Product Licensing Performance Guarantee: Make Sure Your License Has One

GuaranteeYou develop a useful product. Let’s say its a needle for performing biopsies. You file a patent application on your invention.

Then you approach a medical device company and enter into a license agreement where the company receives exclusive rights in the invention in exchange for a royalty on each product sold.

Years pass and the company still has not fully developed and marketed the invention. You sue the company for not doing enough to get your product to market. But you lose because the license agreement contained no performance guarantees requiring the company to meet minimum sales or use best efforts to make, market, and sell the product.

This is similar to what happened in the case of Beraha v. Baxter Health Care Corporation, 956 F. 2d 1436 (7th Cir. 1992).

Don’t Rely on Oral Assurance as a Substitute for a Performance Guarantee

The Beraha case demonstrates that one of the most important terms in licensing your invention or product is a performance guarantee. A performance guarantee protects you if the other party (the “licensee”) buries your invention or does not do enough to market or sell it.

In the Beraha case, Beraha originally proposed a license agreement that contained a guaranteed minimum annual royalty of $50,000 per year after the first year. However, Baxter responded with a proposal that eliminated the guaranteed minimum annual royalty and increased the royalty advance to offset the removal of the minimum guarantee.

At first Beraha refused to sign the revised proposal from Baxter because it did not contain a minimum guarantee or a best efforts clause. However, during a phone call with a Baxter Vice President and without committing to any specific level of effort, the VP said he would send Beraha a letter . On the basis of the assurance that a letter would be coming, Beraha signed the exclusive license with Baxter, which contained no performance  guarantees.

The letter Beraha later received said “…Although we work in an environment that is always subject to changing conditions, you can be assured that our present intent is to do our very best to make this project a success…” However, this letter had no effect on the license agreement that was already signed. This is due in part because the license had a merger clause. Most license agreements have a merger clause, which basically says that “no matter what I said before, the only terms that matter are the terms written in this license agreement.”

The court found that Beraha could not inject a best efforts clause into the agreement when it did not provide one and when the minimum sales provision was removed during negotiation.

The court left open a possibility that Beraha could recover if it could show that Baxter breached its obligation to act in good faith and fair dealing. But, there’s no surety that Beraha could recover under that theory because the court said, “the jury could find that Baxter did not breach the contract even if it exerted no efforts at all to develop the Beraha needle if Baxter can show that its decision to exert no effort was reasonable under the circumstances.”

You do not want this to happen to you. Therefore, your license agreements should have a performance guarantee. Performance guarantees come in several forms.

Minimum Sales Requirement

The best approach is to provide a clause that requires the other party (the licensee) to hit minimum sales in a defined period of time. For example, as in the first proposed agreement in the Beraha case, the minimum can be in the form of a guaranteed minimum annual royalty payment. This requires that no matter what the sales are during a given period, the other party must pay at least the minimum during that period. If the guarantee is $50,000 per year, then you are guaranteed at least that amount even if the unit sale royalties do not reach that amount.

Also you can provide the guarantee in units of product. So you can say that the annual minimum unit sales is 50,000 units. If the royalty rate is three percent of the net sale price, and you know the net sale price, then you can calculate the annual minimum in dollars.

Consequences if Minimums are not Met

What happens if the minimums are not met?

If the license provides that you are paid the minimum no matter what the sales are maybe you don’t care if target sales are not met. However, if you want to see your product succeed in the marketplace you might want to provide a provision that cuts off some or all of the licensee’s rights if the minimums are not met.

One example is a license that provides for termination if the minimums are not met for one or more periods. When the license terminates you can approach other companies to make and/or sell your product. Another option, is that an exclusive license can be converted to a non-exclusive license if the minimums are not met. This means that the first licensee can continue to mark and/ sell your product, but that you can go to other companies and have them make or sell your product as well. When the agreement is non-exclusive you can cut deals with multiple companies to sell your product.

