Tech clusters and the role of lawyers

A recent paper on ‘Tech Clusters’ from Harvard Business School concluded that tech clusters play a central role for modern innovation, business competitiveness and economic performance. Whilst analysing some of the reasons behind the growth of tech clusters, both in the US and globally, one of the factors that the paper omitted was the role that lawyers and other professional advisers can play in helping to develop and grow tech clusters.

First though, what is a tech cluster? For this, I am going to borrow from the key messages presented last year in a report by the Organisation for Economic Co-operation and Development (OECD) on the Cambridge Cluster. The report identified seven key criteria or growth drivers for the Cambridge Cluster:

• A major knowledge and talent anchor –  in this case the University of Cambridge, playing much the same role as Stanford University does for Palo Alto or MIT does for Boston – a source of knowledge, through research, teaching and IP generation, which spills over into the local business community. The University also acts as source of young talent with cutting edge skillsets;

• Strong commercialisation of University research – through Cambridge’s science parks and incubators. This is the infrastructure, if you like, for the cluster, or gives rise to that infrastructure through spin-outs and start-ups;

• Entrepreneurial finance – the accessibility of investors and venture capital to help fund the growth of the tech companies in the cluster;

• Entrepreneurial culture – building up a culture which encourages and facilitates spin-outs and start-ups;

• Entrepreneurial networks – building a series of networks through collaborations and information exchange between the tech companies in the cluster, and between the University and those companies;

• Ecosystem leaders – the existence of key serial entrepreneurs and their commitment to the development of the cluster (Cambridge has, I would suggest, quite a few of these tech leaders); and

• Corporate knowledge and talent anchors – companies such as Microsoft and Astra Zeneca locating in Cambridge in recent years have facilitated further research, knowledge and IP, and have undoubtedly attracted talented individuals from outside of the cluster to work within the cluster.

This is not intended to be definitive definition of a tech cluster, but rather a blueprint for the major constituent parts that make up a tech cluster. But why should lawyers need to know any of that? Well, if we want to play a role in helping to develop a tech cluster, then we need to know where to focus our skills and resources (and conversely, where not to do so) within the cluster blueprint. Here are some examples:

• As lawyers, we are good at buying and selling companies, and helping companies through their initial and subsequent rounds of investment. The corporate lawyers play an important role in facilitating University spinouts and local start-up companies. Our advice in relation to these activities helps to strengthen and grow the tech companies and entrepreneurs operating in the cluster;

• The commercial lawyers play an active role in drafting and negotiating the commercial contracts, such as collaboration, IP development and licencing, and supply agreements. These tech-related contracts are the lifeblood of the cluster and the basis for revenue generation for a lot of the tech companies in the cluster;

• The IP lawyers advise on the protection of trade secrets and IP, thereby establishing the basis for the commercialisation of the IP and further investment in research, all of which contribute to the knowledge base of the tech cluster and its protection against infringement;

• The employment lawyers help to develop the talent pool in the cluster through employment and consultancy contracts, enabling the provision of employment benefits (such as share options and incentive schemes) and in ensuring that the tech companies have in place the necessary policies and procedures which will allow the talented individuals to thrive within their chosen organisation; and

• The commercial property lawyers negotiate leases and licences for offices and manufacturing facilities, deal with planning issues and conclude secured lending. These activities are a major contribution to the infrastructure of the tech cluster as it expands spatially.

There is also an international dimension to tech clusters and, as professional advisers, we are often involved in deals or contracts that relate to tech clusters in other countries. We regularly advise tech clients who work with universities and research establishments around the world (so called ‘major knowledge and talent anchors’) and we help clients who want to set up operations overseas so that they can be closer to their clients and customers higher up in the supply chain(the so called ‘corporate knowledge and talent anchors’). We might not think that we are contributing to the growth of any tech cluster, at home or abroad, but in many examples of our work that is exactly what we are doing.

I am not suggesting here that lawyers and accountants are in any way driving or determining how tech clusters grow. There are many factors that contribute to the growth of tech clusters – from innovation, competition and economic efficiencies to favourable benefits, government policies and geographical location – and the availability of experienced professional advisers is probably some way down the list. Nevertheless, we do have a role to play and it is one of which we should be proud. I will be writing to Harvard Business School in just these terms.

Andrew Priest

Andrew is a partner in the Commercial and Technology team at Birketts LLP.