IP departments can't afford to fly blind when it comes to strategy, but many unfortunately do because they don't continuously track how their IP portfolio is performing. IP strategy is a multi-year, multi-faceted endeavor. If you’re just worrying about whether your IP strategy is addressing today’s issues, you are missing the true power of your IP and its long term effect on your business.
To ensure that IP counsel is aligned with your company’s business strategy, you need to measure performance to continuously validate whether your strategy is aligned with your company’s business objectives. Consider these 6 key performance indicators (KPIs) as examples of how to measure your IP performance.
1. Operational: Budget and Forecast Modeling
When allocating budget, look at how closely your law firms meet clearly set and agreed upon budget expectations. Firms should never go over budget without prior authorization. In fact, they should be able to consistently meet or be within 1-3% below your set budget. You also should be able to accurately forecast out at least 3-6 months with a high level of confidence.
This estimate also can be done not only for patent portfolio development and transactional related matters, but also for more volatile litigation matters. This confidence is achieved through tightly tracking milestones, (re)validating the accuracy of your presumptions, and keeping outside counsel regularly involved.
2. Efficiency: How much of your resources are used for merely operational efforts?
Daily operational tasks by your team can consume up to 60-75% of your resources. The bulk of this time often is spent managing budgets, communicating with clients, managing outside counsel, and making low value, tactical decisions.
The good news is that use of technology, like an IP management system, can reduce the drain on your limited resources. You can start by first documenting your processes that are purely operational. When possible, shift these tasks to less expensive resources. Then determine how to make them repeatable with less supervision while still maintaining quality. Such information should be touched once and accessed many times. By centralizing your data repositories and ensuring efficient workflows to document, store and retrieve information, you dramatically increase your efficiency and lower your resource needs. By automating these workflows you should effectively be able to reduce the amount of operational work to below 30% of your total resources.
3. Quantity: Compare your filing rates to industry benchmarks
Some say you should be filing one new patent application for every $1-5M US spent in R&D. However, experience shows that such target numbers vary according to such factors as the maturity of your company / industry.
Based on these factors, this metric in the tech space likely is closer to one new patent application per $1.5-3M US spent in R&D. If you’re an early-stage private company or in a substantial growth phase, the new patent application filings per R&D dollar may be higher.
To validate where you should be, you also should compare your filing rates to others in your industry. Use the above numbers as a baseline, which you then can further refine according to your company’s business objectives.
4. Quality: What percentage of your patent portfolio are crown jewels?
Remember that all patent assets should be the same quality. High quality. What should vary is the scope of those assets. Quality over quantity should always be the mantra.
We’d all like to think that every patent asset is a crown jewel—why else would you be filing a new patent application for it? However, filings are done for many business reasons.
A rule of thumb in the technology industry, which typically pursues more patents than others, is that at least 3-5% of your patent portfolio should be critically important to your business, protecting your highest revenue products and services and critical technologies. In other industries, such as pharmaceutical, this percentage likely will be significantly higher due to the closer alignment of its patents to specific products.
The key takeaway is that numbers typically do not matter and such numbers definitely by themselves don’t signify IP portfolio quality or strength. Rather, aim to have a high confidence in which specific IP assets are the most important to your business at any particular time.
5. Business Alignment: Is IP strategy aligned with business strategy?
Ensure that your company’s IP strategy aligns with its business strategy. Understand intimately your company’s business goals, and who the key stakeholders are. Use IP to create business opportunities by evaluating challenges that your company is confronting and leverage your IP to help overcome those obstacles.
Accomplish this through regular monthly business alignment meetings with the CTO, chief architects and key principal engineers responsible for important products and technologies. Also, schedule regular monthly meetings with key product managers, product marketing, corporate development, sales executives and other financial and business representatives. These regular meetings will validate whether your current approach is aligned with the company’s business strategy.
6. Litigation: Examine your patent troll defensive strategy
Patent “troll” suits are those where a legal entity is asserting patents of questionable quality for mere litigation nuisance value settlement purposes. The way to stop such shakedowns is by making them no longer economically viable. By settling these suits, even for small amounts of money under the justification of financial expediency, you are encouraging more of these suits. To evaluate your patent troll defensive strategy, you should not only compare your company to your competitors’, but also consider litigation trends nationwide and industrywide. While aiming for a patent suit rate lower than your peers’, make sure that the trend for your industry is also decreasing. Further, if you have more than 1 active patent troll suit per $2B in revenue, you may want to reevaluate your current strategy.
Now Is the Time
As we approach the New Year, now is the time to begin identifying meaningful KPIs for 2016. Being able to measure and report IP performance will help identify areas of success and areas requiring improvement. And sharing your results with the rest of the business demonstrates your command of the current situation.