As markets become more global and driven by new  technologies, a well-thought-out IP strategy is  becoming even more critical for businesses.

Imagine spending time, money and resources  developing a new process or technology, only to  find out that your competitor already holds the IP  rights for that innovation.  Not only would this  usually prevent you from securing your own IP  rights for the innovation, but if the competitor  enforces its IP rights against your organisation, you  may be required to pay damages and suspend sales,  which could have a huge impact on your profits and  reputation.

It should also be noted that directors of listed  companies who don't adequately manage and  protect their organisation’s IP may be failing in  their responsibility to shareholders.  As custodians  of shareholder value and responsible for building  the company’s value, if directors fail to adequately  protect or extract value from their IP, then it could  be argued that they are not fulfilling their director's  duties.

Companies that are driven by innovation and  change need to understand the impact and value IP  rights can have.  With complexity added by multijurisdictional operations and increasingly popular  joint venture arrangements, companies need to  ensure their IP portfolio and management strategies  are as strong and attractive as possible.

ASSESSING THE MARKET

One of the most important issues for organisations  to consider is whether it has the right to be doing  what it's doing in the market.  Organisations must  determine at an early stage:

  • What IP rights it owns and what IP rights its otherwise has a right to use.
  • The extent of such IP rights.
  • How such rights can be properly used by the organisation (including any limitations or restrictions on use). 

A detailed assessment of the IP assets held by the  organisation is required to determine the quality of  the IP rights attaching to those assets. This  includes reviewing the contracts which affect the  business' IP rights including licences, supplier  agreements, partnering arrangements and  employment contracts and determining what  limitations and restrictions apply to those IP rights.

This also involves understanding what your  competitors are doing - you need to assess the IP  rights held by competitors and the overall IP  landscape within the relevant market to identify any  potential infringement issues - either infringement  by your organisation of third party rights or  potential infringement by third parties of your  organisation's IP rights.

There is no doubt assessing the IP landscape can be  a difficult and time consuming exercise but it is  also incredibly important - it can save you wasting  huge amounts of resources if you later discover that  you do not have the rights you thought you had.

IP mapping allows you to create a visual  representation of your competitor's IP as against  your organisation's IP.  It can show where there are  gaps in the market and highlight areas of the market  which are heavily protected by competitors (and not  worth pursuing).  An IP map is a very useful tool to  enable organisations to shape their innovation  strategy, identify a clear R&D roadmap for product  development, and ensure its products and brands  are not compromised by competing third party IP  interests.

During the early stages of project or product  development, you need to ensure you have  'Freedom to Operate' - that is, ensuring there are no  third party rights which may prohibit or  compromise the commercial value of the project or  product.

Early identification of the your organisation's own  prior art (or knowledge) and third party prior art  relating to new products or competitor products is  important - it can lead to the narrowing or  invalidating of competitor's patents and strengthen  your organisation's own IP portfolio.  It is best to  have a documented history of key components  relating to the organisation's new projects or  products.

If a Freedom to Operate issue does arise, the  organisation will need to consider a costs/ benefit  analysis of either:

  • Invalidating the third party IP rights.
  • Obtaining a licence (or cross-licence) from the  third party.
  • Avoiding use of the IP and any infringement  issues.

Early identification of third party IP rights will also  provide opportunities to:

  • Design around any potential issues.
  • Seek partnering opportunities to gain access to  third party IP.
  • Reveal strategic weaknesses in your  competitor's IP portfolio which can be filled by  new IP rights owned by your organisation.

A Freedom to Operate analysis and IP landscape  review should be regularly undertaken.  There are  various systems available to assist with monitoring  the market to identify third party IP interests that  may affect your organisation.  Regular monitoring  helps to ensure competing IP interests are properly  identified in the market as early as possible.

PROTECTING YOUR 'GOOD' IDEAS

Identifying what are 'good' ideas (and potentially  valuable IP) is critical.  Of course, not all  innovations or new knowledge developed will be IP  that is valuable to the organisation.  An assessment  of what is valuable IP requires an assessment of  whether capturing the IP rights would assist in  achieving the strategic objectives of the business.

In order to capture valuable IP, having adequate  knowledge management systems in place is critical.   To facilitate the capture of IP, personnel should be  required to:

  • Keep accurate and up-to-date records regarding  creation and handling of IP.
  • Comply with their obligations of confidentiality  at all times.
  • Assess new material and innovations for its  strategic and commercial importance at an early  stage.
  • Feed this information into a central database  (rather than individual personal databases).

The central database will provide all personnel with  a forum to log any idea, innovation or new  knowledge that may be of value to the business.   The system also provides a valuable mechanism to track and (where applicable) reward any significant  developments which may lead to the capture of  valuable IP.  By adopting a bonus scheme or  providing an incentive for the capture of valuable  IP, an organisation can actively promote innovative  thinking and enhance the development of IP within  the business.

Once valuable IP has been identified and steps have  been taken to ensure third party infringement is  avoided, the organisation needs to determine the  best means of protecting the valuable IP with  regard to the objectives of the business and the cost/  benefits of protection.

