This article was first published in the October 12, 2009 edition of The Legal Intelligencer Intellectual Property Supplement.
Innovation is far more than an academic pursuit of technological advances. It is a business endeavor that, when successful, provides the competitive edge that feeds the bottom line. IP rights can transform the fruits of innovation into long-lasting commercial assets, allowing businesses to parlay an innovation’s first-to-market competitive edge into a robust and sustained commercial advantage.
IP rights are most valuable when they are strategically aligned with defined business objectives. When they are not, they may have marginal value at best and may even represent wasted resources and missed opportunities. Deliberate alignment of IP and business strategies is therefore fundamental to creating valuable IP assets that maximize the return on innovation investments (innovation’s ROI).
A Right to Exclude
When asking “What does our IP give us the right to do?” some business managers are disappointed by the answer: IP rights, specifically patent rights, do not confer an affirmative right to commercialize an innovation—they instead confer only the right to exclude others from doing so.
IP exclusionary rights provide a powerful commercial advantage. Patents confer the right to prevent others from making, using, selling, offering to sell, or importing the patented invention. Similarly, trademarks can be enforced to prevent others from using a source identifier with goods or services in a manner likely to confuse consumers. With trade secrets, it is a right to prevent others from misappropriating valuable secret information. These are very different rights that serve different public policies. But they all have one thing in common—they confer a right to prevent others from some act.
So instead of asking what their IP gives them the right to do, successful business managers ask “Do our IP rights exclude others from adopting the key features that distinguish our product offerings?” If the answer is affirmative, they know that those rights are powerful, valuable assets.
IP exclusionary rights are especially valuable when they protect the important attributes that differentiate innovative product offerings from the competition. That differentiation may arise from improved performance or efficacy, aesthetic design, brand strength or other attributes that make product offerings stand out in the marketplace.
Conversely, when innovations are not protected they can be adopted freely by competitors, allowing the market to resort quickly to cost-based competition. When unprotected innovations are commoditized in this way, the market advantages and profit margins they once promised will evaporate. Companies therefore have a strong opportunity to outperform rivals if they can establish a difference that they can protect and maintain by excluding others.
Integrate IP Strategies Into Innovation Efforts
Deliberate coordination of IP strategies with product development and commercialization efforts ensures that IP rights will be tailored to protecting important differentiators and advancing defined business objectives.
This coordination is fostered by IP counsel’s active involvement in product development teams. Most businesses utilize cross-functional, multidisciplinary teams to carry out development efforts. These teams include individuals from key disciplines that collaborate throughout the development effort, typically involving representatives from engineering, design, marketing, and other disciplines selected depending on the nature of the development effort.
By taking an active role as an integrated team member, IP counsel remains informed of the intended positioning of product innovations in the marketplace. So informed, IP counsel helps the team to execute strategies for protecting strong product differentiators. In the context of patent protection for example, this includes the collaborative drafting and prosecution of patent claims that exclude competitors from adopting key product differentiators.
The coordination of IP strategies with development efforts is also fostered by incorporating IP-related actions into the processes that development teams use to bring new technologies to market. Whether a development effort is considered incremental (such as cost reductions or product improvements), platform (next-generation products), or breakthrough (technologies new to the business or the world), development teams generally employ formal processes that are structured in sequenced stages, the well-known Stage-Gate® process being one example. A typical process may include a concept generation stage, a feasibility study stage for assessing concepts, a product development stage for developing a selected concept, and a commercialization stage for preparing the product for launch.
By building IP-related actions into staged development processes, alignment of IP exclusionary rights with key product differentiators becomes an organic byproduct of the development effort. In the context of patent protection for example, IP-related actions are scheduled at each stage:
- IP counsel surveys prior patents during the concept development stage to clarify the state of the art and catalyze ideation.
- In the feasibility study stage, IP counsel considers whether proposed product concepts can be protected adequately and prepares patent applications directed to unique features of promising product concepts.
