How To Build A Strong IP Portfolio: rPost CEO Zafar Khan (Part 5)

Sramana: How has your company progressed through 2011? What has your growth rate been?

Zafar Khan: We raised our first private capital in 2001. We raised capital through a number of private financings over the course of time. We signed on the U.S. Government Accountability Office as our first government customer in 2003. The government wanted to buy only from one of the major telecom carriers, so we had AT&T, Sprint and Qwest sign on as resellers for the government market at that time. They were able to insert us onto the GSA schedule. The U.S. GAO purchased our product in 2003 from AT&T and they have re-ordered every year through them.

Greenberg Traurig signed on as an international customer in 2004 and has been using the service ever since. Our first international investment bank, McCrory Investment Bank, signed on in 2005. Today we have customers in all different industry sectors and company sizes. We have customers in nearly every country on the planet. We have business teams in London, Boston, Amsterdam, Zurich, and some parts of Latin America.

Sramana: What is the competitive landscape for this company?

Zafar Khan: We have 35 patents that have been granted in 21 countries. Our patents are early dated, and we believe they give us the broad claim in the market we focus on, legal proof for email, that extends into different business- or email-related transactions involving electronic signatures and encryption. Certainly there are competitors trying to enter the market today, and there are competitors on the fringes of the market as well.

Sramana: Does EchoSign fall into your competitive landscape?

Zafar Khan: The answer there is yes. In fact we just sued EchoSign for patent infringement more than five of our patents.

Sramana: Very interesting. Both companies have been around for a while. Would you talk more about the situation?

Zafar Khan: There is ongoing litigation, so I can’t say too much. There are a lot of ways to electronically sign a document. We do not have patents for every way to electronically sign a document. As people started to look at using electronic signatures to obtain recipient signatures on contracts and documents in a manner that would have a robust audit trail and proof around that transaction we felt that it treaded on our patents. We had not looked hard at their service in the past because it seemed, based on the information we have, that only recently have they started focusing on having a more robust record around the sign-off transaction.

Sramana: There seems to be a lot of activity going on right now in the patent world. The acquisition of Motorola Mobility by Google is an example of a patent-driven acquisition. You seem to have a good IP portfolio. How is this driving your business strategy?

Zafar Khan: If you are early enough in the marketplace and you have the means and insight to obtain intellectual property, then you do it so that when the market becomes riper and others try to enter it you have something to help you protect your position. Patents are a way of teaching the world about your technology and how to replicate it. You are giving your message out rather than a trade secret. That will help spur innovation and in exchange for that the government declares you have an exclusive claim to that area of technology for a period.

The goal of an inventor is to make sure that the invention and the claims cover a broad enough aspect of your business that you have a way to monetize your technology when the market catches up. We have seen that the market has caught up to our technology. You can tell that by the shortening of the sales cycle and the number of new entrants like EchoSign. What you are seeing in the market today is that people are respecting the value of patent portfolios. You are seeing that in a lot of companies like Apple. They have a very elegant product that they entered the marketplace with, and they filed patents for those mobile devices. When they saw people infringing on their patents, they decided to take action.

With companies like EchoSign and others who we are suing for patent infringement, it is the same thing. People assume they can enter late in the game for a free ride without having made the investments early on. That is what patents protect against.

This segment is part 5 in the series : How To Build A Strong IP Portfolio: rPost CEO Zafar Khan
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