Partner Kate Wilson gives an in depth account of what you need to do to develop an IP strategy for your business.
There is no question that an IP strategy should be aligned with the business strategy.
But, what needs to be better recognised is that IP1 issues can actually drive most strategic considerations in an organisation. For example, many pharmaceutical & chemical companies (Dow for example) focus their research on compounds for which they have freedom to operate and can gain the most patent protection.
When you consider that 80% of the value of a business is in its intangible assets, then it makes sense that the framework of an organisation is based around those assets and associated IP issues – rather than trying to dovetail an IP strategy into a less than effective business plan.
However in the real world most businesses have grown organically rather than through ruthless planning, so this article also takes into account the existing DNA of a business when developing an IP strategy through a step wise approach.
Thus, the first step is to analyse the organisation itself, along with the environment in which it operates. One way to do this is to have regard to the following categories.
The organisational type of a business guides the structure of an IP Strategy.
Individuals often need resources such as money, expertise, staff or distribution outlets. Instead of a comprehensive IP strategy or policy they may only need to know what few steps need to be put into place to attract a commercial partner to provide the resource required.
For small to medium enterprises (SMEs), internal structures need to allow for growth. SMEs are great opportunities to instil an effective IP framework and tend to be quick adopters of IP policies.
Research organisations invariably have issues surrounding their researchers' desire to publish and a culture more biased to science, rather than business. Plus many interactions are around research contracts where ownership of the resulting IP can be ambiguous.
Therefore an IP strategy must include a stringent publication2 policy, an ownership policy and associated template agreements, a training policy to increase the awareness of intellectual property3 amongst the research staff as well as means to encourage them to communicate IP issues to their commercial arm.
Corporates are often large and unwieldy. Therefore the IP strategy needs to have firm guidelines on management responsibilities and communication throughout the organisation to ensure that there is a consistent overall approach to IP issues. This is where either in-house council or a strong relationship with an IP firm can be invaluable. Regular IP strategy meetings help considerably here.
The culture of an organisation can influence strongly how systems are introduced and the content of those systems.
For example, a more gentle approach is required with academic entities than those having a purely commercial focus. Often considerable staff education is required.
Creatives hate accountability and engineers hate paperwork (especially lab books). Therefore any system must be easy to adopt.
Understanding what motivates staff is important as this could affect whether inventor award schemes are introduced and what form they take.
Customer relationships count too. While the correct legal approach may be to lock down ownership of IP in all third party dealings, this approach could adversely affect existing 'friendly' customer relationships.
An audit of existing intellectual property shouldn't just include the basics such as a schedule of registered intellectual property including patents, trade marks, design registrations and plant variety rights.
There also needs to be documentation (where possible) of unregistered assets such as know-how, copyright and even 'collections' which can give a competitive advantage.
It should also include such things as ownership issues as often there are historical relationships which are not immediately apparent.
Conditions of use need to be identified, for example it is quite common to be offered a licence4 to use intellectual property for research purposes only, but a separate licence has to be negotiated for commercial purposes.
And, of great importance but often overlooked, is the scope of protection. Just having a patent5 for a product or a process is not enough. Particularly, if the claims of that patent are quite narrow or do not cover the present form of your products and services.
An IP audit therefore helps determine:
- Gaps in protection,
- Risks, particularly in terms of internal systems, ownership and conditions of use,
- Opportunities as current IP protection may be broader than the current business model, and
- Whether you are spending money on dead wood.
Involving the right people at the genesis of IP can save a lot of heartache later on.
It is expensive and difficult to grow a business that has a weak IP position as a consequence of choosing inappropriate trade marks or developing unprotectable products.
And, it can be financially disastrous to invest heavily in a marketing campaign or product manufacture to find that you cannot enter a market because of freedom to operate6 issues. Then, there is the loss of reputation if you have to recall product.
Plus it is disappointing to miss out on an opportunity because the wider application of an idea is not identified.