- During the development stage and prior to completing the commercialization stage, IP counsel ensures that IP protections are tailored to protect features of the product that are intended to distinguish it in the marketplace.
Products inevitably evolve between the time they are conceived and the time they become frozen for commercialization. At the same time, the scope of patent claims often change between the time a patent application is filed and the time a patent is granted. Therefore, it is critically important to maintain collaborative communications among IP counsel and other members of the development team throughout the development and patenting processes. Doing so ensures that IP protections do not miss the mark.
Meet Business Objectives Throughout Product Lifecycles
Product development is typical preceded by a long-term planning phase and followed by an active lifecycle phase and then a decline/exit phase—virtually every product offering progresses through these phases. The planned coordination of IP and business strategies is therefore important throughout all product lifecycle phases, not just during product development efforts.
In the long-term planning phase, a new product release is on the distant horizon, perhaps three to five years out. In this early phase, product plans are being matched to business objectives and general plans for a new product are formulated. Even in this early phase, IP counsel contributes in a significant way by identifying prospective IP positions associated with product offering opportunities, including the types of features that can differentiate proposed products in the marketplace.
As a product is commercialized and enters its active lifecycle phase, profits are maximized and brand equity is deepened. In this phase, IP counsel helps the product team to audit the activities of competitors, police and perhaps enforce IP rights if competitive activities infringe those rights, and protect any product improvements to expand and align IP rights with evolving product offerings and line extensions.
In the decline or exit stage in which a product reaches its sunset, strategies are adjusted to extract value from IP assets. IP counsel helps product managers to mine for IP assets that no longer relate to core products of the business and harvest them by licensing out or selling them to other entities. Those IP assets may also provide valuable leverage to negotiate disputes with other entities. If any IP assets no longer add meaningful value to the business, they can be abandoned to eliminate the expense associated with their maintenance.
Like product development, lifecycle management is an interdisciplinary effort. Active involvement of IP counsel helps ensure that IP strategies advance business objectives as they evolve throughout the product lifecycle, thus maximizing an innovation’s ROI.
A Comprehensive Business-Centric Approach
Securing business-oriented IP rights is just one important aspect of a business-centric approach to IP strategies. The deliberate alignment of all IP strategies with business objectives is a guiding principle for every IP-related initiative.
IP risk management efforts, for example, should directly advance the business objectives of avoiding conflicts with IP rights of others and reducing the uncertainty associated with such conflicts. As with the protection of IP rights, risk management efforts are most effective when coordinated with product development processes:
- In the concept generation stage, IP counsel informs the development team of general areas of IP risk, including any relevant patents owned by competitors and potential blocking patents. Any product concept that gives rise to intolerable infringement risks can therefore be eliminated early.
- Later in the development stage, IP counsel identifies patents relevant to specific features of the selected product concept. If needed, a “design around” effort is made to reduce infringement risks proactively.
- Product launch in the commercialization stage is contingent upon management’s consideration of any identified IP risks. By integrating IP risk management efforts, prompt communication of such IP risks to business managers is ensured.
If a conflict does ultimately arise between business initiatives and IP rights of others, litigation strategies are best tailored to focus efficiently and effectively on key outcome-determinative issues and to achieve a success that is defined carefully with a business outcome in mind. Similarly, a business-centric approach helps to ensure win-win business solutions to legal disputes and to protect key business interests in negotiated licenses and other IP transactions.
As part of a broader business-centric approach to IP strategy, businesses can turn innovations into valuable assets by aligning IP rights with defined business objectives. They can achieve this by:
- integrating IP counsel into innovation efforts to protect key differentiators of product innovations;
- meeting evolving business objectives at all phases of a product’s lifecycle; and
- taking a business-centric approach when formulating all IP strategies, including those related to risk management, dispute resolution, and IP transactions.
By integrating IP and business initiatives in this way, companies can ensure that IP strategies are aligned with defined business objectives and thereby maximize the return on their innovation investments.