Boston Cool and Silicon Valley Cool: Which Do You Prefer?

This Kat is packing his bags and bracing himself for the 24-hour, door-to-door flight to San Francisco to participate in the 2011 INTA Annual Meeting. For those of you who may not recall, last year's INTA meeting took place in Boston. I thought about these antepodian locations, East Coast v West Coast, Atlantic v Pacific, in reading a piece that appeared this week on Boston.com. Entitled "The Road to Awesome" here, its author, Scott Kirsner, considers some reasons why Boston is playing an increasing second fiddle to Silicon Valley (and even New York City) as the leader in the innovation economy.

The problem, as Kirsner sees it, is as follows:

"Boston likes to see itself as a hive of innovation, and a fertile place for entrepeneurs with big ideas. But when it comes to young, first-time founders working on websites, mobile applications, and devices designed for consumers, the magnetic pull of San Francisco and [even] New York is strong."

The reason for Boston's relative decline can be summed up in one word--"coolness". As compared with Palo Alto and New York, Boston suffers from a "coolness deficit when it comes to retaining twentysomethings and newly minted college grads." When Kirsner says "coolness", that is what he wants it he means. Quoting one entrepreneur who moved his business from Boston to the Bay Area, "Boston doesn't have the star power or the glitterati." Intuitively, this Kat graps this: when the decide to do a "Big Brother-like" reality show following the every move of a budding innovator, the show will certainly take place in Silicon Valley and not on Route 128 in Boston.

Still, "coolness" is an atttribute that one identifies with the contents of People magazine and not with some young entrepeneur toling away on trying to create the next great high tech idea. How does "coolness" translate into a more fertile environment for innovation? The article lists several factors:

1. A critical mass of investors open to taking big gambles on seemingly wild notions.
2. Casual meeting places that just seem to attract both entrepeneurs and investors and which create an atmosphere that encourages "serendipitous meetings."
3. Enbdless office-launch and product-launch gatherings.
4. Products that your college classmates are likely use, or at least be familiar with.
5. CEOs with larger-than-life personalities.
6. Veteran entrepeneurs willing to mentor aspiring youngsters.
7. Skilled programmers and product designers.
8. An environment that enables one to enjoy an informal proximity with many other smart people also involved in trying to build successful start-ups.
[9. And though no one seems to have admitted, better weather.]

Significantly, issues more likely to attract attention in any discussion of policy considerations to encourage innovation are missing from the list, namely, (i) corporate tax rates (and tax policy in general); (ii) housing costs; (iii) traffic and (iv) California's increasingly dysfunctional public finances and services. The issues for the entrepreneur are much more focused and "here and now" in nature--develop the product and/or obtain necessary funding and/or create a self-propagating buzz about your innovation. The presence of a world-class marathon is equally irrelevant.

And what about IP? Interestingly, there is no mention of IP (or even lawyers) in the article's discussion of "innovation" and "cool." I think that there are a couple of reasons for this. First, as I have suggested elsewhere, social media is an underweight IP activity, where branding and matters of secrecy predominate. Second, the focus of the article, being on social media, downplays other types of innovative activity.

Take biotech, where Boston still seems to be equal to Silicon Valley (and certainly New York City) as a world-class hub. Freshly minted MBAs, and other other twentysomethings itching to establish a start-up, do not gravitate to biotech. There, you are more likely to find Ph.D. types grinding away on R&D and patent attorneys working hand-in-hand to protect their discoveries. But writing about biotech and alternative energy, as well as more traditional software and hardware, and the environments in which they flourish, would produce a much less cool article.

Pioneers, Pirates and Parvenus – IP v Innovation

Pioneer -- but was he first
a pirate or a parvenu?

The IPKat's friend Gwilym Roberts (Kilburn & Strode) attended a Hargreaves meeting earlier this week which, though smartly chaired by Johanna Gibson, was sadly lacking in input from its target SME audience. Participants were exhorted to get their submissions in by the end-of-month deadline and Gwilym was inspired to do so.  This was what he writes:

Pioneers, Pirates and Parvenus – IP v Innovation

Value comes from resources and there are two kinds of resource: physical and intellectual. Mere access to physical resources – raw materials, say – can provide value, and only when location or extraction of a physical resource becomes competitive does innovation cease being marginal. For intellectual resources, however, innovation is the sole creator of value. As the UK only has intellectual resources, therefore, innovation is everything.

With this in mind, and in its never-ending quest to find a British iPod, the UK government has commissioned another report, this one led by Prof Hargreaves, which seems to ask the slightly wrong question “How can IP promote innovation and growth?” The problem of stimulating innovation is of course fundamentally unrelated to the nature of the legal system protecting it, and if this is the goal then the nation must be tasked with creating the necessary culture of creativity, risk taking and adventure. IP is useful but peripheral – innovation leads IP; not the other way around. What is useful is ensuring that the framework IP provides (and I’m focusing on patents) is properly thought through.

At one end of the IP spectrum sparkle the pioneers. These iPod-creating, dual cyclone-reaping entrepreneurs have ideas so world-beating that there is often a clear patent playing field, and a reasonable monopoly is enough to merit the research and investment underpinning their success. The patent system is well designed to provide this, and given the funding to support development and the relatively modest proportion spent on protection, the system has rewarded their creative/ risk-seeking adventurous handsomely and fairly.

At the other end lurk the pirates. The IP system is again very effective, as long as technology can keep up, at stopping plain, sometimes criminal copying. Here again it seems fit for purpose.

Which leaves us in the middle with the legitimate latecomer competitor, the provider of an alternative approach, the parvenu. Unlike the pioneer, they are not moving into uncharted and unclaimed territory, but a region cluttered with patent thickets and landmines. Yet unlike the pirate, they are just trying to carve out a fair slice of the action. An advantage is certainly that the market is established and the rewards are quantifiable – the risk has shifted from a commercial to a legal one. The problem that the latecomer has, therefore, is of uncertainty. If they knew they couldn’t do something, they’d move on, but what they face is a game of percentages, endless waiting and painful legal costs while they establish a rough idea of FTO.

So at the highest level IP v innovation can be boiled down quite neatly. First, innovation leads, and this is a cultural issue beyond Hargreaves’ remit. For those who’ve “got” innovation – the pioneers - it’s then about funds, to develop to market, and to get the good advice, often with little third party IP in the way. For the parvenu it’s about timely clarity and a good understanding of where they can safely compete. And for the pirate – hopefully – it’s about time they gave up.

Wishful thinking, or cruel deception?

The government can help therefore. The system at either end is fine – it’s clear how we can get patents, and it’s relatively easy to stop straight rip-offs. The problem is in the middle. We need an accessible and educated market for raising money to fund innovation – simple and early exposure to potential investors and respected metrics for evaluating the value of intellectual assets can provide the platform for exploitation of a great idea. We also need a faster way of resolving uncertainty about potential infringement, whether through limiting the remedies or improving mechanisms such as declarations of non-infringement. With these in place we’ll be able to exploit our intellectual resources more readily, and with less fear that they’ll turn out to be someone else’s.

Ideally this will lead to upwards mobility in our strange IP class system: pirate becomes parvenu; parvenu becomes pioneer. As for where the pioneer goes, well they’ll do fine whatever the framework, and if the outcome of Hargreaves is a few more of them then it will have been an unmitigated success.

The IPKat hopes to hear from those pioneers, pirates and parvenus who read this weblog: has Gwilym got it right?