Best Efforts

One alternative to defining the minimum dollars or units per period, is a license that provides this: “the licensee agrees to use its best commercial efforts to make, market and sell the product.” Sometimes “reasonable” is substituted for “best”. Regardless, see how wishy-washy that phrase is? What does “best/reasonable commercial efforts” mean? How will it be measured? A best efforts clause is an invitation for a dispute (e.g. a lawsuit) because it is uncertain what best commercial efforts means.

It is better to specify what activities are desired, such as minimum sales, a list of marketing activities, and/or other requirements.

Do not rely on oral assurances that the licensee will use their best efforts to make, market, and sell your invention or product. Put concrete numbers and activity requirements in a product or invention license.

Photo credit to John Walker under this creative commons license. The image above is cropped in from the original photo here.

Henry Ford: The Assembly Line, Entrepreneurship, and Bigotry

HenryFord_ThePeoplesTycoonNo successful boy ever saved any money . . . They spent it as fast as they could for things to improve themselves.
-Henry Ford

Henry Ford revolutionized manufacturing with the introduction of the assembly line. While many companies were selling expensive cars for the rich. Ford’s goal was to build a light weight affordable car for regular working people.

Since the assembly line might be the single most important invention in industrial history, I wanted to learn more about the man behind the company that put it to use and the circumstances around its invention. Steven Watts’ book The People’s Tycoon: Henry Ford and the American Century provides an interesting biography of Ford and history of his companies. Unfortunately, as explained below, the exact circumstances of the invention of the assembly line are not clear. But first….

Don’t be a Bigot

Ford revolutionized manufacturing not just in the automobile industry but across industries with the invention of the assembly line. I started reading this book with a desire to learn about Ford’s life and to write about the interesting entrepreneurship and business issues of Ford’s life.

But Ford espoused antisemitic bigotry and ignorance. As I wrote about the entrepreneurship and business issues, I kept thinking about how Ford’s antisemitism overshadowed all of his successes.

Watts’ has a chapter in the book entitled “Bigot,” which describes Ford’s anti-semitism. Among other instances, Ford owned a newspaper, the Independent, through which he waged a campaign against Jews. This eventually resulted in a libel suit being filed by Aaron Sapiro against Ford and the Independent in 1925. Rather an testify at trial, Ford shutdown the newspaper, publicly apologized, and paid a cash settlement.

But he continued to hold and privately express anti-Semitic views. When Ford was privately asked if the idle newspaper presses from the Independent should be sold, he is reported to have said, “I made a deal with these Jews and they haven’t lived up to their part of the agreement. I might have to go back back after the Jews again.”

Watts’ says, “…[Ford’s] mindless bigotry against Jews indelibly stained his reputation and raised questions about his moral and ideological character that would linger for the rest of his life.”

A stain that lingers after Ford is long dead. Rather than posting nothing about Ford, I think it is appropriate to lead off this post noting Ford’s bigotry. A bigotry that overshadows his business successes.

Invest in Yourself – The Gospel of Spending

Twenty years after Ford launched the car that made him famous, Ford started a controversy when he insisted that hard work was a good idea but thrift was fruitless. When asked about how to become successful in America, Ford said:

“No successful boy ever saved any money . . . They spent it as fast as they could for things to improve themselves.”

This was in contrast to the traditional advice at the time to work hard and save your money. Some denounced Ford’s “gospel of spending.” But according to Watt, the dissenters were overwhelmed by publications that supported Ford’s advice on spending, with one publication saying “He who nurses the nickels misses the knockouts.”

Ford followed his own advice while developing his first prototype automobile and while building his businesses. An employee of a tool company, said of Ford:

[he] would be in our place two or three times a week buying something that had to do with something he was making… Mr. Ford loved anything in the way of tools, any kind whatsoever. Anything new that came out in a tool, he wanted to see it…

As Ford was making his first automobile, the Quadricycle, his wife, Clara, was concerned about his purchases:

Clara Ford became concerned about the constant purchasing of materials. As Henry’s sister Margaret recalled, Clara ‘wondered many times if she would live to see the bank account restored.’

