The patent protector

Justin Simpson, the 35-year-old former lawyer, had one idea: to make the filing of international patents cheaper and easier.

He started PCT Filer (now called Inovia) seven years ago.  Inovia has revenue of more than $10 million and just this month, in the midst of the financial crisis, is profitable for the first time. Amanda Gome talks to him about his tips, and the barriers, to building a global business.

Amanda Gome: Why Inovia?

Justin Simpson: I am from a patent attorney background and the patent process is long and painful, but there’s one step where you take a single application and you need to file it in foreign countries – and that’s what Inovia helps with.

So you’ve got the idea and you need to patent it, and you’ve come up with a way of doing it cheaper, quicker and easier than going through the normal legal process. How’s that done?

Normally you’ve got a patent attorney in your home country, which has to communicate with patent attorneys all around the world to get this filing done. We’ve invented a technology, which I’ve patented, which streamlines a lot of the process.

Our systems perform a lot of the paperwork that happens in Australia and overseas so it’s through technology. And secondly it’s through the bulk buying power that we have. We now handle more of these applications than any law firm in the world. Most of which have been around for 100 years. And our bulk buying power allows us to get better rates, which we pass on to our clients.

So how much would it cost to get an idea patented in say 20 countries?

Well 20 countries is kind of an extreme, so maybe six countries might cost you about $40,000 in the traditional way, and it might be about $25,000 or $30,000 using it our way.

What countries are necessary to hold patents in?

It depends on where the company plans on commercialising, where they have capacity to manufacture and sell, or where they intend to go.

Most Australians will typically file in the US and Europe and Japan; those three are kind of the three most popular. And then it tiers down from that where you go into China or India depending on whether you’re in manufacturing or automotive, or depending on the technology.

You started this at 28 and you were a lawyer that had a good idea and started the business. What was the hardest thing in the early days?

I didn’t really have any business training. I guess it was a matter of working things out as I went along, which I did the best as I could. But as you go along you make mistakes along the way. I think if I’d had a mentor or a senior business adviser who had gone through and made the mistakes, it probably would have been easier to have got that advice. But I was young and I thought I knew what I was doing, so I just went and did things myself. Having to make all those decisions without any guidance was probably one of the harder things.

What were some of the other big mistakes you made back then?

We didn’t build a sales team in the way that professional sales teams should have. I sort of hired one or two people and they were working by themselves in a foreign country, and not having that direct control and management meant that they weren’t particularly productive. So that money was effectively wasted. The sales team we’ve now built has a good leader, an experienced leader and experienced team, and all the checks and balances that have happened.

Another thing we did, I think we grew a little bit too fast. And as the global financial crisis hit late last year, rather than continuing the very strong growth that we’ve been aggressively pursuing, we thought, well we need to be a little bit more conservative and burn less cash, and we had to cut some of our costs. And that’s one of the reasons we’ve been able to turn into a profitable business now, so it’s a lot more secure.

Funny isn’t it, you get a recession and you make all these clever decisions. It’s like cleaning the house before you sell it. You think, why didn’t we do that before.

That’s right. It’s in the times of necessity you have to make those difficult decisions.

How did you raise the money for the business? How much did it cost?

Initially I took a part time job as a patent attorney and worked part time to keep the business going. We then got a little bit of investment from a patent attorney firm and a small venture capital organisation. Just a few hundred thousand dollars, and then further down the track we were able to raise a couple of million dollars from different patent attorneys from around the world. So we’ve raised about $3 million to date in tranches as the years have gone by.

How long did it take you to be profitable?

Seven years. We’ve just turned profitable this month.

Congratulations.

It’s really been a deliberate choice. We could have been profitable earlier but our growth wouldn’t have been as strong. So it was a strategic choice to take investment from various sources and grow the business faster than our natural growth would have allowed.