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How a Brilliant Idea Can Lose Billion-Dollar Opportunity if Not-Protected Well: The Case of NEST Labs

February 26, 2012

With more and more new businesses making it to the headlines every day, the urge of making your big idea to a multimillion dollar business keeps you restless all night – It is time you start putting it into documents and then translate them into a highly successful business.

But wait, is there a step in between that can cause this rosy dream to shatter – The story of NEST – The Silicon Valley Wonder Kid Startup says it all.

Nest Lab

The Nest thermostat, created by the minds behind the iPod and the iPad, and probably the only smart thermostat to create a solid buzz in the Silicon Valley and the technology community globally.

Nest, which was founded by the godfather of the iPod, not only provides an intelligent thermostat for your home but also saves energy as well. For example, the technology will analyze the thermal decay of a house to determine how long it takes for heat to dissipate. An “Auto-Away” feature uses far-field motion detection to assess whether no one is in the house for a few days, perhaps because you’ve gone on vacation. If so, the unit goes into low-energy mode.

The Nest thermostat also tracks your manual heating adjustments. For example, it can learn that you turn off the heat when you leave for work in the morning and turn it back on when you return in the evening, and then start to automatically make these changes for you.

With the brilliant innovation that NEST came up with, this product won the best Innovation award at the Consumer Electronics Show in Las Vegas. While the NEST team was busy enjoying their moment of glory they got the shock on 6th February when Honeywell sued NEST Labs for infringement of seven of its patents.

So what did this really mean – The lawsuit actually names both Nest Labs and Best Buy, which sells the Nest Labs thermostat. Honeywell not only wants to prevent Nest from the continued use of its patented technology but also seeks to recover damages caused by the infringement.

Nest Lab

According to a pressrelease, the specific patents are:

U.S. Patent No. 7,634,504 – “Natural Language Installer Set Up for Controller”
U.S. Patent No. 7,142,948 – “Controller Interface with Dynamic Schedule Display”
U.S. Patent No. 7,584,899 – “HVAC Controller”
U.S. Patent No. 7,159,789 – “Thermostat with Mechanical User Interface”
U.S. Patent No. 7,159,790 – “Thermostat with Offset Drive”
U.S. Patent No. 7,476,988 – “Power Stealing Control Devices”
U.S. Patent No. 6,975,958 – “Profile Based Method for Deriving a Temperature Setpoint Using a ‘Delta’ Based On Cross-Indexing a Received Price-Point Level Signal.”

Though this IP war might rob the consumer from a great product, but looking at it from Honeywell’s perspective, they are justified at protecting their Intellectual Property.

So what does this mean for your startups:

  • Protecting your startups intellectual property should be a strategy not an after the fact tactic.
  • You need a plan for trademarks, copyright, trade secrets, contracts/NDA’s and patents before you get funded.
  • Your intellectual property may be an additional revenue stream or may add substantial value to your company.
One Comment leave one →
  1. July 15, 2012 2:43 pm

    Fast Execution is the best protection 🙂

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