This is a true story contrasting two Israeli mobility companies. There is a happy ending for one. But for the other, due to poor IP planning, dark clouds may be approaching.
The story begins a number of years ago, when the co-founders of a seed-round mobility startup met me in a north Tel Aviv coffee shop on a bright spring day to share an idea way ahead of its time. For reasons you will understand when you read on, I am not sharing the name of the startup. But if you know the Israel mobility space, you know the company. During that meeting, the founders shared a paradigm-shift technology vision. Having spent years representing automotive companies, I had the immediate sense that the founders' vision, while fascinating, was somewhat naïve in that it could put the company in a head-on collision with powerful market forces. These forces would not hesitate for a second to investigate the startup's technology and take its innovations without paying a shekel. After all, the mobility space is fierce. The OEM automobile manufacturers are powerful and get what they want. And the Tier 1's who supply the OEMs often use cut-throat tactics to satisfy the OEMs' demands.
The startup had one major potential advantage to ensure its survival. If the startup could develop a blocking patent portfolio, future competitors and potential partners would not be able to steal the startups' innovations. Developing a blocking patent portfolio is easier said than done. Patents are like roadblocks. When done right, they restrict access. But ensuring that the roadblocks are properly located on the right roads takes significant planning and skill. Due to a lack of up-front strategic planning, most patents end up off to the sides of the road or only block one lane, leaving room for competitors to bypass.
In that sunny spring meeting in the Tel Aviv café, I envisioned a series of patents that if properly executed would have been extremely powerful roadblocks. But the startup did not appreciate the value, and that was the last I heard from them until we met last week, a few years later, when the company shared a problem.
In the intervening years since we met, the startup pursued and obtained a few patents. But those patents were not strategically developed, and barely blocked even one lane of traffic, leaving significant room for competitors to take what they choose. The startup did a very good job of publicizing its technology to the point that one of the large OEM automobile manufacturers reached out to become a strategic partner. Ordinarily, that would be a startup's dream. But because this startup lacked the patents to keep the OEM from taking the technology for itself, cutting-out the Israeli startup, the startup felt it had no choice but to reject the offer. It was a dream that was hard to pass up, but the Israeli company felt that it could not take the risk of the more powerful OEM moving forward on its own after receiving the startup's know-how.
A strategic patent portfolio would have leveled the playing field. Had the startup invested in a thoughtful strategic patent portfolio, the startup could have confidently partnered with the OEM, knowing that the strategic patents would minimize the risk of an underhanded play by the OEM. Ironically, the startup's unwillingness to partner may only have bought a short window of peace, because even without a partnering arrangement, the OEM, who employs hundreds of engineers, has the resources to copy the Israeli company's technology freely and legally. Since the Israeli company's technology is already published and the product could be purchased and reverse engineered, it may be just a matter of time until the startup faces a competitor with far more market power than the startup will need to effectively compete.
Under these circumstances, investors may think twice before investing in the startup's next round. When I met with management of the startup last week, one of the executives candidly conceded, "we understand technology inside and out, but there is a big black hole that we do not understand: it's how patents work." Time will tell if its lack of IP understanding will cost the Israeli startup its life.
Not long after meeting that Israeli company, I received a call from the Chairman of another Israeli mobility startup, EVR Motors—the developer of electric motors with a new architecture that provides superior power and performance and is less than half the size and weight of existing motors. The Chairman and the CEO are both patent-savvy. They understand that they are leading their company into a highly competitive space and that without a strategic patent portfolio carefully designed to block competitors, the technology will be copied. The Chairman and CEO also understand that developing strong patents is not just about protecting the company's current products, but is also about envisioning how competitors will try to find their way around the patents, and block those alternative paths as well.
When competitors assess a patent portfolio to decide if they are free to use the technology, they do so from a litigation perspective. In other words, a competitor's lawyers ask themselves, will the patents hold up in court if our client is sued for infringement? For this reason, EVR Motors chose to work with a strategic patenting team that included a seasoned U.S. courtroom litigator. A U.S. litigation perspective maximizes the chances a competitors' lawyers will understand that the patents were built to withstand attack.
EVR Motors undertook a disciplined patent strategy program to carefully aim their patents at would-be competitors. Then, over the course of 18 months, the company obtained 10 strategic U.S. patents, with more in the pipeline. Unlike the first Israeli startup who could not close a partnering deal for fear the partner would run away with the technology, EVR Motors' strategic patent portfolio gave it the confidence to close six partnering relationships since 2022, and to be recognized as one of Israel's top 10 Israeli startups electrifying transportation.
Having considered the risk and reward of two very different approaches to patents, consider this question: Does your company have a strategic patent portfolio to prevent competitors from offering a competing product that will impact your expected revenue streams?
Originally published by Calcalist EcoMotion.
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