The key here is not just spending. But, the spending must a reasonable investment in yourself or your project.

Starting It On the Side

Countless inventors and company founders started their companies and invented their inventions while working a day job and then working on the side. Ford is no exception. Ford developed his first automobile while working as engineer at the Edison Illuminating Company. Ford eventually became Chief Engineer, which meant he was on call all day, but he had flexibility and free time to “tinker, to visit machines shops, to trade tips and shoptalk with mechanics, and to experiment with improving his little gasoline engine.” He also took a job teaching metal working class at the YMCA, which gave him access to the school shop to on work metal parts for this automobile. Ford said:

Every night and all of every Saturday night I worked on the new motor. I cannot say that it was hard work. No work with interest is ever hard.

Bouncing Back from Failure

Ford failed many times. But kept going. Ford spent $86,000 (more than $2 million in today’s dollars) developing and manufacturing a car at his first investor backed company, Henry Ford Company. But he failed to produce a working production vehicle. Many say this was due to the fact that he continually changed the design of the automobile and never stopped to commit to making a particular design. Only three months after forming the Henry Ford Company, Ford either resigned or was fired. That company was renamed Cadillac Automobile Company.

Ford resented control by his investors in the Henry Ford Company. Ford said “They were to stay by me to have the experimental work done…From here in, my shop is always going to be my shop…I’m not going to have a lot of rich people telling me what to do.” After gaining fame as a race car builder and driver, Ford would make another attempt at automobile manufacturing in the Ford Motor Company.

Knowing the Target Market

Ford famously wanted to build an inexpensive car for the masses. However, Alex Malcolmson, an investor in Ford Motor Company, wanted to make an expensive car for the wealthy with a higher profit margin. Many other car companies were making expensive cars.

For a time, Ford did reluctantly produced an expensive car. For example, before making the Model T, Ford made the Model N, which weighed 1,050 pounds and sold for $600, the model K weighed some eighteen hundred pounds and cost $2,800. Eventually Malcolmson was forced out of the Ford Motor Company and Ford was left to pursue an inexpensive car.

The implementation of the assembly line allowed Ford to sell the Model T for $500. Ford said, “There are a lot more poor people than wealthy people. We’ll just build one car for the poor people.”

Invention of the Assembly Line

The adoption of the assembly line may be the most revolutionary change in industrial history. The idea is that the work should be moved to the worker instead of the worker moving to the work.

Before the adoption of the assembly line the best time for assembling a car chassis at the Ford plant was 12 hours and 28 minutes. By 1914, the assembly line enable this to be accomplished in 1 hour and 33 minutes.

The exact details surrounding the invention and adoption of the assembly line are muddy and uncertain, at least according to the account in Watts book. There conflicting stories about the origins of the assembly line. Watts says:

Henry Ford’s own version of things changed. At one point, he declared that the inspiration came from observing the overhead trolley that Chicago packers used in dressing beef at the slaughterhouses. Another time, he claimed that he got the idea from observing a watch factory where parts sat on a moving belt and assemblers took them off as required.

Others offered different stories. William C. Klann, foreman of motor assembly at the Highland Park facility, asserted that the conveyors used to transport sand in the factory foundry inspired the idea of using a similar method in the assembly process.

Charles Sorensen, in a memoir written many years later, averred that as early as 1908 he and several subordinates had arranged stock parts sequentially on the floor of the old Piquette Avenue factory, put a tow rope onto a car chassis with wheels, and pulled it from pile to pile, attaching appropriate components one after another. “Over several weeks we developed it as well as we could,” Sorensen wrote. “Then we laid it away and put it on the shelf until we were ready to use it.”

Regarding the first use of the assembly line at Ford’s plant, Watts provides:

Evidence suggests that the first actual use of the assembly line came on April 1,1913, when workers in the flywheel-magneto department stood alongside a waist-high table with a smooth metal surface and were instructed by foremen to install one part and then slide the component along to the next worker, who would add something else.

