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Lightning Lab startups ask – ‘where’s the money’? Peter Kerr May 21

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Lightning Lab 2013 saw nine startups pitch their digital products to would-be investors last week, seeking expansion capital for ideas that 12 weeks before mostly existed on paper.

The Wellington Demo Day saw highly polished presentations, with clear development plans and just as clear ‘here’s how we and our investors are going to make money’ to about 300 people at Te Papa’s Soundings Theatre. About half the audience were financiers.

Any investment secured goes to the next stage of development and expansion into global markets.

My initial underlying thought was jealousy.

Why? Because the participants have obviously learned so much.

Tui Te Hau, CEO of Wellington startup incubator Creative HQ up summed this rationale better than I can.

“Lightning Lab is turning out 30 entrepreneurs with a harder edge and keener and smarter drive to succeed than many. How far they go is up to them, but these companies are 12 weeks old and they already have more scars than most get in several years.”

These nine companies were whittled from 87 applications to LL late last year, and each received $6000 per head from a set of founding investors. By being part of a three month intensive acceleration programme, their digital concepts have been validated, built and established with early customers.

The startups have been mentored by local and international advisers, faced hard deadlines in growth targets and a structured model for accelerating early stage business growth based on international best practice.

When Te Hau talks about scars, she’s not exaggerating – but obtaining them so quickly and with the ability to ask advice such as “what should we do now” in such a concentrated manner – is something so valuable it really can’t be priced.

What is patently clear is that the 30 participants, and their wider networks, have had such an injection of entrepreneurial spirit and possibilities that multiplier spinoffs and benefits can only result for Wellington and New Zealand.

Put another way; this programme, with its hand-holding, arse-kicking and question-asking intensiveness will create a virtuous circle of increasing wealth.

And sure, like all of us, these startups have, and will make mistakes.

But, they know what needs to be done to get back on track, or alternatively how to fail-fast (and then get on with another project).

Because the Demo Day was asking for money, what can be reported publicly is limited.

Suffice to say that (and you’d have to imagine that the mentoring has been also strong in this area) the investment dollars being asked for by the startups seemed reasonable and appropriate.

Many of the companies had potential exponential growth rates, but realism ruled.

It is now up to the individual companies themselves to reveal if or what investment(s) have been made in them – and as this becomes known Lightning Lab will have its own raison d’etre validated.

For the record, those presenting were:

LearnKo – delivers online learning programs to English language organisations in Asia, harnessing Australasian tutors, training them and providing them with content to deliver through an online classroom

Publons – platform for crowd-sourced peer-review of academic articles, where academics build a reputation for their contributions. An alternative to the extremely slow, expensive and closed status quo of the past 300 years of academic publishing

Adeez – specialist mobile marketing platform, enabling brands and their agencies to increase their ROI on mobile marketing

Expander – tracking and analytics platform that protects brands by providing them with powerful tools to combat counterfeit, while connecting manufacturers and consumers

teamisto – turn a typical business sponsorship donation to an amateur sports club or team into an effective advertising channel with measurable results

Questo – works with organisations by providing a platform to create activities with incentives and rewards to engage their visitors. A mobile app and analytics engine provides the ability to track, measure and evaluate their visitors’ behaviour

promoki – social media platform that gamifies photo and video contests. Help brands co-create advertising campaigns with their audience and distribute crowd-filled media across multiple social networks

Kidsgomobile – software device to help parents teach their children to become responsible users of their first smartphone. Tool that notifies parents if their child engages in potentially risky phone behaviour and helps them resolve these issues

WIP – platform that enables professional video makers to share their work-in-progress videos with their team and clients to gather precise and meaningful feedback

Without doubt, some of these startups will go on to become much larger businesses. Without doubt too, most of them would not have got to this ‘go’ position without Lightning Lab.

The learning has been immense, and a thumbs up to those investors and sponsors who put their hands in their pockets from the get-go to kick the whole thing off.

Applications for the next Lightning Lab 2014 will open in September this year.


Email sales tool allows companies to ‘dress to impress’ Peter Kerr May 07

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On the face of it, creating clever emails with embedded graphics and other gee-whizz stuff that acts as a smart sales tool should be pretty easy.

