Intellectual assets strategy


Protection and management of intellectual assets

Intellectual assets (IA) are intangible and essentially different from tangible assets such as capital equipment, buildings and financial resources. IA can be classified into two broad categories [1]:

  • the legally protected assets, such as patents, copyrights, trademarks, domain names and trade secrets,
  • the assets that are closely held in minds of individuals and groups, like know-how and the related processes and protocols associated with production and delivery of goods and services.

In this section key problems related to protection and management IA are considered. The discussion includes forms and consequences of IA protection on firm's competitive position, the link between company's IA strategy and technology roadmap, and methods of extracting value from IA.


Legal tools for protecting intellectual properties

Patent [2] is a property right granted by the government of a country that excludes others from producing, using or selling an invention, for a limited time, in exchange for public disclosure of the nature of the invention at the time the patent is granted. Patents are often categorised into different types, which may vary for different countries. Typical types of patents are:

  • a utility patent – granted to an inventor who creates or discovers a new and useful process, machine, manufactured item, or material;
  • a design patent – granted to the inventor of an original and ornamental design for a manufactured item.
In order to be patentable an invention must pass certain tests, for instance:
  • it must be useful, i.e. it must produce a desirable result, solve a problem, improve or propose a new use of a known invention,
  • it must be novel, i.e. it must not be already patented or described in public literature, or be in use for more than a certain period of time,
  • it must be not obvious, i.e. a person with experience or skill in the particular art of the patent would not be expected to achieve the same invention with a normal amount of effort.

            As an example, in the US patent law discovery of scientific principles that describe natural laws (e.g. gravity) cannot be patented as they are considered to have always existed, printed materials are not patentable, while since the 1998 software algorithms are eligible for patent protection.

            There are various advantages of patents. They protect IP rights produced by innovators/inventors, giving them opportunities to benefit from their invention and to receive a fair return for the capital spent. New knowledge, when protected by a patent, can be made public and contribute to science and technology development, which is especially important and attractive for academic institutions and researchers. On the other hand, the patenting process is lengthy and expensive. Moreover, because the patented IA becomes publicly available, there are rather few technologies that can be effectively protected by patents. Though patents offer relatively good protection of new chemical products or simple mechanical inventions, they are especially ineffective at protecting process innovations. Many patents can be “invented around” at relatively low cost and rarely present perfect appropriability. In some industries, particularly for protecting process innovations, trade secrets can be a viable alternative to patents.

            Copyright [3] vest in an author of work or in those who acquires the right from the original author. Its role is to prevent people from copying or manipulating the work created by its original author. Copyright can arise in various areas, including written works, art works, songs, paintings, books, labels, movies and computer programs. To be copyrighted, a work must be expressed in a tangible form, such as written or recorded.

Therefore, unlike patents and trade secrets, copyright cannot protect ideas. For instance, the algorithms themselves cannot be copyrighted, while the software implementing the algorithm can. The owner of the copyright has the exclusive right to the work with respect to: reproduction, derivative works, distribution, public display or performance. The advantage of copyright is the ease of obtaining the registration and the long time the right lasts, as compared to patents. The disadvantages arise from the narrow area that can be addressed when the infringement is alleged and in the fact that the copyright can cover only the tangible expression of the idea, not the idea itself. As a result designing around the copyright is usually relatively easy.

            Trademark [3], unlike patent or copyright, does not protect the underlying invention itself. Instead, trademarks are words, slogans, designs, shapes, colours, sounds and other symbols that identify and distinguish different products and services, and indicate their origin in the marketplace. In practice, trademarks are often related to brands. Rights in a trademark arise as soon as the trademark is used in the marketplace on a product or service. A legal protection is obtained through registering the trademark at the state level and almost all countries have laws that provide some form of protection for trademarks. The concept of “use” is central to trademarks. A trademark owner, generally, cannot obtain a registration unless the trademark is in commercial use.

            Like other forms of property, trademarks can be sold or transferred between parties. Just as trademark protection begins with use, its owner preserves its rights by continuing to use it in commerce. A trademark owner abandons its trademark when it stops using the trademark and has no intention to resume such use. Protecting and maintaining a registered trademark requires continuous effort. The reward is great, however, since unlike copyrights and patents the trademark protection can last forever.