This soon led to the idea of pulling the evolving component along at a set rate with a chain, a move that steadied the process by speeding up the slow workers and slowing down the speedy ones. By tweaking this system in various small ways over the next few months, Ford supervisors were able to cut the man-minutes required for assembling the flywheel magneto from twenty to five.

This quadrupling of productivity caught the attention of nearly all Ford production engineers, and they began to develop the technique in various areas.

The creation of the assembly line at Ford’s factory revolutionized manufacturing. However, Ford’s bigotry leaves a dark stain the part he played in this innovation.


How to be a Disruptive Inventor: Lessons from Alexander Bell

TheMasterSwitch_TimWu[the inventor’s] significance is enormous…The inventors we remember are significant not so much as inventors, but as founders of “disruptive” industries, ones that shake up the technological status quo. Through circumstance or luck, they are exactly at the right distance both to imagine the future and to create an independent industry to exploit it.

On the same day in 1876 that Alexander Bell’s patent application on the telephone was filed, a patent application by Elisha Gray was filed on the same invention. Sixteen years before this, Johann Philip Reis of Germany presented a primitive telephone to a scientific group. And, Daniel Drawbaugh, a Pennsylvania electrician, claimed that by 1869 he had a working telephone in his house.

The story of the invention of the telephone is similar to other invention stories where multiple inventors independently invent the same or similar invention within a short period of time. Steve Johnson notes that this substantially simultaneous invention occurs because the invention becomes “an adjacent possible” once founding or necessary elements or parts are created, discovered, or otherwise available. Tim Wu, author of The Master Switch: The Rise and Fall of Information Empire, notes the same phenomenon. One might question whether a particular inventor’s act of inventing is ever significant, if the invention/discovery was bound to happen, by this or another inventor. Wu argues the inventor’s significant is very important for founding of disruptive information industries in a process he calls “the Cycle.”

In The Master Switch, Wu provides a look at the control and innovation in information industries, such as the industries involving the telegraph, telephone, entertainment, radio, TV, and the Internet. These information industries tend move from a freely accessible channel to a channel that is strictly controlled by one corporation or cartel.

Wu’s thesis is that the history of information industries shows that such industries oscillate from an open to closed state in what he calls, i.e. “the Cycle.” Based on this history, Wu predicts that the information industry of the Internet may move from an open platform (which it currently is) to a closed system. A separation principle is needed to protect the Internet from being turned into a closed system. The separations principle provides, in part, the following must be kept separate: those who develop information, those who own the network infrastructure on which it travels, and those who control the tools or venues of access.

The book provides a discussion of the development of the telephone industry as one example of (1) a birth of an information industry and (2) the characteristics of a disruptive inventor.

Inventor’s Enormous Value As Disruptor

Wu describes invention as making available the adjacent possible. The reality that there was no single inventors of the telephone “suggests that what we call invention, while not easy, is simply what happens once a technology’s development reaches a point where the next step become available to many people,” said Wu.  Wu notes that others had provided the tools for the adjacent possible telephone, e.g. others has invented wires, the telegraph, and discovered electricity and the basic principles of acoustics. Therefore the building blocks for the telephone were available and Bell had to put them together. Wu asserts, that “inventors are often more like craftsman than miracle workers.”

Given the regularity with which simultaneous discovery/invention occurs, should the lone inventor be accorded much significance? Wu says the inventor’s significance is still enormous:

…I would argue his significance is enormous; but not for the reasons usually imagined. The inventors we remember are significant not so much as inventors, but as founders of “disruptive” industries, ones that shake up the technological status quo. Through circumstance or luck, they are exactly at the right distance both to imagine the future and to create an independent industry to exploit it.

Bell build the telephone industry that eventually killed the prior communication industry, the telegraph industry dominated by Western Union. Bell’s patent turned out to be a critical asset for doing so.