But (apparently), there’s only three companies around the world have pulled off the feat – including Auckland-based LiveLink Connect.

The three-year old six-person entity (you can hardly call it a start-up now), was incubated through The Icehouse and has had two angel funding rounds for a total of about $450,000 invested.

Its founder and managing director Jason Roberts (disclaimer….an old mate of mine) had been in sales and marketing roles for a number of years and more often than not found email a terrible sales tool.

“It was hard to share information between distributors, retailers and customers, and, if as a salesman you sent an email, you had no idea if it was opened,” says Roberts.

“As a salesman, you want to ensure your email dresses to impress and ensure the ability to perfectly time your follow up call, so that was one of the things we set out to do.”

Roberts et al have created what they call ‘everything email’, which as well as being robust technology is also able to work with other email products LLC has on a collegial basis.

For example, company logos are rendered properly no matter what type of device the email is read on (and estimates now are that 50% are done so on a mobile device), whether it has been opened, or even if a disclosure document has been read.

The latter ability is especially important for those selling financial services such as insurance or broking other products – and having an electronic proof of a disclosure having been opened is becoming an increasingly important sales tool for LLC.

“What we’ve created, and continually improving is technologically complex, though, being cloud-based means it has to be simple, easy, secure and cheap,” he says.

“The information and data we can provide back to our clients about what actions have occurred as a result of the email makes its an invaluable marketing and sales tool – exactly what we set out to achieve.”

Roberts says LLC’s next major development is a sophisticated and integrated ‘statement stopper’. That is, to halt the sending of letter-based bills such as electricity, and instead has them sent by email.

LLC’s tracking ability indicates whether a customer hasn’t opened a company’s email, and a paper statement can then be automatically sent by snail-mail.

At that stage, Roberts expects to feature on the radar of a larger company looking to expand its offering, “so in five years or less we’re definitely looking to be acquired.”

Given that LLC is export-expanding, and is now trialing its technology with CMC, a division of giant Indian company Tata, that five year window may be short.

Not too bad for a sales tool that seems a sitter but obviously is a difficult one to pull off.


Adding a hole lot of value to a piece of pine Peter Kerr Apr 04

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We all know that we’d prefer to export more than just a log of pine to overseas markets.

At the same time, the NZ Inc desire to add value to our raw commodities such as trees is almost tiresome through over-use.

So, it is a pleasure to be able to highlight a company and person doing something different and in their case, making a better pine pole.

Now TTT Products (and no, I’d never heard of them either until going through a recent exercise to maximise the return from a 20 year old four hectare block of pines that I’m involved with) isn’t a small firm. Its North Island headquarters at Tuakau covers 20ha, specialising in creating pine poles of many different sorts.

It may even seem to be a coals to Newcastle scenario, but TTT exports a fair number of these poles all around the Pacific and even to Europe and North America. This is partly because only pinus radiate (and Southern Yellow Pine) can take up the anti-insect, anti-corrosion chemical preservatives that then guarantee a longevity when buried in the ground.

However, the other clever product from TTT, partly ‘inspired’ by the recent Christchurch earthquakes, is what is called a MultiPole (and the basic focus of this blog)

It is a pole that’s actually a tube – TTT managing director John Reelick having perfected (and is keeping secret) a means to drill a long 50 – 150mm diameter hole in a pole. The pole is no weaker, and indeed, because the preservative chemicals can also be applied from the inside out, even more protected against rotting when in the ground.

What MultiPoles allow is a range of tools and complementary products such as cement or grout, that can be deployed because of this hole/tube.

For example, a water jet can be used to help clear the way and push the pole into the ground.

There’s a swag of engineering proofs and performance criteria, and Reelick and his team have further refined the MultiPole over the past couple of years.

Equally, the company’s demonstrating the versatility and application of poles as a modern building material for (rebuilding) Christchurch. They’ve built five storey offices, and a 15 storey model has also been proven as viable for the Garden City.

Which, is quite a lot of value-add for commodity, and an example of taking a raw material and making it work better.

Fantastic stuff all round. Keep up the good work TTT!

P.S.

The MultiPole appears to be a perfect, exportable, value-add product beyond a commodity. I’m sure John Reedick and his team have ideas they would like funding to research and perfect.

