Intellectual Property Management Strategies for Small Business
The objectives of an intellectual property management system will typically include at least the following:
- Weather times of economic downturn by protecting products that afford competitive advantage.
- Counter competitor attacks.
- Gather strategic intelligence.
- Possibility of licensing revenue.
- Increase asset register thereby increasing valuation of business.
- improve internal performance by consolidating knowledge, for example in design files, bills of materials and documentation necessary for creation of patent specifications.
- Throw out obstacles to competitors and barriers to entry.
- Gain exclusivity to innovative products and draw new clients away from competitors.
- Obtain marketing advantages.
Alignment with Business and Technological Goals
The above objectives will only be attainable if the IP management strategy is aligned to the overall business strategy. If there’s a misalignment then products which are essential for the commercial viability of the business may either not be secured or alternatively are at risk of not being free to use after the investment in development has been made.
In order to implement an effective IP management system the business plan must set out operational requirements for identifying intellectual property associated with the goals of the business plan.
To illustrate, consider a mining equipment company. The company’s business plan includes the development of a third generation product within eighteen months in order to meet revenue projections for sustained growth. The new generation product is to include a number of improvements and features which the marketing department has reason to believe will be highly desirable to customers.
At initial product development planning meetings a product specification is developed. At these meetings persons with expertise in the mechanical, industrial design, electronic hardware, software and marketing areas will typically give their input in relation to possible design approaches that might be adopted to meet the new product requirements.
It is at this initial planning stage that intellectual property considerations need to be taken into account. The business plan includes a requirement for Intellectual Property issues to be considered in relation to the new product and meeting agendas incorporate intellectual property discussion items, around the following questions:
1. What is the situation with third party IP rights in relation to the new features that are being planned?
In particular, have competitor patent portfolios been checked to determine if any competitors have already applied for, or been granted patents that would prevent sale and use of the planned new generation product? There is no point in investing time and money in R&D for new products that can’t be legally used.
2. What is the likely value of the new generation product to the business?
Presumably the whole point of innovation from a business, as opposed to a purely scientific, perspective is to provide improved products which will be in demand by consumers and so will improve the profitability of the business.
It is fundamental economics that scarcity drives up the price of commodities. Patent protection creates scarcity because it restricts legal supply of the patented product to the patentee. Consequently, investigations should be made to determine if the new features are likely to be patentable. It is a waste of R&D investment to create new and innovative products that can be freely copied by competitors.
Securing IP protection provides a two-fold advantage. Firstly it allows for higher profit margins to be charged, because the patent owner is the only legal supplier of the product. Secondly, it increases market share and so provides an opportunity for the business to develop relationships with new clients. These new relationships are in themselves intangible assets which add to the value and ongoing security of the business.
3. Will the business have clear title to IP created during the new product development?
This question opens up a range of issues regarding the relationship of the technical and creative people that work on the project to the business. In particular, employment agreements should be vetted to ensure that they include intellectual property ownership clauses in favmy of the business. If external contractors will be engaged then it is essential that IP ownership clauses appear in a written contract with the contractor. Whenever new employees join the business then, particularly if they have left a competitor company, it is essential that they be briefed in relation to ownership of intellectual property. There is no point in paying to develop intellectual property that the business does not own. (For more information on the difference between patentability searching and patent clearance searching see my article on this topic. )
4. Has a brand name been considered for the new product?
It is very difficult to build a strong brand, and obtain trade mark registration, with a descriptive name (see for example my article on this topic and branding in general). A list of candidate distinctive names should be arrived at. Each of the names on the list should be searched for on the IP Australia trade mark register to determine if they are free to use. Internet search engine, and other general searching should also be conducted to ensure that no common law rights are likely to be infringed by adopting a particular name. If the brand includes a logo that was created by a graphic artist external to the business then it is important that a copyright assignment be put into place.
5. Are staff, particularly marketing staff aware of the need to keep the details of the new product confidential until any patent and design registration applications have been lodged?
In academia there is pressure on academics to “publish or perish”. I have seen at first hand that this pressure can cause inadvertent early publication of commercially valuable inventions to occur so that potential patent rights are lost. Similarly, marketing staff are often under pressure to explain new product features to potential customers in order to gain pre-sales. It is very important that marketing staff understand what they can and cannot talk about publicly and that premature non-confidential disclosure could mean irretrievable loss of valuable IP rights.
Instill a Culture of IP Awareness into Your Business
It is an old saying that “if you give a man a fish you can feed him for a day but if you teach him how to fish he will be able to feed himself for a lifetime“. This saying concisely sums up why intellectual property is valuable. It provides a sustainable ongoing advantage.
However, although intellectual property is valuable the fact is that it is an asset that is owned by the business, not the technical and creative staff. There will often be initial employee resistance to the adoption of an intellectual property culture. Usually this is because staff members have not worked in an environment where intellectual property has been valued or properly managed.
In my experience, overcoming resistance to corporate IP culture involves explaining that intellectual property increases the profitability and long term security of both the business and the employees. Most business plans include sections relating to the ongoing management staff. For example, these sections may include policies for regularly recognising extraordinary staff performance, for example in production or marketing areas, by giving awards or bonuses. This section should be expanded to provide recognition to staff that come forward with new ideas for product and service improvements that would add value to the business.