Lessons from "The Social Network" 

Jointly developed Intellectual Property

It's not often that an abstruse legal subject such as Jointly developed Intellectual property becomes the subject of a major motion picture, but that in fact is what happened with "The Social Network".  The movie about the founding of Facebook, and who really invented it  is  rooted in the complex legalities of intellectual property law.

The movie is built around a court case between the Mark Zukerberg, the founder of Facebook  and the Winkelvoss twins who claim that he stole the idea for Facebook from them.   The story is very interesting to someone like myself who studies Intellectual Property ownership because it's an example of what happens when you don't follow the established procedures and then end up in a mess as a result.

As the story goes the "Winkelvii"  hire  Zukerberg to write the software that will drive their invention,  called the Harvard Connection.  At the time, social sharing sites were not unknown as MySpace was already in the market and doing quite well.   The Winkelvii supposedly had the idea to focus social sharing websites  on specific Universities rather than make it open to every one as MySpace did then [and Facebook eventually did also].

  When they hired Zukerberg they made their first mistake.   They did not execute and sign an intellectual property agreement with him.   It's a very common practice to draft such agreements.  Most large companies use them.  I signed one at Kodak.  They say very plainly that anything you invent on your boss's dime belongs to them, not to you.   Zukerberg could have declined to sign, but he never had to.

The Winkelvii apparently knew  little about writing software.  That's why they hired Zukerberg.  He eventually decided that  their concept was "lame"  and  went  off  on his own to design a "better mousetrap"  which eventually becomes Facebook.   Since the inventions Zukerberg makes after parting from the Winkelvii make no use of their original concepts,  as Zukerberg concludes, when he is brought to court over the matter, he feels they contributed nothing and are owed nothing.

Strictly speaking both the Winkelvii and Zukerberg are co-inventors as they both contributed elements of the final invention.  The rule in patent law is that anyone who is responsible for at least one patent claim is a co-inventor and thus is named on the patent. The fairest way to handle such situations is with a Joint Development Agreement. 

 A properly constructed Joint Development agreement (and I've seen many) has 2 basic rules. 

1) Each side specifies what they owned in advance.  The agreements  usually allow them to keep that material.  

2) Anything that is developed after the project starts, no matter by whom, is considered Jointly Developed Intellectual Property and its ownership is the subject of, and is determined by, the agreement.  

If the Winkelvii and Zukerberg had executed a JDIP agreement, both would have owned a piece of Facebook as specified by the agreement and there would have been no need for a court battle. 

The Winkelvii eventually earned $67M from their court case.   But, given the current value of Facebook, ($24-$32 Billion ) that was chump change.  Their lawyers also probably took at least a third of their $67M.   I understand they are now suing for more. They are not expected to get it. To bad they didn't think things through at the beginning.

 What is not said in the movie is that the Winkelvii founded the Harvard Connection well before connecting with Zukerberg.  If they had patented their  invention, and never even  connected with Zukerberg,  his inventions would have been viewed as improvements to their patent, and while he could have patented the improvements he would have needed a license from the Winkelvii to practice them.  All together the Winkelvii were the ones who made the biggest mistakes and lost the most as a result.

Business Research in the Internet Age

The Internet is an amazing resources.  You can find just about any information that you want at the speed of light and for free.  And that is actually the problem in doing some business research.  While you can get a great start with the Internet . there are many situations where you need information that is not available there ,  at least in the form that you want it.

What clients often badly need is "Specific"  information.   Such as "what do prospective customers think about MY new product".   Where are the potential customers for my product located?   What do they need most?   How do they contrast my product to that of my competitors?

This kind of specific information is seldom available on the Internet.  While general marketing information can be found in any number of places,  specific information is much harder to find.

As an example,  it's pretty easy to get lots of information on publicly held companies. They are required by law to disclose information in their annual reports and in statement filed with government agencies, such as the 10K report they must file with the SEC.  Getting such information on privately held companies is much more difficult.

As an exercise in support of our First Look^TM product,  we did an extensive due diligence report on the local Grocery chain,  Wegmans.   Although Wegmans is a large and well known company, it is not publicly held.  Hence detailed information on it is much harder to find.

Through the use of non-public databases  and other such resources we were able to  compile a pretty complete report on Wegman's.   This involved another  task of modern business research.   Combining information from a variety of places.  

 While a Google search on Wegmans might yield thousands of hits which in aggregate may contain the information you are seeking, no one is likely to have organized them into a useful report.

That's something we can do for you at Penguin.   Just log on to the Penguin Website and click the tab for First Look^TM,.  Learn how we can give you 80% of the value of a due diligence report for 20% of the cost.