Intellectual property and R&D teams need to work closer in order to better monetize IP for companies, writes Mythri Kota
High-quality protection of intellectual property (IP) is a crucial factor for companies to succeed in today’s competitive world. IP and intellectual property rights (IPR) such as patents, designs, trade secret rights and copyrights have during recent decades garnered increasing attention, and IP has become an important way to gain a competitive advantage in many industries. This has also led to an increased importance of strategic IP management in organizations.
For example, Hyundai Motors is dealing with the current transformation of the automotive industry by conducting a number of strategic patent-related activities, including registration of new technologies, in order to achieve product and service competitiveness. The company created i-LAB, an internal organization established to lead on patent-related work, in which research and development (R&D) teams, product managers in charge of technology development, IP analysts and attorneys from the IP/legal department all work hand-in-hand towards protecting new technologies. This has helped boost competitiveness at a product and industry level.
At Hyundai, the IP team becomes involved at an early stage in the product development process to support the development of technologies and minimize the risk of patent disputes in future. The IP team provides advice on cross-licensing opportunities, joint ventures and partnerships, M&A and investment opportunities, sharing patented technologies. This synergy between the IP/legal department and the R&D teams has stood out as a key factor for the company’s success and growth.
Another example is Qualcomm, which believes that the drive to invent is a core value of its identity. The protection of inventors’ rights is important to both the company and its business model. Qualcomm has pioneered in achieving tremendous growth developing CDMA (code-division multiple access) wireless communication technology, and licensing those patents to manufacturers. It receives significant revenue from licensing its IP. Qualcomm’s business model relies on sustained investment in R&D to maintain its technological leadership, using profit generated from its patent licensing. IP experts at Qualcomm work jointly with R&D teams to strategize and protect IP cultivated from related activities, optimizing corporate value.
There are also companies that fail to recognize and appreciate the importance of IP. For instance, when a popular ride hailing company (ABC) acquired a self-driving car startup (PQR) in 2016. In a rush to complete the acquisition, ABC failed to investigate questions about PQR’s IP that cropped up during the due diligence process, dragging the company into a trade secrets row. PQR’s founder had downloaded a trove of files from an autonomous vehicle company where he worked before going on to set up his own company. When disputes emerged, ABC had no option but to agree to pay a few hundred million dollars to the autonomous vehicle company to settle the case.
Most of these types of disasters happen when companies do not align IP with their overall business strategy and goals/objectives. This may include neglecting to scrutinize the existing patent portfolio, not doing proper IP due diligence, procrastinating while filing for trademark protection, failing to recognize the threat of copyright infringement, or not being aggressive in preserving trade secrets. Not acting early enough to protect IP properly can mean a lost opportunity to prevent competitors from entering the market with a similar product or service.
Proactively working with IP/legal departments may help organizations have a proper process/strategy in place to ensure any IP that is created is promptly protected. A few companies, particularly startups and smaller businesses, might also fail to understand the significance of IP because they are preoccupied with being first to market, and hence may not be receptive to the legal department developing a programme to find revenue because of possible costs and risks associated with it.
With the marketplace becoming increasingly competitive, these companies need to look at protecting and enforcing their IP so that they can secure a competitive advantage to build market share and keep their competitors out.
Some key areas where IP/legal departments can contribute as revenue generators/profit centres are:
- IP creation. IP teams can engage with R&D teams from early stages of innovation/product development to help inventors predict and exploit an emerging technology by identifying white spaces through patent landscape studies.
A patent landscape analysis provides the current “state-of-the-art” knowhow for researchers and innovators to learn important aspects of their technology field.
The outcome of patent landscape studies helps inventors and technology leaders to:
- Learn about competitor’s patents, new entrants in the market, potential conflicts with their own patent portfolio and where it could gain a competitive advantage through competitive IP intelligence;
- Learn the strengths and weaknesses of their own patent portfolios;
- Identify cross-licensing, and merger and acquisition opportunities;
- Identify innovations early and protecting them, from a patent perspective, by conducting prior art searches; and
- Have the freedom to practise a technology in the markets of interest, which can be analyzed by conducting due diligence or IP risk mitigation activities such as IP clearances, patent invalidation etc.