Be an Outsider

Wu notes several conditions that help a disruptive innovator succeed. First, it is important for the inventor to be an outsider with some distance from the current industry:

Let’s focus, first, on the act of invention. The importance of the outsider here owes to his being at the right remove from the prevailing currents of thought about the problem at hand. That distance affords a perspective close enough to understand the problem, yet far enough for greater freedom of thought, freedom from, as it were, the cognitive distortion of what is as opposed to what could be. This innovative distance explains why so many of those who turn an industry upside down are outsiders, even outcasts.

Disruptive innovation supplants or destroys existing products or industries, and sustaining innovation provides incremental improvements. The outsider status of some inventors provides him/her the freedom of a disinterested party:

Another advantage of the outside inventor is less a matter of the imagination than of his being a disinterested party. Distance creates a freedom to develop inventions that might challenge or even destroy the business model of the dominant industry. The outsider is often the only one who can afford to scuttle a perfectly sound ship, to propose an industry that might challenge the business establishment or suggest a whole new business model. Those closer to—often at the trough of—existing industries face a remarkably constant pressure not to invent things that will ruin their employer. The outsider has nothing to lose.

Bell was an outsider. Bell was a professor, who taught the deaf, and amateur inventor. He worked out of the machine shop in his attic trying to transmit voice across wires. These early efforts are described by Wu as “mostly futile, and the bell company was little more than a typically hopeless startup.”

But not too Far Away

It is not any distance that will work. The right distance is needed because but too much distance from the industry or the adjacent possible puts you out of the game:

It may be that Daniel Drawbaugh actually did invent the telephone seven years before Bell. We may never know; but even if he did, it doesn’t really matter, because he didn’t do anything with it. He was doomed to remain an inventor, not a founder, for he was just too far away from the action to found a disruptive industry.

Wu credits Bell’s partnership with patent attorney, Gardiner Hubbard, a critic of the Telephgraph company, as placing Bell close enough to the industry. Hubbard formed Bell’s invention into a campaign to supplant Western Union as the dominate communications company. Here, like in the case of Telsa, the Bell brought on savvy partner to help with the commercialization efforts.

In contrast, Elisha Gray’s backer was Samuel White. White wanted Gray to focus on an acoustic telegraph. The acoustic telegraph appeared to be destined for large profits as compared to the unestablished telephone. Wu suggests that but for White’s opposition to Gray working on the telephone and Gray’s need to keep his work on the telephone secret, Gray might have developed a working telephone and patented it before Bell.

Don’t be Distracted by an Apparent Pot of Money for Incremental Invention 

Wu says, “The inability of Hubbard, White, and everyone else to recognize the promise of the telephone represented a pattern that recurs with a frequency embarrassing to the human race.” To a hammer, everything looks like a nail. Our minds are too lazy to seek out new ways of thinking when old ones will due.  “Nothing … concentrates the mind like piles of cash, and the obvious rewards awaiting any telegraph improver were a distraction for anyone even inclined to think about telephony, a fact that actually helped bell.” said Wu.


Wu says “through circumstance or luck” the disruptive inventor is at the right distance to disrupt an industry. However, you may be able to intentionally set yourself up for to be a disruptive inventor by exposing yourself to diverse ideas across disciplines to be in the position to recognize the adjacent possible, having some distance from the targeted industry, and not being distracted by the apparent financial gain available from incremental invention within the targeted industry.

Fending Off Competitors with Barriers to Entry: Hard Problems and Networks

BarriersToEntry_HardProblems“If you can develop technology that’s simply too hard for competitors to duplicate, you don’t need to rely on other defenses. Start by picking a hard problem, and then at every decision point, take the harder choice.” – Paul Graham

Patents are not the only barriers to entry. Sometimes the technology can’t be patented, sometimes patent deadlines are missed, sometimes there’s not yet enough money to pursue a patent, sometimes you’re not sufficiently certain whether the invention will be the next big thing so as to justify pursuing a patent. Sometimes your looking for protection instead of or in addition to patents and you already explored the legal alternatives to patenting. What other barriers are there?

