Happy belated World IP Day! Indeed, April 26th was the annual day of the year where people are reminded that there are these things called intellectual property rights and they matter!
I celebrated that special day by giving a presentation to the bankers at the Business Development Bank of Canada (BDC) at the behest of their IP Investment Group. For that group, and for most of us in this industry, every day is IP Day. Indeed, IP is centric to everything they do. One must remember that close to 90% of the value of companies nowadays lies in their intangible assets. As my former boss Marshall Phelps used to say, IP is not an event; it is a process.
While I have consulted with and mentored technology-based companies for many years, I am always surprised by the frequency with which IP is considered an afterthought. That is… until it isn’t, and senior management and investors then scramble to find immediate solutions that only years of planning and careful execution can really deliver. For many, IP is that leaky faucet, always postponed for a more urgent issue, calling the plumber a forever to-do item, until you discover a serious mold issue in your kitchen.
So, for those of you who have that faucet as a “to-do” item and are wondering where to start the process of building a solid IP position, both defensively and offensively and without losing your shirt, this is for you….
As usual, as I focus on the macro picture in this newsletter, I want to remind everyone that we track everything that is going on in this world and for those who need their regular dose of news, once again you can follow me on either LinkedIn or Twitter where I post almost daily about some of the most newsworthy events..
Tangible IP News
We are pleased to report the closing of another transaction regarding the AST 2020 IP3 portfolio that we have been offering on the market. This is the second transaction on this portfolio, with a third one in the works. However, there are still several families still available for a straight sale at a price point that should please most buyers. So don’t wait too long if you would like to review those.
In the next several weeks, we will be sharing several exciting new portfolios. The first covers those handy floating camera buttons on your phones. It has both US and internal coverage. Let us know if you’d like to review when it is ready for primetime. We are also preparing a great portfolio of over 25 assets originating from both Nokia and Siemens with relevance to wireless communications. This one should be out within the next few weeks. Finally, we are preparing a portfolio that pertains to high frequency trading and should attract quite a bit of interest given the dollars at stake. This one will be ready in the latter half of Q2. Stay tuned.
We have a buyer interested in acquiring US assets in the following technology sectors:
- HVAC (air- and water-cooled chillers, condensing units, air handlers/distribution, sensors, controls, automation, etc.)
- Commercial and residential security systems (access control, video management, cameras, sensors, etc.)
- Fire detection and suppression (controls, sensors, notification devices, water sprinklers/distribution, etc.)
Please reach out to Erika Warner at firstname.lastname@example.org with any assets that may match this request.
I’m A Fast-Growing Company with Little or No IP. What Do I Do Now?
Most people I speak to these days seem to know they should be doing *something* about IP, though the level of education and understanding of how IP impacts strategy runs the gamut. Many people either don’t really understand the role of IP or if they do, they haven’t really started to execute their strategy, usually because a myriad of competing interests will affect their bottom line or their very survival matters more than IP considerations. However, assuming a company survives those first brutal years, the importance of IP never fails to catch up and by then, there can be serious issues on the horizon.
First, and although we speak often about patents in this column, IP is far broader and it extends to trademarks (or brands/logos), trade secrets and know how, copyrights, contracts, etc. So, as the problem might be multifaceted, so will the solution.
Second, it should come as no surprise that a solid IP Strategy is not built in a vacuum and must be in support of and totally aligned with the overall business strategy of the company in order to achieve a sustainable competitive advantage. More specifically, its goals should be to:
- help drive profits and expand revenue opportunities;
- minimize legal risks and dependencies toward third parties;
- position the company as a unique provider of goods or services through an array of enforceable rights;
- maximize the company ROI to its shareholders and;
- boost the company valuation in view of its financing and/or exit strategy.
Put in accounting terms, the goals are to maximize assets and minimize liabilities.
These are the common steps involved in developing any IP strategy:
- DEFINE THE ORGANIZATION’S OVERALL GOALS: The same way you don’t design the same financial plan for someone just out of college compared to someone who’s about to retire, there is no one size fits all approach when it comes to IP. To articulate the right strategy, it is very important to first understand the company’s mission, short and long terms goals, history, product and innovation pipeline, tolerance to risks, name recognition, partnerships, financial, operational & technical strength, ability to raise capital rapidly, exit strategy and timing thereof, etc. This defines a context for planning and a timeline for executing on the strategy.
