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Importance of Sound IP Strategy

12

APR

2020

Introduction

Intellectual property (IP) is the most important asset of technology-centered businesses. This asset developed and owned by technology companies is an intangible asset. The way in which these technology-based companies will eventually fail or succeed depends on the way they handle their intellectual capital assets and convert those into strategic IP assets. These IP assets will allow them to enjoy a sustainable competitive advantage over their competitors. There is a famous saying, “Innovation without protection is philanthropy!” Many studies show that in the technology-based companies the untapped intellectual capital invariable goes waste. The sheer lack of IP culture or bliss ignorance of the importance of converting intellectual capital into IP by senior management with inexistent or bad internal practices to capture intellectual capital and turn it into IP are primary reasons such loss. Financially starved companies normally lack of budget devoted to IP or they end in spending it on the non-useful IP assets. On the other end of the spectrum, there are some companies who believe they have an IP strategy because they filed a few patents along the way. In most cases, these filings have not been made as part of any strategic plan and may end up being of little value to the owner. Filing a patent before having a proper IP strategy in place is like shooting without aiming first.

Wakeup Call: Infringement Notice

The realization that there exists no real IP strategy in place dawns upon a company when an email arrives in the form of a letter from a law firm alleging infringement of one of their client’s IP. Generally, such letters are considered as material events and are reported to the board, investors or shareholders or to any potential acquirer. It is quite obvious that changes in the design of any product in the late production stage in order to remove a potentially infringing feature is extremely expensive as compared to doing it in the early development stage. Consequentially, such an event may trigger legal indemnification obligations towards a company’s partners, distributors and its overall channel. Furthermore, there also exists a possibility where it is difficult to remove the infringing feature and the patent owner may decide to sue regardless in order to recoup damages for past infringement. Yet, most companies completely ignore IP risks they may be facing as they prepare to enter new markets and don’t have a cohesive and consistent branding and trademark and patent filing strategy. An IP Strategy is more than reduction of risks and exposure. Therefore, a management, which does not incorporate a sound IP strategy in its overall business roadmap, is making the company extremely vulnerable to actual or prospective competitors and to other legal challenges. Thus putting its present and future profitability and even survival at stake.

Essence of a Sound IP Strategy

A sound IP Strategy must be in support of and totally aligned with the overall business strategy of the company in order to help achieve a sustainable competitive advantage. The goals should be to use IP as an asset:

In simple accounting terms, the goals are to maximize assets and minimize liabilities.

Methodology in Developing a Sound IP Strategy

These are the common steps involved in developing any sound IP strategy:

This is accomplished by preparing a detailed customized questionnaire for the company and by conducting targeted follow up interviews with selected individuals based on the information provided in response to the questionnaire.

Conclusion

A sound IP strategy focuses on those intangibles that form the quasi-totality of a company’s assets, yet are often neglected by management because they are not as visible as tangible assets and don’t need to be reported in financial reports. A well-articulated strategy becomes part and parcel of the overall business plan and plays a significant role in allowing a company to achieve and maintain a long term competitive advantage and return value to its owners and investors. Investing in creation of IP assets though obtaining statutory grants pays in long run to sustain market completive pressure and emerge as market leaders. An expert advice is obtaining such grants is beneficial and it pays back at times to ward off or minimise IP issues like probable infringement.

About the Firm

LexOrbis
Address 709-710 Tolstoy House, 15-17 Tolstoy Marg, New Delhi – 110001
Tel 91-11-2371 6565
Fax 91-11-2371 6556
Email manisha@lexorbis.com
Link www.lexorbis.com

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