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Wednesday
Apr062011

Physicians & The Accidental Billionaires

Accidental Billionaires?

Last week with my time on the island I had the opportunity to catch up on some reading.

Nothing too earth-shattering or intellectual, but I did make it through a couple of good books.

One book I had considered reading for a while now actually turned out to be rather good.  The book was The Accidental Billionaires: The Founding of Facebook by Ben Mezrich.  

For those of you who have been living in a cave the past few years, The Accidental Billionaires is a sort of fictionalized account of the rise of Facebook, and was recently turned into a popular movie called The Social Network.

I was hesitant to read the book simply because it has been criticized as too fictional.  Mark Zuckerberg-- the person most associated with the founding of Facebook and the current CEO of the company-- did not make himself available for interviews with the author.  Additionally, many of the individuals used as primary sources for the text have openly stated their animosity towards Zuckerberg and/or the company, Facebook.  These foes include Edaurdo Saverin-- a college friend of Zuckerberg and co-founder of Facebook-- and the Winklevoss twins, Cameron and Tyler, who are still in ongoing litigation with the company.

Th book reads like fiction-- Mezrich openly admits he had to use literary technique to bridge gaps in the historical accounts-- but it ends up being an interesting and quick read.  Suffice it to say that if you like the movie, you'll find the book interesting.

Personally, I enjoyed the read simply because while it is obviously one-sided, it does give you one person's (ie- Saverin's) account of the founding of the company and the whirlwind development of Facebook from dorm room daydream to corporate force.  For those who have been involved with any sort of start-up company, the themes of the book ring true:  the initial excitement, the overwhelming work, the near misses and mistakes, the infighting and jealousy, and the eventual victory.

I also enjoyed the characters of the book, many of whom are well-known entities in the world of Silicon Valley.  The anecdotes about "bad boy" Sean Parker, the brilliance of Peter Thiel, the competitive drive of the Winklevoss twins, and the descriptions of life as an undergrad at Harvard were all very intriguing.  

Anyway, if you have any interest in entrepreneurship, venture capital, technology, or start-up companies, then I believe you will find The Accidental Billionaires a fun read.  I enjoyed it and while some parts are somewhat sinister, and others downright bizarre, I think this fictionalized account of one person's view of the Facebook founding is entertaining and worth the short time investment necessary to breeze through its pages.

Reader Comments (10)

Did you catch the newest twist to this story:

WSJ.com - Fight Over Facebook Origins Escalates http://on.wsj.com/ii9rvp

Recently read The Master Switch by Tim Wu. Great books and aptly talks about how whoever ends up with control of the product gets to decide the story behind the product. 5 years from now everyone will remember Zuckerburg as the founder of FB and all the other names will fade into oblivion...

Apr 13 | Unregistered CommenterMehul Sheth

I did see that WSJ article. I also saw that the "Winklevi" lost their appeal ( http://money.cnn.com/2011/04/11/technology/winklevoss_facebook_lawsuit/index.htm ). This is a very interesting case to follow and covers a lot of topics concerning intellectual property laws. If there are any intellectual property attorneys reading this, I'd be very interested in your thoughts on this case.

Lessons learned:
1. Anything of value will attract law suits
2. Be sure to document inventions in lab books or electronic files
3. Be sure to document both the idea and the reduction to practice
4. Learn the difference between the first to invent and the first to file
5. Understand the when and how of entering the public domain as it applies to patenting
6. When in doubt, if you are affiliated with a university, call your tech transfer office
7. Universities, like Harvard, should have had an entrepreneurial ecosystem robust enough to embrace entrepreneurs like Zuckerberg, Gates and other legendary billionaire drop-outs.

Agreed, but it seems that in the big, earth-shattering, game-changing inventions/innovations the one who pushes the most comes out ahead. ATT had a huge lab and basically shut down innovation for 30-40 years if you believe Tim WU because they had the financial and political clout to push others out of the way.

Although I've never been part of a great invention, these sound like appropriate measures to take...the issue is taking it with every idea before the idea is a hit!

Apr 13 | Unregistered CommenterMehul Sheth

Thanks Arlen:
Very good points and advice, having gone through this for 15 years with hundreds of companies (mostly evaluating them for licensing or acquisition by large companies (e.g., J&J), the initial conditions can be outcome determinative. Unfortunately, startups rarely get integrated help up front. My experience negotiating with and for startups and small companies is that they need to drive the negotiations for what is best for both them and the large companies. As stated in point 7, and thanks to six sigma, downsizing and corporate greed, innovation and creativity is mostly extinct in large co's, therefore the small guys have to drive it, and taking steps 1-5 is a great start. 6 is limited to help with getting initial patents and intitial encouragement, so getting outside help is critical: what might you commercialize? What might your competitors commercialize? PATENT IT BROADLY! If you cover your competitors, then you have negotiating power in the law suits! Don't give away anything to anyone, get it in writing up front as they say, and show how everyone is fairly compensated on agreed to terms in writing. Revisit this often and expect there will be fallouts. When you agree in writing, have termination and exit provisions that deal with these potential outcomes. I just heard a talk by a famous patent judge just retired and he pointed out that all of the new jobs and innnovation are coming out of start ups. So get moving!

