![]()
1
Introduction
Introduction
If one were challenged to think about a factory, production site or plant, one would typically picture a physical entity with components and raw material being delivered in and finished goods being shipped out.
The concept of a factory may be based on the large cotton mills in England in the 1800s, Henry Ford and his innovation with mass production in the early 20th century or todayās mass customisation factories.
Inside this building, one can imagine production lines full of products, tools and test equipment. The building is busy with various activities taking place such as sorting, assembly, testing and packaging, with some of these activities being handled automatically while others are handled manually.
Now imagine walking into a large modern mass customisation factory where the material coming in one side of the factory consists not of physical components or raw materials but rather ideas, thoughts, inventions and solutions to problems, while patent applications or granted patents flow out the other side of the factory as the finished goods.
āAsset value isnāt going to be found in machinery and equipment, warehouses or real estate - itās going to be found in patent portfolios.ā
Eric Gillespie, Advancing innovations as assets in the global marketplace. FORTUNE Magazine Innovation Forum, 5 December, 2005
This analogy linking modern factories and patent production is useful for a number of reasons. It is clear that the importance of intangible assets is growing, often equalling or surpassing the value of physical assets for a company. The state of the intellectual property of a company determines its share and corresponding influence on the market. The size and quality of its portfolio has a direct impact on several factors, such as the reputation of the company, the level of returns on investments and the access to the market, amongst others.
The way a company is valued has also changed considerably. In the mid-1970s, approximately 80 % of the value of a company was made up of tangible assets, with the remaining 20 % being made up of intangible assets. Today this percentage is completely reversed, with intangible assets making up 80 % of the value of the company and only 20% being made up of tangible assets.
āIntellectual capital is recognised as the most important asset of many of the worldās largest and most powerful companies; it is the foundation of the market dominance and continuing profitability of leading corporations.ā
Kelvin King, founding partner of Valuation Consulting
The volume of patent applications and granted patents has been increasing in recent years. As companies begin to realise the importance of intellectual property rights (IPR) in the modern business environment, it is unsurprising that this pattern has emerged. Indeed, companies are afraid that failure to evolve in correspondence with todayās business climate will result in their competitors dominating the market in future.
The World Intellectual Property Office (WIPO) Patent Report, 2007 Edition (available at http://www.wipo.int/ipstats/en/statistics/patents/patent_report_2007.html), shows that worldwide filings of patent applications have grown at an average annual rate of 4.7 %, with the highest growth rates experienced in North East Asian countries, particularly Korea and China. The report is based on 2005 figures and shows that patents granted worldwide have increased at an average annual rate of 3.6 % with some 600 000 patents granted in 2005 alone. By the end of 2005, approximately 5.6 million patents were in force worldwide.
The largest recipients of patent filings are the patent offices of Japan, the USA, China, Korea and the European Patent Office (EPO). These five offices account for 77 % of all patents filed in 2005 (a 2% increase over 2004) and represent 74% of all patents granted. With an increase of almost 33 % over 2004, the patent office of China became the third largest recipient of patent filings in 2005.
Use of the international patent system has increased markedly in recent years and although it remains highly concentrated, with 49 % of the estimated 5.6 million patents in force being owned by applicants from Japan and the USA, there is evidence of an increase in the use of the system by newly industrialising nations.
However, the patenting process is by no means simple and there are various steps or stages in the process. The patenting language and terminology is often not easily understood and can also be a relatively expensive exercise. The reason for such complexity, in particular in the application and granting stages, is to ensure that the patents that do get through are of the utmost quality and provide protection only to the extent necessary.
Therefore, in todayās highly competitive environment it is essential that we take a detailed look at how we go about producing these patents.
If one is concerned only with a few patents, one can probably stay with the individual handcrafted approach. However, as volumes increase it is better to compare and contrast how such patent creation activities are organised and structured to todayās mass customisation operations and logistics, in order to then create and manage a patent portfolio.
