military time. There is no solicitor-barrister distinction in Israel. I was basically doing cold work. When I finished my duties, I rented a room, actually, in a firm of patent attorneys. They needed a litigator, which sounded great to me as they proposed I was to do their litigation because I was always attracted to technology. Doing military criminal law wasn't that exciting as a future career of choice. I started doing their IP litigation work and later got more and more involved on the strategy side. I just found it very interesting to sit down with, really, innovative people and see what they are planning to do and how they're building new and exciting products and how they're planning to launch them and what they want to do with them and how we can make our little contribution to that.
At some point, partners came in, partners came out. I had generated enough business and became a partner there and then ended up staying with one of the partners and at some point setting up a branch in the UK. We were looking for an interesting competitive advantage. We both qualified as solicitors and came here to set up a branch and eventually ended up making a lifestyle decision to move here.
Alan Cowley: When was this?
Zeev Fisher: That was in 2012. We set up a branch in 2010 and then moved in 2012, it cost the firm because the other person didn't want me to move. We almost merged the big firm as lawyers come and lawyers go. He merged the big firm. I kept my brand and was transitioning for a while until I set up Pekama and that's what I do today.
Alan Cowley: You set up Pekama. How long were you with the branch until you decided to transition into the entrepreneurial side?
Zeev Fisher: I was full-time IP lawyer in the UK for about three and a half years before I became a full-time Pekama person.
Alan Cowley: Okay. Let's hear a bit about Pekama. This is, obviously, your first entrepreneurial journey. If you could just tell the listeners a little bit about what Pekama does and why you set up Pekama.
Zeev Fisher: It's the first one, I guess, in a tech company because I was running a business before that, but that business was a more conventional IP practise. Pekama started almost by accident. It started as me hiring developers to build automation into how IP works and doing it for my own practises needs. Then I had the enormous pleasure of having yet another chance with David Gill whose just a fantastic person in every possible way and is flowing with positivity and excitement. He got me excited and suggested, why not do something more with that. If you need automation, surely, more people need automation. Why won't you set up a proper company. The idea grew on me and then he introduced me to the first investor, who was Robert Surname? another incredible individual who got excited because, he had the experience of what it means to be a client of an IP practise, and was aware of this black box that you face when you deal with IP portfolios. Yes, that's how Pekama was born.
It started as building automation tools and the case management tool to approve the work of IP attorneys. As startups go, it evolved into what it is today, which is a tracking, budgeting, and portfolio management tool for IP owners, primarily.
Alan Cowley: David Gill and Robert Schwan are still involved at all or ...
Zeev Fisher: Robert Schwan remains an investor. I don't see David as often as I would've wanted. I think that David's passion is about getting companies off the ground and he successfully achieved that. Plus, I'm no longer in St. John's Innovation Centre. I see him sometimes. I always hear good advice, but he's not as involved as he was in the beginning now.
Alan Cowley: Okay. Pekama is all about innovates in the IP industry. Can you tell us exactly how you plan on doing that in the future and where the company is going?
Zeev Fisher: Yes. The IP industry is one of the most ironic ones, I think, maybe between all of the professions. It serves the most innovative companies you can think of. If a company builds a new piece of AI or a new drug or a new medical device, it will always have patent attorneys and trademark attorneys all around it. The most innovative companies in the world are surrounded by IP attorneys, but IP attorneys themselves, they deliver their core competence which is drafting patent applications and preparing trademark applications, typically, to a very high standard. When it comes to innovation and to delivering exciting service, finding ways to deliver added value, creating clarity and transparency on their client side, there has been no change in the way that this profession is conducting itself since, pretty much, forever. There has been a gradual movement to using less paper, but what we see in other sectors of the legal space and other spaces of AI entering the space of more software of better client experience of measured ways of delivering service, none of these things are happening in the IP space. That's where Pekama comes into play.
We firmly believe that, at some point, the IP space has to catch up. IP owners are experiencing a different type of service from their accountants who now deliver completely online and the immediate experience using tools like Zero, from their lawyers who move on to cloud-based tools and faster experiences from other service providers that give them access to partners, to investors, to accelerators. As they experience the change in all of the industries that surround them, eventually, they will come to demand change from their patent attorneys as well. In Pekama, we believe that forward-looking patent attorneys would want and need the IT tools that we're creating to deliver a better experience, and that IP owners will gradually grow to demand more and more of that.
Alan Cowley: How big is the IP industry?
Zeev Fisher: How long is a piece of
Alan Cowley: String.
