PLI's In Brief: The Leader in Continuing Legal Education Since 1933

Sunday, May, 2, 2010

Tarek N. Fahmi (Sonnenschein Nath & Rosenthal LLP): A good IP Audit + understanding your business plan = IP aligned with business objectives

PLI: How can companies best align their IP portfolios with their business objectives?

TAREK N. FAHMI: More than ever, today's corporate leaders need to understand how their companies' intellectual property (IP) assets relate to their business, its operation and its financial performance. An IP audit is one mechanism that can be used in gathering information for such analysis. Together with an understanding of the company's business plan, the audit can help to ensure that the company's IP portfolio and strategy are kept in alignment with its business objectives.

In its most basic form, a company's business plan will generally identify certain objectives and strategies for meeting those objectives. The objectives are often arrived at through an analysis of the company's strengths, weaknesses, opportunities, and threats (a so-called SWOT analysis). The strategies for meeting the objectives may involve the sale of certain products or services, partnering with others to gain access to products or markets, and, often in the case of privately-held companies, raising capital.

Among the objectives to be considered in the business plan are those pertaining to the company's IP. Often, the company will want to ensure that its products or services are covered by patents. Here it is important to remember that the patents must cover not only the current generation products, but also the next generation ones as well. This will help to prevent competitors from leap-frogging over the company's current commercial offerings. Competitive technologies may also provide opportunities for patents. By establishing barriers to design-arounds or other solutions, companies can help ensure themselves a position in the marketplace for years to come.

The company's willingness to enforce its rights will also play a key role in its IP strategy. Often, the question of whether or not a company is willing to sue infringers depends on the perceived importance of the market into which the infringing products are being introduced. For example, companies may be more willing to defend their IP rights in the United States (where a large consumer base exits) than in other jurisdictions (where smaller or negligible numbers of potential customers exist). Accordingly, companies may decide to seek patent protection in only those jurisdictions where the company reasonably expects to enforce its rights with respect to the subject inventions and forgo such protection in other countries.

As the company continues to develop its strategic plans, the IP components of that plan should continually be reevaluated to ensure that they align with the stated business objectives. For example, if new objectives for new markets are going to be pursued, the IP plan should be updated to reflect the need to seek protection for inventions, brand names and other assets in those markets. Likewise, if older objectives are to be abandoned in favor of new ones, companies should consider pruning older IP assets to make way for new ones.

Components of an IP Strategic Plan: An IP plan should address portfolio development (i.e., the acquisition of IP assets by internal development or other means) as well as the monetization or other exploitation of that portfolio.

Generally, developing an IP portfolio is a long-term proposition. Given current processing times at patent offices throughout the world, companies should be looking out at least three to four years in their patent planning. Simply filing patent applications for existing technologies is not enough. To create a portfolio that will truly provide value for the company by erecting effective competitive barriers requires placing those barriers at chokepoints in market and technology trends. A company that takes the time to plan for these trends and file its patent applications accordingly will be in a position to later enter the relevant markets in a much stronger position than its competitors.

One way to glean the developing market and technology trends is to invest in competitive assessment. This form of intelligence can reveal competitors' patents that might present an obstacle to a company's business objectives. Early identification of such obstacles can provide a company with sufficient opportunity to design around problem patents or seek partnering opportunities to gain access to needed IP. The assessment can also reveal strategic holes or weaknesses in competitors' patent portfolios, which the company can exploit by filing patent applications of its own. Importantly, any competitive assessment should include an analysis of the company's own IP portfolio so as to identify weaknesses that need to be addressed. Below is provided a plan for conducting such an internal assessment of a company's IP portfolio.

In addition to filing patents based on competitive assessment, companies should adhere to a well-defined patenting strategy and avoid the tendency to patent everything that results from its research and development activities. Here, reference to the business plan is essential. That plan will help define the company's core business and the technology important to fulfilling that business. The bulk of resources devoted to IP portfolio development should be devoted to protecting that technology. While some funds may be spent with respect to patents for non-core technology, for example to develop licensing opportunities for the company, the focus on core technology should not be lost.

As the company's IP portfolio begins to develop, the company should look to extract value from it. Enforcing the newly acquired IP rights is one means by which this can be accomplished. Here, enforcement is not necessarily synonymous with litigation. Instead, strategic partnerships through sharing of IP assets is a common means for companies to derive value from their respective IP portfolios. So too is the sale of IP assets directed to non-core technology.

