Intellectual Property Rights Management

Rookies, Dealers and Strategists

L. Alkaersig, K. Beukal, T. Reichstein, Kenneth A. Loparo, Karin Beukel

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN: 9781137469526
• eBook ISBN: 9781137469533
• Topic: Law
• Subtopic: Business Strategy
• Index: Law

This book explores how the entire toolbox of intellectual property (IP) protection and management are successfully combined and how firms generate value from IP. It provides a framework of archetypes which firms will be able to self-identify with and which will allow companies to focus on the IP and IP Management issues most relevant to them.

1

Introduction

Abstract: The creation and usage of intellectual property (IP) is central to a wide variety of firms. Firms engaged in new technologies or other intangible assets often find it difficult to reap the rewards of their efforts, not least because of competitors imitating or copying their products. IP is a useful tool for avoiding these infringements, for protecting ideas, for investments and for the future of the firm. However, IP is not only useful for gaining or retaining market share. It may be used as a directly tradable asset or as part of the firm’s strategy to increase competitiveness or positioning in a variety of markets. An IP strategy is a crucial element in the overall strategy of the firm, which addresses marketing, production and sales. The number of IP registrations is increasing globally. IP is hence increasingly relevant to a firm’s ability to operate efficiently and satisfactorily. This chapter argues for the relevance of working with IP as part of the firm’s strategy. The objective and outline of the book is presented in the closing section.

McDonalds does it, Sony does it, Johnson & Johnson does it, not to mention Honda Motor Company and L’Oreal, who also do it. Large firms do it and small firms do it. Old established and newly founded firms do it. Firms in all sorts of industries do it, as do individuals, both men and women. Universities, agencies, committees, and public and military organizations also do it. It is a widespread activity that transcends institutional borders and barriers. These days it is hard to read a newspaper without hearing about it. The creation and utilization of Intellectual Property (IP) has become common in today’s world and is here to stay.

Intellectual property is an integral part of our daily lives but it is something that we cannot see, touch or even discern. This book would not exist without IP. If you are reading it on a computer, tablet or smartphone, those devices all tend to be protected by, covered by or simply registered as IP. If you have a physical copy of the book, both the printing presses and the software it was created with are IP protected. Almost every aspect of our lives involves IP protection and yet we rarely think about it or even understand it. The food we eat, our homes, entertainment, communication, medicines, even art tend to be coupled with IP one way or another.

IP rights were first used in Europe over 500 years ago. However, it was not until the 19th or 20th century that IP was first introduced into the language. IP rights were so important to the emerging United States that they were written into the Constitution. More recently, Asia has been jumping onto the IP bandwagon, with South Korea, Japan and China becoming IP powerhouses. Historically, Japan and the US have been world leaders in IP, registering more IP rights than any other nation. This image is rapidly changing and China overtook the US in 2012 in the number of patents. IP management, the routine activity of generating, maintaining and utilizing IP, is something that happens in each and every corner of the world. IP is one of today’s most widespread activities, and is rapidly becoming a geopolitical tool. But what are IP and IP Management and how do they relate to firms?

What is IP?

IP generally refers to the creation of technological inventions, literary or artistic works, designs, shapes, symbols, names or images that are used for the purpose of commerce or commercialization. It is therefore the outcome of a creative process in which the firm or individual generates something not previously seen. Such creative outputs are often used to obtain a competitive advantage or to gain some benefit other than those that may be found through direct competition in a given market. These advantages and assets can be protected through the granting of patents, trademarks, designs or copyrights, which are often the byproduct of intellectual capital, a term introduced by Tom Stewart of Fortune magazine in 1994 that refers to intangible assets in the form of skill, knowledge and information. It is that subset of intellectual capital which can be legally protected which we refer to as IP.

Apart from the more informal use of IPp like secrecy, firms also make use of more formal IP assets. In principel, there are four major formal IP assets that are debated and registered. These are patents, trademarks, copyrights, and design rights.

Patents

The patent in its basic form is a legal tool granting an exclusive right to the owner to a technical invention, software or business method. In return for a period of exclusivity granted by the patent, the inventor discloses important information about the technology as part of their patent application. The patent application must describe how the technology works, how it can be applied and must contain sufficient information to allow a person skilled within the application area of that technology to reproduce it. These requirements ensure that society as a whole will benefit from the patented technology when the period of exclusivity granted to the inventor expires.

