Is it central to your innovation or product development strategy? Or do you see it as more of a tick box exercise once all your planning and creative thinking have been completed?
Almost certainly it’s somewhere between the two. But if you don’t commit to fully embracing the value of IP as a critical business asset, evolving market conditions mean you’re in danger of losing out.
In 1978, 80% of a company’s assets were tied to tangible assets such as inventory, machinery, buildings etc., with just 20% concentrated in IP. But today the tables have been turned, with an estimated 88% of a company’s value being related to intangible assets¹ – more than justifying a change in attitude to IP and its impact on the business.
With the growing dominance of the knowledge economy, this is set to accelerate. 2015 was a record year for mergers and acquisitions (M&A), which reached $4.9 trillion globally². Patents and other IP are valuable investment assets, and key to M&A transactions. And businesses generally are more global in their reach and reliance, creating more complex issues and risks. As Verne Harnish, CEO of of Gazelles Inc. has said, “With 88% of company value now tied to intellectual property, many biz owners are asleep at the wheel when it comes to properly protecting and defending this critical asset.”
The convergence of technologies such as Big Data, mobile computing, automation, cloud services and the Internet of Things also mean that no one organisation can excel in all the technology components required for its products, and so will need to license or cross-license technology to bring those products to market. Which is why recent years have seen an increase in cross-licensing deals, a trend that will no doubt continue as products become ever-more sophisticated. And then of course there’s the issue of non-practising entities (NPEs), whose primary aim is to enforce and initiate litigation based on patent rights without using those patents themselves – making clarity around IP vital.
What does this mean for my business?
The barriers to changing attitudes to IP can be significant. Among the most pressing of these is that IP is now subject to the challenge of Big Data. It can be daunting to even begin to get to grips with all the patent, trademark, contract and other data that can affect your business plan. Attorneys study for years to understand the IP space, which is also an area where laws and policies are constantly changing. Add to this the potential conflicts between risk of infringement and the constant pressure to innovate as quickly as possible, and it’s easy to see why businesses may be reluctant to change their approach.
But the biggest concern is that some of the ways in which IP has been viewed and managed in the past are simply no longer appropriate to this evolving environment. Traditionally, IP has fallen solely within the remit of the Legal team. This is fine when only 20% of your assets are involved, but not when that figure is 88%. Today, Legal needs to be a facilitator of IP, not just its keeper - collaborating with stakeholders responsible for research, innovation and business strategy throughout the organisation, to improve alignment, ensure an effective IP strategy is in place before new products are envisaged or created, and ultimately to increase ‘first to file’ and competitive advantage.
While adopting this type of approach requires significant changes in mindset, and potentially in roles and resources, failure to do so also presents its own risks. Missed high value opportunities, increased R&D costs when projects start but cannot be completed due to IP issues, employees who walk out of the door taking trade secrets with them, and the very real risks of patent violation, litigation and wilful infringement.
Where to begin?
CPA Global is committed to helping customers address these critical business issues, optimise their IP management and maximise its value. This is the first in a series of articles in which we’ll be sharing our perspectives on the practical steps needed to achieve these goals. To find out more.
- Contact us to discuss your IP management needs in more detail
- Bookmark our blog and make sure to refer back to it regularly
² Dealogic, 24 December 2015