In 2017, everything is going to the cloud. Regulators are trying to keep up with the pace, but much of the current regulation of data ends up missing the mark. This was experienced firsthand by Roschier partner and IP Horizons 2017 speaker Niklas Östman, who, when on a recent trip to London, found out that his credit card had been hacked (once again), this time through a payment terminal that had been hacked. Sophisticated data rules don't help when you are dealing with the bad guys, who – by definition – don't follow the rules. Even though the hackers and scammers do not struggle to comply with any legislation, this change poses the rest of us with a strategic challenge.
As regards intellectual property, companies are becoming increasingly aware of the importance of adapting their IP strategy for the digital economy. As eventually everything will be in the cloud, capturing, storing and analyzing data become key. Managers striving for compliance should remember that the vast majority of data with value will not be personal data, which allows more effective utilization of the data across jurisdictions. But how to choose the right strategic focus for the future, where elections are lost or won with data, and where the biggest competitor of content companies like Netflix is sleep, as their CEO recently stated?
The choice largely depends on the size of the business, and on how technology-intense the operations of your business are. Östman sets out four types of business, with matching IP strategy profiles.
- At the lightest end of the spectrum is a small business with low-tech operations, such as a flower shop. For such an operator, the cornerstone of the IP strategy is Freedom of Operation (F-o-O, or FtO), the focus being to carry out the operations without infringing third-party IP. When adopting this strategy, the less you even hear about IP, the better it is working.
For a slightly bigger and more high-tech business, a successful IP strategy brings cost advantages for the business through IP. This strategy is used, for example, in the Chinese smartphone industry, and is suitable for the type of business that aims to sell products, but make more profit than the competitor across the street by paying less royalties than they do.
As the level of ambition grows along with the size of the company and the role of IP in its operations, the strategic focus shifts towards differentiating the company from competitors on the market. Examples of this can be seen in the pharma industry and the smartphone industry, with the recent Apple v. Samsung case as a good example. This already starts to be pretty demanding as evidenced by Apple losing the case against Samsung.
In the deepest and most intense end of IP strategy are the large, technology-driven companies, which can base their strategy at least partially on IP monetization. At this end of the spectrum, the business is at least to a degree founded on making money out of the company's IP.
With over a decade of licensing strategy experience from some of the world's largest and most IP-intense companies, Östman foresees strategic challenges for companies in the years ahead, especially in the field of patent law.
It is easy to forget that the foundations of patent law date back to 1883, when the world looked a lot different. The paradox at the heart of the digital age's patent law is that its biggest flaws are also its key features, relating to the concept of territoriality. While territoriality is at the core of patent law, at the same time it is ill-suited to the data-driven world detached both from the concept of nation state as well as the constraints of physical space. In 2017, infringements are scattered across jurisdictions, as claim elements of patents may be performed in separate countries. Deploying design-arounds are becoming easier and the design-around schemes are growing in scale, as you can deploy tens of millions of instances of software designs by the push of a button in milliseconds. As technology becomes increasingly more complex, a company's ability to detect infringements determines the success of its enforcement strategies.
For patent regulation at a crossroads, Östman sees two viable development options: embrace territoriality, or defy it altogether. Somewhat in the style of the Unified Patent Court, a new global convention could change the established fundamentals of patent law. On the other hand, it is possible that the patent law might start retreating towards the physical space, to avoid the obvious clashes with the current legislative framework and the digital reality.
Trademark law has survived digital developments better than patent law, and, despite similar global challenges. For example, the takedown mechanisms in Amazon and Alibaba seem to work, supporting global enforcement. In terms of copyright, among the biggest changes may be the shift in the balance of power between content producers and consumers. In the future, it is likely that content firms will compete for the limited time customers have for entertainment by compensating users with loyalty points or the like for watching their content. So, in a nutshell, consumers may start being compensated for watching content – and not the other way around.
In order to thrive in an environment where the balance of power and jurisdictional divides change fast, a company of any size will have to be aware of the focus of its IP strategy, and be able to shift its strategic priorities along with the market and regulatory changes. Regardless of the applicable shade of IP strategy, no company can afford to approach its IP in terms of black and white.