IP analysts also research prior solutions to the product development challenge by conducting prior art searches to avoid “reinvention of the wheel”, thus mitigating the risk of investing in the development of technical innovations that may unnecessarily overlap with existing prior art, saving R&D time and cost.
- Strategic IP protection. IP teams help R&D teams by identifying and protecting unique aspects of the assets/creative works by promptly evaluating and filing them by means of patents, copyrights and trademarks. This way, the company is granted an early entry into emerging markets, giving it an edge over competitors.
For instance, IP teams can help with different filing strategies such as a global patent strategy, which may be cost effective and paves a way for companies to expand to international markets. Building a good patent portfolio can help organizations with driving investment and acquisitions, provide protection during partnerships/joint ventures and business deals, and help defend against patent lawsuits.
- IP Licensing. IP teams engage in developing an effective licensing strategy by licensing the company’s patents or copyright to third parties, which can lead to a steady stream of royalties and generate additional income, boosting the company’s market share or increasing profits. Companies through licensing look for new avenues to expand their product offerings, increase their sales revenue, and foray into new markets.
- IP risk management. IP risk mitigation activities are conducted to ensure that the business really understands its IP-related risks, and then mitigates them proactively. Some examples of how companies can act early on to mitigate risk include:
- IP audit. An IP audit is a systematic review of a company’s IP assets, and related risks and opportunities. Such audits can: help assess, preserve and enhance IP; correct defects in IP rights; put unused IP to work; identify risks if a company’s products or services infringe another’s IP; and implement best practices for IP asset management. A thorough IP audit involves not only a review of a company’s IP assets, but also the company’s IP-related agreements, policies and procedures, and competitors’ IP; and
- Patent infringement check/product clearances. As a company brings new products to the marketplace, it should consider taking steps to ensure that doing so does not infringe on the patent rights of its competitors, or other companies.
Hence IP analysts conduct freedom to operate (FTO) studies, or product clearances, with the goal of identifying any potential IP barriers to market entry, and associated risks of future litigation, before product commercialization. FTO studies, product clearances and patent infringement checks of a wider scope may involve searching for and analyzing a broader group of patents and patent applications to identify potential risks at early stages of development. This mitigation activity helps companies from draining their finances and revenue, in case of patent infringement suits, and allows them to look for other strategies like cross-licensing, initiating invalidation, etc., to avoid litigation.
- Patent acquisition. There might be patented technologies in the market that could enhance a company’s existing inventions, and allow them to control a particular field. Acquiring these patents may open up further possibilities of earning from patents where the company can build and market new products, license these patents, or enforce rights to profit from them.
- Portfolio sale. Companies can also derive one-time revenue gains from selling patents or entire portfolios outright, if those patents are no longer valuable. Selling these patents is advisable, as keeping them can lead to unwanted costs. The key is to find the right fit between the patent portfolio and a potential buyer, based on market needs, competitive positioning and the buyer’s existing portfolio. Often a carefully constructed portfolio can capture more value from a buyer than selling individual patents piecemeal.
Most R&D companies in India with both in-house IP departments or external consultants are working towards creating intellectual wealth and a global brand for the company. For instance, biopharmaceutical company Biocon has been delivering innovation and creating valuable IP, which provided them with a distinct competitive edge in their sector. Similarly, Samsung R&D India has been one of the top patent filers in the country in the past few years, and has constantly produced top-quality patents.
Although most companies in India understand that interdependency between IP and R&D teams is critical for innovation, as well as to reduce legal risks, often there is a constant challenge when it comes to effectively synchronizing both departments, with their different goals and responsibilities. Some obvious barriers can be:
- Goal/motive. R&D teams focus on finding a strong technical solution for a technical challenge, whereas IP teams focus on achieving the best legal position. In most R&D organizations, IP managers compete for their R&D colleagues’ time because of a swarm of factors, which include project pressures. However, continuous high-quality engagement with R&D staff is critical if IP teams are to ensure FTO through the development/product lifecycle, and get R&D involved and interested in other IP processes;
- Language/terminology. Engineers and scientists use technical jargon, while IP has its own terminology around legal protection and boundaries. This language barrier can work against effective collaboration and communication.
