Chances are if you work in an office, some piece of equipment has been assigned to you: a computer, a phone or even a wireless mouse. Chances are also good that your company has a method of tracking those small but important assets. For example, the IT department probably has the serial number your mouse on file. It’s important, of course, to keep close track of all of a company’s assets, no matter how small.
Why is it then, that so many businesses don’t have a clear intellectual property plan, including documents to show what they own and how best to use it? According to Jim Malackowski, chairman and CEO of Ocean Tomo, an intellectual property merchant bank, more than 90 percent of businesses don’t have this vital information written down anywhere.
This sobering fact raises several questions: Why don’t more companies have a handle on this kind of valuable asset? What can companies do to grow, manage, monetize and protect their intellectual property? And what does this all mean for inside counsel?
Though intellectual property assets are not always as closely monitored as they could be, experts in the space agree that IP is more valuable than ever. Wayne Sobon, president of the American Intellectual Property Law Association (AIPLA) and senior vice president and general counsel at Inventergy, sees this as an undeniable trend. “Look at the twenty-first century modern corporation. It’s broken down the walls of the monolithic enterprises,” he says. “IP is the lingua franca. Developing new technology, collaboration and globalization have led to a more integrated, global marketplace where IP and innovation are key.”
Q. Todd Dickinson, executive director of the AIPLA concurs. “Companies have come to realize that this is what gives a competitive advantage,” he asserts. He uses the example of a cell phone. “The vast majority of what goes into it is IP—design, underlying technology, even the branding. That is what companies are about.”
It’s not just the traditional high-tech firms that should see IP as a valuable asset, however. Intellectual property is just as important in the pharma/biotech industry as well. “For pharma and GlaxoSmithKline (GSK), innovation is a key factor. IP and exclusivity are key to fostering innovation and incentives for research and development,” says Carl Battle, senior vice president and chief patent counsel at GSK. “It can cost over $1 billion to discover and develop a new medicine. We would not make the investment if there was not a reasonable certainty that there would be a return on that investment. We want strong patents and certainty that they will be granted, cover the product and provide a period of exclusivity in order to recoup the investment. That’s why it will remain an important issue for pharma.”
Building, monetizing and protecting
While there is no single path that companies must follow in order to take full advantage of their intellectual property, experts agree that there are certain key steps that businesses can take to start the journey. Both Sobon and Dickinson see the value in expanding the conversation to essential parties. “Any company in the economy should have a discussion in legal and the C-suite about the importance of IP rights to the particular industry,” Sobon asserts.
Dickinson agrees that the conversation about intellectual property must be expanded. “The law department does not always want to let go of it,” he says. “They should bring in folks whose knowledge and skill set involve a broader range of IP issues,” stating that a topic as complex and important as this requires collaboration and generation of ideas.
Both Sobon and Dickinson assert that the strategies regarding IP vary by industry and structure of each business. In the case of GSK, for example, the focus is less on monetization and more on building and protecting IP. “We do research and development with the intent to manufacture what comes out of that research,” Battle says. Though the company is not opposed to licensing deals, its primary focus is on creating new products. “We start off with making sure that our IP operations are both customer focused and business focused.” By keeping business objectives in mind, GSK can align its IP strategies with those goals, developing protection around all of its products.
With the knowledge that intellectual property is valuable and must be protected, general counsel must realize its prominence within the business and take steps to prioritize it. “IP is important and adds tremendous value to the organization. Beyond that, there’s the realization that IP is a complex area,” says Battle. “It impacts other areas, from regulatory to competition and pricing issues. It’s important that the IP operation be fully integrated in legal and business. It can’t be isolated or esoteric.”
Sobon suggests that GCs take a holistic perspective on IP. “What the C-suite and board should care about is a balanced view, not just focused on defensive strategy,” he says. “Focus on a balance or you do the company and shareholder value a disservice. Some of the biggest companies will say ‘we have inbound assertions but we are focused on containing these to protect and monetize our R&D investments.’ Without a balanced view of this, you can lose the baby with the bathwater.”
Nowadays, IP has become so important that it affects a wide swath of individuals at all levels, from the boardroom and C-suite to the inner workings of the legal department. “It’s not just for the IP specialist anymore or the general counsel,” says Dickinson. “It’s something that needs to be understood by folks in the law department as well. It affects many areas of law and what happens inside.” He cites the changes of the America Invents Act of 2011 as a series of new and important topics that legal must know inside and out.
Malackowski sees several steps that general counsel can take to help their companies build, monetize and protect their intellectual property. First, GCs need to provide IP-centric input to the company’s business plan. Then, they must prepare IP licensing policies. Malackowski points out that a large percentage of companies do not have such a policy, which can make litigation unpredictable. Finally, he recommends to write it down. “Make a list of your assets,” just as you would with those wireless keyboards.
In the second part of this series, we’ll take a look at global trends on this topic, how companies around the world are handling their IP assets and how the U.S. and other governments are dealing with the issue.