Callaghan Innovation has the mandate to be proactive – go give these guys a hand up.

They already know their market, and have a special product with, as IT businesses like to call it, a secret sauce (how to make the holes).

In the scheme of things, a very good CI investment bet for a multiple (or multipole in this case) return.


What a problem for ikeGPS…..managing its growth! Peter Kerr Nov 29

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ikeGPS chief executive Glenn Milnes with the hand-held device, with plenty of back-end smarts, that can measure and model anything

The ikeGPS has the world at its feet – so much so it is going to have to carefully decide which of many markets it should attack first.

The hand-held device integrates hardware and software and enables anyone from a utility to a mining company to measure and model anything.

By taking a photo combined with laser measurement, and knowing exactly where the device is located through GPS (global positioning system), all parts of the picture can be captured as data.

Any part of the picture can be measured accurately, and that information added to the data stream.

What it means in practice is a tool and package that, for utilities that have assets such as poles for power and broadband distribution which need verification of location and use, a cost reduction of two thirds says ikeGPS chief executive Glenn Milnes.

“Compared to such companies using a measuring stick, we can improve employee productivity by 70%,” he says.

The pole utility measuring and modelling market in the USA alone is estimated to be worth US$5-6 billion alone. But considering industry segments such asenergy and mining who have external assets which they want and need to know where they’re located, how big they are and what condition they’re in; then you’re talking massive market potential.

And also a slight conundrum for Wellington-based ikeGPS.

“The biggest mistake a business can make is try to cover the whole market,” says Milnes, who has a background in the European telecoms market, and in the Wellington venture capital industry before moving to the CEO role 18 months ago.

So, a strategic decision has been made to pursue the utility , defense and intelligence markets in America, and a sales and marketing office is being ramped up in Colorado, with the back end technical R&D and manufacture to remain in Wellington.

The currently 25 person team will look to add another 15 staff, mostly in New Zealand, mostly in the software interface area.

This also indicates a change in the company’s approach, founded in 2005 by current CTO Leon Toorenburg.

“Even two years ago we were all about the hardware,” says Milnes.

“Today, in terms of our engineering resources 70% of what we do is software driven.”

And though ikeGPS has patents and trade secrets around the hardward, its increased software focus is to “provide an end-to-end industry solution,” he says.

Thus, ikeGPS makes its backend software, proliferated on a customer’s IT platform easy to use and install.

To take advantage of the massive interpretation and measurement ability of this system though – well, the customer needs the hardware. And obviously, while there’s competition, ikeGPS sees itself being a few steps ahead at the moment.

“There’s a few layers to our competitive advantage,” Milnes says. “With the software and algorithms needing to network together, and the calibration required; it’s really not that straightforward. It really isn’t just about the hardware.”

The elegance, security and ease of use of the end-to-end solution provided by ikeGPS is also one of the reasons the company has been able to sign a recent development contract with In-Q-Tel, a US company which carries out a lot of strategic development for American intelligence agencies.

ikeGPS is the first Australasian company to be accredited by In-Q-Tel, and will bring remote measurement for asset security assessments.

“They have the capacity to bring a lot of really big customers to us,” he says.

Which again brings the NZ company back to the ‘dilemma’ of what markets to attack first.

Milnes is confident that the private and venture capital backed company can scale up sales and distribution (and NZ manufacture of the hardware).

A decision will probably be required in the next few years around further partnering with others.

“At the end of the day, we’re a platform,” says Milnes. “Do we let others build on it is a strategic question, along with how we’d manage that?”

In the meantime, ikeGPS soon shifts its sales and marketing focus to the US, and will concentrate on the niche vertical market of companies who have poles (and lots of stuff hanging off them).

“We’re looking to become dominant, experts in that; at the moment,” he says.

The company has doubling yearly growth, and Milnes envisages that will continue – at the very least.

The company’s keen to raise its profile and continue to attract clever engineering minds as it continues to develop its products and solutions.

Managing such growth will be a challenge – the past 12 months has seen a lot of change, and preparing for the next phase is equally so.

But, as challenges go, managing growth isn’t a bad quandary to have!

P.S.

In case you’re wondering what ikeGPS stands for; it’s ‘I know everything’.


