© Faveo Limited 2008© Faveo Limited 2008 joanne.morgan@faveo.co.ukjoanne.morgan@faveo.co.uk

Faveo Dr Joanne MorganChief Executive

®

Thank you all for attending this presentation. Dearest thanks to WIPO

& the ICC for inviting me to speak.

© Faveo Limited 2008© Faveo Limited 2008 joanne.morgan@faveo.co.ukjoanne.morgan@faveo.co.uk

Faveo Dr Joanne MorganChief Executive

®

Case Study: Intellectual Property in Business & the Role of Government

Support

History of Faveo®

Use of Intellectual Property (IP) IP based business are important for economies Driving the “Knowledge Economy” UK Government Support for Faveo®

Issues facing businesses wanting IP Rights (IPR) Issues for businesses seeking government

support Practical guide for governmental support for an

IP based knowledge economy

Presentation Overview

Why are IP Based Early Stage Businesses Important?

The brilliant aspect of IPR is that those rights can be largely global, giving the owner a global monopoly

This is rather like have a resource such as gold or oil which you can export to other countries safe in the knowledge that not every country can produce what you have

For countries with dwindling resources, few resources, a high cost base or those wanting to harvest another resource of value – the brains of its people is well worth the investment

If a country produces new inventions that have a global appeal, then undoubtedly that economy will benefit because these businesses will be worth a lot of money & will employ people

In the early stages it is hard to know which invention will succeed, so it is risky, but the value of a successful innovation is likely to be so great this will compensate for any investment in ideas that fail

It is a fact that very few large businesses invent & innovate & that in reality great ideas brought to market by big businesses have been developed by small companies & then sold to big business, so small businesses need to be able to grow big enough to either be bought or to become successful, either is great for an economy

History, Dr Joanne Morgan

I am very lucky to have the background that I have because without it I doubt that my company Faveo® could have done so well with the product that I invented. I believe this because government advice in the UK for private individuals wanting to commercialise an invention is almost none existent in my opinion

I feel UK government support & advice for public institutions like universities & the NHS is extensive & largely very well done

I learned to file & commercially exploit IP from the public sector. I learned my skills through NHS Innovations (www.em-nhs-

hub.org), The Universities of Nottingham (www.nottingham.ac.uk) & Sheffield (www.sheffield.ac.uk) IP exploitation departments & a venture capital company called FusionIP (www.fusionip.co.uk)

Academic Qualifications:– BSc Biological Sciences– MSc Oncology– PhD Medicine & Health Science

History, Dr Joanne Morgan – IPR training

The training for IP commercialisation I received was through a 1 year full time Medici Fellowship (www.midlandsmedici.org)

Formal training from patent agents, public & private sector practitioners, finance institutions (venture capitalists, private investors, banks), inventors, entrepreneurs, academic lecturers, management consultants, accountants & more.

On the job training with a mentor from the University of Nottingham working on live cases of IP that had been generated from academics & the route to exploit & commercialise the IP

Group discussions & advice from colleagues on individual cases The opportunity to do all parts of what is involved: from filing a

patent, raising finance, writing a business plan, starting a business, marketing a business & taking a new product to market, with learned knowledge & on the job experience

This then ‘qualified’ me to begin to give advice & work with public sector institutes in order to exploit IPR

Eureka! to Market – The Key Steps

General over view of the development process, but not an exhaustive list

Eureka! – This is having the idea & (usually) making crude prototypes, doing

very early experiments or really thinking around the idea & it’s feasibility

Proof of concept (P-of-C)– Prototypes are made to show the idea would work on a small scale in

practice – important things are learned about the invention here– Not necessarily tested on a large number or people, or in systems that

the final product would be used in (e.g. tested in mice for medicine, on 5 women for a bra, tested on small scale model not in situ for engineering)

Manufacture Ready Prototype Ready for Market– Tests that the product can be produced using full scale manufacture &

is ready for the market it is intended for– Tested on a significant number of people (e.g. 200 women for a bra),

or in the correct system (in people for medicine) or in full scale and/or in situ (e.g. for engineering)