Therefore, part of a good IP strategy is to have IP savvy people at 'brainstorming' meetings – whether well-trained staff or an IP strategist.
Competitive advantage/barriers to entry
"If you don't have a competitive advantage, don't compete." Jack Welch CEO General Electric
The decision on whether to invest in formal IP protection is largely linked to the value of the competitive edge it provides or maintains. Therefore with a new product or brand, the focus can be on determining the features which will persuade a consumer to purchase the product or service – and protecting those. Or perhaps protecting the internal processes that allow you to compete on price or quality or...
However, a competitive edge can also be maintained through other barriers to entry, which can include:
- Key personnel
- Niche markets
- Exclusive supply of key ingredients
- Regulatory approval (e.g. FDA)
- First to market (unlikely)
- Disorganised competitors.
Understanding barriers to entry can influence the systems and where to formalise IP protection where these systems do not provide the desired security.
Some of these systems are discussed under Third Party Relationships.
You need to know the exit strategy.
This can depend on the desires of the Board – or the actual product lifespan (e.g. novelty/fashion is very short).
For short lived products, either formal intellectual property protection is forsaken, or quick fix deterrent applications are useful7 just to buy enough time to exploit a market.
Companies in for the long haul require a selective managed process and mindful of budget accommodating expansion plans suit.
A large impressive IP portfolio helps if a trade sale or IPO is planned. Patent and trade mark applications can be timed so that you are not committed to completing the applications before the actual sale – thus avoiding major costs.
Third party interactions
Third parties can include employees, suppliers, contractors, customers and partners. Regrettably, much intellectual property is lost because of third party interactions. Your IP policy should therefore mandate that these interactions are defined and good systems are in place – including:
- Employment contracts
- Key person insurance
- Succession planning
- Confidentiality agreements
- Development agreements
- Documentation protocols
- Visitor protocols
- Award schemes (for employees), and
What, when and how to licence or leverage IP is another article in its own right.
Markets shape your policy as to where to file for IP protection plus the scope of the IP protection you should be seeking.
IP legislation differs per country and strategy needs to accommodate this. For example prioritise Asian TM filings as First to File has priority over First to Use. Understand that medical treatment and software can only be patented in some countries. Know-how cannot be licensed in others.
Look at competitor and/or collaborator activity - not only where they market your product, but also where they manufacture. This can help you decide where applications are to be filed. For example, you may choose to file an application8 in a small market if it can stop a competitor manufacturing in that market and exporting elsewhere.
Knowledge of the strength of your collaborator's IP position can help you work out how to approach licensing negotiations.
It also pays to know what complementary industries there are out there. This way you can licence your IP to non-competing industries and create alternate revenue streams.
The IP position of your competitors is also important as freedom to operate (FTO) issues may arise in preferred markets. For example, a competitor may have a patent in the United States but not in Europe so your approach will need to be different for both markets. Always conduct FTO searching at the start of a project – before too much investment has occurred.
Technology trends can be assessed by looking at the rate at which patents are applied for in a particular area. This can help not only guide your research, but whether you decide to file a cluster of patent applications in a particular area to foil your competitors.
Intellectual property searching9 can extract a lot of the information discussed above including market activity, niche markets and other's brands. As part of your policy you should consider augmenting your normal market research with IP searching.
Sometimes timing can be dictated by the type of organisation and the subject matter they deal with. For example, life science research organisations usually have greater developmental time than commercial electronics companies.
It is possible to delay filing applications or shift filing dates of applications if a particular project is taking time to become market ready. To provide this flexibility you need to mandate that marketing and research cannot publish until the IP position has been clearly considered.
A strategy should require milestones to be met by R&D before there is heavy investment in IP protection. For example, one of the milestones may be the provision of examples that are needed to be included in the patent specification to ensure strong patent protection.
IP protection and associated systems must be budgeted for in terms of time, expertise and money.