            Trade secrets [3] law protects confidential and proprietary information from being disclosed to third parties by people who have an obligation to the owner of the information to keep the information confidential. The list of things protected by trade secret is very extensive, including: specific chemical formulas, specific steps in manufacturing process, list of customers or suppliers, designs, as well as, the very know-how contained in employee's brains concerning certain aspects of a business.

            A trade secret, however, must be more than just a secret and possess a potential of deriving an economic value, so that the efforts to keep it a secret must be reasonable. Therefore, to qualify as a trade secret, information must relate to a trade or business, it must be not known publicly or generally, and it must be used or intended for use in a trade or business.

            There are several advantages of a trade secret relative to other types of IP protection. A trade secret can cover things that cannot be covered by a copyright or a patent, such as an idea or information. Moreover, no outside action, such as filling application or registration, must be taken to create or extend the right. Trade secrets can be very valuable where the market advantage comes from specific information itself rather than from excluding competitors from using certain knowledge. The disadvantage of trade secret is that it exists as long as it remains a secret. In contemporary business environment, where collaboration is of increasing importance and employees are mobile, keeping any information secret for a long period of time makes protecting IP rights by trade secrets very difficult.


Regimes of appropriability

A regime of appropriability refers to the environmental factors, excluding firm and market structure, that influence an innovator’s ability to receive profits generated by an innovation. The most influencing factors of such regime are the nature of the technology and the efficacy of its protection mechanisms.

            The ease of imitating innovations depends on the extent to which the knowledge is tacit or codified. Codified knowledge is easier to transmit and receive, and therefore id more exposed to industrial espionage. Tacit knowledge is, by definition, difficult to articulate, transfer and demonstrate to others. Another example of knowledge that is difficult to imitate is a socially complex knowledge, which arises from complex interactions between multiple individuals.

            The IP rights environment within which the innovating firm operates can therefore be classified according to the type of technology and the efficacy of the legal mechanism used to protect the rights to the innovation. The appropriability regimes corresponding to the environments in which the technology is relatively easy to protect are usually referred to as “tight”, while those regimes relating to environments in which technology is almost impossible to protect are called “weak” [4], [2].


Organisation's intellectual asset strategy

The principal value of IA comes from their impact on strategy. An important component of technology-focused firm's strategy is a technology roadmap, which describes the technology state-of-the-art and its foreseen direction. It defines target performance of new technologies, a timeline for the introduction of new products or processes into the market, and it specifies resource requirements for technology development. The technology roadmap addresses also the issues of:

  • Whether a specific work should be performed internally, jointly with an external organisation or acquired?
  • The balance between required time, internal and external costs.
  • Which technologies, resulting products and improvements will be developed?

            A successful IA strategy supports the firm's technology roadmap. It impacts firm's competitiveness, creates or supports competitive advantage, protects markets and blocks competitors, exploit new market opportunities for products or services, and reduces risks from new entrants. Creating good IA strategy involves solving the following dilemmas [1]:

  • Which internal patents support current business? Which are key ones?
  • Which external patents could block firm activities, now or in future?
  • Which internal patents can block firm's competitors, now or in future?
  • Which IAs (internal or external) provide the freedom to practice?
  • Which IAs drive or protect market share in key areas of the business?
  • What IP rights or know-how can be acquired externally?
  • What is the total contribution of the IA to the value of protected products, services, licensing revenues, tax savings and equity of firm's ventures?
(MS, 2008)

References


[1] J. Tao, J. Daniele, E. Hummel, D. Goldheim, G. Slowinski: Developing an effective strategy for managing intellectual assets, Research Technology Management, Jan.-Feb. 2005

[2] M.A. Schilling: Strategic management of technological innovation, McGraw-Hill/Irwin, New York, NY, 2008

[3] D. Huizenga: Copyrights, trademarks, and trade secrets, In: E.C. Kulakowski, L.U. Chronister [Eds.]: Research administration and management, Jones and Bartlett Publ., Sadbury, MA, 2006

[4] D.J. Teece: Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. In: R.A. Burgelman, C.M. Christensen, S.C. Wheelwright: Strategic management of technology and innovation, McGraw-Hill/Irwin, New York, NY, 2004