To patent or not to patent: that is the question

"Americans think the world is flat, bounded by Boston on the East Coast and San Francisco on the West Coast," said Franck Jeannin, the French chief executive of LinkGuard, a Maidenhead-based company that manages web links.

An amusing judgement, perhaps, but one he would presumably not care to extend to Michael Dell, who discovered the startup while surfing on the internet late one night. Dell subsequently announced at Comdex in Las Vegas on 13 November that the two had signed a deal to help the direct PC supplier build a 40 terabyte database purely to handle web links.

"Michael Dell is personally putting his weight behind our project. In essence, Dell treats us as if we were a much bigger company, giving us access to key resources within Dell, providing access to technology that is not yet available and so on," explained Jeannin.

Back in mid-October at Internet World Scotland, when vnunet.com first met Jeannin, he talked to us about the patent-based strategy that has got the PC vendor going.

This was the same day that he found himself sitting on a plane next to a paper-shuffling William Hague (en route for Donald Dewar's funeral in Glasgow).

Software patenting has, notoriously, become commonplace in the US, but Jeannin deliberately chose to go for a French patent. He also, some might say eccentrically, chose to locate LinkGuard's head office in the UK.

Broken web links
So what does LinkGuard do? "We fix broken links on the web," explained Jeannin. "Links get routinely broken because they are only one-way, so each time you move or delete a page, then all the pages that link to that page will lead to a 404 error message. The web was never designed. It just happened, and the problem is getting bigger as the web gets bigger."

"We index the web with robots and spiders, and store all the links so that we know who is linking to whom on the web. We tell all the people who link to your page when you move it. If they are an existing customer, we'll fix the link for them. If not, we send them an email," he added.

Jeannin, who started programming at the tender age of 10, and whose early career included a spell in the software games industry, founded LinkGuard in March 1999, on the basis of his French patent (number 98 04660, Computer system for managing links and method for using said system, http://www.delphion.com/details?&pn=WO09953669A1&show_fami=1}.)

"In the US, you can patent software, but it is worthless because someone else can do the same thing slightly differently. Having a European patent is an advantage because even if it takes three to four years to get it, it starts from the date of application, not, as in the US, the date when it is granted," said Jeannin.

In the US, patents on software and business methods have been spreading like a rash in recent decades. A Supreme Court decision in 1981 promoted the patenting of software, which until then had only been protected by copyright laws. But in 1998, the Court of Appeals for the Federal Circuit ruled that business methods could also be protected in this way. A patenting Gold Rush ensued as a result, with Amazon.com and Priceline.com becoming notable prospectors.

But Jeannin is scathing about the levels of US patenting activity. "The Amazon one-click patent is ridiculous," he said. "It's too weak to be a patent. The USPTO [United States Patents and Trademarks Office] doesn't have enough expertise to determine whether something is worth a patent or not."

On the other hand, he describes his patent as "threefold - our link maps, the central database on which is stored all the links, and the fact that we have the software agent running on the source site and on the destination site".

Outdated laws
Despite being armed with this French patent, Jeannin elected not to establish his business in France, however. "The employment law there is outdated, and there is just too much tax regulation," he explained.

But he spent four years at French business intelligence software vendor Business Objects, where he ended up at the international channels operation division as technical director.

"At Business Objects, I went through the process of globalising a French company. There were too many silly laws restricting stock options and working hours - for example, restricting working hours to 35 per week. I do that in three days, so what am I supposed to do the rest of the time?" he questioned.

As for the US, "the problem there is that you can't find good developers. There are just too few software engineers, and you have to pay them five times as much as in Europe - and then they're gone after three months", he said.

LinkGuard's initial funding of £136,000 came in May 1999 from an advisory board that includes David Payre, co-founder of Business Objects, and a number of other Business Objects' old hands - John Ball, Dave Kellogg, Eugene Kain and Jean-Mark Pugin.

New Media Spark also invested £550,000 in November 1999, and in June 2000 a syndicate led by Quester handed over £5m.

But another £1.5m has come in the form of a 'venture leased line' deal with European Venture Partners. "The way that works is that the venture leasing entity pays for 100 per cent of our hardware. We pay three per cent a month, and they take options in the company to buy shares at a fixed price," explained Jeannin.

"It's a good deal for a startup since it helps with cash flow. We're spending £3m on hardware this year, but we pay only three per cent a month. It's brilliant for what we do," he added.

Into the longer term, Jeannin's preferred exit strategy is to go for a trade sale rather than an initial public offering (IPO). "If we get the right opportunity for an IPO then, yes, we will do that. But it is only an exit strategy for VCs [venture capitalists]," he said.