We all own our agricultural story…..that’s the problem Peter Kerr Nov 20

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This post also runs at pasture Harmonies.

The trouble is; we all own New Zealand’s agricultural story.

That is, the huge collective effort that went into figuring out, developing and improving the soil, pasture and plant/animal interaction that is our pastoral method: is part of our collective birthright.

Unfortunately, NZ Inc has never (and as such never could) apply for a worldwide patent for the knowledge. There’s none of it that’s uniquely identifiable. If, perhaps way back in the 1930s when some of the eminent scientists of the day were working up their theories of how to grow grass/clover better, there may have been some form of IP we could’ve called ‘ours’.

That horse has well and truly bolted these days – indeed, there’s mid-Western American universities who would attempt to claim the mantle.

However, no one has ever claimed the STORY.

No one has ever said, ‘well, we work with rather than against nature, seasonally’. If you want a comparison, it is much like the way the Seregenti ‘works’; with animals grazing then moving on to new, fresh pastures in a circular pattern that is probably as old as the time we’ve been walking upright.

To mix metaphors, this method of growing, grazing, resting pasture is a globally unstaked claim.

By that token, we, NZ Inc can and should nab it. What we’d be laying claim to is responsible pastoralism – and for want of a title/name/brand, I’m proposing we call it pasture Harmonies (otherwise we’d spend all our time debating what to call it).

I’m sure there would be a bit of a furore if we did – but so? (The only bad publicity is no publicity).

From a big-picture point of view for NZ Inc, and particularly the companies and farmers with a financial vested interest in agriculture, naming our story would provide the missing glue, the rationale to allow us to work together when it best suits.

Because one of our main challenges, identified in a host of reports over the past 30 years, is there is no NZ Inc strategic vision.

That’s because there is nothing (yet) to consolidate around.

But the moment we named our agriculture’s comparative advantage, and allowed those who wished to participate (including partnering overseas farmers and companies) to use pH as a co-brand, co-story, is the instant we’d give ourselves a non-commodity future.

The moment we said, ‘this is ours’, and named the method, is when we’d change our offer to the world.

We’d also make more money.

Or, is making money something we shouldn’t aspire to?


Getting to a BLISful state a long and winding road Peter Kerr Oct 11

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Dunedin-based BLIS’s oral cavity probiotic products have “spent a long time on the runway”, as it chief executive Dr Barry Richardson described the other day.

(Briefly wearing a journalist hat, I interviewed Richardson for BusinessDesk). There’s a certain irony in the eleven year old stockmarket listed company’s current position – with its share price less than a cent.

The quirk of fate is that with 50 worldwide patents on its ‘good’ bacteria, Streptococcus salivarius, which crowds out baddies that can cause bad breath and tooth decay, BLIS is potentially on the cusp of a huge ramp up in demand from other manufacturers of products.

Part of BLIS’s strategy is to allow other manufacturers of lozenges and ice cream (among numerous products) to use their probiotics and validated health claims in their own products.

Undoubtedly shareholders have long tired of hearing that nirvana is just around the corner, but with recent United States FDA approval of safety and efficacy beyond its (to date) dietary supplement certification, BLIS’s runway looks truly set for takeoff.

Added to that is the fact that around the world other independent science teams have been further proving BLIS’s claims of its probiotics marketed as K12 and M18 do work.

All that would be fantastic for Dunedin – as the freeze-dried probiotic ingredients are all manufactured in New Zealand, and any addition to its commercial base can only be good for the city and its university.

However, this is a roundabout way of showing and saying that:

  • There’s a heck of a challenge in converting a good idea to a blazing commercial success – it takes time (and then some) and money
  • A stockmarket listing as a capital-raising exercise for a fledgling biotech company will often be an exercise in frustration and ongoing requirement to disclose, disclose, disclose
  • And lastly, and hopefully something that doesn’t come to fruition – BLIS could be ripe for takeover by a savvy investor aware of the potential it has now created

Particularly with regard to the latter possibility, a stripping out of the IP and production from BLIS would be another sad state of affairs for NZ Inc biotech.

Our country’s greatest potential increase in national wealth is adding wealth to our biological resources and raw materials – that is, doing clever things to and with biological bits (+ bytes if we can combine it with the digital side of things).

