Product Startup Podcast Episode 207: Four Types of Intellectual Property

00:00:00 Kevin Mako: Hello, product innovators. Today we learn about the four types of intellectual property protection for your hardware product business from a 30-year veteran in the technology and legal space.

00:00:09 Kevin Mako: This is the Product Startup Podcast, a show to learn from top leaders in hardware product development, prototyping, manufacturing, product selling, and everything in between.

00:00:18 Kevin Mako: Hosted by Kevin Mako, the leading expert on product development for hardware startups.

00:00:24 Kevin Mako: Welcome back, everyone. I'm very excited to introduce Steven Weigler to the show.

00:00:28 Kevin Mako: Steven has been in the startup legal world, ran his own business, and worked for big corporations in the intellectual property arena.

00:00:34 Kevin Mako: Today, Steven will share valuable knowledge for inventors, startups, and small manufacturers on the four types of intellectual property protection, how to use these protections to increase the value of your hardware product business and how these protections work together.

00:00:47 Kevin Mako: Now, on to the episode.

00:00:50 Kevin Mako: This show is produced by Mako Design, the original firm providing end-to-end consumer product development services tailored specifically to hardware startups.

00:00:59 Kevin Mako: small manufacturers and inventors. Take your product from idea to store shelves at MakoDesign.com.

00:01:06 Kevin Mako: Now on to the episode. Hey, Steven, welcome to the show.

00:01:11 Steven Weigler: Good to see you, Kevin.

00:01:12 Kevin Mako: Well, I'm really excited today to talk to you about the four elements of intellectual property development.

00:01:16 Kevin Mako: This is not just the patent, which everybody thinks about, especially as a hardware startup, especially as building a physical product, but there's other elements of intellectual property as well.

00:01:26 Kevin Mako: We'll dive into what those are and some best practices in and around.

00:01:30 Kevin Mako: own that. But before we get into intellectual property protection for a company, a hardware

00:01:34 Kevin Mako: startup, especially one who's thinking about exiting or is in the process of exiting,

00:01:39 Kevin Mako: meaning selling. So looking at selling your actual product business, the end game of your

00:01:44 Kevin Mako: hardware startup potentially and all of the intellectual property considerations that might be behind

00:01:49 Kevin Mako: that. Before we get into all of that, Steve, we just get this a bit of a background of how you

00:01:53 Steven Weigler: became the success story that you are today. Thank you. So I started out very much just wanting to

00:01:59 Steven Weigler: be an attorney. I really wanted to get in the courtroom. So I started as a criminal

00:02:04 Steven Weigler: prosecutor of all things in Miami, Florida. And so what that did is that really toughen me up.

00:02:08 Steven Weigler: It can be a tough place. Long story short, I got into technology law. I was recruited by AT&T

00:02:13 Steven Weigler: and really helped advocate for a lot of their products and plays, especially when we were getting

00:02:19 Steven Weigler: into 21st century plays from used to be just wires going across the country. So 21st century

00:02:25 Steven Weigler: plays and how you had packaged those from both the marketing standpoint and explaining the technology.

00:02:29 Steven Weigler: to utilities commissions and making sure that we could get out of regulation.

00:02:35 Steven Weigler: And so anyway, so I really learned a tremendous amount about number one, how a large corporation

00:02:39 Steven Weigler: works. And number two, a lot about technology. Telecom technology kind of crashed once it became

00:02:45 Steven Weigler: deregulated, the need for attorneys eviscerated. And as opposed to just going to a law firm,

00:02:51 Steven Weigler: I decided to start my own company that was focused on packaging content and predictive analytics

00:02:56 Steven Weigler: for school districts around the United States and Canada and Singapore.

00:02:59 Steven Weigler: work. It was very much a technology play. It led the company for about seven to eight

00:03:05 Steven Weigler: years through the good, the bad, the ugly, which anyway, long story short, about eight, nine years

00:03:08 Steven Weigler: ago, after I exited my own company, I went into a coffee shop and I wrote down everything I knew,

00:03:14 Steven Weigler: and it really led me to this specific practice. The companies I usually work with are growth

00:03:20 Steven Weigler: companies, meaning they could be growing for their own value, and they could be growing for the exit.

