Igniting innovation in utilizing patent assets

IP kindles creativity, but reform threatens to dim the flame

Horacio Gutierrez, corporate vice president and deputy general counsel at Microsoft

There is an old saying that tells us there is nothing new under the sun. And, while that may be true when it comes to storytelling, it is not necessarily the case in the business world. Though we have had cameras, telephones, computers, voice recorders and GPS devices for years, it wasn't until recently that all of those products were rolled up into one device that we could fit in our pockets. So, while the technologies themselves might have been old hat, the way they were integrated together was innovative—that word itself is tricky.

What is innovation, and how does one achieve it? A scientist might tell you that true innovation is born in a lab, while a CEO might tell you that the most innovative business ideas come from the boardroom. True leaders in the IP space, though, acknowledge that intellectual property exists squarely in the intersection of business and law.

“For 3M, with patent assets used to protect our investments, we typically want to obtain a return on them through commercialization of technology. Therefore, our IP is closely aligned with our lab and business interests,” says Kevin Rhodes, vice president and chief intellectual property counsel for 3M. “We constantly look at our portfolio to make sure it is aligned with and covering the direction our labs and businesses want to go.”

The role of research

While businesses in every field have learned the value of intellectual property, those with heavy emphasis on research and development, like companies in the pharma, manufacturing and high-tech industries, have an additional impetus for focusing on IP—a monetary one.

“It's simple. Strong patent rights protect investment in research and development dollars. We put $2 billion into R&D and expect our investment to be protected,” explains Mike Walker, vice president and assistant general counsel, chief intellectual property counsel at DuPont. “The primary way to protect IP rights is through patents, which are a social contract wherein technology is made available to the public in exchange for a limited monopoly.”

Rhodes agrees. “We spend $1.5 billion on R&D, so we have a steady stream of intellectual assets to protect. No company can afford to invest in lengthy, costly and speculative R&D to bring products to market if it can't legally protect the output of those investments. You run the risk of not getting a fair return on investment.”

Convergence breeds innovation

Not all industries are as heavily involved in research and development, yet intellectual property is at the heart of every business. In the computing and mobile device space, patent litigation may grab the biggest headlines, but patents play a large and diverse role in the industry.

These days, when mobile devices have a multitude of functions, the underlying technology is dominated by thousands of individual patents. This phenomenon, known as convergence, has driven high-tech companies to develop patents as a method of differentiation.

“Because we live in a highly competitive market, each company in the industry strives to come up with products that have special appeal to consumers,” explains Horacio Gutierrez, corporate vice president and deputy general counsel at Microsoft. “Look at the marketing of devices. Companies emphasize their unique features, because the basis for competition in the marketplace is differentiation.”

Reform vs. innovation

While patents protect the innovative technology that sits at the heart of modern industry, recent legislative focus on patent litigation has thrown a spotlight on the role of the chief IP counsel.

“Litigation is part of any business and the more technologically complex your products are the more litigation you will see. So one should expect to see some patent litigation in the tech industry,” says Gutierrez. “The purpose of patents is to grant legal exclusivity on an invention, enforced through legal means, such as litigation, if necessary.”

But recent attention on patent litigation, especially as brought by non-practicing entities, has drawn the attention of the federal government, which made reforming the patent system a high priority. While efforts to minimize abuse of the patent system are lauded by many chief IP counsel, some would recommend caution.

“In this legislative environment, there's a tremendous amount of debate about what needs to change in the IP legal system in the United States,” says Gutierrez. “We need to minimize the opportunity to abuse the patent system but have a healthy discussion that puts everything into context. We have the best IP legal system of any nation in the world, and the question at hand is: What is the best way to improve that system?”

Partnership for American Innovation

Microsoft and DuPont are part of an organization designed to draw attention to the important role that IP plays in the American economy. The Partnership for American Innovation also includes Apple, Ford, GE, IBM and Pfizer, and represents a collection of industry leaders in various fields.

“The goal of the partnership is to bring diverse industries together to elevate the message about IP above the current debate about trolls,” explains Walker. “Patents are important to the economy, creating jobs. We need a voice to counter the anti-IP sentiment that is out in the public. The group is pro-reform, but pro-smart reform, calibrated approaches that do not upend the system to deal with short term issues.”

Bringing it all together

Whether a company deals in food, healthcare, electronics or computers, intellectual property plays a key role, drawing together a multitude of experts from across the business. DuPont, for example, holds IP strategy workshops that include members of the legal, R&D, business and marketing departments in the same room, at the same table.

“In the past, IP was seen as a specialized area of practice that is insulated from general legal questions that a GC tends to face,” says Rhodes. “It's much more integrated into the business activities of a company.”

Gutierrez puts it in even simpler terms. “All decisions related to business strategy have an IP component. IP departments must be involved in business discussion or you don't have an effective IP group.”

With the GC at the center, and the chief IP counsel playing a key role in developing a business-driven IP strategy, companies can be secure that that strategy is comprehensive, spurring innovation at the research and development level and supporting business strategies, while protecting the most valuable assets of the company. Those assets, of course, are a lot more than the technology in the latest gadget or the patents filed away with the USPTO. They are the ideas and creativity of the people who make the business run.

Managing Editor

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Rich Steeves

Richard P. Steeves is Managing Editor of InsideCounsel magazine, where he covers the intellectual property and compliance arenas. Rich earned a B.A. in English Literature...

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