But to achieve this, we need to maintain and grow the supporting infrastructure, including the expertise and processing that BLIS has onboard.

Then, not only can BLIS people grow its own portfolio of products (and there’s more in the pipeline apparently), but some of these clever people might head off to set up other ventures. Equally, outsiders can tap into the BLIS skills in the kiwi ‘can you give me a hand’ manner.

So….hang in there BLIS. After more than a decade of trying to get your probiotic plane off the ground you might at last be ready for takeoff.

When that happens, it’ll be good for all of us.


Standing for nothing does our agriculture a big non-favour Peter Kerr Oct 09

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This story also appears at www.pastureharmonies.org

If you stand for nothing; does that mean anything is acceptable….or not?

This is the dilemma for NZ Inc agriculture as AgResearch announces the recent success of ‘Daisy’ a cow genetically modified to produce milk with much less beta-lactoglobulin (BLG). This is a milk whey protein known to be allergenic to some people. See the NZ Herald version of the story here.

I’m not commenting on the clever science behind GM Daisy – essentially using two microRNAs and RNA interference to knock down the expression of BLG. AgResearch next want to normally breed from Daisy and see if the same non-BLG milk is produced by her daughters – a several year exercise.

At its core, Daisy is a world first, and it really is (in my opinion) excellent applied science in creating her.

What’s of greater issue; especially given the pro/anti GM stirrings that resulted from AgResearch’s announcement, is the lack of ability ‘we’, as NZ Inc agriculture, have to figure out where Daisy and her ilk could or should fit in our offer to the world.

This is because we don’t own our story.

We don’t own our story because we’ve never named it – that is, we’ve never given a title to the rotational grazing technologies and grazing in situ we perfected over the past 100 years.

It means that we have no strategic big picture notion of what we ‘offer’ the world.

In ‘standing for nothing’ we do ourselves a huge disservice.

Is it no wonder that young people, the very lifeblood for agriculture’s next generation, are turned off. It is such a shapeless industry, who can blame them for avoiding education in it in droves.

It is no wonder that urban NZ only sees and hears grizzling cockies, polluting producers and sellers flogging commodities.

It is no wonder that tourists to New Zealand (or the vast majority of Kiwis for that matter) never appreciate the complex science behind what they see out their bus window.

Which may seem a long way from a debate about a genetically modified cow on an experimental farm?

But it is the other side of our unnamed story.

NZ Inc has the opportunity to name/brand our country’s core comparative advantage – and in doing so become the global custodians of responsible pastoralism.

The moment we do, is when we’d provide ourselves with the ability to debate Daisy, determine if such genetically tweaked beasts can fit into what we proffer to the world.

Non-BLG milk could indeed be part of a suite of ‘clever’ biologically-derived products that we produce.

But, getting back to the opening sentence – by standing for nothing, we can only have a nothing sort of debate.


New media + books = Literary Angels: friend recommendations set to fly Peter Kerr Oct 04

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Lisa Buchan and Mike Peters are hoping to tap into friend recommendation as a way of promoting and selling digital and real books

Literary Angels, a Facebook (with other social media to come) book socialising, tracking and selling tool, could be exactly what the publishing industry has been looking for.

LA sets up a unique identity for a hard copy or e-book, allowing readers to recommend, and give away a single copy. It also allows an author and/or publisher to see how much engagement fans and potential fans have, and whether indeed a purchase has been made.

The Angel’s co-founder Lisa Buchan and her business partner Mike Peters, have been involved in authorship over the past couple of years through their rights trading platform, Sparkabook.com.

They were aware that the book industry itself is on the cusp of experiencing similar internet/digital revolutions that has turned other industries such as media and (some) manufacturing upsidedown.

“For book publishers, the big difference is that where they used to completely rely on retailers and distribution, is completely turned on its head with e-books,” Buchan says.

“Publishers are well-aware they need to communicate directly with readers and do their own sales, marketing and promotion to find an audience. The question has been how; and we think we’re the answer.”

Unlike other consumer brands, who have both a budget and can target certain segments of people, book publishers are different.