Barriers to entry provide a competitive advantage in the market place. If it is too hard for your competitors to enter a market or solve the problems you are solving, then you will have less competition. With less competition, you will be able to charge a premium for your solution. Financial backers, such as venture capitalist, are often interested in barriers to entry related to your solution because those barriers protect the financer’s investment. Barriers to entry come in many forms. Below I look at the strategy of picking hard problems and building networks, among the many others that might apply.

Pick Hard Problems

Paul Graham explains why it is important to pick hard problems to solve.

Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way. At Viaweb one of our rules of thumb was run upstairs. Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him.

What this meant in practice was that we deliberately sought hard problems. If there were two features we could add to our software, both equally valuable in proportion to their difficulty, we’d always take the harder one. Not just because it was more valuable, but because it was harder. … I can remember times when we were just exhausted after wrestling all day with some horrible technical problem. And I’d be delighted, because something that was hard for us would be impossible for our competitors.

Seth Godin notes Ford’s advantage by taking on hard problems:

Henry Ford did the same thing [take on hard problems] with the relentless scale and efficiency he built at Ford. Others couldn’t imagine raising their own sheep to make their own wool to make their own seat fabric…

“How do we do something so difficult that others can’t imagine doing it?” is a fine question to ask today.

Build-in Network Effects

VC, Fred Wilson, notes another way to create a barrier to entry is to develop a product or service that features a network effect. Fred provides an illustrative story–read the whole story here–involving the dentist industry where the first entrant provides high priced software for managing a dental office. A second entrant run by two entrepreneurs develops a low priced version of the software with mobile apps which eat away at the first entrant’s market. Then an open source version of the software is developed, which kills the first and second entrant’s businesses. Fred concludes:

…software alone is a commodity. There is nothing stopping anyone from copying the feature set, making it better, cheaper, and faster. And they will do that. … we asked ourselves, ‘what will provide defensibility’ and the answer we came to was networks of users, transactions, or data inside the software. We felt that if an entrepreneur could include something other than features and functions in their software, something that was not a commodity, then their software would be more defensible. That led us to social media, to Delicious, Tumblr, and Twitter. And marketplaces like Etsy, Lending Club, and Kickstarter. And enterprise oriented networks like Workmarket, C2FO, and SiftScience….
[emphasis added]


When you build technology that requires a network of users and you gain a user base, it is hard for competitors to be successful because simply copying the software is not enough. The competitor needs users too. Getting users is (or at least can be) hard. So the “network effects” barrier to entry may simply be one type of “pick hard problems” barrier to entry.

Photo credit to flickr user Anton Steiner under this creative commons license.

Risks of Waiting: Independent Invention & Google PageRank

InThePlexQuestions often arise about the risks of waiting. Waiting to get started, waiting to file a patent application, waiting to launch a product or service, etc. The risk is that someone else is independently working on the same problem or the same idea and beat you to the market or the patent office or both. What’s the chance of someone independently inventing in your space?  It is impossible to know for a particular circumstance, but we do know that independent invention around the same time happens. According to In The Plex: How Google Thinks, Works, and Shapes Our Lives, Larry Page of Google was not the only person in 1996 to recognized that the link structure of the internet was the basis for a powerful way to find information on the web. The resulting algorithm based on link information allowed Google’s search results to be much better than other search engines at the time it was introduced. Two others were working on this idea, but Google was the first to make it to market.

Adjacent Possible and Independent Invention
As Steve Johnson noted in his book Where Good Ideas Come From sometimes when a scientist or inventor comes up with a new idea or invention, they learn that one or more others have independently come up with the same invention at about the same time period, such as within a year. Johnson notes that this is because the invention becomes “an adjacent possible” once founding or necessary elements or parts are created, discovered, or otherwise available.

To demonstrate the idea of the adjacent possible, Johnson notes that if Youtube was created 10 years earlier in 1995 it would have failed. This is because in 1995 most web users were on slow dial-up connections and it could take an hour to download a standard Youtube clip. In 1995, Youtube’s innovation was not within the adjacent possible, but ten years later, with broadband internet and Adobe’s Flash technology, it was.