00:03:26 Steven Weigler: And in a way, it doesn't matter. Growth is growth. Certain things in certain things.

00:03:29 Steven Weigler: steps you have to think about along the way. And so that's really what this firm is called

00:03:33 Kevin Mako: EmergeCounsel. That's great. Very helpful and useful. And I'm really excited to dig into the

00:03:37 Kevin Mako: legalities of that, especially looking at intellectual property. So let's just start big picture

00:03:42 Kevin Mako: in the beginning. What are these four pillars of intellectual property protection for a hardware

00:03:48 Kevin Mako: startup as they're scaling or planning to exit? Let's go through each of those just at a high level.

00:03:53 Kevin Mako: And then we'll dig into each one with some best tips and tricks. Sure. Well, to begin with intellectual

00:03:58 Steven Weigler: property, all it means is intangible assets that were created by the month. And so it's a broad

00:04:04 Steven Weigler: quantity of assets. And it's something that carries on the balance sheet, right? It's an asset. It can be

00:04:10 Steven Weigler: very hard to quantify. So we kind of look at it from a protection standpoint. Patent protects ideas

00:04:16 Steven Weigler: and inventions. And so or improvements, substantial improvements on inventions. And so an example of a

00:04:23 Steven Weigler: patent can be how the product is designed. So the Apple iPods or anything.

00:04:28 Steven Weigler: Apple is really uniquely packaged from Apple Corporation. That design has really carried

00:04:35 Steven Weigler: a lot of Apple's value, the design of their product. All they all create a unique design. Those designs

00:04:41 Steven Weigler: are patent. But a lot of times, it can also be a utility patent, meaning it's a utility of the function

00:04:49 Steven Weigler: and functionality. It could be software. It could be hardware. It could be the electronic components that connect the

00:04:56 Steven Weigler: hardware. And so it becomes extremely abstract what you can patent and what you can't patent.

00:05:01 Steven Weigler: If you're really going to patent, you have to take a look at the strategy. You also have to look

00:05:05 Steven Weigler: in patent. You can't use the product, put it at market, and then say there's a patent. And I'm keeping

00:05:11 Steven Weigler: this really easy because the patent books are like this. You can't put the product out there,

00:05:15 Steven Weigler: then file for a patent. Generally speaking, you can on certain circumstances a year.

00:05:20 Steven Weigler: A lot of times, you really have to make sure that you're within the time frame that you can file a patent.

00:05:26 Steven Weigler: So, and then I'll go on to the other forms of IP. If your business play, say, is, I have put all

00:05:31 Steven Weigler: my money, all my time into building a circuit box that is unique on how the circuits can do. And

00:05:37 Steven Weigler: you put it out there. This is your play. Everything's going to grow up that play. You're the

00:05:42 Steven Weigler: circuit box company. You decided, oh, you know, I never really thought about that two years later.

00:05:47 Steven Weigler: Well, you kind of blew the whole ability to obtain a patent.

00:05:52 Kevin Mako: Now, it's never like absolutely 100%

00:05:55 Steven Weigler: and a never like 0% chance. Sometimes it's closer to zero than the 100% percent. And patent is

00:06:02 Steven Weigler: regulated by the United States Patent and Trade Merck Office. It's examined by someone that has

00:06:07 Steven Weigler: from the same field that the inventions brought. It's much easier, generally speaking, to get a design

00:06:13 Steven Weigler: patent. Remember, we talked about the Apple, how they're designed. That's much easier to get them

00:06:18 Steven Weigler: than not, but sometimes less bad. So that's the first one. Patent is a huge area of law, especially for

00:06:25 Steven Weigler: your listeners. And you really have to have that strategy early. You can improve on your

00:06:31 Steven Weigler: own product and get a patent later. Sometimes the person that patents the products because they're the

00:06:36 Steven Weigler: inventor is not the person that actually brings the product to market. The person who brings

00:06:42 Steven Weigler: the product to market can get a license for that. And so it can become a very intricate area of law.