Consumers don’t buy brands, they buy authors, which is where the value lies. And all books have a different target. With fewer bookshops (and the enthusiastic salespeople within), the whole previous ecosystem is being stripped away. E-books mean publishers are losing the ability to target a book at the right audience.

Which are among the reasons publishers have been very very interested in the www.vangelizer.com offer through Literary Angels.

“They’re at this point in time where they’re grappling with what they’ll do,” she says. “They know they have to do something, but they can’t figure out what, or how to communicate and get in touch with fans. What we’re saying is here is a social media tool to help.”

So far they’ve talked to New Zealand, Australian and a few USA and UK publishers. One Brit immediately demanded the Literary Angel Q.R. code (and Facebook recommendation and tracking) his a reprint of his ‘Harry Potter on Location’ guide.

Publishers will be expected to pay to use LA, be they big or self-publishing. Such self-promoters will have the ability to get their books into the hands of those who would most enjoy it.

The four month old venture is getting better and better as it learns about the book reading and recommending ecosystem, with such learnings being incorporated in succeeding generations of the software.

The Twitter, Linkedin and Good Reads social networks will be added to the LA landscape over the next few months.

Buchan has already been to a couple of Frankfurt book fair’s, and, knowing her way around the show and the publishing industry’s infrastructure, is looking forward to spruiking the book socialising Angel’s abilities to the same in early October.

“We’re trying to edge publishers to the territory where the person to person communication happens, and where they can continue to make money through being part of the process,” she says.

And just as the Literary Angels’ ‘job’ is to go forth and promote a book, this is exactly what Buchan and Peters will be doing for their social media oriented tool in a month’s time.

As a kind of MusicHype for books, as a way of enabling publishers to stay in business, Literary Angels may be the type of guardian they’re looking for. Keep reading.


ATI Establishment Board role far bigger than most people realise Peter Kerr Sep 27

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For something that has the extremely important job of kicking along (on an NZ Inc basis) the never simple endeavour of turning of an idea into income, the Advanced Technology Institute’s Establishment Board has so far operated very below the radar.

What the ATI EB is being asked to do, extremely quickly, is much more than the body tasked with creating the Crown Research Institute structure(s) over 20 years ago from what was then the DSIR and MAF Tech.

Perhaps part of its challenge is that some people think it is going to be about a new building or two – and that hasn’t been helped with the announcement that the institute will be named after the late Sir Paul Callaghan. That strikes me as being ‘institute’ as a noun.

But, if you have a look at the ATI EB’s Terms of Reference it is clear its seven person team has an extremely wide mandate. This is ‘institute’ as a verb.

This is seen in the ToR’s Purpose:

The purpose of the Advanced Technology Institute (ATI) is to support firms in the manufacturing and services sectors to improve competitiveness and growth through science and technology-based innovation and its commercialisation.
 
It will achieve this through being:

  • an intermediary to improve connectivity and capability in the innovation system; and
  • a service provider working closely with business clients and collaboratively with other service providers and research organisations

It is no wonder that the date for establishing the ATI has been put back two months (at this stage) to Feb 1 2013 – and even that is an extremely ambitious timeframe considering what is being asked of it.

Indeed, reading between the lines, what the ATI EB is being asked to come back with are suggestions around broader issues such as routes to market, funding/capital options and partnering.

As well as the morphing of Industrial Research Ltd into a new Crown Agency structure (being developed/consulted on as we speak), The ATI EB is being asked to work closely with the NZ Food Innovation Network, and NZTE and MBIE and ….. well everyone really. This includes figuring out how to work with and alongside the CRI and university technology transfer offices and commercialisation units – most of which are biologically-oriented.

That makes sense – one aspect of our economy that could really do with improving is adding value to the raw materials our country produces. Think milk, meat, trees, horticultural produce, fish. And not only adding value, retaining the value for NZ Inc as we get much closer to the market.

There’s some excellent science around these areas, as reasonably favourably commented on in a ‘Supply Side Report’ in some of the background policy work on the ATI in June this year.  

But, turning what are good ideas, processes and products into sustainable new businesses (or new areas within older businesses) is something we’ve found hard to do.

There’s a suspicion that super minister Steven Joyce recognises that as a country we need a circuit-breaking change/adaptation/boot-up-the-rear in the innovation area.