Eureka! to Proof of Concept (P-of-C) for Faveo®®

I had a Eureka moment whilst working for the NHS: I had discovered what I thought was a new method of breast support that worked very differently to how bras normally worked

I knew what to do due to my training & experience, I:1. searched the patent literature (it took approximately 100 hours)2. obtained advice from a retailer & manufacturer in the market, they

said the product would have a good future3. engaged a patent agent with experience in this field & filed a patent4. did top level, global market research (used £6,000 worth of

marketing reports free from the British Library) – told me market size5. wrote a business plan to gain investment to do proof of concept work6. Started a limited company: Faveo Limited7. Got investment from friends & family 8. Secured the work of a designer & advisor in return for shares in the

business & began the proof of concept phase9. Filed a PCT after 12 months adding more to the patent found during

the R&D phase that is part of the P-of-C

Eureka! to P-of-C: Grants & Government Support

P-of-C was 18 months-because we didn’t have enough money Grants were hard to access & advice not available

– Grants in the UK only pay a percentage of what it costs mainly 30-50%– At that time it took a long time to get approval (6 months) & the

chances of getting a grant were low– There were different grants for different things, a separate grant for

patent fees for instance– The rules for each grant were different– There was not 1 over all strategy of funding help that would see IP &

prototype manufacturing costs as 1 problem, & addressing 1 grant often meant you couldn’t apply for the another

– Prototype grants often only helped if you made a plastic product Due to my experience I knew there were 2 grants that were worth

obtaining at the time– £3,000 towards patenting costs from a local council– £1,000 to buy materials to make prototypes

In total the proof of concept phase cost £40,000 (no salaries) I worked a salaried job 4 days a week to survive financially

The Invention & Market Conclusions after P-of-C

After P-of-C I realised that the invention could revolutionise the lingerie industry as this new method of breast support could be used to change the way bras work & are manufactured

Few are aware that bras use complicated physics to create their familiar appearance

Just as an aeroplane wing looks simple, it is indeed complex & relies on high-tech design & fabric combinations to work

Designing the wings of larger-heavier aircraft is infinitely more difficult than for smaller-lighter craft; demonstrated by the Wright brothers who did not deign to design a Jumbo Jet as their first attempt

Bras are like no other type of clothing; women need bras to support & lift up their breasts, so bras are technically precise garments

Larger-heavier breasts are more difficult to lift & support because of the inherent cantilever bra design

Our innovation actually reduces the influence gravity in the design, making size & weight much less important- designs can be prettier, more efficient, effective & comfortable

Patents – vital to secure investment due to R&D– countries that will manufacture or sell– Only the EU has determined that the original patent is actually more than one

invention so that a divisional must be filed

Registered Designs Trademarks (GB & Worldwide) Copyright, Unregistered Design Rights Know-how or trade secrets

– Few really understand how & when to use a trade secret in a business; manufacturing processes for instance, should often be kept as a trade secret because they are usually very difficult to police & filing a patent tells the whole world how to do something- however, the product to be produced should always be trademarked in order that the manufactured product or component is synonymous with quality & performance

This layered approach to intellectual property means that value can be added to the business as it grows. There is usually an additive effect whereby one form of IPR adds value to another – for instance, patenting a product & disclosing that is one thing, but knowing the most cost effective way to manufacture can be an important trade secret adding value to the patent

IPR Conclusions after P-of-C

P-of-C to Market Ready Prototype & Product Launch Date

The next stage was to turn a product that was only tested on a handful of women to something that was tested & developed for a world wide audience & then to launch the product to the market

We used manufacturing techniques that had never been used before so this need to be tested using mass manufacturing processes.