00:06:49 Steven Weigler: But ultimately, remember, it's like, what I look at when I'm, again, trying to get the client from point

00:06:55 Steven Weigler: at a point, is this patent going to help build the actual value of the intellect in intellectual

00:07:01 Steven Weigler: property portfolio on the company? So many people come to me, they like the idea of the patent

00:07:07 Steven Weigler: and it sounds good and maybe the investors will like it. But really, is it going to add value?

00:07:12 Steven Weigler: Sometimes the answer is no. And so it's not patent for patent sake. That's what I can say about pounds.

00:07:18 Kevin Mako: That's good information. It's good intel as well. You've got to really look at your

00:07:21 Kevin Mako: specific business, your specific product and understand what is the best.

00:07:25 Kevin Mako: value, not just doing something for the sake of doing something or because you heard

00:07:28 Kevin Mako: somebody else did this thing, really understanding what's the strategic play, especially as it

00:07:32 Kevin Mako: pertains to an exit or growing the value. As you said, I really like how you mentioned it. Whether

00:07:37 Kevin Mako: you're planning to exit or whether you're planning to grow a massive empire with your product,

00:07:42 Kevin Mako: a lot of these principles still apply. But if you look at it under the mind of planning to exit,

00:07:47 Kevin Mako: well, you're looking then for value. Because when you exit, you're selling to somebody and

00:07:50 Kevin Mako: obviously the more value you can provide to that person, the significantly better value,

00:07:55 Kevin Mako: that you're going to get for the actual product. Well, that's relatively similar to what you're thinking

00:07:58 Kevin Mako: about as you grow it as well, because you're trying to grow sales, you're trying to add value to

00:08:02 Kevin Mako: your customers, and you're trying to increase your intellectual property portfolio, as we're talking

00:08:08 Kevin Mako: about here today. And all of these things combined, if done well, have done strategically,

00:08:11 Kevin Mako: continues to increase the overall value of what somebody would pay for your product, business,

00:08:16 Kevin Mako: brand, et cetera. So let's go on to some of these other ones, so it might be lesser known

00:08:21 Kevin Mako: or lesser addressed, especially in the hardware world where a lot of people are focused

00:08:24 Kevin Mako: on patents, but there's other elements of intellectual property that can build value to your

00:08:30 Steven Weigler: hardware brand, hardware product business as well. What are those? Yeah, I mean, I think for the most

00:08:36 Steven Weigler: understated and most valuable aspect of intellectual property is a trademark strategy. So trademarks

00:08:43 Steven Weigler: protect brands. Apple is a brand. IBM is a brand. Lenovo. But you can go on and on and on.

00:08:50 Steven Weigler: And for example, you go into Costco.

00:08:54 Steven Weigler: And a consumer looks at a brand and you're not looking at, well, here's a no name or

00:09:02 Steven Weigler: some brand you never heard of. And I want to buy that because the specs are a little better.

00:09:08 Steven Weigler: They're like, oh, I see this Microsoft Surface or whatever the high quality brand is or the brand

00:09:14 Steven Weigler: brand that people know. And they're going to usually, even if the specs are a little less than the

00:09:19 Steven Weigler: no name sitting next to it, they're going to buy the piece of hardware that is known

00:09:24 Steven Weigler: and a value. That's because in the consumer's mind, they know that this company has built up

00:09:31 Steven Weigler: their brand and brand is identity. And identity is usually a positive experience because they put trust

00:09:38 Steven Weigler: in that the quality of the product based on the brand. They could again look at the specs and say,

00:09:44 Steven Weigler: well, gosh, that has an Intel X, Y, Z chip and not an Intel, you know, the top Intel chip. But that again

00:09:51 Steven Weigler: is a brand play. If it were a known name chip, they would probably,

00:09:54 Steven Weigler: pass it by. So the whole thing is like, it's how consumers identify with your good or

00:09:59 Steven Weigler: service. So your brand is going to grow. If you're starting a company, it starts at zero.

