It is almost indisputable that a sound intellectual property (IP) strategy, and effective execution of such a strategy, are essential ingredients of a technology company’s road to success. An IP strategy is an action plan with principal objectives of (a) protecting company IP and leveraging it for economic benefit—an offensive component of the strategy, and (b) navigating the minefield of third-party IP rights—a defensive component of the strategy. While many, if not most, enterprises have instituted, and are executing, an IP strategy of some sort, an important question should be considered: Is the IP strategy optimal, such that its execution extracts maximum value from company technology?
Some corporate IP strategies may seem sound in theory, but in practice they are (a) selectively or inconsistently applied within or across projects, (b) incompatible with how teams actually work, (c) relatively narrow in how they perceive innovation, and (d) distracting to innovators and IP practitioners while consuming enormous resources. Ultimately, the return on IP investment of such strategies may be questionable. However, enterprises that periodically take a step back to reflect on their current IP strategies, and recalibrate them if appropriate, are likely to derive the greatest possible value from IP.
Signs Your IP Strategy May Need a Tune-Up
IP strategies are as unique and varied as the companies that develop and implement them. However, they commonly are supported by processes and policies that may be formal or informal, written or unwritten, prescriptive or guiding, and general or highly detailed. For enterprises desiring to assess the effectiveness of their IP strategy, it may be more productive to scrutinize, at least at first, broader aspects of IP program execution and actual IP outcomes being achieved (or not achieved), rather than the supporting processes and policies. Something may be amiss if one or more of the following is true of the enterprise:
- Inconsistent Execution – Sometimes IP processes and policies are followed, other times they are not, depending on whether team members are attuned to IP issues and conversant with the spirit and letter of such processes and policies. Similarly, leaders charged with determining whether necessary IP actions have been taken at project milestones apply disparate standards, clearing one project and pausing another similarly-situated project.
- Limited IP Strategy Discussions – Business leaders and project teams only selectively or occasionally engage with IP professionals, such as in-house or outside IP counsel, to discuss broader implications of company technology, such as long-range product planning, the competitive landscape, potential adjacencies outside the intended scope of application of the relevant technology, and monetization opportunities.
- Limited Team Participation – Product managers and other stakeholders who may have a broader view of market context and company aspirations in the short and long term are often peripherally involved in implementation and execution of IP strategy, with technologists participating and making most decisions.
- Dormant IP Assets; Limited Line of Sight to Company and Competitive IP – The company holds many patent assets, often in multiple jurisdictions globally, that seem to be collecting dust. In addition, the company may be able to quickly generate a list of its patent assets, but cannot quickly identify which patent assets particularly protect which technologies, products, features, and components. The company likewise has limited understanding of its competitors’ relevant patent footprints.
- Use of Metrics Not Reflective of IP Impact – Metrics such as invention disclosures submitted, patent applications filed, patents issued, and adherence to budget are used as primary indicators of IP value and robustness of the IP strategy, without regard to the nature of the IP being submitted, pursued, or obtained; how IP is being leveraged; how precious dollars are being spent; and the return on investment in IP.
If one or more of the above aspects represents the status quo, opportunities to offensively leverage company IP for maximum benefit are likely being missed. Additionally, defensive IP strategies, such as performing IP clearances, including freedom-to-operate and design-around efforts, may not be sufficiently stringent, placing the company at risk vis-à-vis competitor IP.
Tips for Recalibrating Your IP Strategy
In order to raise the bar on IP strategy and execution, stakeholders within an enterprise, including individual innovators, engineering staff, product leadership, IP counsel, and their respective support staff, can take the following five steps:
- Create Triggers for Engagement on Critical IP Topics and Clearly Define Required IP Actions
Unfortunately, enterprises sometimes mistake the mere execution of IP activities, such as the filing of patent applications, the issuance of patents, and the undertaking of IP clearance efforts, as evidence of possessing a sound IP strategy. This is true despite having made no real attempts to architect and execute a holistic strategy, whether at project, product line, P&L, division or enterprise-wide levels. IP processes that require team members to take certain IP actions, but not arguably the most important one—contributing to the proactive development of an IP strategy—may fall short. In practice, knowledgeable project team members may alert IP counsel to issues arising in particular projects, thus filling IP process gaps. Nevertheless, other projects may remain vulnerable.