Zeev Fisher: String. Yes. I've seen various estimates. The highest one I've seen, it talks about a $40 billion industry globally. The number of IP filings annually are about 19 million. It's not small, but it's interesting in the sense, that it's very big and everyone recognises that it's important, but it lives on the side-lines. Entrepreneur goals are through an investor deck or what's your sale strategy, marketing strategy for that market fit. Do you have patents? Yes, carry on. That's as much attention as IP usually gets. It's a tick that needs to be ticked, which is the source of what I believe is most of the problems of this space.
Alan Cowley: Should all start-up protect their IP?
Zeev Fisher: No. It really depends on the space. A start-up in a IP heavy space has to protect its IP. Primarily, inventions. If you're building a medical device or if you're creating a new drug or you're a biotech company, essentially, all of your value lies in your IP and the more and higher quality patent you will generate, the better you usually are. Your valuation would normally be higher. You'll be expected to do it. If you want to do it, then hard questions will be asked. It's almost obvious that you need to do it. In other spaces such as software, not AI but software that's harder to protect, for example, it's a difficult question. Sometimes it would be sitting with a patent attorney and you'll have a borderline software patent. You will wonder whether it's worthy of protection or not.
I think, to answer this question, you have to think of what exactly are you trying to achieve. Are you going to draught and file a patent now so that you can stop other companies from creating the same technology? If that's what you're thinking, then you'll likely to be disappointed because no software patent in a borderline field would ever stop anyone from doing anything. Nobody is ever going to bother reading which patents are in these spaces. If someone would try to figure out what's in these spaces, the space is really crowded with patents that are very hard to read and cover a very uncertain amount of data. If what you're trying to achieve is to have the right to stop someone else from using your technology in a borderline space, then that's unlikely and even if there is a clear infringement that your patent is gone and there's a clear infringement, even then, would you have the capital to enforce, where would you like to enforce. If it's in the UK or the US, typical enforcements can cause hundreds of thousands to millions.
Would you have other options such as, in the US, you can enforce patents using alternative models such as hiring companies that would fund your litigation and exchange for a percentage of the proceeds. Maybe, you will be able to enforce, but I think that looking at patents and the creation of patents, and I'll talk about trademarks in a minute, solely from the perspective of, would I be able to enforce this patent as its not seeing the whole picture, as it is. I think that the first question that a start-up CEO needs to ask themselves is, would drafting more patents help me achieve short-term goals such as getting funding. That depends, for example, in the type of investor that you're looking to recruit. Sadly, to my opinion, patents are not going through proper due diligence in most angel rounds in the UK. Most angels don't treat them properly, don't get opinions on them properly, and they look at other things.
Alan Cowley: They're just ticking the box or something ?
Zeev Fisher: If the expectation of the investors that you're approaching is that you need to have something in place and you can have something that looks solid enough to satisfy that need, then even if it's not the objective reality, it might be useful for you. Whereas, you might have a completely solid and strong IP proposition, but you're going to be funding yourself with a group of investors that couldn't care less. In which case, you may be better of spending your money doing other things. There is no clear and definitive answer. It always depends on the circumstances, but few things are general truths. It's rarely a bad thing to have IP protection. You're probably better of exaggerating, to have more IP protection, as opposed to have less IP protection. More IP tends to raise the value of companies. It's a fact even if it's low quality IP, it tends to raise the value of companies. That's a fact as well.
An IP portfolio tends to make exits easier in the sense that, politically, for many purchasing companies, it often helps to say, "We're buying that company alongside other things because it has a chunk of patents that we need." Equally, in the beginning, that is not always looked into as deeply, as it should be. There are good reasons beyond enforcement, per se, why one would want to have a good patent portfolio. As for trademarks, trademarks are usually done because they're inexpensive. It's quite easy to do. If you start building a brand, then protecting that brand is a few hundreds of pounds, at least, in main territories. It's kind of a no-brainer. Is it essential? In most of the cases where companies are doing tech? Probably not because the company is selling tech. It's not selling a brand, but it's useful. They would want to have the brand as protected. If you have people starting to register domain names that are similar to your brand whether they do it intentionally or not, you would want to have some enforcement mechanism and then trademark is also, a very good enforcement mechanism. Because it's inexpensive, it's a no-brainer.