Asking the ATI EB to propose what this institute (as a verb) should be is either:

  • a recognition he’s not quite sure what to do
  • a hope it comes up with some more than useful suggestions, or, and more likely
  • a bit of both

Now all this is a roundabout way of saying, all power to the ATI EB seven charged with the task setting the strategic direction of the new entity (whatever it looks like).

The discussions it is having, and path it is plotting will be uniquely New Zealand in its structure – no one else has our mix of biology, skills, distance to market and investment-adverse capital markets.

Rumour has it that (original ATI proposer) IRL is fully onboard in its desire to move and act as the foundation of the new Crown Agency – which makes a damn good start.

Now, if the EB’s super seven can ‘simply’ come up with some clever solutions for those route to market questions….we’ll be singing their praises for a long time to come.


Patents Bill Second Reading: A Software Storm in an Ideological Teacup Peter Kerr Sep 17

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By guest blogger Doug Calhoun

Thirty years after the Muldoon government first looked at patent law reform, a new patent law is on track to come into force by the end of 2013. This guest blogger has been involved in working with and on the current act since 1974. And my reaction to the second reading debate?

“This is the way the world ends:
This is the way the world ends:
Not with a bang but a whimper.”

“The Hollow Men”

-TS Elliott

The bill runs to 165 pages with over 300 sections. It emphasises the goal of its authors to make it as difficult as possible to obtain a patent and as easy as possible for anyone to invalidate one. But the second reading debate: was based almost entirely on whether patents should be granted for software. And not a single Maori Party MP took part. Only Steffan Browning (Greens) mentioned that none of the Wai 262 Report recommendations on changes to patent law were implemented – even though the introduction of the Patents Bill was delayed from 1994 until 2008, largely because government concerns about the Wai 262 claim (hence my TS Elliott quote) – but that’s another blog post.

A Bit of History

The Patents Bill was introduced in 2008 by the then Labour government. The original bill did not have any software exclusion. In the policy development process, the MED officials had issued policy papers, considered submissions and recommended that there be no software exclusion. The practice of the Intellectual Property Office (following a decision of the Commissioner of Patents) was that if an invention involved software as a means to an end and it was novel and inventive then it could be patented; but if the software was an end in itself it could not be. This had been the practice since 1994. It was founded on old UK decisions that you could not get a patent for a mere mathematical formula – and software code itself is a form of mathematical formula.

In the select committee hearings most of the submissions on software patents came from software developers who were vehemently opposed to them. And the squeaky wheels got the grease. The committee introduced an amendment saying:

“A computer program is not a patentable invention”.

The committee reported in March 2010 and the bill sat on the Order Paper for nearly two and a half years until this month. The government then introduced a proposed amendment that qualified the exclusion. The exclusion would, “prevent anything from being an invention for the purposes of this Act only to the extent that a patent or an application relates to a computer program as such.”

The effect of the exclusion is that there is no real change in the law. Software as an end in itself is still not patent eligible; software as a means to an end still is patent eligible. That is the beginning and end of the effect of the words, “as such”.

But in politics reason is the first casualty.

The Second Reading Debate

The commerce minister, Craig Foss, stated that the intention of the select committee:

“was that granting of a patent should be prevented only where the novelty and inventive step lie in a computer program. In order to make the committee’s intention clear, and to avoid any doubt as to what is intended, I propose that the computer program provision be amended so as to provide that only computer programs as such are ineligible for patent protection.”

The opposition was adamant that the change had completely cut across and changed what the select committee had recommended. And the consequences were said to be putting the software development industry at risk.

Clare Curran was the lead Labour spokesperson. One example she gave of an industry at risk was the games development one:

“The chair of the New Zealand Game Developers Association said: ‘We’ve learnt how to make money from business models like digital distribution, freemium, virtual goods and crowdfunding. Exporting and acting global from day one have been key to the industry’s growth.’ Ninety-seven percent of Kiwi games were digital downloads, with low distribution costs and high margins. Ninety-nine percent of sales revenue came from exports, with the USA and Europe being the largest markets.”