āLeaders must encourage their organisations to dance to forms of music yet to be heard.ā
Warren G. Bennis
This book is about the successful management and leadership of a patent factory and considers the organisational structure and mode of operation required. This involves providing clear direction and meaningful vision to all parts of an organisation, and deploying and controlling resources, be they people, money, and physical or intangible assets. Drawing from my experience and insights, this book guides readers along the path, providing advice about how best to arrange the human resources available to optimise the effectiveness and efficiency of the organisation. It then looks at which tasks are best conducted internally as opposed to outsourcing and what sort of organisation structures and formats work best. Decisions then need to be made on the key processes and the necessary tools to put in place.
This book highlights the key issues for consideration, the options available, the decision-making process and the opportunities and challenges that exist at each stage of this journey towards setting up a successful patent factory. In order to embark upon this journey you must ensure that you have the passion, determination and persistence in order to create a successful organisation.
Throughout this book, I will refer to this factory as a Patent Creation Factory.
Why āInside the Patent Factoryā?
The title of the book āInside the Patent Factoryā obviously comes from the analogy painted above.
The factory analogy stems from the idea that patent creation should not be seen as some simple legal process but rather that it should be seen as a core activity of ācreatingā patents, just like a factory creating products.
The basic idea is that if you wish to create patents as effectively as possible, you should then see the process like a factory production line, in which the end result is the granted patent. You should treat patent creation in much the same way that you would handle product development and granted patents just as you would handle a finished product.
However, it is important to realise that just as with modern factories, not all the tasks and activities are handled internally by the factoryās own employees or even by the key suppliers and component vendors. Some tasks are outsourced to specialists.
āCompanies are now treating intellectual property as a business asset not very different from a product on a shelf.ā
Ken Cukier, The Patent Survey, The Economist, Oct 2005
In this book, I will look at a number of critical success factors for this patent factory, starting with the overall goals and objectives of the factory followed by the organisational structure and mode of operation. Cost and quality management, internal versus outsourced activities and the flow of raw materials into the factory are all vital elements to consider.
What questions does the book intend to answer?
I examine the key issues that any organisation interested in creating patents should consider and what options are available in terms of organisational structure and mode of operation. What are the factors to consider when making fundamental decisions about how to organise, structure and operate an organisation to create patents? I also look at some of the challenges that are likely to be faced along the way, such as deciding upon the correct metrics to use when managing and leading an organisation to create patents.
Who is the target audience for this book?
This book should be of use to anyone interested in IPR, more specifically those interested in how to organise and structure people and processes to ensure that the patent creation part operates effectively and efficiently. As I myself researched and drafted this book, I reached out to many people from different backgrounds and experiences and not just those linked directly to Patent Creation Factory type activities. I found surprisingly strong interest in this subject matter across a quite diverse group of individuals, including the following:
ā¢ company managers interested in IPR and patent creation;
ā¢ IPR professionals within companies;
ā¢ External Patent Agencies filing and prosecuting cases on behalf of a Patent Creation Factory;
ā¢ functional managers with links to patent creation such as Human Resources, Finance and Quality;
ā¢ those involved in corporate strategy and strategy development;
ā¢ research and development managers interested in the subject of IPR and patents;
ā¢ investors interested in the intangible assets of companies;
ā¢ merger and acquisitions experts interested in the intangible assets of companies;
ā¢ the inventor community;
ā¢ students of business management;
ā¢ students of law and especially of IPR and patents.
Readers will gain a sound and detailed understanding of the workings of a Patent Creation Factory and its immediate environment. I describe everything from the point of view of a layperson so that the often confusing intellectual property concepts begin to appear relatively clear. Quotations from reputable sources are used to emphasise the significance of the text and case studies are provided to highlight specific issues. Moreover, analogies are used where it is felt that readers may struggle on first glance to come to terms with certain aspects. Ultimately, you need look no further to find a clear, yet detailed, account concerning the āins and outsā of what I term the Patent Creation Factory.
Why have I written this book?
This book is based on my own experiences of managing and leading one such Patent Creation Factory and taking it through some dramatic organisational changes, including the removal of the matrix structure, a shift from site to technology focus, putting External Patent Agency management in place and conducting a major benchmarking exercise.
My primary responsibility has been in the management and leadership of a Patent Creation Factory.
I spent time and energy examining our organisational structure and mode of operation, reviewing various options and benchmarking our organisation against other companies and IPR organisations...
