The Chief IP Counsel, the CEO and Business Strategy

One of the core principles of my company and the development of our software is that IP strategy needs to be aligned with business strategy. As you might have guessed, we’ve developed our software to help companies do just that. Rather than posting another blog entry that espouses the benefits of achieving this alignment, I wanted to pass along a few other blogs I’ve found that share similar perspectives on the this topic.


Chief IP Counsel
We’ve discussed the concept of a Chief IP Counsel on this blog before. I came across a very cool post on the concept over on the e^(ip) blog. Not only does it discuss the importance of the CIPC role, but the author does a great job of describing some of the more strategically-minded business issues the person in this role needs to consider.


IP-Business Strategic Alignment
Speaking of good posts, I’ve come across a blog dedicated to the concept of IP strategy equating to business strategy by the folks over at IP-Refinery.com. There are some good posts over there. One post that caught my attention recently was on the topic of using IP strategy to reduce the inherent uncertainty in business decisions.


WIPO - A Practical Guide
I’m not sure when this entry was posted over at WIPO, but A Practical Guide to Managing IP is another good piece that outlines everything from organization alignment, education to proper oversight of an IP licensing business.

....More to follow in our next post.

Business Strategy IS Intellectual Property Strategy

by Ron Carson
Regional Sales Director
Innovation Asset Group, Inc.

IP assets are increasingly recognized as key business assets. The management of IP assets is no longer a discretionary function, nor solely the domain of the legal department. It has become a pillar of corporate strategy. If you are reading this, you probably already know that IP is important.

A lot has been written about both business strategy and IP strategy. In the case of business strategy there are a multitude of models, formulas and approaches that provide a framework to assist in development of the strategy. In contrast, it seems to me, most writings about IP strategy deal with why it is important, but there is little written about how to go about developing or implementing such a strategy. In fact, most writing seems to position IP strategy as a separate concept that must be aligned with a pre-existing business strategy. In my opinion business strategy and IP strategy are at the very least deeply intertwined, if not two sides of the same coin.

IP IS IMPORTANT...
According to a number of recent reports by PWC and others:
• Approximately 90% of worldwide corporate net worth can be attributed to intangibles and intellectual property.
• Over 80% of executives believe the importance of intellectual capital to the value of their companies will increase over the next 3-5 years.

...BUT APPARENTLY MISMANAGED.
• Almost 70% of executives believe IP management is too often treated as a legal, not a strategic issue.
• Over 60% of executives believe current accounting practices understate the value of IP.
• Over 80% of royalty agreements are under reported.
• Over 60% of executives believe their companies could extract significantly more value from existing IP and IP formation if it devoted more assets and attention to relevant processes.

WHY THE INTELLECTUAL PROPERTY DICHOTOMY?
• Over 70% of executives believe a focus on short-term results inhibits the development of sophisticated processes for managing IP.
• Intellectual property is inherently more complex than tangible assets.
• Most business executives would rather not have to read the claims of a patent, let alone the claims of an entire portfolio.
• It is easier to continue to have the legal department manage these assets. (In my opinion, this is why we are seeing the legal function around IP become elevated to a more strategic position in companies, just as we have seen with IT departments in the past 10-15 years. You can read a related post about Chief IP Counsels and Chief IP Officers here.)

IP Strategy can be approached in much the same way as business strategy. In some respects, they are the same.

IP STRATEGY IS BUSINESS STRATEGY
I think part of the challenge executives have is the concept of mapping their IP strategy with their business strategy. IP strategy is simply a component of a business strategy. In fact, I think you could take a model such as the Balanced Scorecard or the Five Forces and insert an additional component for Intellectual Property.

In developing a business strategy, there are some common things to consider that apply equally well to the realm of intellectual property. Generally speaking, you want to consider the needs of your customer, the nature of the competition and your own capabilities. (For the sake of simplicity, I’ll leave market sizing and some other topics out of this post.)

Customer
Eventually, the value of the IP a company hopes to control is derived from the needs of the market. Just as a business strategy must consider the needs of customers in various segments, so too must IP strategy consider the needs of customers. Understanding these needs will drive product requirements, R&D priorities and eventually help prioritize patents to be acquired, licensed, applications to be filed or even trade secrets to be protected.

Competition
In business strategy, a company cannot chart its course without understanding its competition in terms of strengths, weaknesses, distribution strategies, pricing strategies, etc. In the IP realm, companies can look at the profile of their competitors to understand the relative strengths and weaknesses of their IP portfolios, strategies and technological directions. With this information in hand, a company can patent or acquire rights to technologies to strengthen their own competitive position.

Product
In business strategy, a company looks at its relative areas of expertise. What does it do better than other companies, how does it differentiate itself? Similarly in IP strategy, a company must consider its portfolio -- what does it have, and what does it need to add? On the business side, a company has to make the build vs. buy decision. In IP, a company looks out across the IP landscape with an understanding of the market requirements, competitive implications, and determines if it should invent (make) or acquire (buy) the necessary components to round out the portfolio.

Understanding what the market needs, the competition and your own capabilities are key elements of both business and IP strategy. With this information in hand, you can intelligently plot your course forward with all appropriate milestones and metrics.

Stay tuned for next-in-series posts that will get deeper into the ‘how’ does one go about this – at each stage of the IP Value Chain and at varying levels of IP sophistication. And please…feel free to add your insights.

IP Culture - a Political Priority?

by Peter Ackerman
CEO and President
Innovation Asset Group, Inc.

