I was interviewed last month by Acquisition International, as part of their “Ones to Watch in 2014: IP Experts” panel.  I talked about the impact of IP in acquisitions, using the Smart Grid as an example.

If you are interested you can view the October edition online, or let me know and I can email the pdf copy of the full writeup.

Some excerpts of the interview are below:

IP is becoming a key piece of both growth and acquisition plans.

In the energy sector, specifically the Smart Grid and Smart Home sectors, there is a growing market opportunity that many firms are moving to capitalise on. Within these sectors, IP is becoming a key piece of both growth and acquisition plans. Considering in more detail the smart home sector, as firms like Google and Samsung pursue growth into the sector through acquisition, other new entrants are trying to position themselves to be an alternate platform for the market – which is projected to be at US$100bn by 2018. The position of this market is a list of highly fragmented sub-segments, coupled with no one venture owning a controlling piece of the entire segment, which means key players are looking for acquisition targets to become the market leader.

With IP being critical for this growing market, from the acquisition perspective this results in the need for deep analysis of any venture portfolio to ensure it will result in future value. Analysis of the entire sector trends also indicate which firms are prime targets fo acquisition, and hold key IP assets for this growing future market. For investors the areas of lighting control, intelligent bulbs and consumer smart devices hold the largest market share opportunities. There are other smaller sub-segments that still have no large market leader yet hold tremendous opportunity for investors that have the capital to build market leadership through acquisition.

For the price of one globally filed patent, one can likely file 10 new patents in a single jurisdiction.  For a business with budget constraints, the result is trying to find the balance between a broader portfolio of unique patents or a large global portfolio covering only a few inventions.

For one or two applications this decision may be manageable, but for larger portfolios if they are not managed the foreign-filing costs will quickly outpace new filings and potentially impact the finances for continued new growth.

In a patent strategy, the foreign-filing plan is important to consider from a financial-expenditure and business-use perspective.

Thus, the development of a comprehensive foreign-filing roadmap and decision matrix is recommended to aid in a business unit or corporate filing process. The first key benefit of a foreign-filing roadmap is the ability to project and forecast multi-year financial requirements of nationalization decisions. The second benefit ensures all nationalizations have business use. The result enables optimization and reduction of maintenance costs of the portfolio. The third benefit relates to institutional knowledge as foreign-filing decisions may occur 12, 18, or even 36 months after the original filing date. As team members move on, the institutional or project knowledge over this time period may be impacted, and a foreign-filing decision plan ensures continuity of knowledge.

There are at least three points of view that need to be addressed for each foreign filing or the overall foreign-filing position of the portfolio: market, legal, and business. The end goal is to have a brief business rationale for expansions that can be linked to the company or product sales, realistic legal enforcement capabilities, and the internal business needs.

While corporate environments vary, an example of a foreign filing business rationale provided to support the overall business is as follows:

• Foreign extension recommended as EP only in mature markets of France, Germany, Italy, Spain, Switzerland, and UK.
• Key competitor is based in Switzerland with manufacturing plants in Germany, thus EP filing would cover production of competitive products sold and shipped worldwide.
• Market data indicates emerging markets (India, Brazil, Russia) will be 10+ years before patented technology will be utilized by a large market thus with budget constraints the added costs to support filings in these jurisdictions is not recommended. In addition enforcement in the emerging markets is likely not to occur.

In addition to the foreign filing rationale, legal filing strategies around the nationalization should be discussed with counsel.  For example filing PCT applications and making a decision on specific countries requiring costly translation fees until after the first search report has been issued.

The take-away action plan for IP Managers and executives:

As part of the overall filing strategy, create a replicable and scalable process that considers market opportunities, legal issues, and long-term portfolio direction. To do this, define a comprehensive foreign-filing roadmap and nationalization decision matrix:

• Have a process to generate the market opportunity match, that is built off the existing company’s marketing and sales materials.
• Have counsel create guidelines for foreign jurisdictions important to the company, and a way to compare the patents to the enforcement ability and other legal issues that need considered.
• Have management generate a ‘patent portfolio profile’ that new patents for foreign extension can be compared to and prioritized based on budget, KPI’s, and other company criteria.

There is always more to solving the problem than we think, and the human resource aspect of intellectual property strategy is a critical component of building a strategy that companies can’t afford to ignore.

If you have worked with me before, or asked me high level advice about your patent situation, you will recognize the following phrase: “It depends.”

An IP strategy specific to a company is not something that can be digested into an easy soundbite without knowing all the details and the business environment. More specifically, when asked about the best strategy to pursue there is so many variables that the reply – like any good strategy – needs to take into account the environment it is both build it, and created to exist in. This translates me repositioning the question I am asked “Can I patent this?” to “Should you patent that, what is the scope of the business you need use the IP for, and will your current scope help you?” Is the patent part of a defensive strategy, or licensing program you are hoping to build? Are you key competitors already in this technology space, or is it a blue-ocean you are planning for?” There is 100 more questions I could ask a venture that will help narrow in on the best strategy for that venture based on the business environment they are playing in.