00:10:07 Steven Weigler: Your brand value starts at zero, unless you have their cure for cancer, which again,

00:10:12 Steven Weigler: your clients don't want. If you have the cure for cancer, who cares what the product's called?

00:10:17 Steven Weigler: Who cares what the brand experiences? It's a cure for cancer. For the rest of us, they have to

00:10:22 Steven Weigler: connect something to buy the product, they have to connect some kind of name, some kind

00:10:27 Steven Weigler: of identity to that product. It could be a consumer play. It could be a business to business play.

00:10:32 Steven Weigler: In my case, it was a business to government play. It doesn't matter. You have to protect brand in that

00:10:37 Steven Weigler: brand experience. And so generally, it's like, all right, well, what's going to be the name of the company?

00:10:43 Steven Weigler: Has that name been taken? Where's your end users? And really doing a thorough search to make

00:10:49 Steven Weigler: sure that you can secure that. Then the strategy.

00:10:52 Steven Weigler: grows out depending you might have a suite of products. You might have a special element to your

00:10:57 Steven Weigler: product. Those things all need to be brand. And so generally, and it's very inexpensive, and then

00:11:04 Steven Weigler: where is it going to be? If you're sourcing from China and it's not everything's white labeled or from

00:11:09 Steven Weigler: India, you have to then think about an international strategy. But all that together is your brand strategy,

00:11:15 Steven Weigler: is your trademark, your brand protection strategy. You better believe that if you're thinking about

00:11:20 Steven Weigler: exiting or if you're thinking about even growing value in the company, you don't know

00:11:24 Steven Weigler: zero value without having a secure and thorough brand implant. I love that you bring up brand strategy

00:11:31 Kevin Mako: because that's something especially as a hardware startup, they look at it and go, well, I'm not an Apple

00:11:35 Kevin Mako: brand. And I don't think I'm going to be that level, at least not in the next few years, let's say.

00:11:40 Kevin Mako: But what hardware startups don't realize is when we talk about brand, it doesn't mean a global

00:11:45 Kevin Mako: brand that people recognize, especially as a hardware startup. This means a brand that,

00:11:50 Kevin Mako: as you said, starts at zero, but starts to gain traction within your specific industry

00:11:55 Kevin Mako: niche, that vertical. And that is what is actually very powerful. You look at a lot of these small

00:12:01 Kevin Mako: products that maybe it's a hiking product that only is very specific for hiking in these certain

00:12:06 Kevin Mako: conditions. Well, let me tell you, if you've got a great product that is really benefiting people,

00:12:11 Kevin Mako: your brand value will start to take off in tremendous ways. It'll have a viral effect.

00:12:16 Kevin Mako: And people that have that pain point that your problem solves start to hear about.

00:12:20 Kevin Mako: that brand, start to trust that brand, and so on. So the point for a hardware startup isn't to try

00:12:25 Kevin Mako: and look at brand as something that you don't need to worry about for 20 years because it'll be a long

00:12:29 Kevin Mako: time before you're some massive global empire. You can start building your brand from day one

00:12:34 Kevin Mako: within the very small geographical market, very specific product vertical, very specific

00:12:40 Kevin Mako: pain point solution within that product vertical. Start building your brand from day one.

00:12:44 Kevin Mako: And that brand within that smaller community, which of course over time will grow as your name grows,

00:12:50 Kevin Mako: that is where you can really start to instrumentally put yourself out as a leader,

00:12:56 Kevin Mako: as a pioneer, as a changemaker, and all these elements, everything you're doing with your business,

00:13:00 Kevin Mako: especially the product itself, are adding value to your brand reputation.

