As disruptive new technologies such as robotics and blockchain reach critical mass, Chris Donegan and Matthew Vella explore what impact this next generation software infrastructure will have on IP monetisation

While NGSI is already an integral part of our daily lives, from the product choices that Amazon offers us to surveillance by the National Security Agency (NSA), it is poised to revolutionise many other aspects of what we do (eg, transportation, autonomous vehicles, accounting and aerial delivery drones).

Home service robots will clean, provide security and play with your dog, while smart sensors will monitor people’s blood sugar and organ functions, robotic tutors will augment human instruction and AI will lead to new interactive ways to deliver media. As all this is happening, robots and smart systems will move inventory in warehouses, schedule meetings and offer financial advice.

McKinsey estimates huge markets for NGSI adoption of between $3.5 trillion and $5.8 trillion. The greatest NGSI markets are expected to be in marketing and sales ($1.4 trillion to $2.6 trillion) and supply chain management and manufacturing ($1.2 trillion to $2 trillion). McKinsey expects NGSI retail to reach $800 billion in market size and NGSI healthcare, banking and automotive to each reach over $300 billion.

In a ‘barbell’ IP strategy, innovators will leverage open source code to build software whose value is derived from huge proprietary data sets that fuel machine learning. Where patents are granted, many will contribute to open source projects (which are effectively types of patent pools) as efficient vehicles to monetise value and support innovation.

A handful of large companies will hold proprietary data sets that allow their AI algorithms to be better trained and utilise machine learning to create uniquely valuable business models. The value of public data sets may also increase in this scenario, subject to data protection laws, as NGSI companies enlist governments to help them maintain a hammer-lock on their data lakes, and others approach the government to release the data from their control.

The challenges and outcomes for IP monetisation in a cloud-based world of software with significant trade secret protection are summarised here.

Challenge Impact

General background:

  • Migration away from physical layer.
  • Cloud deployment.
  • Patent and trademark office resistance to granting and willingness to invalidate software patents.
  • The importance of China.
  • More sophisticated IP strategy.

It is harder to determine infringement for software patents since many applications are not easily discoverable. It is more risky to seek restitution as invalidity finding percentages remain high.

Any IP strategy must include China, since it is the number one filer, data can move freely and instantaneously, and injunctions are possible.

IP strategy is tightly linked with commercial strategy as a result of the primacy of data. NPE position is weak.

Software as a machine:

  • Less ambiguity more patentability.
  • Experience curve of courts and practitioners

The trend is towards a clearer picture for software than in the past. Newer patents are likely to be stronger.

The courts are becoming more educated and nuanced in their decisions.

Open source:

  • Growth in open source patents and algorithms.
  • Migration in value from patent to data.
  • De facto standards

Business models favour open source patents and proprietary data. This creates an integrated IP package that is an opaque, effective and structural barrier to entry for competition.

Commercial value continues to migrate to data.

The use of common libraries creates a de facto set of standards for certain patents.

Job to be done:

  • Focus on outcomes not inputs or tools.
  • Primacy of data.

The combination of cloud, integrated IP position and skew to data makes detection, quantification and prosecution of infringement more difficult.

Significant opportunities remain in niche patent situations, insolvency and M&A.

Lobbying government for laws and regulations that enable NGSI companies to hang on to their data lakes, without compromising the government’s need to regulate data pertaining to individuals, will be key.

Monetising data:

  • Commercial focus.
  • Challenge for NPEs.
  • Event driven.
  • Government enlistment.

The combination of cloud, integrated IP position and skew to data makes detection, quantification and prosecution of infringement more difficult.

Significant opportunities remain in niche patent situations, insolvency and M&A.

Lobbying government for laws and regulations that enable NGSI companies to hang on to their data lakes, without compromising the government’s need to regulate data pertaining to individuals, will be key.

This article first appeared in IAM. For further information please visit www.IAM-media.com.