However, there is one consistent piece of an IP strategy that transcends all types of ventures, and growth plans they have: People. And it is not enough to have “a team member who knows about IP” as part of your strategy to have IP as a competitive advantage in your venture.

Startups and smaller ventures need to have staff that are masters of many topics, but in reality for IP it is a strategic skill set that is often not available internally. This translates into the need to have outside counsel that is not only versed in the legal side of IP, and also with business experience in the industry to help guide the work being done. As a cautionary note, simply outsourcing IP to an attorney with the hope that they will guide the strategy is often a plan I hear startups talk about, but in practice does not always generate the portfolios needed for the future venture. For other more savvy startups, they opt to have a strong advisory board or board member that has the background to keep the venture and external counsel on track. Larger firms need to realize their end goals of having an internal IP team, and see if the core competencies required exist in the team or if it should be outsourced. For ventures with an existing team who have been building a patent portfolio, the question I would ask is as follows: “Is the team that build it also versed in setting the appropriate business strategy? Or are they just a team build to execute?”. There are larger ventures who have been staffed with an IP team before the vision is set, so while execution of a program happens it may not be execution of the best program for the venture.

Jim Collins, author of Good to Great, talks about the “First Who, Then What”, which elaborates on how the right people can be the most important asset, but the destination of a successful venture is defined by the WHO you have on board, leading to WHAT they will accomplish. Building and executing an IP program or strategy is no different – you have to have the right people. If you have stacked your venture with skills in executing and prosecuting IP, your ultimate portfolio will largely be defined by patents that were generated and prosecuted efficiently, yet the ultimate scope and view may have no defined strategic position.

The key core competency of a patent team is not just legal. It is the ability to apply the combination of legal, business, and technical skills to the venture from both the strategic and tactical perspective.

For smaller ventures I would ask: Do you have a mentor team, advisory board, or board member that has the skills to help strategically position your IP? While these individuals may not do the work they can steer smaller groups with restricted budgets to spend their efforts and filings costs in the best areas. Do you have the WHO to get you where you need to be in order to have a protected competitive advantage in the market?

For medium and growing ventures I would ask: Do you have a team built to execute, and are you actively making time with your executive teams to ensure you are providing them guidance? Measuring a team on patent volume as the metric of progress needs to be supported by a measure of quality and scope as well.

For larger ventures with established teams I would ask: Do you have the leadership in both the businesses and IP groups to set the strategy that needs executed? Is the IP position part of the strategic planning cycle, and are KPIs in place to drive the right behavior for the IP team?

In summary, a tangible take-away for ventures is to really think about the HR aspect of your patent plans. Having the right people to define the strategic view on your team will be a key success factor in your final portfolio position, regardless of venture size.

Note: 2017 update at the bottom. 

How can ventures in Canada, without licence expertise or experience, actually benefit from the IP they have acquired over time?

This week the DEEP Center in Canada (Center for Digital Entrepreneurship + Economic Performance), who has been doing research around the governance of IP, posted a blog about their ongoing research into sovereign patent funds (SPF’s). They looked to address a few specific questions around the rise of SPF’s, and how policy-makers can think about these types of funds. So far the governments of Japan, South Korea and Taiwan, all leading innovation nations, have all set up SPF’s.

There are many that won’t take the time to read through the paper, assuming it doesn’t impact their roles in IP or innovation activities, but I would suggest that many rethink the potential impact it will have on their venture. Looking through the DEEP work, it is obvious the question about the economic development of IP has been a topic of interest, and with recent talk in the news about SPF’s and moves by RIM we can say there is at least a discussion started that could impact how IP could be approached by firms in Canada.

Last June, Jim Balsillie (co-founder and former co-CEO of RIM / Blackberry), wrote an article in the Globe & Mail entitled “Time to invest in better protections for Canada’s intellectual property”. He lamented that if Canada wants to continue to invest to grow SME’s into globally competitive firms, they also need to invest in an ecosystem that protects their ideas.

“The Government of Canada annually invests billions of dollars in innovation strategies through various grants and programs designed to harness ideas and turn them into commercialized services or products. Yet the intrinsic value stored in the intellectual property that has been generated by these public investments will not yield maximum dividends if we do not consider equally shrewd approaches used by GE, other global corporations and governments.”

One such way to do this, Balsillie suggest, is to build and increase the IP rights capacity through tools such as sovereign patent funds.

Ironically, last month in August, Blackberry spun off and launched BlackBerry Technology Solutions – the IP arm of Balsillie’s old company – to essentially build a separate licence venture. In essence, Blackberry’s budget and pool of 44,000+ patents was enough to launch their own corporate patent fund.