Most of the discussion is really about patents and it's a difficult discussion. It's not as much about what you want and how strong you think that patent might be. It's a broader discussion, about what's your short-term funding goals, what's your long-term funding goals, where do you see the value of your companies lie, another fundamental truth is that, it's rarely a good idea to overpay. Nevertheless, most people do that. Why do people love brands as often? I'm a trademark attorney by profession and yet, it's often a mystery to me why people are so obsessed with brands, but I'm yet to see a single funding round fail because the investors have thought that the patent firm which drafted the patent applications, was not reputable enough. Yet, I've seen many entrepreneurs thinking that someone cares, which branded firm draughts their application. That's one misconception
Another misconception is, you get what you pay for. That's my favourite one. Yes, you always get what you pay for. If you pay expensive, you get expensive. It doesn't mean you're getting good quality work. Generally, in the legal profession, when you instruct a big brand to do a piece of work, you can rely on that brand, typically, the mechanism is in place, not to do anything horrible. The likelihood of your patent not being filed on time or a deadline being missed, which are the true disasters of this profession, is very low. Equally, and I'm a fan of mid-sized firms, I always thought that the value lies in even small mid-sized firms that have very good attorneys that used to work in big branded firms and have moved to work in smaller and less expensive facilities. If you work with someone who used to be a partner in a big firm and now works for a smaller firm, they don't stop being good just because they move to work for a different firm.
My general feeling about IP work is that everyone or almost everyone overpays and there is no reason to. It's entirely possible to get more IP without overpaying and better service. It's all about being an informed customer and giving this issue the attention it deserves. Yes, it's part of what we're doing in Pekama. We're creating the platform that enables these relationships and makes them feel safer.
Alan Cowley: Many of our listeners are either early stage start-ups or they're thinking about starting up a company. What top three tips would you give people if they were thinking about defensibility and IP of their idea or their product?
Zeev Fisher: The first step would be, get advice from someone who understands business. It's not easy to find particularly, when it comes to firms of patent attorneys. You need a combination of understanding of your product and understanding of your business. There are commercially savvy patent attorneys out there. They're just not that easy to find. Get advice. If you sit down in a meeting, go to a few meetings. Don't choose the first person you meet. Don't choose based on the recommendation of a friend because they have a different business. Go to a few meetings until you are completely satisfied that the person that you are talking to, getsa your business. That would be my number one advise. My number two advise would be, get a good deal. What's entrepreneurs fail to understand often is that IP is extremely expensive. It starts with a few thousands of pounds, which is not cheap but it's not the end of the world. Within a year and a half or two years, it goes up to tens of thousands pounds.
Disparity in this market is very significant and it's completely unjustified. It gets even worse when the portfolio becomes global because you will be working with a firm in China and a firm with Japan and a firm in Canada and a firm in the US. All of these firms, you would rarely know them and they will have no direct loyalty to you. They will have a system of agreements with the UK firm that sent them the work, which they might be sending that firms work back and you wouldn't even know about it. It's very easy for this to become a very significant expenditure. It's not just about the money. It's also about the level of attention. You sit down with someone, you get all of their attention, and then you're passed on to the paralegals, and you'll get standard reports that you would not understand or get a notification saying that your patent is published and you will have no idea what that means.
It's not just making sure you get a good deal in terms of price. It's to make sure you get a good deal in terms of this strategic understanding of what my business says, that existed in the beginning when you initially helped me identify whether I should file a patent on something, or not. That should carry on throughout the entire relationship. Every time there is a decision to be made, it's very important to reconsider everything, see what happens since then. Has my invention changed? Are there changes incorporated into what we've done? Is there a justification to file another patent? How was it going to look? Yes, that would probably be advise number three, plan. Planning is difficult for IP. Again, this is some of what we do. We create budgets for patents based on the number of pages and claims and things like that, but in almost any other industry, if you ask the service provider how much is that going to cost me in the next year, in the next two years, in the next three years, they would have the proper answer.
In the IP space, you would normally get a very wide range of possibilities. If it would be very difficult to prosecute this patent, then it could be tens of thousands. If not, it could be a quarter of that. It's possible to narrow down that range. Again, this is some of what we do with technology, but it's hard. For patent attorneys to give numbers that support proper planning and proper budgeting, they need to sit down and work hard on that, but the key to any venture is proper planning. This is absolute key. They use other sort of things where we feel that experience in the IP space is lacking. We build tools that provide budgeting and proper planning and so on. We help facilitate relationships where ongoing strategic advice is part of the relationship and it's incorporated into it. Obviously, we're always happy to help, but if it's not us, these are the things that, I think, are absolutely necessary.
Go for someone that understands both your product and your business, which is very hard to find. You can't just rely on the fact that someone understood someone else's product in business. Get a good deal because it does get expensive. Plan and get all the data that you need in order to plan properly. It's not easy to achieve. It's very easy to dismiss, but that's the key to success in that space.
Alan Cowley: That is absolutely, brilliant. I know that would be hugely useful to a lot of people to know along with your point about investors doing due diligence on the IP and the defensibility of a patent.
