Protecting Intellectual Capital

Establish an on-going dialog with legal counsel.
By John Teresko

Aug. 1, 2005 -- Strategic initiatives such as nanotechnology heighten the need for intellectual property safeguards, advises attorney Alan J. Ross, a partner in the Cleveland office of Bricker & Eckler LLP.
He recommends periodic reviews of operating procedures and policies as well as establishing an on-going dialog with appropriate legal counsel.
To facilitate initiating that dialog, Ross offers the following list as preparation:
Designate an oversight team to handle electronic records management that includes business, legal, and IT staff. Electronic records have become a major problem for business from both compliance and litigation discovery standpoints. The law is clear that record retention policies must be enforced and routine destruction of relevant records must cease once a company learns of a claim. Failure to follow proper procedures may completely undermine a company' s litigation position. New federal civil procedure rules governing electronic records will heighten the problem.
Apply sensible metrics to intellectual property decisions. Increasingly, businesses are required to value their intangible assets and justify their acquisition and maintenance costs. Sarbanes Oxley effectively mandates this for public companies. A team from R&D, marketing and legal should develop business-based metrics for your company's IP program. You need to know to what extent a market is protected by patent or trademark. Require blanket IP assignments from employees and develop post-employment strategies. You must be able to claim exclusive ownership of IP assets developed by your employees. Get assignments in writing before employment begins. In an exit interview get an acknowledgement that the employee is not leaving with company assets and will not be disclosing company trade secrets. Then confirm everything in writing to the employee with a copy to his new employer.
Update electronic use policies periodically and enforce compliance. Technology evolves rapidly. Stale electronic use policies will eventually present ambiguities or vulnerabilities. Company policies should be updated periodically and require that PDAs and electronic files taken off site be password-protected or encrypted. Leverage technology to bolster IP protection and increase productivity. Most employees are unaware that the identity and nature of the sites they visit, how long they remain online, and sensitive information in search terms are routinely captured. You may realize productivity gains by periodically reminding employees of this practice. You also should consider programs or services that quarantine communications referencing words associated with proprietary information and communications to a competitor's Internet domain.
Monitor employee blogs. Current estimates suggest that there are 2.5 million blog sites in the United States, and 10,000 are coming online every day. While company-sponsored blogs may be an asset, employee blogs represent a potential source of competitive intelligence and a place where “dirty laundry” may be publicly aired. You clearly have a right to protect yourself from disclosure of proprietary information and should monitor blogs for references to your organization and react to inappropriate postings.
Monitor competitors' patent developments. Under current law, knowledge of a competitor's patents can be problematic. But Congress is moving quickly to change that with a package of patent reforms that likely will include universal publishing of patent applications after 18 months and post-grant opposition procedures. You should begin monitoring your competitors' patent activities. Advance knowledge can forewarn of a competitor's R&D direction, potential patent coverage that might intersect with your own developments, and potentially weak patents that should be challenged before they are issued.
Make privacy a top priority. Although several federal privacy acts like HIPAA, GLB and COPPA protect specific, limited categories of information, privacy issues are currently governed by a patchwork of state regulations that are rapidly evolving as identity-theft crimes explode. Compliance with one state's laws does not guarantee compliance will all. You should periodically reevaluate the privacy requirements of each state in which you do business or every state if you sell via the Internet and should comply with the most stringent regulations.
Employ confidentiality agreements when outsourcing. The risk of exposing trade secret information to non-employees increases exponentially with outsourcing. Every outside organization performing work for your business should execute a non-disclosure agreement. They demonstrate your company's dedication to preserving its proprietary information, which is essential in trade secret misappropriation litigation, and they make the outsider more cognizant of confidential information.
Monitor trademark usage on the Internet. Today's technologically-savvy users often copy companies' marks and paste them onto their own Internet sites. While such use is often inoffensive, courts routinely hold that to maintain trademarks, the owner must police them and ferret out inappropriate uses of its marks.
Prohibit mobile phones with cameras in sensitive areas. Mobile phones with built-in cameras have become the bane of trade secret protection. A picture continues to be worth a thousand words, and perhaps more, if it shows your newest development before it' s been released to the public.
Require employees to encrypt their home wireless networks. In the computer age, e-employees often take their work home. With the proliferation of wireless home networks, it is essential that you require your employees to activate their router's encryption to exclude outsiders from the network.

