| Select a topic: |
| . |
|
Intellectual Property Management (IPM)
By Jerry Oakes CEO of Synergy Consultants, Inc. Most companies squander over seventy percent of their annual intellectual property budget on a foreign filing-spending spree that yields nothing. It is prudent to prune out some of the deadwood patents. However, every intellectual property manager knows the risk. Trim costs and management chops your budget; drop the wrong patent and management jettisons your career. One of our objectives in our consulting practice is to determine if your technology assets can be valued and employed to generate previously untapped revenue. Companies are beginning to appreciate that additional benefits can be realized from patents and technology including: 
Most managers are aware that to succeed the company must make intellectual property management "everyone's job." IP management should not be confined to the patent lawyers, licensing office, R&D, corporate planners, or any single corporate department. Rather, responsibility for IP has to become a basic biological condition of being that permeates the corporation. The proceeding chart is from a 1993 speech to the annual meeting of the Licensing Executives Society, an organization of which we have been an active member for about 10 years. I borrowed the concurrent engineering concept to describe an "ideal" model for placing IP at the heart of the corporate enterprise. A greater awareness of a corporation's technology assets and deficits is a necessary precondition to improving and exploiting IP assets via internal product line extension, secondary field of use license, first-time license, "entrepreneurial" new product launches, spin-off companies, or joint ventures. Connecting Technology with Markets Throughout the corporation, there is an ongoing conversation about the value and cost of IP and its applications, maintenance costs and market potential. Decisions about how to handle IP — for example, to spin off a new IP, develop it internally, license it to another business entity, or drop it—are made with the timely input and awareness of all functions and departments. Corporate groups are in regular touch with other company divisions and outside companies that may have a role in developing, licensing, selling, or using the IP. A similar ongoing conversation takes place about properties that could be licensed in or acquired to enhance the company's IP portfolio. Every decision about IP is made at the same time other decisions are being formed—that is, concurrently. If IP is handled sequentially - in other words, "thrown over the wall" from R&D to patent department and then thrown over the next wall to marketing and so on - the result may be a product idea that has a weak relationship to the market, encumbrances that prevent it being licensed to outsiders, an R&D department whose mission does not reflect the corporation's future, murky understanding of the needs for in-licensing, costly administrative processes to correct early wrong decisions, and ultimately, properties that are slow to reach the market and expensive to build as specified. The concurrent engineering model also presupposes that relatively junior people within departments are empowered to take responsibility and are aware of the big corporate picture. A corporate culture that encourages creative thinking, cross-functional communication, and teamwork will be more successful at IP management. Furthermore, we have observed in our own practice with companies both large and small that the ones open to new ideas—no matter their origin,—and companies prepared to trade, sell, and buy technology assets from others and to others as needed in a fluid way—are in a better position to take advantage of the cyclical nature of business and their IP portfolios. Superb management of intellectual property is associated with continuous innovation and desirable outcomes such as increased market share and faster product development. For manufacturing companies, the key to excellent intellectual property management is the chance to create an entirely new category and market for a truly innovative product. IP management should strive to spur innovation and growth. When our firm is consulting in IPM we want to know the following: Our clients need to know and understand what their companies want to accomplish with their intellectual property strategy. What are the company's business goals? It is surprising how many lawyers have not asked these basic questions. Many lawyers think they know the answers already, but often they are too caught up in details of their current system to see the big picture. These basic questions have a lot to do with management's vision for the future and very little to do with how invention disclosures are processed. It is probably safe to say that most companies' business goals are to win in business. This may have little to do with filing lawsuits, petitioning administrative agencies, and winning reversals in the courts of appeals. Rather, it has more to do with combating uncertainty, maintaining flexibility, and containing costs. Thus the intellectual property strategy should be engineered to evolve, to address the unexpected, to cut the unnecessary, to discard the weak options, and to hone the good ones. An engineering intellectual property strategy that responds well to change and continually evolves is best. However, evolution involves a delicate balance. Finding this balance in every company is different, and thus every strategy will be different. Nevertheless, there are proven analytical techniques that can assist you in accomplishing your goals. What Deming taught the Japanese executives has spread to the United States. Concepts such as Total Quality Management (TQM), Reengineering the Enterprise, Continuous Improvement (the list goes on and on), have spread throughout the U.S. business community and are now being absorbed into the culture of the legal community. Deming's basic concept and how it applies to the management of intellectual property is to monitor the quality of your product (legal services) and continually fine tune and improve your procedures so that your product continuously gets better. When things get out of control, don't simply put the system back to where it was before chaos stepped in. That is just putting out fires, and putting out fires is not improvement. The intellectual property manager needs a practical strategy that works. To accomplish this, you should divide the task into these three basis steps: 1. Conduct an intellectual property audit, 2. Develop intellectual property guidelines, and 3. Develop an implementation plan. Step One: The Intellectual Property Audit The objective of the audit is