Archive for May, 2014
Michael D. Moberly May 28, 2014 ‘A long form blog where attention span really matters’.
The experts’ perspective…
I routinely hear presumed experts on various media describe how intellectual property (IP) is being targeted and stolen through economic espionage and/or cyber-attacks at alarming rates.
While these experts often make passionate and intriguing cases by, among other things, either eluding to or outright naming the (nation state) perpetrator and assigning a mind boggling dollar value to such losses that routinely range from $40 billion to $500+ billion annually by U.S. companies, not counting losses experienced by other countries, particularly those who are members of the World Trade Organization and signatories to the 1994 Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) which established minimum standards for many forms of intellectual property regulation
There is no question economic espionage, particularly since the passage of the Economic Espionage Act (EEA) in 1996, that the losses attributed to it have risen considerably. One reason is self-evident, that is, by virtue of the passage of the EEA, there is an abundance of players, i.e., various federal agencies, sectors of the U.S. intelligence community, and a variety of ‘think tanks’ along with researchers and practitioners such as myself who monitor/track economic espionage and endeavor to assess both its magnitude, targets, and economic impact.
There is virtually no question that losses of intellectual, structural, and relationship capital, anyone of which can be (company) proprietary information, a trade secret, or collectively assembled to become a patent, i.e., intellectual property. Many of these experts self identify as current or former employees of agencies within the U.S. intelligence community, federal law enforcement and/or prominent researchers at various ‘think tanks’. To put it plainly, it’s just prudent today for listeners to assess a speakers’ potential motive(s) and the context in which economic espionage is being discussed, and how such calculations (values) were made, before arriving at a conclusion.
How much is actually lost…
But just how much is actually lost, that’s subject to some debate. I am confident it is significant and it’s very likely it continue to escalate for multiple reasons, three of which are…
- the overall global trade and business transaction environment have become increasingly aggressive, predatorial, competitive, and ‘winner-take-all’ in nature.
- economic espionage and its related acts are relatively easy to accomplish and there are multiple (quite stealthy) ways to be successful at it. And, it can be initiated by individuals or state sponsored entities from anywhere in the world. In other words, economic espionage need not exclusively be cyber-oriented or conducted or subsidized by any one particular nation state.
- And, perhaps most importantly is the economic fact/reality that steadily rising percentages of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability reside in intangible assets, i.e., intellectual, structural, and relationship capital, one of which is intellectual property. So the routinely espoused notion that U.S. or other county’s companies are solely being targeted for their intellectual properties, is not only a misnomer, but a misunderstanding of where a company’s value really lies.
How are losses calculated…
In terms of how the calculations are made and/or what factors are taken into consideration to assign a particular dollar value to IP losses figures and the context and/or motives in which these estimates are announced, and which source is used as evidence ultimately are preludes for such a wide range of loss estimates.
So, what’s missing in my judgment, from some experts’ equation (related to losses attributed to economic espionage) is the adversary’s ability to understand and/or replicate the intangible assets, i.e., the intellectual and structural capital and know how especially that are embedded in any misappropriated, infringed, or stolen intangible assets.
Know how (intellectual capital) can, to be sure, be classified as trade secrets (providing the holder consistently meets the six requisites of trade secrecy) or proprietary. Either way, I can confidently report that companies would be well served if they identified and safeguarded the contributory value of the intangible assets that underlie all of their intellectual property, because that’s what the world’s economic and competitive advantage adversaries need and want most.
Please don’t misinterpret my position…
It would be most unfortunate if any reader of this post should choose to misinterpret my remarks thus far. I have been a strong and consistent researcher and investigator of economic espionage and its many related issues since the mid 1990’s. In fact, I served on a professional association conference panel, along with relevant, high echelon federal agency personnel for one of the initial public ‘roll outs’ of the EEA in 1996.
I want to make my position clear. Which is, while I don’t dispute these expert’s positions about the significance of the problem, I do find reason to dispute their consistent characterization of it solely as an ‘IP problem’. Intellectual property is comprised of patents, trademarks, copyrights, and trade secrets. In today’s increasingly competitive, predatorial, and winner-take-all global business transaction environment it’s rapidly becoming a given that company’s intellectual properties are not merely vulnerable, rather the probability that theft, misappropriation, or infringement will occur at some point during the assets’ life-value-functionality cycle is highly likely. Just how likely, remains somewhat subjective and carries many variables, i.e., asset demand, attractivity, effectiveness of safeguards, etc.
I do hold however, a somewhat different view about what most of the economic and competitive advantage adversaries are targeting and it’s not solely a company’s IP. Be assured, those engaged in using/applying stolen intangible assets have, in most instances, an equally strong desire to compete globally and in the same market space as the rightful holder-owner of those assets did. I have worked, studied, and conducted much research on intangible assets and economic espionage over the past 25+ years and find it essential to understand the real or presumed adversaries in social, political, economic, competitive advantage, and intellectual property (legal) history contexts. Collectively, this suggests many of the adversaries are now commencing the early stages of a second generation of businesses and individuals who possess the capability to buy – own private property, intellectual property notwithstanding, and create large scale manufacturing facilities to produce the various products and/or services that sometimes emanate from infringed – stolen – misappropriated intangible assets.