I think this is all to much protection, but would happy to hear from anyone with a view, John is a good guy and has worked for some top organizations, and some of his ideas maybe extreme but as early stage companies we must take seriously the protection of your I.P. as it is your value

Slainte

Gordon

Finding the Right Fit for your company

Finding the Right Fit ( 20/20 hindsight)

The key to hiring the right executives may lie in hiring the right recruiter. That's not easy.
Brian Hecht knows the trials of an executive search. As CEO of Enews.com, a leading online vendor of magazine subscriptions, he took far more time than he should have in finding a new CFO. "I had been interviewing personally referred candidates for months and nobody was quite perfect for us," says Hecht. "At some point, we decided we needed a good CFO yesterday."
So the company called in executive search firm Redwood Partners. "We did not have a bake-off," he says, but rather looked for a firm that "looked like us" and understood the pressures of Internet time. "Waiting three to four months is simply unacceptable."
With the firm's help, Enews found and hired Phil Callaghan in just under six weeks. As CFO of Multex (MLTX) , Callaghan helped take the investment research and financial-services company public last year. Enews came up with a better candidate "than we ever imagined by using a good firm," he notes. "When it's a tough search, you want the professionals on your side."
Find Right Recruiter
Choosing the right professional is critical. The wrong recruiter can be a startup's nightmare. A bad fit could mean a search that languishes in the murk between the hiring company's expectations and the recruiter's responsiveness and connection to the market's best talent. Worse, the wrong recruiter could lead a company to make the wrong hire, creating a mess that sucks up time, effort and resources.
So how does a company find the right recruiter? Consider streaming-media company Electrifier's search for a chief executive. Current CEO and cofounder Mihail Lari conducted a thorough search of his own. "I've been in the technology business now for several years, and I've been following the most high-profile recruiters," says Lari, who plans to step down as chairman of his venture-funded company once the ongoing search for its next CEO – its first recruitment effort at the management-team level – is completed.
Lari also sought advice from people with firsthand experience: "We have several directors on our board who had done searches before, so we turned to our directors" to help select and engage the best search firms.
"The management team at Electrifier met with several people who are in the recruiting business," Lari says. The company eventually consulted with three firms that demonstrated solid leadership in placing executives at Internet companies and appeared ready to commit to Electrifier's search. Then Lari checked out one of the firms, Christian & Timbers, with a former client of the recruiter. He consulted his friend John Herr, senior VP of sales and marketing at Buy.com, which had engaged the search firm for its CEO slot. "I shot off an e-mail to John to see what [Buy.com's] experience was like and got very positive validation that [the firm] would do a solid job. We felt that we had found the right fit."
But how does that fit really feel? And what does it mean to the hiring company, and to its investors? Amy Bromberg, VP of human resources with Jupiter Online, says today's leading Internet companies are looking for lasting relationships with recruiters who can prove their strategic value and justify their high fees. "The best firms become an adviser to you on issues that go beyond making the hire," she adds.
The right headhunter will respect the client company's sense of urgency. Gone are the days when a recruiter could spend nine months searching for an executive job candidate, and one need look no further than the executive-search industry for proof. It is cashing in on company demand for executive talent, but it's also reinventing itself to meet the requirements of an increasingly wired world. "I think the significant difference today is the speed at which you want things done. When we've identified a need, it's immediate," says Thomas Pace, president and COO of the Internet Financial Network. "I think if they're good and effective at what they're doing, they're literally beginning to bring in people a week after you talked to them and [have] signed a deal to do it and to close the search inside of 60 days."
Furthermore, both the hiring company and its recruiter have to commit to keeping the search nimble. "There's just absolutely no time to waste in deciding whether you want this candidate or not," says David Lord, CEO of Executive Search Services, since it's likely the candidate, if he or she is destined for dot-com stardom, has already received other offers.
Dot-coms also need to decide whether a single recruitment provider can handle multiple search assignments across job functions, Pace says – in his case, from marketing to business development and editorial talent – without compromising quality on candidates. He also suggests that hiring companies attend industry-specific conferences and talk with others about search firms they've engaged and who they would recommend.
A recruiter, says Pace, will be more willing to channel the best candidates to a hiring firm if it has a vested interest, such as a fee agreement based in part, or totally, on equity – a potential pot of gold that has already started to line the pockets of many firms. "The idea of the search firm having or taking some of the compensation in equity gives it an incentive to deliver the best candidates and an ongoing interest in the welfare of the company. It's to its economic benefit to make the search work," says Pace.
Once one finds the right recruiter, however, there's another problem. "I think the challenge for a dot-com is not just finding a search consultant who can do the work but one that has the capacity," adds Executive Search Service's Lord. "There's so much work [for recruiters] in this sector right now. The best search consultants are helplessly busy."

WHY SEARCHES FAIL
The conventional wisdom in the recruitment industry pegs headhunters' "completion rate" at 75 percent. But what about the one in four searches that never end in delivering a top-flight candidate to the hiring company? It's just as likely that the hiring company pulled the plug on these "failed" searches as it is that the external recruiter waived the white flag. The hiring company may cite a new merger, acquisition or restructuring as reason for giving up on a search, or perhaps it simply changed its mind about creating or filling the position. It might also blame the recruiter for promising more than it could deliver or for presenting underqualified candidates who wouldn't fit into its corporate culture.
The recruiter might give up on a search because of a dearth of high-caliber candidates, because the hiring company has unrealistic expectations or because the company won't pay what it takes to find the best talent. A headhunter might also grow impatient if a client tries to change the job specifications halfway into the search, if the company is indecisive or if it insists on having too many honchos involved in the interviewing process.

Slainte

Gordon