to eliminate deadwood and address problems. This alone will likely pay for itself in less than two years, even if subsequent steps two and three are never taken. Aside from the obvious benefits of rediscovering what you have, the audit paves the way to guideline development. The audit forces the company to think about its pool of intellectual property and corporate know-how. Step Two: The Intellectual Property Guidelines This step is where you can start to apply Deming's theories. Think of the pool of intellectual property and corporate know-how developed during the audit as a reservoir of corporate wealth. Competitors (and the forces of chaos) are constantly trying to divert wealth from this reservoir. Thus as part of Step Two, look for the weak spots in the containment walls. Think like a competitor and identify how this wealth might be diverted. If your company has key technology that gives it a competitive edge, the intellectual property guidelines might specify that this technology get the full attention of the patent lawyers. On the other hand, perhaps the company attributes its success to a highly efficient marketing system. The guidelines might specify that patents on this system are not a priority, but that careful control should be placed on protecting this marketing know-how as a trade secret. Still further, perhaps the company markets its data to third parties. The guidelines might specify that patents are not a priority, but that tight license agreements and copyright protection should be pursued. To strengthen the guidelines, separate the pool of intellectual property into classes and articulate what makes each class unique or commercially valuable. For patentable subject matter, identify the maturity of technology. Is it embryonic technology that may or may not hatch; is it growth technology marked by frequent spurts of innovation; or is it mature technology where advances are largely incremental improvements? Also ask, is the technology key to this company's core business; or is it simply base technology that the entire industry shares; or is it breakthrough technology that could redefine the entire industry? These are things that dictate what the guidelines should look like. Step Three: The Implementation Plan Construct step-by-step processes to implement the intellectual property protection decisions dictated by the guidelines. Different classes of technology call for different protection plans. Key technology gets one protection plan; embryonic technology gets a different protection plan; corporate marketing know-how gets a third protection plan, and so forth. In Step Three it helps to use PERT and CPA charts to show, step-by-step, how the protection plans operate. Often the act of drawing these charts reveals gaps. Companies with intellectual property annual budgets in excess of a million dollars should consider having an intellectual property management strategy constructed using CASE tools. The control it affords cannot be matched by paper and pencil. It could well find infringers of your IP. In this event, you should consider the following. Established Models for Capitalizing on IP Infringers In recent years, several landmark decisions awarded millions of dollars against patent infringers. A case in point is the Mostek Corporation. It held dominant patents for DRAMs (Dynamic Random Access Memory) and other memory chips, and in 1976 and 1977 was the largest producer of 16K RAM chips in the world. But the cyclical nature of the semiconductor business had put the company on a financial roller coaster. It was acquired by United Technologies, the large American defense contractor. Demand for memory chips went flat. At the same time, the Japanese were bringing new plants on line and over capacity was driving down the price mercilessly. Finally, in October 1985, United Technologies decided to bite the bullet and take a $424 million write-off and shut Mostek down entirely. It was the only way to end the losses, which for the first nine months of that year had reached $328 million. United Technologies sold Mostek to Thomson for a mere $71 million. In doing so, they completely overlooked Mostek's patent portfolio. In July 1987, Thomson merged with the largely state-owned Italian semiconductor producer SGS to form SGS-Thomson. At about the same time, the Japanese were capitulating to the patent licensing demands of Texas Instruments. The agreements TI negotiated with the Japanese companies were for five years from 1986 to 1990. The results were astonishing. Texas Instruments has earned one billion dollars in royalty income from those settlements. The significance of that event was seized upon by a former TI engineer named Dave Leonard (Mahr-Leonard located here in Dallas). We have had numerous meetings with Dave Leonard and are presently working with his associate and in-house "hit-man," Chuck Neuenschwander, on some remediation patents. Dave Leonard understood that the Mostek patents were core patents for the DRAM and he suggested to Mostek that they develop a licensing program for them. It was a novel concept for Mostek because most semiconductor companies had never truly appreciated the value of their patents, at least not before Texas Instruments had hauled seven Japanese and two Korean chipmakers before the International Trade Commission for patent infringement. Mostek had traditionally paid other people for a license to use their patents. They threw in their own patents to reduce the amount of money they were paying. So a lot of companies got the rights to the DRAM patents. And of course, once a patent is licensed, you can't go back and re-license it. But a number of companies were using the Mostek patents without license and these were the ones Mostek decided to go after. They were concentrating on companies that were making DRAMS and SRAMs (Static Random Access Memory), which made sense. At that time, in 1988, the worldwide market for DRAMs was $5 billion. To improve its share of that market, SGS-Thomson developed a sophisticated program designed to search out every infringer of its patents. Reverse engineering every DRAM and SRAM that was produced by competitors, photographs and schematics were prepared and the comparison with Mostek patents began. The schematics were color-coded and the patent claims would be listed and also color-coded. The colors on the schematic that corresponded to the patent claims identified an area of infringement. They would then present their infringement analysis. The other side would look at it and be hard pressed to present reasons why they did not infringe. In analyzing our clients' IP we use this model, i.e., looking at the patents, making sure they are enforceable, and making sure all the