I knew what to do due to my training & experience, I:1. wrote a new business plan looking for £650,0002. wrote a grant application to received £200,000 in grant funding3. started pitching to private investment organisations4. found that they wouldn’t approve the grant until I had the funding5. found that the funders wouldn’t give me investment without the grant6. found that the funders wanted to give the money in tranches & wanted

us to move to the West Midlands (30 miles away) because they were part-government funded & couldn’t invest in the East Midlands

7. found that we couldn’t have the grant if the funding was in stages or if we moved to the West Midlands

8. Found that funders did not understand a business with a female oriented product

P-of-C to Manufacture Ready Prototypes- GRANTS

In the end, we had to turn down a grant of £200,000 because we couldn’t fulfil the strict criteria

– The main problem was that the grant was agreed by the East Midlands local government but the West Midlands local government could not honour the same agreement

– The other big problem was getting proof that we had £600,000 to cover a project that would cost us £400,000 because the grant should be paying for £200,000.

– This is almost impossible unless you are a big business or have a public sector organisation to say that they back you when ever you need money

– This is a silly thing to have to prove, clearly who ever determined this is not a business person because in reality any grant is paid retrospectively, all invoices are checked, proof of payment from bank statements are required & an accountant has to support the claim – so we couldn’t claim for what we could not pay for at any point during the process

However, when I spoke to the Chamber of Commerce, Business Links & other government organisations, they said just how brilliant these grants were & how easy & useful they were. The advisors had no real understanding of the obstacles or processes.

Private Equity Finance

Local government advisors were definitely not trained to help on this front. It was clear that their knowledge was rudimentary & text book. They didn’t even have any way of sign posting to someone that did.

Fortunately, I knew what to do but wanted advice because being a private company rather than large public sector organisation affects how investors evaluate the business

I knew a great website: www.thefunded.com which listed funders & each funder had been commented on by people that had received investment from them or had attempted to engage them- it was a practical guide to investment

What I knew did not prepare me for the problems we encountered during this process & nobody was qualified to help from support organisations

I often wished that I had started a property development company, shop, café or service based company- lots of people advised here

Female Inventors & Finance

Investors were not comfortable investing in a product that they didn’t understand because of their gender

Using all of my teams experience we still encountered a fundamental gender problem – men were embarrassed by the subject matter or else treated the sector as a trivial, low-tech sector

They did not understand how to evaluate the product potential, without exception turning to their wives rather than industry experts to gain market insight & product information

One such experience was feed back from a VC that told us that: a company called Bravissimo was a massive competitor, had been in business for 10 years & therefore we could not possibly usurp them because they were a fast growing, successful company

– he freely admitted that how he had assessed the opportunity- he had asked his wife for advice, but unfortunately she had confused Bravissimo as a competitor when actually they were a potential customer

– the fact that their business was fast growing was great news for our product, if they bought & sold it

– he refused any further dialogue on his wife’s advice

Private Equity Finance & Government Support

Business support organisations should be a voice to feedback problems facing an industry or sector

Often, financing is not understand by support organisations in the context of IP based businesses – they understand about bank loans which are rarely applicable to these business models

Without finance, IP & innovation goes no where because of the high cost; getting this right is integral to success

Support & governmental intervention can influence financial institutions with incentives, allowing innovation to flourish & thrive

I estimate that it costs on average £100,000 - £500,000 to get most inventions through the P-of-C phase which takes 1 – 3 years. £40,000 is likely to be patent costs

This depends on the type of business, it takes longer & costs more in medicine/life science, engineering can vary depending upon the market & consumer based products vary enormously depending on the sector (this may reflect relative costs depending on the country)

Few private individuals have the resources to fund this amount themselves

The Faveo® Product Launch to Market

The investors, whilst supportive decided that we should cut down on our testing phase & launch 6 months earlier other wise they wouldn’t invest

The launch went extremely well but like any new invention, the audience was sceptical & took a lot of convincing

It is common that new inventions take 1 to 3 years before the market accepts & embraces them, & contrary to popular opinion, I do not believe that the market is prepared to pay more for an innovation (this might work for a big corporates with huge marketing budgets but not for small businesses launching a totally new idea)

The launch was intended to prove that we could achieve the previously impossible so that our other more valuable innovations could then be licensed to global brands – it would make them take us seriously & demonstrate the impact that using our innovations & their market presence could produce

Because of the reduced testing phase, we have decided to change our marketing material but not the product. This is very common!