The patent is granted based on three distinct criteria of patentability: novelty, non-obviousness and industrial applicability. Novelty requires, as the name implies, that an invention is new and not previously disclosed or published. The second patentability requirement, non-obviousness (also referred to as the inventive step), exists to prevent patents from being granted to technologies that follow normal product development, and ensure that only inventions that go beyond the current state of the art can be patented. The final requirement of industrial applicability covers whether the invention can be utilized in an industry. While the concept of industry is broad, this requirement exists to ensure that patented inventions have the potential to be used in the development or manufacturing of products, or as products themselves.

Once a patent is granted, it works as a legal tool for a limited period. Patent protection is granted for 20 years from the date the patent application was handed in to the patent office. The length may vary in a few instances. There are, however, significant differences in the extend of technological coverage across countries. During this period of protection, the owner of the patent has the right to prevent others from using, manufacturing, selling, marketing or researching and developing (with exceptions) the technological inventions protected by the patents. The patent owner is therefore effectively granted a means to defend the invention from infringement and has a foundation to initiate litigation should infringement take place. The patent owner can also choose to generate revenues from the patent, for example, by out-licensing the right. Once protection ends the patent reverts to a public good and the owner is stripped of the right of exclusivity. Note that patenting is not free; in addition to the costs of developing the patent application, translation fees, application fees and renewal fees must be paid to process an application. While these costs may seem small on their own, a firm with a large patent portfolio can incur quite high costs from these fees alone. For small firms even engaging in undertaking one patent application can seem overwhelming.

Trademarks

Trademarks come in different shapes and sizes, from simple word marks covering the name of the firm or product, to more exotic types, such as scent or 3D marks. Unlike the patent, trademarks are not protecting a specific technology or invention, but a specific image or brand. A trademark essentially functions as a signal to the customer, a promise of the consistent quality of a particular brand. This reduces the customer’s search costs and makes it easier to choose between different products. Walk into a Starbucks anywhere in the world and you know beforehand what kind of coffee you will get. In return for those lower search costs a well-known trademark allows a firm to charge a higher price compared to similar rival products and to build, over time, a base of loyal customers who prefer a specific brand. As with other types of IP protection, the trademark is intended to motivate the firm to invest further in product development, using the trademark as a method of protecting their investment from imitators.

A trademark needs to be distinctive; no common words or phrases can be used and it cannot be similar to existing trademarks. A trademark commonly refers to a firm name or brand in the form of a word mark, or a picture or logo as a figure mark. While these remain the most common trademarks, multiple other marks are available. Shapes, sounds, colors, 3D shapes, holograms and scents are also potential trademarks. Some well-known examples include Intel’s Leap Ahead music, the Pullman Brown color of the UPS truck and the triangular shape of Toblerone chocolate bars. However, 3D shapes, holograms and scents are less commonly used, mainly because they are difficult to register since the public can find them difficult to distinguish distinctly.

Unlike patents, a trademark does not necessarily entail an application process. Some countries employ a first-to-use regulation, whereby an unregistered trademark can be obtained simply through its use. In spite of unregistered trademarks being freely available, most firms choose to register their trademarks. A trademark provides the owner with the exclusive right to prevent others from marketing similar or identical products using the same or a confusingly similar trademark. Other than application and maintenance fees, which are miniscule compared to patent fees, the costs of a registering a trademark are low. In comparison to a patent application, very little information has to be disclosed about the trademark and firms often register trademarks while still developing the product.

Copyrights

A copyright covers a range of intellectual, creative, literary and artistic “works”. The specifics of what can be protected by copyright varies by jurisdiction, but copyrights can apply to works such as books, theses, poems, plays, films, sound recordings, broadcasts, paintings, music, dance performances, computer programs, software, and even industrial products such as lighting, furniture and toys. In general copyright protection is not registered, but is obtained automatically when the creative work is articulated and presented in a tangible form (usually written down or drawn).

The length of protection also varies across jurisdictions and type of product, and is dependent on the ownership of the right. The most common length of time that copyright protection is in force is 70 years after the death of the creator of the work. However, in some cases protection can run for only 25 years after the creation of the work.

