What is your IP Strategy?

What is your IP strategy
Paula Natasha Chavez
  • Paula Natasha Chavez -
  • "In the early 1990's, as a new California lawyer and patent attorney, I practiced in Silicon Valley where I worked with companies who mostly already understood the basics of patent law and why patents were important for their long term strategy. After that experience I have now made it my mission to bring Australian companies up to speed about why patents are important for their long term strategy, having written extensively on the subject. At this time I am now establishing a training program to teach in-house patent engineers to mine their companies for patentable inventions while carrying on my IP legal practice."

Before we discuss considerations of an IP strategy, it is useful to distinguish the various types of IP from one another, and to recognise that other forms of intangibles are also valuable.

  • Patents are used to protect utilitarian innovations;
  • Design registrations are used to protect aesthetic aspects of innovations;
  • Trademarks are used to identify a source of goods or services;
  • Copyright protects an expression of an idea on a certain medium;
  • Trade Secrets protect know how and knowledge;
  • Contracts are used to establish rights to ideas, know-how, and other intangibles.

Each type of intellectual property has different legal requirements to establish, maintain and enforce them. Some of the legal requirements are codified in statutes, others have been established in case law. Each country has its own set of legal requirements, and in any given country, the various requirements must be specifically met. In addition, registered rights are jurisdictional meaning, for example, an Australian patent is not enforceable anywhere other than in Australia.

One major reason to be concerned with establishing an IP strategy is if you determine that your competitors own IP. For example, if you are in a software business for graphic design, your competitors may include, for example, Adobe. If you wanted to know Adobe’s patent position, you can very easily look up their published patent portfolio on any online patent database. In doing so, you would find thousands of results. Judging by the high number of results, you would then know that your competitor, Adobe, aggressively patents. A patent attorney can help you cull through those results to determine what features of their products that they have patented.

Or, maybe you are in a software business for accounting. Again, using any online patent database, you can get an initial idea of how aggressively Intuit patents.

If your competitors aggressively patent, then there is a good chance that if you do not do so, you may one day find yourself in a patent lawsuit with your competitor. One way to make a lawsuit go away is by trading your patent portfolio in a cross-licensing deal. In patent intensive industry sectors, companies patent for defensive reasons as well as for offensive reasons. For example, in the smartphone industry, there were many patent lawsuits over many years that eventually settled with cross-licensing agreements that meant that the parties could co-exist in the marketplace. In this way, creating a patent portfolio is a type of “freedom-to-operate” insurance.

Therefore, determining whether others in your industry sector have IP is a good place to start in developing your own IP strategy. Accordingly, your IP strategy should be determined based on, amongst other factors, your industry sector and your business goals. If you are happy to keep your business limited to, say, manufacturing and selling in Australia, then you only need to concern yourself with your competitors’ IP positions in your industry sector, in Australia. However, if you are planning a global business, you would need to concern yourself with your competitors’ IP positions in your industry sector, worldwide.

Trademarks are a completely different issue. Unfortunately, many countries have a “first-to-file” system where even if someone is not using a trademark, they can apply to register it. So, after you have decided on a trademark after rigorous clearance searching, if you are going to be a global business, you may want to file trademark applications internationally using the Madrid Protocol system.

When considering whether to invest in IP, you might consider some of the benefits of IP ownership:

  • Wealth Building;
  • Engaging in tech transfer through licensing your technology;
  • Improving the chances of securing and/or increasing investment;
  • Improving the chances/quality of liquidity (e.g., acquisition/IPO);
  • Preventing patent infringement actions against the company (Freedom-to-Operate type arrangements);
  • Improving the company’s negotiating position with other companies (e.g. cross-licensing);
  • Enhancing the company’s reputation/product image; and
  • Of course, preventing others from copying products or service.

On the downside, registration can be costly and requires some effort. However, you can greatly reduce the cost and improve outcomes by hiring an IP engineer as an employee, or under a contract arrangement, to work in-house and have them develop a close relationship with your patent attorney firm. In that way, an IP engineer can help you build a patent culture in your business, which is necessary to build up a large patent portfolio.

Patents, designs and trademarks are the three types of IP that you must register in order to own. However, it is important to note that you do not have to have build a working model of the innovation to patent it or obtain a design registration. As long as you describe how the innovation would work, it can receive patent protection. Obtaining design protection does require accurate drawings so you should only file any application once you know what the product will look like. Copyright, trade secrets and contracts are also governed by the various laws of individual jurisdictions.

A well-known fact in IP circles is that since 1978, the value of the S&P 500 companies’ assets has flipped from being 80% tangibles and 20% intangibles to being 80% intangibles and 20% tangibles. A general statement can be made that modern companies have a substantial amount of their wealth in IP and other intangibles. Therefore, all types of IP and other intangibles should be considered individually in your IP strategy.