Unfortunately for most ventures launching a private fund or group is not feasible, which is where the DEEP research comes into play. By starting the conversation for policy-makers, it puts another viable option on the table. Right now there are several semi-private funds in Canada, such as Wi-Lan, but there exists no easy way for smaller ventures to be helped with protection, or even larger ventures without the expertise or connections to build a licence program. As a result it implies there is a considerable amount of work many governments can do on the IP front – they routinely invest billions in innovation and R&D grants, but as a percentage dedicate little to no effort or funds to the future of protecting innovation outputs.  Granted, there is a large time gap between funding innovations and having patents that can be used for licensing, but that does not make it any less important in the cycle of taking an innovative idea from conception and building a global business around it.

If the innovation outputs are supported by IP they can be a vehicle for future venture growth both remain in and be profitable inside of Canada. There are those that will argue against a SPF, just on principle that a state sponsored NPE shouldn’t be created, but it ignores the key market force at play: Regardless of who is funding and managing the funds there is a multi-billion dollar opportunity in both jobs and revenue that has been created by the enforcement side of the patent system that exists. Many firms and individuals understand that and are reaping the benefits, using the patents supported by the innovation funds originally supported by early state investors and government funds.

If countries and firms want to be leading edge on the innovation front, it will also take effort to remain out front protecting their developments.

2017 UPDATE: An update has been posted in relation to this. I bring this up because the global IP licensing market has changed dramatically in the past few years – both in what is working and in what jurisdictions they are working best in.  While SPF’s and Patent Assertion Entities are still relevant, their approaches are expanding from pure licensing to stronger linkages to venture innovation projects and associated funding.

I recently authored the INTIPSA IP Strategist Column in the July/August 2014 issue of IAM Magazine, entitled “Using a patent roadmap to lay the ground for an IP strategy”.  I centered the article around the challenge I recognized many companies face:  Ideally an IP strategy should be defined from the outset, but there were many practical cases where this was not always possible.  For these situations I outlined some practical steps in the form of two best practices for “IP advance positioning” that IP professionals or CIPO’s can undertake to build a quality portfolio before a strategy is fully developed or approved in the board room.  The methodology can be applied to startups, small and medium entities, and larger entities that usually require a lengthy runway to develop and deploy a roadmap.

While an IP strategy is the gold standard, it is not always possible due to constraints on time and resources. However, a patent roadmap and partial deployment by IP teams can still make a difference to an organisation’s bottom line.

The magazine is quite good, focused on the real business side of IP, and I would recommend you subscribe beyond the trial if your budget allows.

The article is part of a larger discussion or workshop I often end up having with growing ventures that recognize they need an IP Strategy, but need to make some tactical filings first due to time, bar date, or budget constraints. The larger discussion contains additional best practices and is built around the three critical components of strategy, process, and people. I often refer to these as Components of the Patent Engine – all three are required for the long-term success and scalability of a program and can be adjusted to work in all environments: startups, technology offices, local business units, national teams, and corporate global entities.  As companies grow there is an expanded set of components that mix in legal and corporate views, but the foundational three are always consistent.

 

 

The Components of the Patent Engine:

For Strategy	›  The strategy component defines the vision and mission of any patent plan. This includes the strategic intent (where the venture needs to be) and strategic actions (top-level actions to achieve the strategic intent).
For Process	›The process component defines the infrastructure required to move ideas to patents and is important because it can be replicated in an efficient and scalable manner. It also ensures key stakeholders are involved in relevant decisions and enables monitoring of KPIs and other measurements of success, inefficiency, or failure. Most importantly, and because the patent process is fairly lengthy—upwards of four to five years from idea to a granted patent—it ensures tracking and knowledge continuity as staff and counsel depart over this time period.
For People	› The people component defines the organizational behaviour aspect of deploying and supporting any patent strategy or process. It is the foundation of an IP-centric culture.

 

In the business environment different ventures may consider an IP strategy for varying key reasons, for example:

• Startups, SMEs – protect the fundamental technology, while accounting for technology pivots; Spend limited resources wisely.
• Accelerators & incubators – identify which ventures need IP as a core strategy, and mentor them successfully.
• VC & Investors – Instill process to reduce costs, set expectations for an IP ROI for the teams, and increase valuations for the next exit round.
• Universities & TTOs – focus on mining and identifying the best research areas to focus IP investments in, and link those to commercial benefits.

I will use another post to dive into the 3 components but the common thread is to position & protect growth while deploying processes that will support the IP vision and scale up as growth happens.  Whether you define a full IP Strategy, or deploy an IP roadmap ahead of approval, any IP planning action gives IP leaders a response when asked in the boardroom “What IP do we have, and is it useful for our business? ”.

For those wanting to know more about IP Strategy, feel free to contact me.  If you are looking for external references on IP strategy, check out both IAM Magazine and INTIPSA (International IP Strategists Association) for more IP-Business related content.