The trouble with that example is that the New Zealand patent law is only applicable in New Zealand. So (on her quoted figures) only one percent of the games developers’ sales revenues would be at risk from infringing someone else’s New Zealand patents. Any sales made in the USA or Europe are still going to be subject to the patent laws there.

Trevor Mallard joined the fray:

“What has become clear over the last few days is that this Government has been captured. This Minister has been captured by offshore people who are involved in the software industry.”

What Trevor Mallard did not mention was that he was a member of a Labour cabinet that agreed to a cabinet paper (Review of the Patents Act 1953 – Stage 3, Part 1)

that included the paragraph:

“50. There are, then, no strong arguments for specifically excluding business methods and software from patent protection. In light of this, I consider that business methods and software should continue to be patentable as long as they meet the requirements for patentability.”

It could equally be argued that the select committee had been “captured” by the software development lobby. And it should be remembered that the select committee was chaired by Lianne Dalziel, also a member of the same Labour cabinet that could see no strong arguments for excluding software from patent protection.

No Software Patents Petition

The opponents of software patents are quick on their feet. They set up a website:and collected over a thousand digital signatures asking that the “as such” wording proposed by the government be replaced so that it says that the exclusion:

“does not prevent an invention that makes use of an embedded computer program from being patentable.”

The origin of that wording is in the select committee report where the committee expressed some reservations about the effect of the ban. While embedded computer programs are an example of inventions relating to software as a means to an end, they do not represent all such inventions – and the exclusion would not be of much assistance in making the more general distinction.

Clare Curran tabled the no software patents petition during the course of the debate. She also introduced a Supplementary Order Paper seeking to amend the government amendment exactly as proposed in the petition. And then her colleague, Mr Mallard, accused the government of being captured by an interest group – not the first pot to call a kettle black.

Those who signed the petition might well consider the complexity of making the distinction between software as an end in itself and software as a means to an end in this post by Australian blogger, Mark Summerfield.

The No Software Patents contains a space for comments as well as for signing. There are several recurring themes in the comments. Many petitioners are under the mistaken impression that the original Patents Bill was introducing software patents for the first time:

“The potential introduction of software patents in New Zealand critically threatens our ability to innovate in the information technology field.”

“It greatly disturbs me to think we may bring in software patents to appease the Americans with the TPPA.”

Others are under the mistaken impression that inventions related to computer code as an end in itself would be patentable:

“Computer software programs are essentially mathematical algorithms, i.e. methods to solve problems. If software were to be patented, then any thought process can be patented – an absurd situation.”

“Computer software is nothing more than design decisions mixed with algorithms.”

Many expressed concerns about the complexity and costs of enforcing patents in international markets. While these concerns are real, any change in New Zealand patent law is not going to have the slightest effect on the laws of other countries or the players that seek to take advantage of them there.

I am left with the same feelings as Ken Perrot in this recent post:

The Labour opposition has sided with an ideological ghetto that has not taken the time or effort to try to understand both sides of the debate on the worth of patents.

Patents and Innovation

Jonathon Young was the only speaker who talked about the positive role of patents:

“Recently it was announced that the Advanced Technology Institute is going to be set up and established. It will be named after Sir Paul Callaghan, one of our great scientists. He said that science could make New Zealand a better place, and that is such a true thing. We are focused on boosting growth and creating jobs, and you do not do that just by talking about it. You have to innovate, you have to invest, and you have to then commercialise those inventions and those products in order to get the financial gain from them.”

One of the man objectives of the Patents Bill is to ensure that quality patents are granted. A quality patent is one that claims an invention that is novel, inventive and of a scope that is fairly based on what is described. I know of no patent attorneys who do not strive to get quality patents for their clients. But the policy development and debate have been single minedly focused on how to make it more difficult to get a patent in New Zealand and how to make it easier to block patents from being granted and to overturn granted patents. What if the balance has been tipped so far against patents that very few innovators can be bothered, or afford, to get patents? The Paul Callaghan Institute mentioned by Mr Young will have to overcome the higher barriers being set by this law in order to fulfil its roll of transferring its inventions to the firms that will commercialise them.

What this country needs is a change in culture that embraces technology transfer – both inwards and outwards – as a path to improving innovation and thereby increasing productivity. And we need to acknowledge that patents are the currency of that technology transfer.


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