Mikael Tranekær Christensen, Plougmann & Vingtoft, and Jon Wulff Petersen,
TTO A/S, recommend that the strategic aspects of patent work are transferred from legal and technical departments to senior management.
In the mid-1970s, an electronics company had developed a videotape format which was introduced on the market by the name of Betamax. Betamax was in many ways technically superior to the VHS tape and the company protected its golden goose by forbidding others to license the patented technology.
However, as you know, VHS still became the dominant format worldwide. Despite the fact that the rival electronics company that had developed VHS had an inferior product, it had a more efficient patent strategy. The company decided to make its VHS technology available to all competitors through licensing agreements, and Betamax was thus doomed to lose when the time came to decide on the standard videotape format.
The story of Betamax perfectly illustrates the critical importance of having a good patent strategy and this has become even more important in the globalised 21st century than it was at the time the two electronic companies fought the battle over videotapes. However, a large number of companies today do not recognise the importance of a good patent strategy, which is clearly reflected in the way they downgrade the importance of patents and rights, commonly known as IPR or Intellectual Property Rights.
IPR is much more than law
IPR management is often reserved for the technical or legal department which solely focuses on ensuring that the company does not infringe the patents of its competitors and prosecuting those who infringe the company’s own patents.
It is our firm belief that although this particular focus on IPR may be relevant, it is still rather inefficient because there is too much focus on the legal aspects of IPR and not enough on making IPR part of the company’s business strategy.
A person who is competent to make decisions and consult on IPR matters must have access to and be involved in the company's long-term strategy and goals.
To illustrate this, we use an example of a high-tech company that foresees that the market is moving in a direction where one of its main competitors already holds several important patents. An employee working at the operational level – e.g. in the legal department - will immediately raise concern and advise against moving in that particular direction. Contrarily, an employee working at the strategic level – e.g. an IPR executive – will consider how the company can enter into relevant agreements with competitors regarding patents, so it can save costs on development by using competitors’ rights in exchange for some of the company’s own knowledge and rights.
If employees working at the operational level are required to solve strategic tasks, they will be bound to fail. However, we often experience that the management does exactly that: Turns to the employee in the patent corner to develop a patent strategy, unaware of the fact that the employee is probably unable to solve the task efficiently due to insufficient knowledge of business and strategy.
Today, an IPR employee usually becomes involved in the decision process when problems arise because the company has infringed the rights of others or if others have infringed the company’s own rights. However, a properly managed IPR strategy can be applied by the management as an effective tool to uncover what needs to be developed and marketed.
By lifting IPR management to the strategic level and making it part of the managerial responsibility, it can become an important resource that adds significant value to the company.
Difficulties in finding the right one
Why does the strategic aspect of IPR then continue to be the responsibility of other departments? One prevailing reason is probably that the management considers IPR to be a difficult and time-consuming task and therefore chooses to entrust it to someone else in the company. This is perhaps also the reason why there is a tendency to underrate the importance of IPR management.
But the main reason is probably the fact that it is extremely difficult to find an employee capable of assuming the complex role of an IPR executive - and even if someone should succeed, he or she becomes a significant drain on the wage budget.
The employee must be competent in legal, technical and business aspects. Most IPR managers today have technical education combined with a degree in patent law, but they lack training and practical experience in business.
A good example of how difficult it is to find an employee who has all the necessary skills is one of the largest Danish companies which had the position of IPR executive vacant for eighteen months.
There are several solutions available. The management can engage potential talents who are already employed in the company: Invite them to strategy seminars and challenge them on the issue of IPR and its significance in various fields. Send them to courses. Or pay external consultants to spar with the management.
Look at competitors' patents
A good patent strategy is not only aimed at balancing own patents and rights, it also means dealing with competitors' patents. These represent an important but highly underestimated information channel, which provides valuable insight into which products the competitors can be expected to develop during the next five years. We know of major Danish companies that have absolutely no insight into what their competitors are working on, even though they have free access to see all patent applications 18 months after they are filed.
An ineffective approach to solving the task is to completely refrain from patenting and annoy over competitors' patents. The promising approach, on the other hand, is to make efforts to translate competitors’ patent applications into something that is of relevance to one's own business. The competitor's applications may in fact influence your decision about the next product you introduce to the market.
Again, it is crucial for a company’s competitive edge to have an IPR executive who not only has insight into technical and legal areas, but who is also a skilled businessman.
This is also highly relevant in cases when mergers and acquisitions are on the agenda. Here, a traditional legal approach would consist of focusing solely on assessing whether the company that is being acquired has any potential or ongoing legal proceedings due to patent infringements. However, the IPR executive should play a much more central role in these cases, and already at an early stage evaluate whether the intellectual property rights of the other company have commercial relevance for their own business. Patents and other intellectual property rights can be worthless if competitors have something better, and the assessment of this sort requires more than just legal expertise. It requires that the person responsible for IPR is part of the management.
The growing importance of IPR
Working with IPR poses significant challenges for a company, firstly in finding the right person for the job and secondly, in effectively managing its IPR. We often experience that some companies face these challenges by burying their heads in the sand. However, this can turn out to be a costly affair because globalisation means that the focus on patents and other intellectual property rights is continuously increasing in importance.
Globalisation means that it is highly unlikely that you will identify a local need that does not exist elsewhere in the world. Presumably, somewhere in the world, someone else will be in the process of developing something in order to meet that same need. Therefore, it is important to have a patent strategy ready as soon as you have a new product or production process: Should we form an alliance with a competitor, or should we use our own patents to beat competitors? Or should we simply forget all about spending time and money on patent applications?
The winner will most likely be the company with the right strategy and not the one with the best product.
Why is patent strategy a task for the management?