00:13:05 Kevin Mako: So protect that brand so that as you're adding value into the piggy bank, let's say,

00:13:10 Kevin Mako: of that brand, that brand is protected and something that you can then sell to an eventual buyer,

00:13:15 Kevin Mako: not only somebody who's buying your product, because they want that widget and they want that patent,

00:13:20 Kevin Mako: the technology that you've developed and that you're selling, but they want the brand that surrounds

00:13:24 Kevin Mako: it as well. And that will give you a much larger valuation when you're starting to put all these

00:13:28 Steven Weigler: different pieces. It's so true. In two ways. Number one, it's like I participate in some Am and A and so

00:13:33 Steven Weigler: that's my favorite thing is when the business number gets to that point and I've been working with

00:13:38 Steven Weigler: them from the very beginning or the middle. It's fantastic. And I've worked on some litigation

00:13:42 Steven Weigler: and where the brands that issue or someone ripped off the brand. It's the easiest thing to show,

00:13:47 Steven Weigler: I can show the correlation between building brand and

00:13:50 Steven Weigler: valuation of the company, much easier than I can generally show a patent. Sometimes a patent

00:13:55 Steven Weigler: stands on its own. Yes, it does. It's like such a great invention. But the most time it's like,

00:14:00 Steven Weigler: no one, a patent just protects an invention and you need it sometimes. I'm not saying anything negative

00:14:05 Steven Weigler: about it, but I'm saying if you're talking about growing value, brand grows value. And the trademark

00:14:10 Steven Weigler: strategy is like, how do you protect that if you don't have a registered trademark, including like,

00:14:14 Steven Weigler: again, if you sell in Canada, well, this is 10% of American market? Is Canada? That's a big

00:14:19 Steven Weigler: market that you don't want to ignore it. We work strategies to get the trademarks in various

00:14:23 Steven Weigler: places. It's really just kind of showing the exit person, the venture capitalist or whatever,

00:14:28 Steven Weigler: that you have a brand strategy. And we map that out. It's really pretty straightforward.

00:14:34 Kevin Mako: Steven, just because we're short on time here a bit, I want to get to the next two as well.

00:14:38 Kevin Mako: Let's talk about these last two elements of intellectual properties. We can round out the whole

00:14:42 Steven Weigler: puzzle here today. Sure. So copyright protects original works of art. So almost anything can be

00:14:47 Steven Weigler: copyrighted if it's original.

00:14:49 Steven Weigler: So really, if you have code that drives your platform, that code can be protected through copyright.

00:14:55 Steven Weigler: Sometimes it can be protected but through patent, but not generally.

00:14:58 Steven Weigler: The other thing is product packaging.

00:15:00 Steven Weigler: So everyone, even if it's a widget or something that's really generic that you're developing as a hardware developer,

00:15:09 Steven Weigler: how you package it can be protected through copyright.

00:15:13 Steven Weigler: So it's done through the United States Library of Congress.

00:15:15 Steven Weigler: And there's something called the Berlin Convention, which allows, if you copyrighted some

00:15:19 Steven Weigler: place, the other countries are supposed to honor that copyright. So it's really cool and

00:15:23 Steven Weigler: really powerful and really cheap. So I'll leave it at that. But code can also be copyrighted. And

00:15:28 Steven Weigler: any product packaging are the two most relevant. It might be some product design. We've done that,

00:15:34 Steven Weigler: but it has to be looked at carefully. Because again, there's patent. There's even something

00:15:38 Steven Weigler: called trade dress, which we can go into that's part of trademark. The last thing is

00:15:43 Steven Weigler: something that businesses don't do very often, which is trade secret.

00:15:49 Steven Weigler: Heat things that are supposed to be secret make a big deal about their secrecy.

00:15:53 Steven Weigler: Coca-Cola, besides the fact that the brand is amazing, like everyone knows what Coca-Cola is.

00:15:58 Steven Weigler: But one thing they've done is just keep the Coca-Cola secret.

00:16:02 Steven Weigler: Eight people know it or 10 people know it.

00:16:05 Steven Weigler: They sign an agreement that they're going to really sign their life away if they give up the formula.

00:16:09 Steven Weigler: They get suppliers from various places that don't even know each other, and they keep the whole thing secret.

00:16:14 Steven Weigler: Well, that's a big deal. You can't emulate that product.

00:16:17 Steven Weigler: And I can't tell you, Kevin.