To ensure that essential IP actions are taken in every appropriate case, processes should act as a forcing function. For instance, IP processes for development projects may require that (a) designated team members reach out to IP team members for support in devising an appropriate offensive and defensive IP strategy, (b) the team members certify that dialogue and action have actually occurred, and (c) leaders not approve project continuation unless steps (a) and (b) are completed. Absent a framework that forces engagement, IP likely cannot be leveraged most optimally. Of course, the quality of the engagement and resulting strategy depend significantly on the expertise and creativity of participants, including IP team members.
Care also should be taken to develop crisp, clear IP processes that seamlessly intersect with corporate processes focused on technology development, productizing, commercialization, and the like. Already under intense demands, innovators should devote bandwidth to IP actions of greatest impact. Busy work, such as the completion of checklists and questionnaires that focus on irrelevant actions and questions, should be eliminated going forward. Innovators and other stakeholders should be asked to provide inputs to help inform development and execution of the IP strategy, with the IP team and its associated resources taking the laboring oar to produce outputs and impacts.
Many enterprises employ stage-, toll-, or phase-gate R&D processes in which leaders determine whether necessary actions have been undertaken—and undertaken with sufficient rigor—before subsequent project phases (and their associated monetary investments) can be initiated. It is crucial that leaders not declare a phase complete if important IP actions have not actually been completed. In addition to educating leaders, it can be helpful to define in formal processes the clear deliverables that team members must provide, such as an indication that IP strategy meetings have been conducted, a list of patent, copyright, and trademark filings being pursued, and sign-off from IP counsel regarding third-party IP clearances.
- Think Big and Broadly
Enterprises that approach IP from limited perspectives limit the potential impact of any resulting IP rights they may eventually obtain. All too often, IP-related activities in an enterprise primarily revolve around (a) innovators submitting invention disclosures directed to concepts to be considered for patenting, (b) pursuit of patent protection for a subset of such concepts, (c) maintenance of resulting patent assets, (d) project members flagging features for potential commercialization that conceivably could be covered by third-party IP rights, and (e) the performance of related IP clearances. While such activities are important, they typically have narrow, task-centric objectives that are achievable without the need for discourse on broader IP topics. Moreover, team members performing them may be disconnected from the enterprise’s overall business strategy or lack necessary project context.
To counteract thinking within narrow bounds, an IP strategy must intentionally apply holistic, creative thinking by those connected to the enterprise’s overall business strategy or at least having project-wide visibility. For instance, IP processes and rhythms may include strategic sessions geared to product portfolios, innovation roadmaps, invention harvesting, and the like. Participants in IP-related meetings should be thoughtfully selected to foster informed, synergistic dialogue and decision-making. Foremost in the minds of participants should be considerations such as system-level embodiments, industry trends, white space opportunities, competitive threats, adjacencies, and monetization avenues.
- Fight Scale and Resource Constraints by Dividing and Conquering
The challenges of successfully building and executing an IP strategy also can be overcome by assigning appropriate team members responsibility for defined actions, and by leveraging proven IP software.
Structurally, stakeholder groups can be formed to provide IP teams with needed inputs to execute an enterprise’s IP strategy. One exemplary model is presented below.
The tendency for execution of IP actions to encroach upon high-level strategic thinking can be endemic to IP teams as well as their clients. IP teams should be staffed to prioritize such thinking. An exemplary team structure utilizes designated IP attorneys or engineers to handle detailed execution of certain IP actions, such as oversight or handling of patent prosecution and IP clearance actions, with senior IP attorneys being responsible for defining and directing overall strategy. Other skilled IP professionals, such as outside counsel, analysts, and paralegals, can contribute to the division of labor as well. What is seldom effective, particularly in large enterprises rich with innovation and organizational complexity, is concentrating in a single job role the development of both high-level strategy for the organization and the execution of substantially all associated granular activities. The latter generally tends to overtake the former, with mixed outcomes resulting.
