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Developing an Intellectual Property Strategy

Published: 14th July 2015

Published in: Fine Print | Issue #67

There’s no question that an intellectual property (IP) strategy should be aligned with business strategy. What needs to be better acknowledged, however, is that IP issues can actually drive most organisation’s strategic considerations.

If the majority of the value of your business is in its intangible assets, it makes sense that your organisation’s framework is based around those assets and associated IP issues – rather than trying to dovetail an IP strategy into a less than effective business plan. This article takes into account the existing DNA of a business when developing an IP strategy.

Organisational type

Individuals often need resources such as money, expertise, staff or distribution outlets. Instead of a comprehensive IP strategy they may only need to know what few steps should be put into place to attract a commercial partner to provide the resource required. For SMEs, internal structures need toallow for growth. As fast adopters, SMEs are of a good scale to instil an effective IP framework.

Research organisations invariably have issues surrounding their researchers’ desire to publish and to develop a culture more biased towards science, rather than business. As well, many interactions are around research contracts where ownership of the resulting IP can be ambiguous.

Therefore an IP strategy must include stringent publication and ownership policies and associated template agreements, a training policy to increase the awareness of intellectual property amongst the research staff and a means to encourage them to communicate IP issues to their commercial arm.

Corporates are often large and can be unwieldy. Their IP strategies, therefore, should have strong guidelines on management responsibilities and communication to ensure there is a consistent approach to IP issues. It will be invaluable if there is an in-house counsel or a strong relationship with an IP firm. Also important are regular IP strategy meetings.

Culture

An organisation’s culture can strongly influence how systems are developed and introduced. 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.

IP Audit

An audit of existing IP shouldn’t just include the basics. Documentation of unregistered assets such as know-how, copyright, etc is essential. Ownership issues should be documented along with conditions of use. As well, and of great importance, is the scope of protection. An IP audit therefore helps identify 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 requires, and whether you are spending money on redundant projects.”

IP Creation

It’s expensive and difficult to grow a business that has a weak IP position as a result of choosing inappropriate trade marks or developing unprotectable products. It can also be financially disastrous to invest heavily in a marketing campaign or product manufacture only to find that you cannot enter a market because of freedom of operation issues. Then there’s the loss of reputation if you have to recall a product. A good IP strategy ensures having an IP strategist, or well-trained staff, at brainstorming meetings.

Competitive advantage/barriers to entry

The decision on whether to invest in formal IP protection is largely linked to the value of the competitive edge it provides or maintains. With a new product or brand, the focus should be on developing features that will persuade a consumer to purchase the product or service – and then protecting those features. A competitive edge can also be maintained through other barriers to entry, including key people, niche markets, exclusive supply of key ingredients, regulatory approval (eg: FDA), first to market (unlikely) and disorganised competitors.

Exit strategy

An exit strategy can depend on your company’s strategic direction or the product lifespan. For short-lived products, either formal IP protection is forsaken or deterrent applications can buy enough time to gain traction in a market. Companies in for the long haul need a managed process. A comprehensive IP portfolio helps if a trade sale or an Initial Public Offering is planned. Patent and trade mark applications can be timed so that you aren’t committed to complete the applications (and incur major costs) before the actual sale.

Third party interactions

Third parties can include employees, suppliers, contractors, customers and partners. Regrettably, much IP is lost because of third party interactions. Your IP policy should ensure that these interactions are defined. These include employment contracts, key person insurance, succession planning, confidentiality agreements, development agreements, documentation protocols, visitor protocols, award schemes (for employess) and licences.

Markets

The market will determine where to file for IP protection and define the scope of the IP protection. IP legislation differs by country and your strategy needs to accommodate this. For example, we recommend prioritising 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.

You should examine competitor and/or collaborator activity – not only where they market your product, but also where it’s manufactured. For example, you may choose to file an application in a small market if it can stop a competitor manufacturing in that market and exporting elsewhere. It also pays to know your product’s complementary industries. This way you can license your IP to non-competing industries and create alternate revenue streams. Freedom to Operate searching should be considered at the start of a project.

Timing

Sometimes timing can be dictated by the type of organisation and the subject matter it relates to. It’s possible to delay filing applications or shift application filing dates if a project is taking time to become market ready. To provide this flexibility you need to ensure that marketing and research cannot publish until the IP position has been clearly considered. Your strategy should ensure R&D milestones are met before you invest heavily in IP protection.

Resource

IP protection and associated systems must be budgeted for in terms of time, expertise and funding. Ask yourself these questions:

  • 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 resource that can be diverted to IP indicates the level of development of a limited or expansive IP policy.

Putting it together

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.

Any gaps identified in your IP audit should also be plugged. If an opportunity to gain broad protection has passed, then use some creativity to decide what alternatives are still available.

Finally a regular review process needs to be organised. This can be a formal audit and/or regular meetings with an IP strategist to ensure that your business and the IP strategy are in synch and working well together.

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The name Hannan comes from Mr Michael Hannan whose son John Hannan (Jack) joined the firm in 1908. Jack Hannan remained in partnership until he passed away in 1974 at the age of 90!

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