Assessing IP from an economic perspective

Protecting intellectual property is integral to corporate operations and must be evaluated from an economic perspective

Technology is what often differentiates companies, and the ability to copy or imitate is faster and less costly than innovation and development. As a result, one must understand the various forms of intellectual property protection to assess the perceived value, longevity, and cost effectiveness of their IP protections. As noted in a previous article, a strategic IP management program can generate competitive benefits, market defenses, and even revenue. Protecting intellectual property is therefore integral to corporate operations, and any IP strategy must be evaluated from an economic perspective.

Before creating and implementing an IP program, there are several key issues to consider. The first action should be to define a specific set of goals and intentions with regard to the purpose of the IP protection program. This is not only critical for operational success, but also in determining the reasonableness of the related expenses. A well-defined IP program can be used to provide better insights into the true cost of IP generation, protection and development.

A company should also take industry or market practices into account with regard IP protection. These practices should be evaluated carefully in determining the potential value of the intellectual property being included in the program. An IP program should also carefully consider the types of products or services to be protected, and their economic value and longevity. This will shape IP budget considerations. Conversely, budget limitations may dictate the scale and scope of a protection program — and prioritization between product protections.

Companies should also consider the real cost of time invested in protecting, licensing and litigating IP. Further, both industry and technology dynamics may affect the long-term viability of IP and its application to particular products. Therefore, the cost of IP protection should be assessed in light of the longevity of the protected product and the net present value of a projected income stream. A company can use automation and productivity tools can help to assess the life cycle of IP protections relative to the longevity of the products to be protected.

The use of electronic tracking databases, docket databases and other technology can also facilitate a substantive IP program while minimizing costs. The proper use of technology tools may also reduce staffing costs.  

Defined licensing policies and practices are also key to a cost-effective IP program. These include standardized terms for licensing, ownership, infringement and indemnification. The creation of templates and form agreements should be the first stage in this process, followed by policies as to when the templates can be altered. Establishing clear policies and standard terms and conditions empowers company personnel to stand fast on standard terms, thereby avoiding the cost of acquiring specialized IP protection for a unique situation.

The use of such IP incentive programs is also important to ensure a consistent approach in the protection of intellectual property. Any program should clearly set out rights in works created in the course of employment, and also include incentive provisions to motivate employees to disclose and participate in the protection of IP. This is critical under the new “First to File” vs. “First to Invent” model of the new AIA patent statute. Such a program should include training, guidelines and procedures for filing and maintaining intellectual property rights; as well as the ability to establish and retain relationships with key inventors. IP training programs can be varied in length, content and style, and should be conducted in a manner to engage the employees. However, such training will pay dividends in having employees that can help facilitate appropriate IP protections vs. having to rely on more costly outside expertise to do so.

As with any aspect of doing business, managing an IP program is an economic activity first and foremost. By treating it as such, companies will ensure they are making the best decisions for their business.

Contributing Author

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David E. Mixon

David E. Mixon is a partner and registered patent attorney with Bradley Arant Boult Cummings LLP (Huntsville, Ala.). He can be reached at

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Contributing Author

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David Vance Lucas

David Vance Lucas is a partner and an IP attorney with Bradley Arant Boult Cummings LLP (Huntsville, Ala.), with a focus on strategy, enforcement...

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