2. ASSESS THE INTERNAL RESOURCES OBJECTIVELY: There are three steps to this process. This starts first with an objective appraisal of the internal innovation resources. In other words, who creates IP in the company? This step often reveals that the systematic IP capture checkpoint (if there is one) is limited to the R&D teams and undervalues the innovation potential of the rest of the employees (e.g., marketing, sales), consultants, customers, etc.
Then, we focus on the assessment of the IP resources and value them along a three-prong axis relative to their legal scope, geographical range and duration. This step is often referred to as the “IP Audit”, although it goes further than simply categorizing those assets by classes. A comprehensive assessment will cover:
- patents filed and issued worldwide, defensive publications, in and outbound licenses, etc.
- trademarks and how the branding strategy is articulated, locally and in new markets;
- trade secrets and how those are identified and protected;
- copyrights, especially when it comes to software code, with a special attention to issued raised by a liberal use of open source software;
- any challenges posed by third parties to any of the above;
- how those various categories of rights are protected and obligations made enforceable via proper contractual agreements;
- money available/earmarked to invest in IP assets;
The third step consists of assessing the internal IP practices, which focuses on the presence (or absence) of established practices and policies that affect the creation, protection and monetization of IP assets, such as: use of NDAs, disclosure forms for capturing innovations, inventory and protection of trade secrets, level of IP savviness within management and employees, treatment of competitive business intelligence, sharing of information with customers/partners, guidelines regarding incoming and exiting employees, use of third party components (data, images, software –both commercial and open source), participation in standards body organizations, etc.
3. EVALUATE THE COMPETITIVE MARKET: This is about assessing short and long term liabilities as well as opportunities with respect to actual and prospective competitors. What do we know about the company’s competitors? Is the company’s main product or brand at risk? In which geographies? Are competitors or other players filing numerous patents? Can the company enforce its own IP assets against competitors? Can suppliers or partners present a competitive risk? Can that risk be contained? How? Is a FTO study useful to alert about risks and allow preventative measures to be developed ahead of time? Would a landscape study reveal industry trends and patenting opportunities in so-called “white spaces”?
4. DEVELOP A SIMPLE, LONG-RANGE IP STRATEGY AND MANAGEMENT PLAN: This step is the synthesis of the various assessments made in the previous steps. It involves articulating the overall strategy and related IP management plan that is based on the detailed analysis of potential risks, untapped resources and underutilized assets that can be strengthened or otherwise monetized (e.g., via licenses, spinouts, etc.). Consistent with budget and goals, the IP plan must ultimately allow the company to focus on i) preserving; ii) perfecting; iii) transferring; iv) acquiring and; v) enforcing its IP rights.
5. IMPLEMENT THE IP STRATEGY AND MANAGEMENT PLAN: Once the overall IP Strategy has been reviewed, discussed and approved internally by senior management, implementing it involves taking the necessary steps to follow specific recommendations and remedial measures; measuring performance at each stage and follow up as necessary. A quarterly checkpoint and an annual refresh of the assessment and resulting plan is optional, but highly recommended.
Sadly, while no one plans to fail, too many fast-growing companies simply fail to plan when it comes to IP. A robust IP Strategy will focus on those intangibles that form the quasi-totality of a company’s assets yet are often neglected by management because they are not as visible as tangible assets and don’t need to be reported in financial reports. A well-articulated strategy becomes part and parcel of the overall business plan and plays a significant role in allowing a company to achieve and maintain a long-term competitive advantage, returning value to its owners and investors.
In concrete terms, the three immediate actions we most often recommend clients take are: i) conducting a freedom to operate analysis (FTO) to uncover and assess any potential third party IP risk, ii) undertake a landscape study to understand how their industry handles IP and where R&D efforts might be most impactful and, finally, iii) conduct a patentability assessment of any alleged invention prior to investing significant efforts and money into reinventing the perennial wheel. If they do just this, they will be eons ahead of their competitors in terms of putting in place a sound IP strategy.
In our next column, I will elaborate a bit on how successful companies build their patent portfolio as well as some of the pros and cons of inbound and outbound licensing in the context of open innovation.