As In the Plex explains, Larry Page realized you can estimate the importance of a web page by considering the web pages that link to it. Page called his resulting algorithm based on linking “PageRank.” Page said, “In a way, how good you are is determined by who links to you and who you link to you determine how good you are…”Both the number of links and the quality of the links mattered. If a respected web page linked to a page, that link would be worth more than a link from a less well-known or respected website.

In addition to considering the number and nature of links, the anchor text used for the link is considered. Early search engines would provide results based on the content of a particular page. Therefore the results to a search for “newspaper” might not include the most relevant results, such as the New York Times website, if the New York Times did not say “I’m a newspaper” or otherwise use the word “newspaper” on its website. This caused search engine results to be poor and allowed the best result to be buried under relevant results. If a web page used the word “newspaper” to link to the the New York Times web site, then newspaper is the anchor text. And if enough and/or important websites link using that anchor text, then search results for “newspaper” would include the New York Times website. Page’s algorithm ranked each web page based on the incoming links, anchor text, and other factors. The resulting ranking of each page was used to determine which search results were returned for a particular web query, which vastly improved the relevance of search results as compared with other search engines at the time.

Others Independently Discovered Linked Based Ranking
Jon Kleinberg, a postdoctroal fellow at IBM’s research center, discovered that the link text, e.g. what a linking page said when linking to anther site and how many pages linked to a particular site, was useful in determining the relevance of a particular page. While having the same core idea, Kleinberg and Page each approached it differently. Kleinberg wanted to understand network behavior, Page wanted to build something that helped people in searching the web. Kleinberg said “all sorts of IBM vice presidents were trooping through Almaden to look at demos of this thing and trying to think about what they could do with it.” But they couldn’t figure out what to do with it.

Another person,Yanhong (Robin) Li, in 1996 saw the link between the ranking of scientific papers based on the number of other papers that cited them and ranking web pages in the same way. He came up with a search method that calculated relevance from both the frequency of links and the content of anchor text, which he called RankDex. Li described this to his bosses at Dow Jones, but they didn’t do anything with it. Li said, “I tried to convince  them [Dow Jones] it was important, but their business had nothing to do with Internet search, so they didn’t care.”

Li first filed a patent application himself in June 1996 after reading a self-help patent book. But then Dow Jones hired a patent attorney and filed another application on the same invention in February 1997, which resulted in US Patent No. 5,920,859. A patent application for Page’s Page Rank system was filed January 1997, which resulted in U.S. Patent 6,285,999. As you can see, the patent application were filed within about a month of each other. Li left Down Jones and eventually started Baidu in 2000, which is now the largest Chinese search engine.

These three individuals, Page, Kleinberg, and Li, were each independently working, without knowledge of the others, on one of the most important developments in improving internet search results, and in turn, improving the utility of the web. While it may be possible that you can sit on your ideas for years without consequence, waiting carries the risk that someone else is independently working on the same problem or invention as you. The patent office, and sometimes the market, rewards first movers.

Invention, Design, & Branding Lessons from Apple’s Lead Designer Jony Ive

JonyIveThe GeniusBehindApplesGreatestProducts

“In a company that was born to innovate, the risk is in not innovating. . .The real risk is to think it is safe to play it safe,” said Jony Ive, the lead industrial designer for Apple.

Jony Ive is the subject of Leander Kehney’s book Jony Ive: The Genius Behind Apple’s Greatest Products . Steve Jobs, deservedly,  gets a lot of attention and credit for the success of Apple products. However, Jony Ive is the man behind many of the decisions about and features of Apple’s products.  The book is not an authorized biography. Yet, it provides insights into the product innovation process and product development process at Apple. It also demonstrates how product design alone can indicate a brand to customers.