00:16:18 Steven Weigler: And ultimately, and I know we're short of time, but we do all this because you can get knocked

00:16:23 Steven Weigler: off. And if you get knocked off your value goes way down, you're in the dumps. And so all these

00:16:29 Steven Weigler: strategies together, woven together, help you maintain first mover or strategic advantage.

00:16:35 Steven Weigler: The goal is to minimize the price. We do a lot of process work, meaning we look at it just like

00:16:41 Steven Weigler: engineers, how we do our legal work. So to process and deliberate strategy, we try and minimize the price

00:16:48 Steven Weigler: to protect the entity while maximizing the value. And ultimately, that's when an

00:16:53 Steven Weigler: entrepreneur wants is low price and maximize value. Steven, that's a great way to tie it all in

00:16:59 Kevin Mako: together at the end. Look at this strategy of holistic approach, especially if you're building the

00:17:03 Kevin Mako: brand, especially if you're considering exit, especially if you haven't maybe got some of these things

00:17:08 Kevin Mako: as well as tightened up as they should be. Look at a smart strategy for these things.

00:17:13 Kevin Mako: Work with somebody like Steven who understands the ins and out these various processes.

00:17:17 Kevin Mako: And of course, that brings me up to the

00:17:18 Kevin Mako: My final question here before I let you go, talk a bit about what your firm does,

00:17:22 Kevin Mako: helping entrepreneurs scale up to making sure that they've got the right strategy and approach to

00:17:28 Kevin Mako: all of these different elements, especially as they're growing and scaling and potentially

00:17:33 Kevin Mako: looking to exit at the best valuation.

00:17:35 Steven Weigler: Sure. We're a full service business and intellectual property law firm.

00:17:39 Steven Weigler: Our passion is to grow businesses from inception all the way to M&A, and we have all the

00:17:46 Steven Weigler: tools to be able to do that as well as connections around the world. We do a lot of

00:17:50 Steven Weigler: international work. We offer free 15-minute consults and our goal for that is to really get to know

00:17:55 Steven Weigler: the entrepreneur or entrepreneurial organization and really see if we can build a relationship.

00:18:01 Steven Weigler: We're very relational based. We have a lot and we do a lot of fixed fee work because we, again,

00:18:06 Steven Weigler: we have a lot of processes. This isn't our first rodeo. And so I've spent a lot of time

00:18:11 Steven Weigler: to putting that together. If you want to know more about me, I have a really pretty built-out

00:18:16 Steven Weigler: LinkedIn site. So it's Steven Weigler, W-E-I-G-L-E-R, and Steven is with a V, not P-H.

00:18:23 Steven Weigler: The other thing would be, we have a thorough website also with a lot of resources on a

00:18:27 Steven Weigler: resources page. It's EmergeCounsel.com, E-M-E-R-G-E-C-O-U-N-S-E-L.com. And again, I would love

00:18:35 Steven Weigler: the first step of any professional relationship is get to know the client, get to know the

00:18:41 Steven Weigler: entrepreneur, and I want you to get to know me.

00:18:43 Kevin Mako: Steven, much appreciated for all those words of wisdom. And as always,

00:18:46 Kevin Mako: I will put those links into the show notes below for anyone else who wants to click through.

00:18:50 Kevin Mako: Thanks again, Steven, for being on the show, and we look forward to talking to you again.

00:18:53 Kevin Mako: Thanks, Steven, and take care.

00:18:55 Kevin Mako: Thanks for tuning in to this episode of the Product Startup Podcast.

00:18:59 Kevin Mako: If you found some value in the show, please do us a huge favor and hit the like button and subscribe.

00:19:05 Kevin Mako: If you have any questions, guest suggestions, or anything else, feel free to reach out to us

00:19:10 Kevin Mako: anytime at our email, podcast at MakoDesign.com. This show is hosted by Kevin Mako,

00:19:16 Kevin Mako: North America's leading expert on product development for hardware startups, and the podcast is produced by Mako Design, the original firm providing end-to-end consumer product development services tailored specifically to hardware startups, small manufacturers, and inventors. Take your product from idea to store shelves at MakoDesign.com. That's M-A-K-O-Design.com. Thanks for joining and see you again soon.