- Physical separation. Both departments are usually physically separated from each other in different offices, or even countries, which reduces communication, leading to lack of interaction, confusion, and misalignment in goals and objectives. Distance can add latency into R&D processes when teams need some key legal opinions/inputs on inventions and technical advancements, thus slowing down the product development process; and
- Processes/plan. Using outdated processes/tools, both IP and collaborative tools, or not having a risk management framework in place, can increase company’s exposure to risk.
This is where R&D and IP teams should come together to understand the significance of operating in synergy to achieve business goals. The fundamental approach should be the integration of the IP team into the R&D segment, and identifying important goals based on which viable strategic IP plan can be built throughout the product development lifecycle.
IP strategies during the development phase of new products and businesses differ from those strategies in the growth and maturity phases. In the development phase, the strategy overall is to create and acquire IP assets. In the growth phase, the IP strategy shifts to making sure the assets are protecting global markets in various regions of the world. In the maturity phase of a product or business, the objective is to prune assets to just those that are still delivering business value.
A strategic IP plan can help protect unique aspects of the assets, foster innovation and expand product offerings through licensing or joint ventures to satisfy the unmet needs in the market, which in turn generates new income streams. An effective strategic IP plan will therefore prompt the development, acquisition, maintenance and exploitation of IP assets, just as a traditional business plan would do with tangible assets.
The following are some best practices for effective collaboration for strategic IP management and risk mitigation:
- An effective way to start is to train inventors and technology leaders by conducting periodic brainstorming sessions on the importance of IP protection and the need to obtain and enforce IP rights. R&D teams/employees should be made aware of their responsibilities in protecting their IP, which helps them participate in the identification of key IP assets, and helps IP teams strategize on how, where and when to protect, manage and monetize intellectual contributions. It is key for IP and R&D teams to proactively collaborate throughout all the stages of the product lifecycle, especially during the ideation/innovation phase of a product, to identify white spaces in R&D by conducting patent landscape analysis. This helps develop and leverage innovation at an early stage, and allows the exploration of opportunities for future development and research.
- Inventors or researchers should be sensitized to avoid accidental disclosures of their new inventions, and to keep sensitive IP information confidential to both external/internal parties. R&D teams must be trained to approach/inform IP teams before they start discussing their company’s know-how in collaboration with another party, so that confidentiality of IP is maintained. For instance, if the invention is publicly disclosed, it may not be patentable because it is no longer new. There is a grace period in some countries, like Canada and US, which allows inventors to file for a patent within one year of public disclosure, but other countries require absolute novelty. One best practice is to make the employees sign a confidentiality/non-disclosure agreement (NDA) and invention assignment agreement, where an employee agrees that the ownership of any new ideas/inventions/designs or trade secrets developed by the employee belong to the employer.
- Conducting frequent IP audits with the R&D teams can help explore and identify IP owned, preserve and enhance the value of existing IP, identify new opportunities to profit from IP, and facilitate and optimize business transactions.
- Establish a culture of innovation by organizing crowdsourcing activities on a bi-weekly or monthly basis.
- Aggressive internal promotion about IP through newsletters or organizational brochures, daily knowledge nuggets through emails, to give IP development efforts recognition and respect within the organization.
- Conduct town hall meetings where the entire organization can get firsthand information on updates relating to IP and related initiatives.
- Celebrating World Intellectual Property Day to create awareness on the role of IP rights in encouraging innovation and creativity. In addition, announcing IP awards for employees with the maximum number of patent filings, and inventors with granted patents for the year, will promote interest among employees.
- IP training during the employee induction programme should be imperative.
- IP contribution efforts should be incorporated as an important element in the employee evaluation process. This way the employee will be eager to make more contributions.
An effective IP strategy built together can aid the organization to manage its IP portfolio and attain a significant portion of the earnings. IP should be considered both a source of technology to exploit, and a means of exploiting technology. A “not invented here” attitude to externally sourced technology can be shortsighted. Thus, IP teams or legal departments should be viewed as profit centres, rather than cost centres, by the R&D teams and the corporate management. This way there can be synergy between the teams to work together in order to expand the company’s footprint in the market.
Mythri Kota is a manager, legal, at Cognizant Technology Solutions in Bengaluru.