In general, copyright protection is used mainly by firms in the music, movie or literary industries where copyright is the primary form of protection available. Copyright can be applied in other industries, such as protecting marketing material and photos used on websites and print; however, outside the industries mentioned above, copyright has a limited application and is therefore often used in combination with other types of IP rights.

Designs rights

A design right is an exclusive right to the visual appearance of a product or part of a product, such as its lines, shapes, and contours or its ornamentation. A design must be an original creation, sufficiently different from what is already in the market. As with trademarks, designs can be both registered and unregistered depending on the jurisdiction. To obtain a registered design the creator must hand in drawings and/or photographs that illustrate the details of the product that is to be protected by the design registration. Designs are different from patents in that not only do they cover visual rather than technical aspects, but also the ability to produce and market the product during the registration. In some jurisdictions there is a 12-month period where the creator can market the design without destroying the novelty demand, effectively allowing the firm to delay handing in and thereby publishing their design only when the product is ready. The length of protection is different in different geographical locations; in the EU the length of protection is a maximum of 25 years, whereas in the US it is limited to 20 years.

The design right is narrow in its protection, meaning that only small differences in the visual appearance of a product may fall outside the protection of the individual protection. In this respect a design right is to keep competitors from directly copying a product, rather than from making a similar product. The design right has some resemblance to 3D shape trademark registrations, however they differ in a number of key points. The design right is generally much easier and faster to obtain than a 3D mark, partly because a design right in many jurisdictions are granted without any examination, whereas a 3D mark is under substantial examination, especially considering the distinctiveness of the product or packaging sought protected.

IP management

On the surface, it seems to be child’s play to engage in IP and actively start to consider IP as part of a business. At least, it seems obvious that such assets can be translated into gains and benefits for an organization. But the task of managing IP is certainly not easy. This is evident from the fact that firms often spend a relatively large share of their budget to utilize IP in a productive and useful manner. In fact, a group of 20 prominent international firms, active in various industries meet three times a year to devise management practices that routinely create, identify and realize value from IP. The challenge is to understand how best to translate intellectual capital into IP in a pragmatic and efficient manner and to unravel how an organization should manage their IP in such a way that they gain the most from these assets. These firms spend a fair amount of resources in order to improve the organization and management of their IP and IP portfolio. Clearly, IP management is something that challenges even the most skillful and experienced organization. In economics we are led to think that having IP assets automatically gives you a competitive edge, leading to a monopoly-like position. Yet, in management, it is often debated how the firm should go about handling and managing these assets in order to realize the advantages that they, theoretically, represent.

Two takeaways from the above:

1.Intellectual property is both a legal and a business asset – While IP is technically a legal right to exclude others, it can also be used as a business asset. That is, as a means of competitive advantage. More and more companies are viewing IP as a revenue generator and as a way to differentiate. Prior to mid-1990s, IP was something that only lawyers did and was hidden away in the bowels of the firm. Today, many CEOs of larger firms in particular are fluent in IP speak and understand it is a potential competitive lever at their disposal.

2.IP only has value in context – This idea took a long time to figure out. Why isn’t valuable IP valuable all the time? History is littered with inventions whose value was not fully realized until they changed hands. The computer mouse was invented at Xerox but, because it was not ink, toner or paper (the three most important inventions to Xerox at the time), it was not useful to them. Paired with the newly emerging computer industry however, the mouse became an integral part of computing today. Inventions happen all the time, however their value and utility is in the eye of the beholder. The IP Dealers market has made this value more readily available to inventors, however it still has significant limitations, which we will discuss later in the book.

These are clear and precise takeaways that suggest a general pattern. Yet, they offer little guidance with respect to management decisions such as ...

Table of contents

• Cover
• Title
• 1  Introduction
• 2  IP Archetypes: Rookies, Strategists, Dealers and Strategic Dealers
• 3  The IP Rookie
• 4  The IP Dealer
• 5  The IP Strategist
• 6  The IP Strategic Dealer
• 7  IP Strategy
• 8  Markets for IP
• 9  IP Archetypes and Demographics
• 10  IP and Economic Performance
• Index