Intellectual property (IP) is the product of independent thought; the outcome of human creativity and innovation. An intellectual property right (IPR), in turn, is the right to prevent others from using that IP and it has a definite and often considerable commercial value. This is unlikely to surprise you. But do you know how best to realise the full potential of your IP portfolio?
Let’s look at four different strategies for deriving benefit from your IPR, using Ann Landers’ 2001 parody-style analogy of the two cows.
MONOPOLISING STRATEGY (Enforcement)
Let’s say you have a dairy cow. You don’t want others to have dairy cows and sell milk in competition with you. A monopolising strategy may be used to enforce your IP rights to secure a monopoly, in situations where:
- The market is big and you can meet market demand.
- It is possible to police for infringement.
- Your invention can be easily copied by your competition.
- Damage suffered through infringement far outweighs enforcement costs
To be successful with this strategy, it would be best to have a strong portfolio of registered rights (which requires aggressive patenting). In addition to securing market share, an enforcement strategy may also allow you to recoup damages for patent infringement, which can be significant!
From 2009 to 2017, the ten largest damages awards in the United States (where patentees can recoup punitive damages for patent infringement), averaged over a billion dollars, according to PWC’s 2018 Patent Litigation Study.
MONETISING STRATEGY (Licensing)
Let’s say you have your original dairy cow plus an extra dairy cow. You rent the second dairy cow to someone else, so they can also sell milk. Here you want to create an additional income stream through licensing, without relinquishing market share to your competition. This monetising strategy may be appropriate where:
- The market is big or geographically remote.
- You cannot meet market demand.
- You have limited production infrastructure.
- Enforcement costs make a monopolising strategy unattractive.
To be successful with a monetisng strategy, you must have a licensable interest. Although content and software licensing (which relies on copyright) is common, when it comes to high tech inventions, patent rights would be preferable. If you are a tech business adopting a monetising strategy, you need to invest in developing more technology and acquiring IP, to remain at the cutting edge.
COLLABORATIVE STRATEGY (Cross-Licensing/Co-Development)
Let’s say you have a dairy cow and your neighbour has a bull. Together, you can pool your resources to make more dairy cows! Sometimes it makes sense to use IP as a lever to collaborate with others. A collaborative strategy may be appropriate where:
- The market is big with several players.
- Technology development is in the nature of incremental (not revolutionary) improvement.
- Cross-licensing and IP pooling/aggregating are not unconventional in the technology field, so collaboration opportunities are not hard to find.
To be successful with a collaborative strategy, you need a lever or something to trade - that is, you must have something to contribute that makes you attractive to others as a collaborator.
As Shane Robinson, HP’s Executive Vice President and Chief Strategy & Technology Officer, puts it, “Increasing a patent portfolio increases our ability to trade intellectual property with others. Our focused innovation strategy – investing in technologies where we can lead and partnering for the rest – is paying off.”
SECRECY STRATEGY (Retaining Secrecy. No Patenting)
Let’s say you have put your dairy cows on a diet that makes them produce more milk. You could keep this diet a secret so others can’t benefit from it. Here you are using a trade secret to give yourself a competitive edge. This secrecy strategy may be appropriate where:
- It is unlikely that the same technology would be easily and independently developed by others.
- Patent infringement would be difficult to police, e.g. in the case of manufacturing processes for commodity products.
- There is little or no budget for patenting.
When it comes to products sold on the open market, this strategy could only work if you have a ‘black box’ invention (that is, the invention underlying your product is not evident by reverse-engineering, once the product enters the market). The risk with this strategy is that the technology leaks into the public domain or a competitor independently arrives at the same solution.
The reality is this: Successful innovation will always attract imitators. If you invest in technical development, you should consider an IP strategy that enables you to reap the rewards. Leading businesses don’t only have IP, but also know how to use it.
Written by Dina Biagio, Partner, Spoor & Fisher South Africa