prior art was called to the attention of the examiner. We prepare position papers on any known prior art and present them at the outset so there is no doubt that we have done our homework. A key element in this strategy is to negotiate from a position of overwhelming strength, aware that the only time the other side will settle is when they realize they can't win. Basically it's a buyer and seller transaction. You are selling rights, and the other side is buying those rights. Although you have them cornered and they have no choice but to buy the rights or get out of the business, you have to come up with a compensation plan their management will accept. You need to be aware if there are infringers of your patents. There are good resources and successful models, such as the one described above, that can be followed to determine infringement. The process we recommend is: The steps we will use to accomplish this are: Patent Analysis Strategy Patent analysis, particularly analysis of international patenting, represents an important source of quantitative, objective information on technology that can be used to gain strategic advantage. Patent analysis looks at large numbers of patents, where certain key aspects are quantified, patterns and trends are sought, and the results are interpreted in relation to questions of technology management and strategy. Competitive Intelligence Competitive Intelligence is used to identify companies that have patented in a technology or to characterize the technological activities of companies, as well as generate a list of active companies ranked by number of total families. The number of patent families is used to indicate level of technological activity, the number of foreign patents is used to represent potential commercial value, and the number of patent citations received is used to represent technological significance. This facilitates comparisons across agencies and indicators. International Patterns of Protection Corporate patent departments often need to know the countries in which a competing firm has sought patent protection and those countries in which patents have actually issued. It is difficult to get this information for several reasons. First, no single on-line database covers all the countries of the world. (INPADOC covers the most countries, with about 50.) Also, many patent databases do not track when a patent application becomes a granted patent. National patent systems differ in the number of stages through which a patent application must go and the number of times that patent publications are published. In the United States and a few other countries, only granted patents are published; therefore the U.S. column represents granted patents only. Also, some countries publish patent applications but not granted patents; therefore the number of applications that have gone on to become granted patents may be overstated in some countries. Competitor Strategies Patent citation maps shed light on corporate technology strategies. If a large share of the citations on a firm's patents refer to its own patents, that indicates that the firm is building on its own technology development efforts and is accumulating a body of technological knowledge within the firm. This type of strategy is termed the "pioneer" strategy. If a small share of a firm's patent citations refers to its own patents, this means that a large proportion of its citations refers to the patents of others. These firms are building on the work of others. This is called the "imitator" strategy. If a large proportion of the citations to a firm's patents comes from its own (later) patents, that means the firm has been able to capture the benefits of its work. That is, it has been able to protect its intellectual property and continue developing it. This strategy is called "protecting." If, on the other hand, only a small proportion of the citations to a firm's patents comes from the firm itself, that means that other firms are citing its patents. This in turn means that other firms have been able to build on the work better than the originating firm has. The originating firm has in effect taught other firms its technology, so this is called "teaching." If the optimal strategy for a firm were to be an imitator, it would want to rely as much as possible on other firms' technology while in turn preventing its rivals from imitating it. Thus it would cite others heavily and it would try to keep others from learning from it (i.e., its share of citations received from self would be high). If a firm's strategy were to be a pioneer, it would cite its own patents frequently and hope that it could prevent others from building on its technology. It is possible that two firms may be building on their own technologies to the same extent and have more or less success at preventing others from building on their technology. Patent analysis and Competitive Intelligence, properly conducted and interpreted, can provide your company with information in developing your own technology strategies and assessing those of competitors. International secondary research and patent data give a global picture of where R&D and engineering are being conducted and where companies are seeking patent protection for their inventions. Secondary Market Research In addition to global patent searches, we suggest conducting Secondary Market Research that will compile background information on your industry in the U.S. and globally. Business and government organizations have spent literally hundreds of millions of dollars to obtain statistical data and information on every industry. These findings are available to professional researchers trained on how to retrieve these facts. One of our objectives in this phase will be to gather details about the various industry players. This can be used to your benefit to accomplish your objectives. For most companies, secondary market research is an essential step in IPM. In this phase, you should gather data from sources such as government reports and publications, industry studies, business directories, industry experts and authorities, trade journals, and trade associations. Market intelligence is a vital resource for planning and decision-making. A tremendous store of information is available. At the conclusion of this phase, a detailed tabulation should be made of names, addresses, phone numbers, etc., of companies identified and classified as potential strategic alliances, niche markets, and distributors on an international basis. Infringers should also be identified and targeted for licensing. In addition, a list of the following subject matter (including names, addresses, phone numbers and other relevant information) should be considered.
|