I am frequently asked to post to our blog. I’ve liked the excuse that my reflective nature requires more time. My blog blockage is cured with this. Nothing to do with political predilections. President Bush was asked about whether over-the-air broadcasters should pay performance royalties. Turned out to be esoteric from his perspective (“I have like no earthly idea what you’re talking about”). The question was asked by Al McCree, president of Altissimo! Recordings. Just an interesting subsurface alignment between the two that McCree is in the business of recording, licensing and distributing military music. His company licenses music from all of the U.S. Armed Services and their label is found in military academies, on military bases and in war memorials across the United States. It appears that, following a tour in Vietnam in which he earned the Distinguished Flying Cross, he was a constituent of Governor Bush in Texas for a time. Not that one would have expected the president to know that.

But that’s not my point. The point I want to make is that I might have preferred a response that even generically referred to the critical need to maintain a national entrepreneurial culture. I would have preferred that a question containing the key words “royalties” and “music exports” triggered the mind into gear about the competitiveness of U.S. innovation and protected creative expression. It’s what savvy political leaders do. This has nothing to do with McCree’s specific issue. And it has nothing to do with political ideology. I asked a Democratic candidate for an Oregon U.S. Senate seat about his thoughts regarding capital availability for emerging U.S. technology companies. His answer was that he felt it was a “state” issue, one for the governor to be concerned about. Great. Oregon to an extent seems to get that as I’m sure other states do. But really it’s a national issue.

It’s simply a matter of priorities and re-jiggering the A-list of mentally-parked talking points. Strikes me that so much falls out of the subject of intellectual asset formation. This is still probably the best country for giving birth to an idea and navigating it to a point of commercialization. And ultimately, an environment that nurtures good ideas is an environment capable of liberating itself from myriad ills and dependencies. But there is much more to be done, as highlighted in a piece last year in U.S. News & World Report.

Sure, I self-servingly want intellectual property issues to be on the front of everyone’s mind. But more broadly, I just want the economic reality and possibilities of a fully supported knowledge economy to be tightly packed in the minds of our political leaders. We’re getting there. eBay and Alan Greenspan among others woke a few people up. But what you read and hear about the most - piracy and patent reform - are symptoms. There’s a lot to think about on the front end of the entrepreneurial value chain. Another post for another day.

It was just a question of the president by someone whose interests would be served by a good answer. Sometimes larger thoughts can be triggered by small things.

The New Era in the IP Assets Market

by
James E. Malackowski,
President & CEO, Ocean Tomo, LLC

This year may turn out to be a watershed moment for intellectual property in the U.S. Relative to recent years, there are better prospects for patent reform legislation and a noted appetite at the Supreme Court for patent cases. At the same time, the market is witnessing the prospect of increased IP regulation in the form of new accounting rules and expanded review of patent-related business transactions. In addition, there is widespread and growing appreciation that enhanced competitiveness is inextricably linked to IP. Against this backdrop, the time is ripe for the development and widespread use of private sector mechanisms to cure inefficiencies in the IP marketplace.

The Supreme Court’s current interest in patent cases coinciding with momentum building for a patent bill indicates an activist Court seeking to influence the scope of patent legislation. The Court’s timing is impeccable. The private sector now has an opportunity to widen the application of patent pools and IP securitizations, participate in the development and use of secondary markets for IP transactions, and explore new avenues for IP asset monetization and commercialization. With Congress and the Supreme Court taking up IP issues, a level of urgency surrounds private sector activity.

The IP debate has revolved around promoting innovation and American competitiveness in the global markets. While the public dialogue extends to new technologies, new legislation, and new business models leveraging IP assets, there has been less attention devoted to the marketplace mechanisms and infrastructure necessary to make IP assets liquid and transferable at low cost. Yet the maturation of the IP marketplace is critical and necessary. First, corporate IP management stands to benefit from marketplace innovations. Second, efficient market mechanisms create benchmarks for the courts to recognize in IP infringement damage awards. Third, private sector innovations can cure market inefficiencies, thereby influencing the shape and scope of legislative remedies. Examples of recent marketplace innovations include public auctions of IP and emerging patent valuation standards.

It is a momentous time for the IP markets as 80% or more of a public company’s market value resides in its intangible assets, and this dependence continues to increase. Business models are emerging to more efficiently acquire, enforce, and monetize IP assets. Small and large corporations with IP portfolios will benefit from widespread adoption of the newly available IP marketplace mechanisms. A new era is dawning with efficiencies ready to be exploited by IP-rich companies. For example, the ability to buy and sell patents and patent portfolios in a liquid market changes the IP management options at a company’s disposal. Greater transparency in IP-based transactions and the development of a secondary market for IP assets are welcomed by investors and policymakers. Use of the new IP marketplace mechanisms supplies IP assets to a market with pent-up demand. The time is ripe for the private sector.

Last week on April 19th, Ocean Tomo held its Spring Live IP Auction, where total floor sales reached $11,429,000, including sales of $3,025,000 and $2,860,000 setting the world’s record for highest selling prices for patents at a multi-lot live IP auction. The auction had a 51% transaction success rate; 55% of the sellers who participated in the auction successfully transacted their patents; and the average selling price per lot was $336,148.

About Ocean Tomo: The next Ocean Tomo Live IP Auction is set for June 1, 2007 at The Dorchester in London, England. The Catalogue, now accessible online at ww.OceanTomoAuctions.com, provides information regarding the 600+ IP assets to be offered. Sellers include top multinational companies such as PCTEL, Inc., Air Products and Chemicals, ABB Research Ltd., MeadWestvaco Corporation as well as small to mid-sized companies, professional inventors and investors.