Ideas are the lifeblood of any technology-based company, but for the company to succeed, the ideas must be translated and transformed into value. Yet companies based on mediocre ideas are often wildly successful, and companies based on incredible innovations often fail. One difference between success and failure is managing the process that transforms ideas into IP and IP into value.
All of our previous articles have dealt with the intersection of IP and value in one form or another. In-house counsel play a critical role in managing the transformation of ideas into value. All IP is ultimately a legal construct. As the strength of patents, for example, within the courts and the U.S. Patent and Trademark Office (PTO) changes, the value of external threats and internal assets change with them.
We discussed the pitfalls and difficulties inherent in the valuation of IP obtained from mergers or acquisitions. We also discussed using the Pareto Principle (i.e., the 80/20 Rule) as a tool to guide the management of IP portfolios. Finally, we warned against neglecting nonpatent forms of IP. In a sense, these articles all addressed “internal” drivers of value—by innovation, acquisition and management of IP.
There are many other internal challenges to managing the transformation of innovation to value. Depending on the age or nature of your organization, your R&D department must transform from a cost center to a profit center. Although this can be a cultural evolution, in-house counsel can foster positive evolution by altering the incentive structures in R&D. Too few innovations might be impacted by increasing monetary and other incentives for new disclosures; too many narrow improvements might be impacted by implementing a review panel, for instance, or by offering equal or greater awards for internal design-arounds.
We also discussed how to preserve value by managing and assessing external threats. One of our articles discussed how NPEs can be deterred and your own litigation costs can be lowered by properly deploying reexaminations and the new PTO opposition proceedings—inter partes review and post-grant review. Additionally, we surveyed the changing landscape of patent infringement damages.
Other external threats need to be monitored and managed. Although sales and marketing often track the activities of direct-market competitors, technological competition may come from indirect sources. For instance, we can look at the market for batteries. Energizer and Duracell are two leading battery manufacturers and directly compete both in the market and technological developments. Yet, their biggest technological threat might come from fuel cell manufacturers, a cell phone manufacturer or from a solar power company that cannot compete against its own direct market competitors (e.g., wind, coal, gas, hydro) without a better battery. In-house counsel can more easily identify and assess this competition. Today’s patent applications are tomorrow’s products.
Ultimately, in-house counsel will need to assist their internal stakeholders in understanding the value of technological development and the parallel investments required to execute on technology advantages. In today’s economy, in-house counsel need to build both a legal department and business operations around execution on the competitive advantage their technology brings to bear. Obtaining patents is just the beginning. Constantly adapting, assessing and advancing your company’s technology base to meet tomorrow’s demands is the real goal.