To create a stronger market position regarding IP  protection, organisations can incorporate a range of  protective mechanisms to create different layers of  protection in the market.  This may include use of  patents to protect different aspects of innovation,  trademarks to protect the brand, design rights to  protect product appearance, copyright to protect  valuable works and confidentiality to protect trade  secrets and know-how.

Overseas protection

When considering the protection of new ideas,  entry into overseas markets will always be an  attractive goal for organisations as they grow  beyond their original borders.  It is important for  companies to secure IP rights (following a balanced  assessment of costs and benefits) as early as  possible in all jurisdictions which it plans to operate  and exploit the IP. Without proper protection,  foreign companies may be able to exploit, or  register IP created by another organisation and  possibly hinder or prevent that organisation from  exploiting the IP in that country. 

Defensive publications

Organisations should also consider use of defensive  publications. This is where you strategically publish  an invention to create prior art which will destroy  the novelty of a potential future patent.  This can be  a very useful technique to ensure competitors are  not able to obtain patent protection for inventions  that you've found (and may need to use in future)  but don't need to protect.

OPTIMISING YOUR PORTFOLIO

Once the initial development phase is over, and the  IP has been properly captured and protected, it's  important for the organisation to have clear policies  and procedures to maintain and manage its valuable  IP.   The principal elements of an effective corporate IP  strategy should include:

  • A statement on how IP management supports  the overall mission of the organisation and  actively communicating the strategy to staff.
  • The responsibilities of the IP management  function.
  • The strategy to be adopted towards IP  negotiations with suppliers/ third parties;
  • How to develop new IP opportunities in line  with the business strategy and IP landscape; and
  • Various corporate policies and procedures  which may include:
    • Personnel Policy – for engagement and  termination of personnel (in the context of  handling IP) and incentives to promote  innovative thinking and creation of IP  rights;
    • Documentation Policy – for creating and  filing documents to ensure that IP is  properly captured and establishing a culture  of documenting ideas;
    • Confidentiality Policy – to ensure secret  business information is kept confidential by  non-disclosure agreements and noncompete clauses in employment  agreements;
    • Protection Policy – for early stage review  of new products and ideas to determine  potential value and the best form of  protection;
    • Infringement Policy – to ensure the  organisation is not infringing third party IP  rights, and that speedy action is taken  against infringement by others;
    • Research Policy – to ensure research  projects are developed, resourced and  managed effectively with regard to IP  issues;
    • Branding Policy – to manage brand  awareness and guidelines for use of brand  internally and externally;
    • Education and Awareness Policy – educating staff and management on the  importance of the protection and  management of the organisation’s IP; and
    • Commercialisation Policy – how the  organisation can properly leverage off its  IP base (both internally and externally) to  ensure IP is used in the most effective  manner.

It is becoming more popular than ever to develop  new technology in conjunction with partners, suppliers or other third parties who bring existing  (or background) IP and expect to obtain use of the  results or benefit from the commercial exploitation  of the IP.  In these cases, it is critical that IP issues  are considered at the initial contract negotiation  stage of all new projects.  The agreement needs to  expressly and clearly confirm ownership of  background IP and provide details regarding  ownership of the new (or resulting) IP, including  the specific rights (and any limitations) regarding  use and exploitation of that IP for each party.

Companies could also find themselves on the  defensive as non-practicing entities (NPEs or patent  trolls) continue to grow in number and enforce  patents on a large-scale.  NPEs generally are not  trading or operational companies and exist solely to  enforce patents by way of licensing or litigation.  Generally, the patents that are held by NPEs  contain broad claims and are being enforced in a  manner clearly not contemplated by the original  patent. Licenses are offered to unsuspecting  companies for a sum that is significantly less than  the cost of disputing the matter in court and, after  analysis, many companies choose to settle the  dispute.  Companies need to be aware of patent  trolls and have a policy and procedure in place for  dealing with these companies. 

While the issue of managing IP is universal, it’s  important that organisations consider their own  individual situation and circumstances to determine  an IP strategy that suits them – one solution won’t  suit all.  To optimise an IP strategy to suit your  particular organisation, the IP strategy must be  moulded to ensure it integrates seamlessly with the  operational and management function of the  organisation and, importantly, each member of the  organisation takes ownership of the strategy.  Often  by implementing an education and awareness  program for staff and adopting a bonus scheme or  other incentives for the capture and identification of  valuable IP, organisations can promote innovative  thinking and significantly enhance the cycle of IP  management within the business.

CONCLUSION

While traditionally companies may have focussed  on their tangible assets as an indication of their  value, many are now recognising the real value of  IP and the need to properly protect and manage  these valuable assets.

Having a robust IP portfolio and management  strategy is an essential part of any company that  develops and innovates, not only because of the  financial returns that it can help generate (through  the sale or licensing of IP), but also because it  contributes to other company objectives such as  being a more attractive partner or supplier, and  reducing the likelihood of IP infringement claims or  patent troll attacks.

An effective IP strategy must work along-side the  overall plan of the organisation and be integrated  with other management activities.  When properly  implemented, an IP strategy enables decisions to be  made regarding protection, use and enforcement of  IP - in terms of how they assist with achieving the  objectives and adding value to the business.

As the global market becomes more competitive  and increasingly driven by innovation, an effective  IP management strategy is becoming essential for  all organisations and the time to act is now!