In addition, software can be a critical enabler of IP strategy. In the past decade or so, IP portfolio, process, analytics, monetization, and practice management software tools have come into their own, offering a multitude of features and functions that embody best practices, automate or semi-automate corporate processes, enable collaboration within and without the enterprise, and allow for sophisticated analysis of its own IP assets and those of its competitors. Such software can reduce administrative work, inefficiencies, and other distractions that plague IP teams and their clients, while providing powerful tools to execute, inform, evolve, and assess IP strategies.
- Complement Processes with IP Sensitivity
Even the most elegantly crafted IP processes rely upon humans to apply them. Therefore, an IP culture in which stakeholders are sensitive to IP issues and opportunities is a necessary complement to the processes themselves. Stakeholders should be trained not only in the processes, but also in their rationale, what constitutes a sound IP strategy, why a strategy is necessary, and what qualifies as sufficient execution of IP processes. Training may entail dedicated sessions regarding theory and practice, as well as situational training in which IP team members educate by example while counseling stakeholders on IP issues. IP team members should seek to build special rapport with leaders and innovators who already have a passion and appreciation for the possibilities IP can bring to the enterprise; such clients can augment the innovative thinking brought by the IP team and act as role models for their peers.
- Utilize Meaningful Metrics to Assess Impact of the IP Strategy
An enterprise should question the use of assessment metrics that do not meaningfully reflect the quantitative and qualitative impact of an IP strategy. Such metrics often pertain to sheer numbers of patent applications and patents, without a qualitative look at such assets, how those assets align with the enterprise’s commercial activities, and how the assets are being monetized.
While numbers do not always tell the complete story, an enterprise should choose IP metrics wisely as a vehicle to assess execution and impact of IP strategy. Exemplary metrics include:
- percentage of projects for which an IP strategy session with IP team members was conducted;
- percentage of projects for which an IP clearance investigation was considered and either deemed unnecessary or concluded;
- average number of patent applications filed per project;
- percentage of filed patent applications related and not related to development projects;
- patent applications filed per each $1M of R&D spend;
- percentage of patent assets in portfolio broken down by key business, technology, or product categories;
- percentage of patent assets in portfolio aged between 1 and 3 years, 4 and 7 years; 8 and 10 years, etc.;
- percentage of patent assets in portfolio that primarily are classed as (a) covers core / competitor-differentiating product feature, (b) covers non-core / non-essential product feature, (c) licensed to a third party, (d) covers industry standard, (e) defensive, and (f) potential for licensing in the next 2-3 years;
- total IP monetization revenue received (with breakdown by litigation revenue, licensing in industry, licensing outside industry, sales, etc.);
- value of IP assets sold;
- ratio of outbound licensing revenue received and inbound licensing royalties paid; and
- number of invention harvesting sessions conducted outside the project context and within projects.
The above list is by no means definitive or exhaustive. Also, some of the listed metrics may be resource-intensive to gather and track, perhaps prohibitively so in small- and medium-sized enterprises. Even if numbers are not deemed essential, a qualitative or thematic discussion on these issues could be instructive. For example, if most of the enterprise’s patents admittedly claim specific features not of importance to competitors or other third parties, then an aggressive recalibration of the IP strategy may be justified.
Besides highlighting the potential need to recalibrate IP strategy, IP metrics can shed light on the enterprise’s state of innovation. If, despite having demonstrably sound IP processes in place and talented team members to execute them, headwinds seem to be impeding IP success, questions can be posed. Is the enterprise truly innovating? Is the relevant industry or product area substantially mature? IP metrics thus may reveal a need for the enterprise to invest further in R&D or improve its technology development processes and culture.
An optimal, comprehensive IP strategy does not magically come into being simply because an enterprise executes disparate IP actions, even if each is intrinsically important. To move to the next level, an enterprise should honestly assess the status quo and, if warranted, effect intentional adjustments to its IP strategy. Such adjustments should assure an optimal IP strategy that includes the following ingredients: (a) processes that reliably trigger the execution of essential IP actions; (b) holistic, creative thinking that capitalizes on broader opportunities; (c) structuring of teams to tackle respective objectives; (d) the cultivation of IP sensitivity throughout the enterprise; and (e) the use of metrics that align with desired outcomes.
This article reflects my current personal views and should not be necessarily attributed to my current or former employers, or their respective clients or customers.
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