Zeev Fisher: Here's an anecdote. We used to do patent drafting for one of the biggest patent filers in the world. As a policy, they would basically file patents for everything. We were in charge of what we called, as a joke the non-patentable subject matter department. We got, every month, three or four disclosures of things that are completely unpatentable. Our job was to make patents out of them. They knew and we knew, but it was part of a value generation. It's a bit cynical, but taking a commercial approach is the only sensible approach to doing IP properly. It's a bit sad, I think, that the UK is a bit behind the US on this especially when it comes to software.
The Americans, in recent years, narrowed down significantly, what could be a software patent. It's no longer such a broad open door as it used to be in the past, but even then, when software patents were easily obtainable in the US or relatively easily obtainable. I saw people coming from advice they receive from patent attorneys based on this country that a certain patent is not patentable, which was true in the UK or Europe, but it wasn't true in the US. When a company builds a software product, the likelihood that they will eventually go to the US as the main market, is so significant, that you can't just dismiss the fact that there's a different jurisdiction that does allow the patents. You have to have a degree of knowledge on other country's practises as well. I think that changed to a degree, but it's this commercial understanding of, "Okay, who is that client? It's a software company. Where's the target market? It's America. Okay, we don't advise on European law even though we know it better. We advise on the relevant law, which is American law."
Another example, China, Japan, Brazil, Germany, a group of other countries are awarding an IP right called, The Utility Model. It's something between a patent and the design. It's a functional design. For products that have a shape and form such as a medical device, for example, sometimes it's the appropriate mechanism of protection. It's normally an alternative to a full patent, but it's granted faster and there is less prosecution in products that are likely to be copied. The domestic filers like Chinese companies, they file lots of these utility models. UK applicants don't file utility models even when they go to China. That's a mistake. Why don't they file utility models? Because a similar right does not exist in the UK. It's just not something that local patent profession is normally used to advising on. It just escapes the thinking pattern. If I don't know about it and if I don't do it domestically, I don't think about it when it comes to overseas protection.
Now, obviously, some patent attorneys are advising to file utility models. Particularly the ones that went to a conference and heard from their Chinese counterparts that it's a good idea for certain products, but it's exactly these things where when a company has an in-house department, the in-house department builds up that knowledge and expertise in relation to its products. They know to question their outside counsel and say, "Okay, why are we doing this? Why are we not doing that?" For the layperson, IP is such a complicated space that they just take all the advice they get and take it for granted, but it's a problem. If you really want high quality advice and high quality service, you have to have a degree of understanding of the space or at least enough understanding to ask the right questions.
If, for example, I enter a national phase of a patent application in China, it's appropriate to ask the local experts what is the best way to do that. Would you recommend in this particular case to go for a utility model as opposed to a patent. That's another point.
Alan Cowley: It sounds like, as you spoke about the start of this podcast, innovation and change are something that's just not that common within the UK space.
Zeev Fisher: I think that the last couple of points I made was more about good advice that does exist. It's just that a more matter of luck than anything else that innovation in its own rights or what innovation should do in that context is to be an enabler to good advice. For example, it's inconceivable that I would go to a certain patent firm and that patent firm is in any other aspect identical to a different patent firm that's just down the road. Unfortunately, sadly, all patent firms, at least the way they're perceived, are pretty much the same. At least, I haven't identified any particular brand difference or anything they do exceptionally different from each other, but even within the same patent firm, if I will go to one partner, they will know how to advise me about utility models in China. If I go to another partner who wasn't in the same conference, they wouldn't know how to advise me about the very same thing.
Technology that can create knowledge bases or the right kind of alerts can be the enabler that will make sure that I will get at least the same type of basic advice from everyone regardless of who I go to. That's something that technology can do.
Alan Cowley: Before we finish the podcast, is there anything else you'd like to add?
Zeev Fisher: Yes. Just one thing from the Investor's perspective. We do think that companies with IP should be, at least in theory, more interesting than companies that don't have something defensible. We do work with quite a few companies that have IP portfolios that we help them manage. We're more than happy to act as a funnel or if anyone is interested in a particular space, we're very happy to make introductions to people who work with us.
Alan Cowley: Well, that was incredibly insightful and seriously useful for a lot of people within the industry and the UK system for start-ups. Invested Investor would just like to thank you for being in the podcast.
Zeev Fisher: Thank you very much. It's an honour.
Peter Cowley: Thanks for listening to another Invested Investor podcast. You can subscribe to all future podcasts via our website, investedinvestor.com or via a number of podcast platforms online. Remember, you can order our book online and be sure to follow us on Twitter, LinkedIn and Facebook to get the most up-to-date instinct and insightful content from the Invested Investor.