I am often asked, “How can my company best align its intellectual property (IP) portfolio with our business objectives?” The answer is pretty simple.
Tarek N. Fahmi, a partner in the Silicon Valley (California) law firm of Sonnenschein, Nath & Rosenthal, has stated that IP can be aligned with business objectives by performing a good IP audit and integrating the audit with a sound understanding of a business plan.
Increasingly, today’s corporate leaders need to understand how their companies’ IP assets relate to their business operations and financial performance. An IP audit is a mechanism that can be used in gathering information for such analysis. Together with an understanding of the company’s business plan, the audit can help to ensure that the company’s IP portfolio and strategy are kept in alignment with its business objectives.
Basically, a company’s business plan will identify certain objectives and strategies for meeting those objectives. The objectives are selected through an analysis of the company’s strengths, weaknesses, opportunities, and threats (a SWOT analysis). Strategies for meeting the objectives may involve the sale of certain products or services, partnering with others to gain access to products or markets, and, often in the case of privately-held companies, raising capital.
Among objectives to be considered in the business plan are those pertaining to the company’s IP assets. The company should want to ensure that its products or services are covered by patents. Patents should cover not only the current generation products, but also the next generation ones. This can prevent competitors from leap-frogging over the company’s current commercial offerings. Competitive technologies may also provide opportunities for patents. By establishing barriers to design-arounds or other solutions, companies can help ensure themselves a position in the marketplace for years to come.
A company’s willingness to enforce its rights also can play a key role in its IP strategy. Often, the question of whether or not a company is willing to sue infringers depends on the perceived importance of the market into which the infringing products are being introduced. For example, companies may be more willing to defend their IP rights in the United States (where a large consumer base exits) rather than in other jurisdictions (where smaller or negligible numbers of potential customers exist). Accordingly, companies may decide to seek patent protection in only those jurisdictions where the company reasonably expects to enforce its rights with respect to the subject inventions and forgo such protection in other countries.
As a company continues to develop its strategic plans, IP components of that plan should continually be reevaluated to ensure that IP protection aligns with stated business objectives. For example, if new objectives for new markets will be pursued, the IP plan should be updated to reflect the need to seek protection for inventions, brand names and other assets in those markets. Likewise, if older objectives are to be abandoned in favor of new ones, companies should consider pruning older IP assets to make way for new ones.
Components of an IP Strategic Plan. An IP plan should address portfolio development (i.e., the acquisition of IP assets by internal development or other means) and monetization or other exploitation of that portfolio.
Generally, developing an IP portfolio is a long-term proposition. Given current processing times at patent offices throughout the world, companies should be looking out at least three to four years in their patent planning. Simply filing patent applications for existing technologies is not enough. To create a portfolio that will truly provide value for the company by erecting effective competitive barriers requires placing those barriers at chokepoints in market and technology trends. A company that takes the time to plan for these trends and to file its patent applications accordingly will be in a position to later enter the relevant markets in a much stronger position than its competitors.
Competitive Assessments. One way to glean the developing market and technology trends is to invest in a competitive assessment. This form of intelligence can reveal competitors’ patents that might present an obstacle to a company’s business objectives. Early identification of such obstacles can provide a company with sufficient opportunity to design around problem patents or seek partnering opportunities to gain access to needed intangible business assets. A competitive assessment can also reveal strategic holes or weaknesses in competitors’ patent portfolios, weaknesses that the company can exploit by filing patent applications of its own. Importantly, any competitive assessment should include an analysis of the company’s own IP portfolio so as to identify weaknesses that need to be addressed.
Patenting Strategy. In addition to filing patents based on competitive assessment, companies should adhere to a well-defined patenting strategy and avoid the tendency to patent everything that results from its research and development activities. Here, reference to the business plan is essential. That plan will help define the company’s core business and the technology important to fulfilling that business. The bulk of resources devoted to IP portfolio development should be devoted to protecting that technology. While some funds may be spent with respect to patents for non-core technology, for example to develop licensing opportunities for the company, the focus on core technology should not be lost.
Enforcement. As the company’s IP portfolio begins to develop, the company should look to extract value from it. Enforcing the newly acquired IP rights is one means by which this can be accomplished. Here, enforcement is not necessarily synonymous with litigation. Instead, strategic partnerships through sharing of IP assets is a common means for companies to derive value from their respective IP portfolios. So too is the sale of IP assets directed to non-core technology.
Identify Prior Art. A less traditional, but not to be overlooked, means of deriving value from one’s IP portfolio is to search through that portfolio for prior art that might be useful against competitors’ patents. This includes not just the company’s own patents, but any prior art cited during the prosecution of those patents. References culled from the file wrappers of the company’s own patents can sometimes be used to provoke reexaminations or other attacks on competitors’ patents. By narrowing or even invalidating such patents, a company can indirectly strengthen its own patents and thereby enhance the overall value of its own portfolio.
Continuations. A less aggressive, and more traditional, approach to enhancing the value of one’s patent portfolio is to maintain a liberal continuation practice. Filing of multiple continuations or divisional applications can help companies shape their portfolio as a market matures or develops. Such a practice can often help convince investors to commit funds in favor of one company over another. It should be noted that recent USPTO proposals to change the rules regarding the filing of continuations may severely limit the availability of these vehicles for value enhancement of patent portfolios.
Integration. A key to successfully integrating any IP plan with a company’s business plans is education. Engineers, sales and marketing professionals and company executives must all be indoctrinated with the idea that the company’s business objectives can only be achieved if the elements of the IP strategic plan are adhered to. This requires regular and continuous communication with and among the people responsible for creating and managing the company’s IP assets as well as executives focused on executing the business plan. Integration cannot be achieved with a single “IP Asset Day” or one-time meeting to discuss a plan as if it were a static idea. The IP plan will be an ever-evolving idea, just as the company’s business plans will change over time. It is important that these changes be communicated among the people within the company responsible for ensuring its success.
Incentives. A company should also provide incentives for ensuring integration of an IP plan. Many companies provide monetary or other awards to inventors when patent applications are submitted or when patents are issued. Similar incentives could be provided to others tasked with competitive analysis or other forms of IP portfolio development. Incentives encourage employees to remain with the company. Employees are often one of the most under appreciated intangible assets of a business.
Metrics. Metrics should be established to allow manager to determine whether IP objectives are being met. In the absence of a dedicated licensing program it can be difficult to directly tie any increased sales or profits to the company’s IP portfolio. However, metrics such as the number of patent applications filed per quarter or number of patents issued can be used.
By doing these seemingly simple things, corporations can establish a successful program to protect and monetize their intangible business assets and align their IP portfolio with their business objectives.