Greg: responding to the Winklevoss twins as an IP attorney, if the stakes are big enough, then there will be these kind of lawsuits. The strategy is generally that if there is enough money at state, you will at least get a settlement of what the potential litigation costs will be and at the most a percentage of sales or the company. It can look to a litigation law firm like a no-lose proposition when they are getting 25-40% of the settlement! The mistake the Winklevoss twins made was to take the $65 million settlement and then want more! Signing a settlement agreement includes agreeing to not sue again on the same issue, so legally that is the end of the story, as we saw here.

Thanks, Kevin. Very interesting stuff. The whole IP realm is fascinating and one of great importance for entrepreneurs. Just out of curiosity, what would Harvard's position on Facebook have been had Zuckerberg been a junior faculty member or a grad student when he developed the site? Do you think Harvard would now own Facebook? Issues like these are one of the reasons I left big-time academic medicine. I was cocnerned that the institutions would own anything I produced.

Arlen and Mehul, thanks for weighing in. Great insights.

Thanks Greg and great blog!
Another aspect of university and company mindsets is that it is hard to get support for new ideas, and Facebook is certainly one of them! If Zuckerberg had been a junior faculty member, he would have had to sign an employee agreement where he would have to assign all IP rights to Harvard for anything he worked on during working hours or using any of Harvard's resources (e.g., their computers or network).
This would mean that Harvard would own all the rights to Facebook, unless Zuckerberg was very careful to not work on or develop Facebook during his working hours or at Harvard or using any of Harvard's resource (e.g., their computers).
Additionally, it is probably unlikely that Harvard would provide funding for developing such a revolutionary idea and it would probably have died in the early stages of development.
However, assuming that patents were filed by Harvard on Facebook, one option might have been that when Harvard decided not to pursue commercializing, then Zuckerberg could have asked Harvard to assign the IP rights back to him, and then he could have developed it on his own. Most employess are not aware that they can ask their employer to assign patents or other IP rights to them if they are not developed or commercialized by their employer.
Thus, this is an important option to consider. However, the downside is that this process will take several years at least, so it is better for employees to develop new inventions that they want to commercialize independently of using work time or resources of their employer.

Another point: Should university faculty members under Bayh-Dole be required to assign their intellectual property rights to the university? Keep your eyes on Stanford v Roche in front of the Supremes.

I provide a response to (i) whether a physician must assign patent rights to a University, where the physician is employed and does work funded by the government and subject to the Bayh Doyle Act (37 CFR 401) in view of the pending Supreme Court case of Stanford v. Roche. The above comments I made still apply, where it is best to work independently from work time or resources on any inventions that an inventor wishes to retain rights to for commercialization independent of the university or employer. Note that work done as part of employment or with employer resources is normally assigned under the employee agreement to the university or employer. However, under Bayh-Doyle, this is not currently required and could be contracted around by physician-employee and the university, but the government retains a free license to use the invention when the government funded work resulted in the invention and issued patents.

The current legal isses in this case were argued before the Supreme Court on 2/28/11 by Stanford, Roche and the US government, which involve patent law, contract law and the Bayh-Doyle Act. In short, a Stanford inventor assigned ("I do assign") future patent rights to Roche under a confidentiality agreement, BUT ALSO assigned present and future patent rights to Stanford ("will assign"). Roche wants to validate its assignment to avoid paying royalties to Stanford.

The arguments involve whether the assignment to Roche supercedes the Stanford assignment. This case has big implications for Universites and other non-profits, as well as small business entites, under Bayh Doyle. The results of this case may include one or more of: (a) requiring non-profits to have employee-inventors assign all inventions or lose government funding; (b) require change in wording of employee agreements to "I do assign all current and future inventions made in course of employment and/or using government funding to the non-profit; and/or (c) changing non-profit employee agreements to prevent, limit, or narrowly control, employees' interaction, collaboration, or agreements with outside companies.

Physicians should be very careful in what they agree to any agreements with their employers who receive federal funding, as well as patent terms they agree to in consulting, collaboration, or other agreements they enter into with outside companies or institutions. Additionally, if they want to potentially commercialize inventions outside of their work for non-profits and other federally funded institutions, they need to document and develop their inventions outside of work time and without employer resources.

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