Design Alone Can Carry Branding without a Logo or a Name
The face of the iPhone and IPad has an infinity pool look devoid of any product or company name or logo. The brand is carried by the design itself:

iPhone 4 with the black “infinity pool” face common to all iPhones

The front face bore neither the company logo nor the name of the product. “We also knew from our experience with iPod,” [Chris] Stringer [of Apple] explained, “if you make a startlingly beautiful and original design, you don’t need to. It stands for itself. It becomes a cultural icon.”

Apple sought design patents to protect the look of the iPhone which proved effective when Apple sued Samsung alleging Samsung’s phones were copied from Apple designs and infringed Apple’s design patents, among others.

Apart from patents, the idea that the shape of a product can indicate a source of the product is recognized in trademark law as trade dress protection. Apple was also successful proving that some of Samsung’s phones infringed Apple’s trade dress rights in the design of the iPhone. The iPhone and iPad are products that demonstrate the look of a product through its design can do the work of conveying the brand to the customers.

Innovation is a Series of Steps, Not one Giant Leap
Richard Powell of the design firm Seymourpowell is quoted on the process of invention in the book:

“Innovation…is rarely about a big idea; more usually it’s about a series of small ideas brought together in a new and better way. Jony’s fanatical drive for excellence is, I think, most evident in the stuff beyond the obvious; the stuff you perhaps don’t notice that much, but which makes a difference to how you interact with the product, how you feel about it.”

Design Should Make Technology Approachable
Apple is famous for making products that are easy to use. The handle and the transparency of the iMac case (click here for a photo of the IMac case) is discussed as an example:

The transparency added a sense of accessibility, but in order to give the iMac an even more approachable feel, the designers added a handle on top. For Jony, the handle on the iMac was not really for carrying it around, but to build a bond with the consumer by encouraging them to touch it. It was an important but almost intangible innovation that would change the way people interact with computers.

“Back then, people weren’t comfortable with technology,” Jony explained. “If you’re scared of something, then you won’t touch it. I could see my mum being scared to touch it. So I thought, if there’s this handle on it, it makes a relationship possible. It’s approachable. It’s intuitive. It gives you permission to touch. It gives a sense of its deference to you.”

Design Interest from Early Age Cultivated by his Father
Jony had an interest in design from a young age.

As a young boy, Jony exhibited a curiosity about the workings of things. He became fascinated by how objects were put together, carefully dismantling radios and cassette recorders, intrigued with how they were assembled, how the pieces fit. Though he tried to put the equipment back together again, he didn’t always succeed.

“I remember always being interested in made objects,” he [Jony] recalled in a 2003 interview conducted at London’s Design Museum. “As a kid, I remember taking apart whatever I could get my hands on. Later, this developed into more of an interest in how they were made, how they worked, their form and material.”

Jony’s father, Mike Ive, worked as a silversmith and a teacher. Mike eventually was put in charge of monitoring the quality of teaching at schools in his district, focusing on design and technology. In doing so Mike moved design technology from a marginal subject to something that occupied seven to 10 percent of a student’s school time. Mike’s design emphasis was not limited to school but also was passed on to his son:

Mike Ive encouraged his son’s interest, constantly engaging the youngster in conversations about design. Although Jony didn’t always see the larger context implied by his playthings (“The fact they had been designed was not obvious or even interesting to me initially,” he told the London crowd in 2003), his father nurtured an engagement with design throughout Jony’s childhood.

He was constantly talking to Jonathan about design. If they were walking down the street together, Mike might point out different types of street lamps in various locations and ask Jonathan why he thought they were different: how the light would fall and what weather conditions might affect the choice of their designs. They were constantly keeping up a conversation about the built environment and what made-objects were all around them . . . and how they could be made better.

Jony Ive: The Genius Behind Apple’s Greatest Products is a worth while read with interesting insights into Apple’s product development and design processes and philosophy. Particularly interesting was Apple’s intentional reliance on trade dress rights in the look of the product–without any logo or name on the face of the iPhone and iPad–to convey its brand.