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Intellectual Property from a Corporate in-house perspective

Keltie LLP

K2 IP Limited

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IP targetIt’s easy for a private practice patent attorney to develop a narrow view of the IP world. Essentially:

Draft – File – Prosecute – Grant – Repeat*

It was therefore a pleasure to welcome Donal O’Connell1 to Keltie recently to provide some insight into the world of Intellectual Property from the perspective of the corporate in-house officer.

Some highlights gleaned from Donal’s presentation are below. As Donal noted during his talk the idea behind the presentation was to present some alternative ways and techniques for looking at corporate IP and to provide a toolkit for having a more engaging discussion with a corporate in-house IP department.

  • Intangible assets now make up around 80% of the value of a company compared to around 20% 40 years ago.
  • Companies owning intellectual property rights (IPRs) tend to have better revenue per employee, more employees and pay higher wages than firms that don’t have any IPRs.
  • The definition of IP is wider than just patents, trade marks, designs, copyright and domains etc. Intellectual assets may encompass any documented company “knowledge” such as business plans, company data, meeting minutes etc. Intellectual Capital may refer to the knowledge and skill of a firm’s people.
  • When meeting a corporate in-house IP function it can be very useful to get a feel for the overall organisational structure of the company in question and how the IP function sits within that function.
  • Simply asking who the IP department reports to can shed light on the way in which IP is viewed within the company. If they report to the CTO then the firm may be regarded as essentially creative. If the IP function reports to the CFO then the IP function is seen as a cost centre (and so are likely to be interested in costs and cost saving measures). If the IP function reports to the General Counsel then there may be a more litigious or contentious angle to the use of IP in the company.
  • Companies, whether they know it or not, are likely to sit somewhere on an “IP maturity ladder” (see Figure 1 below) comprising a number of different “rungs” denoting the sophistication within which they view IP. Level 0 in this ladder is reserved for those companies that do not have any IP knowledge. Level 5, at the top of the ladder, covers companies that have a visionary approach to IP and who use IP to guide the future of the business. Most companies however are likely to fall into the levels that regard IP defensively (level 1), as associated with costs that need to be managed (level 2), or as assets which can be traded (level 3).

    Slide B

    Figure 1

  • A useful exercise (see Figure 2 below) to undertake is to work out what proportion of an IP function’s time is taken up with different types of activity, e.g. strategic IP management, tactical IP management, legal implementation, data management etc. Too heavy a focus in any one area could suggest the IP function is not working as efficiently as it could do or is being distracted by tasks that could potentially be sub-contracted out. In this regard it can be useful for an IP function to consider what tasks are core to its operation (i.e. those tasks that provide a competitive advantage) and those that are context activities (i.e. assets and activities that are needed to fulfil certain commitments to stakeholders).

    Slide 10

    Figure 2

  • The IP environment (see Figure 3) in which a firm sits can be very useful to determine as it can help highlight where IP risks are. IP from an environment perspective can be plotted into a four quadrant graph as below.

    Figure 3

    Figure 3

  • If a firm’s competitors are all within the same quadrant as the company then this might indicate that immediate IP risks are relatively low (as everyone is in the same position). Where competitors are in different quadrants then there may be risks to the company in question.
  • As an example Donal highlighted the journey of Nokia who had begun their corporate “life” as a goldfish (low sales, low IP strength) and had gradually moved in a clockwise direction through the “target” quadrant to the “glasshouse” quadrant and finally into their present position as a “shark” where they now license their IP but have low actual sales.
  • An interesting anecdote surrounded Facebook’s IPO in which they came to an arrangement with IBM prior to the IPO to allow them to acquire IP assets in the event they were challenged on an IP level during the IPO process (Facebook at the time having low levels of its own IP). During the IPO, Yahoo apparently came knocking but Facebook was able to (temporarily) obtain relevant “anti-Yahoo” patents from IBM to avoid the need to take out costly IP licences. This situation contrasted sharply with that of Google when they went through a similar process some years ago.
  • An in-house department must also not just concern itself with its own IP but that of other players in its own eco-system. In this regard it was noted that Dell has a relatively low IP portfolio but has a good IP strategy because it is “friends” with Microsoft (who can therefore provide protection to Dell on software matters) and Intel (who can provide hardware protection).
  • It is also useful to get a handle on the level of IP control a firm exercises. Some firms have a strong controlling atmosphere whereas others can be quite turbulent.
  • There are 5 main IP areas that a firm should be strong in from IP creation through IP portfolio management, IP exploitation and IP enforcement to IP risk management (see Figure 4).

    Figure 4

    Figure 4

  • IP permeates an organisation from the R&D level through sales, marketing, HR, finance and other levels. IP adds value in a number of ways such as freedom to operate, product differentiation, revenue, image, investment and others.
  • It is important to have an IP risk mitigation process in advance: it’s no good trying to get insurance and indemnities after you’ve just been sued!
  • There are many platforms available for financially modelling the performance of an IP asset and it is important to keep in mind how the IP strategy of a company aligns with the overall corporate strategy.

 

Mark Richardson 17 November 2015

*Nine times out of ten at least. In the 10th go around you may get Draft – File – Prosecute – Grant – Post grant action – Repeat

1Donal is an experienced IP consultant specialising in the areas of innovation and intellectual property management. Donal is founder of Chawton Innovation Services and now a consultant at K2 IP


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