A less traditional, but not to be overlooked, means of deriving value from one's IP portfolio is to comb that portfolio for prior art that might be useful against competitors' patents. This includes not just the company's own patents, but any prior art cited during the prosecution of those patents. References culled from the file wrappers of the company's own patents can sometimes be used to provoke reexaminations or other attacks on competitors' patents. By narrowing or even invalidating such patents, a company can indirectly strengthen its own patents and thereby enhance the overall value of its own portfolio.

A less aggressive, and more traditional, approach to enhancing the value of one's patent portfolio is to maintain a liberal continuation practice. Filing of multiple continuations and/or divisional applications can help companies shape their portfolio as a market matures or develops. Such a practice can often help convince investors to commit funds in favor of one company over another. It should be noted that recent USPTO proposals to change the rules regarding the filing of continuations may severely limit the availability of these vehicles for value enhancement of patent portfolios.

Integrating the IP Strategy with the Business Plan: The key to successfully integrating any IP plan with a company's business plans is education. Engineers, sales and marketing professionals and company executives must all be indoctrinated with the idea that the company's business objectives can only be achieved if the elements of the IP strategic plan are adhered to. This requires regular and continuous communication with and among the people responsible for creating and managing the company's IP assets as well as executives focused on executing the business plan. Integration cannot be achieved with a single "IP day" or one-time meeting to discuss a plan as if it were a static idea. The IP plan will be an ever evolving idea, just as the company's business plans will change over time. It is important that these changes be communicated among the people within the company responsible for ensuring its success.

Another means by which successful integration can be assured is by providing people within the company with incentives for ensuring such success. Many companies provide monetary or other awards to inventors when patent applications are submitted or patents issued. Similar incentives could be provided to others tasked with competitive analysis or other forms of IP portfolio development.

Of course, metrics should be established to allow manager to determine whether IP objectives are being met. In the absence of a dedicated licensing program it can be difficult to directly tie any increased sales or profits to the company's IP portfolio; however, metrics such as the number of patent applications filed per quarter or number of patents issued per year, can be readily evaluated.

More from Tarek N. Fahmi — Download Aligning IP Portfolios with Business Objectives

Posted at 11:06AM | Permalink | Comments (0)

Comments

The comments to this entry are closed.

« One Adam J. Levitin (Georgetown University Law Center; Robert Zinman Resident Scholar at the American Bankruptcy Institute): Proposed Consumer Financial Protection Agency changes the architecture, but not the mandates of consumer protection laws | Main | And Where Do You Go If Your Breach Claims Are Against the Federal Courts? Contract Claims Against The Government »

About "In Brief"
PLI in Brief is the online home of Practising Law Institute's popular weekly eNewsletter series more...

Recent Archives
• June 2010
• May 2010
• April 2010
• March 2010
• February 2010
• January 2010
• December 2009
• November 2009
• October 2009
• September 2009
• Complete Archive

Categories
• All-Star Briefing
• Compliance Counselor
• The Lawyer's Toolbox
• The Pocket MBA
• Accounting
• Antitrust
• Bankruptcy
• China
• Class Actions
• Communication & Media
• Compliance
• Consumer
• Copyright
• Corporate
• Corporate Governance
• Due Diligence
• Employee Benefits
• Employment Law
• Environment
• Estate Planning
• Estates & Trusts
• Ethics
• Executive Compensation
• Export Control
• Financial Institutions
• Financial Products
• General Practice
• Government Contracting
• Green Tech
• Hedge Funds
• Immigration
• Information Technology
• Insurance
• Intellectual Property
• Internal Investigations
• International
• Law Practice Management
• Licensing
• Litigation
• Mergers & Acquisitions
• Patent
• Privacy
• Private Equity
• Real Estate
• Secured Transactions
• Securities
• Tax
• Taxation
• Trademark

20% off PLI Treatise!
Employment Law Yearbook 2008, by Orrick Herrington & Sutcliffe LLP, the one volume source to help your clients lessen their legal exposure, no matter what front, including whistleblowing, workplace violence, downsizing, privacy, and trade secrets.
order...

20% off PLI Treatise!
Accountants' Liability, by Dan L. Goldwasser (Vedder Price Kaufman & Kammholz PC), M. Thomas Arnold (University Of Tulsa College Of Law), and John H. Eickemeyer (Vedder Price Kaufman & Kammholz PC). Use the link to order this uniquely comprehensive legal and tactical resource.
order...

PLI Patent Blog
Law Professor Blogs
WSJ Law Blog
DealLawyers.com Blog
CorporateCounsel.net Blog
US Supreme Court Blog