50% smaller busted 50% larger busted

Faveo’s First Product to Market

Fashion Dictated by Lingerie

Sources: www.kays.com www.bravissimo.co.uk www.finestlingerie.co.uk

Competing Products

Only for smaller sizes: A B C/D

Faveo® : C D DD E F FF G GG H

Faveo® DD+ Perk-Ups

Moulds into shape

Moulding a heavy breast is the same as moulding a light breast…..

But lifting a heavy breast is harder than lifting a lighter breast

How does it work?

Same lift as a

normal bra

AGE: 54

Size: 38F

How does it work?

Same lift as a

normal bra

AGE: 54

Size: 38F

New inventions get press! UK press: News Papers & Television We gained ca £300,000 worth of

advertising with a PR budget or £50,000

From a business point of view, a good return on investment

Press & PR for Faveo®®

Future Potential of Faveo®

Having taken our product to market & proven that sales are possible, we have signed up a global distributor to take the product world wide

We expect to secure a licence agreement with a large global brand for applications in a broader context during 2008/2009

We expect to launch new products through partnership with a global lingerie brand in 2010

We have challenges ahead that include– Ensuring the integrity of our IP– Ensuring the integrity of our brand image– Monitoring our licence agreements post launch– Maximising the applications & territories of the licence– Continuing to develop & grow as a business

We continue to learn & experience new things & have a team of multi skilled individuals to help us along the way

KEY QUESTIONS FOR YOUR CONSIDERATION

I had 1 year full time a Medici Fellowship that gave me a sound insight into what IPR was & how it could be utilised to add value to a business. Skills: Legal, commercial & marketing

Questions for those addressing this presentation:Question 1: What level of knowledge are you going to expect

your staff members to have if they are going to:

compile literature in order to educate others (will they have the right skills to find the right experts to prepare the document?)

advise others about the value of IPR & how to exploit those rights

put funding or grants in place in order to support the use of IPR

Question 2: if they aren’t experienced, how will know whether they are putting in place the right processes & putting forward the most appropriate information?

Helpful Grants

Should not be regionalised like in the UK where you reside influences what you have access to: anyone that can innovate should be encouraged

Grants should be overseen by public sector workers that have experience or independent/experienced private sector organisations

Governmental organisations need to employ people with experience in order to put new structures in place, all to often grant schemes are a practical waste of time & cost more money to implement than actually help where it is needed

Grants should be carefully overseen but not to the extent that they stifle innovation because of red tape

Grants should not have silly rules attached to them- in the UK if you begin to export too much or a big company buys your business out within 3 years you need to pay some grants back! Silly.

Governmental organisations need to feed back to the funding bodies to help implement good schemes by having case studies & practical experience

Conclusions

The path from Eureka! to market is easy to map for those with experience, regardless of the market sector i.e. there is a process & way to go about turning an idea into a product on the market so giving advice is possible, if you have experience

Real inventions need a lot of money (this is true of the vast majority of inventions & possibly the reason why so few patents are ever taken to market)

Public sector organisations that support small businesses need to employ expert advice before putting across support for businesses to ensure what they offer is relevant, helpful and supportive. The legal, marketing & business aspect of inventing a product and bringing it to market need to be included – simply getting a patent agent in to do a talk or to give 1 hrs free advice to companies is not enough

Investing in a knowledge economy will be worth the investment There are a lot of schemes operating very well, so learning from

these will save a lot of effort

© Faveo Limited 2008© Faveo Limited 2008 joanne.morgan@faveo.co.ukjoanne.morgan@faveo.co.uk

Thank you for your attentionwww.faveo.co.uk

joanne.morgan@faveo.co.uk