Questions can be asked such as:
- Can you afford to have staff conducting preliminary IP searching?
- Is it smart to negotiate with distributors to share in the IP investment?
- Should you license the manufacture and distribution of products (and associated IP) to other parties in selected markets?
The amount of resource that can be diverted to intellectual property determines development of a limited or expansive IP policy.
Putting it all together
The second 'step' in developing an IP strategy is actually quite easy. The mere act of gathering the information above naturally identifies to an IP strategist what is needed. It just takes grouping of the information.
Systemic weaknesses identified within an organisation will need policies to plug the gaps. These need to tie back into communication lines, education of staff, employment contracts and other third party agreements.
Many organisations prefer to have a formal document reflecting these policies – often on the company intranet.
Any gaps identified in the audit should be plugged as well. If an opportunity to gain broad protection has passed, then some creativity may be employed to determine what alternatives are still available – e.g. filing a selection invention patent application.
Product lines with similar markets can be grouped together and filing strategies developed accordingly for each line.
Finally a regular review process needs to be implemented. This can be formal audits and/or regular meetings with an IP strategist to ensure that the business and the IP strategy are synergistically working together.
80% of the value of a business is in its intangible assets.
Understanding the DNA of a business and its environs is essential to realise the true value of those assets.
And, once developed, an IP strategy must be maintained.
Work with your IP strategist to achieve this.
1Refers to the ownership of an intangible thing - the innovative idea behind a new technology, product, process, design or plant variety, and other intangibles such as trade secrets, goodwill and reputation, and trade marks. Although intangible, the law recognises intellectual property as a form of property which can be sold, licensed, damaged or trespassed upon. Intellectual property encompasses patents, designs, trade marks and copyright.
2At some point a patent application is published, meaning its contents are available for anyone to read. In New Zealand publication occurs when a patent application is accepted. However, in most countries publication occurs 18 months after the application is filed.
3Refers to the ownership of an intangible thing - the innovative idea behind a new technology, product, process, design or plant variety, and other intangibles such as trade secrets, goodwill and reputation, and trade marks. Although intangible, the law recognises intellectual property as a form of property which can be sold, licensed, damaged or trespassed upon. Intellectual property encompasses patents, designs, trade marks and copyright.
4A legal document granting another party permission to use an invention that is the subject of a granted patent. The details of a licence depend on the arrangement agreed by the parties, but normally a licence fee and/or royalties will be payable.
5A proprietary right in an invention which provides the owner with an exclusive right for up to 20 years to make, sell, use or import the invention. In exchange for this monopoly the patent is published so that others can see how the invention works and build on that knowledge. The patented invention may also be used by the public once the patent lapses.
6Typically used in respect of a search performed on granted patents or pending patent applications to determine if a product or process infringes any of the claims. If the search determines that there are no relevant granted patents then someone may be said to have freedom to operate (ie to operate a business making and selling the product or using the process). Pending patent applications may affect freedom to operate in the future if granted. Note that the search may be expanded to include registered designs.
7The document that accompanies a patent application. It defines the scope of the invention in the claims and provides a detailed description of the nature, use and purpose of the invention. A specification may be provisional or complete and there are different rules applying to each.
8In most jurisdictions patent applications are subjected to an examination process to determine whether the subject matter is novel and inventive. The terms "application", "pending" or "patent application" are used to describe the status of the application up to grant.
9A review of patent databases to look for relevant published patent specifications. Typically the search will be performed with respect to particular jurisdictions. Patent searching can be carried out for a number of reasons. The most common reason is to determine whether a party has freedom to operate in particular countries, in which case the search will only be concerned with patent applications and granted patents which remain in force in those countries. Patent searching may also be conducted to identify relevant prior art which can be used to support a patent opposition/revocation, or by an examiner during examination of a patent application.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
James & Wells Intellectual Property, three time winner of the New Zealand Intellectual Property Laws Award and first IP firm in the world to achieve CEMARS® certification.