Naming the culprit countries…
A significant difference I, and I presume many other advocates of safeguarding intellectual property rights have noticed, is that these experts are more comfortable today, than in years past, in naming the presumed culprits and/or countries where the cyber attacks – thefts of IP originate. In a growing number of instances, these experts freely cite either state sponsored or independent operators as the origin of the problems, often citing China, Russia, eastern European countries, and numerous other ‘legacy free’ player countries as being the primary culprits, that is the recipients and/or beneficiaries of the stolen intangible assets
Naming the culprit countries in open sources carries some potential benefits, i.e., the adverse publicity may, in some instances…
- bring political – diplomatic pressure to bear on the named country’s legislative and enforcement bodies to be more aggressive and consistent in their pursuit of infringers and/or product counterfeiting, etc.
- prompt holders of valuable intangible (IP) assets to strengthen their international business transaction due diligence to reduce asset vulnerability by putting in place practices and procedures designed specifically to sustain control, use, ownership, and monitor the value, materiality, and risk to the key intangible assets in play in both pre and post transaction contexts.
A lot of information regarding potential infringement, theft, counterfeiting, etc., is in open source…
It’s important to note however, that much of the country specific challenges, insofar as economic espionage, infringement, misappropriation, and counterfeiting, etc., are readily available through the Office of the U.S. Trade Representative, Section 301 list, as well as the Department of States’ Overseas Security Advisory Council and numerous other reputable online sources.
The bottom line…
If any company, be it a startup, small to midsize firm, or part of the Fortune 1000, which is fortunate to have issued intellectual property, usually in the form of a patent, is devoting all or most of it asset protection resources to safeguarding and/or mitigating risks to a patent from possible infringement, I am simply saying such a strategy may be misplaced, because the real targets, particularly emanating from developing countries and the businesses within, is acquiring the actual knowhow which does not translate as a patent per se, rather as the knowledge that is embedded in a patent, i.e., the underlying intellectual, structural, and relationship capital that actually makes ‘things’ work quickly and profitably the first time!
For example, here in St. Louis is the world headquarters of Monsanto, perhaps most known in recent years for its progress in genetically modified organisms and the enforcement of patents it holds on varieties of its soybeans and corn. I can reasonably assure folks that the global economic – competitive advantage adversaries who engage in economic espionage and/or aggressive business intelligence operations against the likes of Monsanto, are not after the GMO related patents. Instead, they are seeking the operational knowhow embedded within and/or underlying Monsanto’s patents, and that translates as intangible assets, pure and simple, i.e., the intellectual, structural, and relationship capital accumulated and held by Monsanto researchers and executives.
Michael D. Moberly May 27, 2014 ‘A long form blog where attention span really matters’.
Intangibles’ are inherently nuanced…
Because intangible assets are inherently nuanced in terms of how they evolve and ultimately come to be used or applied in companies, especially intellectual, structural, and relationship capital, they are not well suited for one-size-fits-all or snap-shot-in-time management.
This makes it all the more prudent for company management teams to achieve the necessary familiarity with intangibles’ company-operation specific elements, e.g.,
- how, where, or from whom they originated.
- their development, maturation, and eventual utilization path, and how to
- identify, unravel, and differentiate each assets’ contributory value such as competitive advantages, a source of revenue, and efficiency creation, etc.
Intangible asset management has shifted to fiduciary obligations…
It is for these and many other reasons that I urge company c-suites to consider intangible asset management as having shifted from merely being optional ‘nice to have’, but not absolutely necessary skill sets for their management team members to possess, nor skill sets that should be left solely to personal motivation and far sightedness to acquire. Today, these skill sets have become very much akin to genuine fiduciary obligations if not responsibilities.
This level of managerial dexterity and awareness are essential now insofar as representing consistent bases to effectively and profitably operate intangible asset intensive companies, particularly in globally competitive, aggressive, and predatorial business management and transaction environments in which intangibles’ are consistently in play.
Overtime, as management teams’ operational familiarity with intangibles’ elevate, sufficient clarity will be achieved to recognize and distinguish the most effective, lucrative, and strategic path options in which to engage and put a firm’s intangible assets to work, and, with greater assurance they will remain so. Whether management teams conceive and frame their operational familiarity in a ‘roadmap; (visual) context viewed through conventional business lens, or as a ‘mosaic’ (big picture), the message remains the same…
any business decision maker, regardless of their specialization, professional experience, or job title, are, as it were, ‘fiduciarily’ obligated to acquire and remain current in the stewardship, oversight, and management of their firms intangible assets!
Remember, 80+% of most company’s value…
Of course, the economic fact that underlies these managerial obligations are that 80+% of most company’s value and sources of revenue today lie in – evolve directly from intangible assets generally irrespective of a company’s size, maturity, annual sales, sector, innovation, or receptivity to risk.
Key business operating perceptions need to be addressed…
While achieving these hopefully self-evident managerial expectations will absolutely aid management teams to ’put their company’s intangible assets to work’, there remain, what I call, a few key business philosophy hurdles and misconceptions that routinely need to be simultaneously overcome, six of which are…
- the assumption that intangible assets are merely another term for or form of intellectual properties, patents particularly.
- the stewardship, oversight, and management of a company’s intangible assets are exclusively legal, accounting, or IT processes and responsibilities.
- decisions and actions affecting how a company’s intangibles can – are to be used, represent genuine business decisions to be made in concert with security, risk management, legal counsel, accounting, and IT.
- intangible assets and their (stewardship, oversight, and) management are not the sole province of large, multi-national, Fortune 1000’s and thus irrelevant to startups or small, medium size firms.
- there is a correlation between the intensities embedded in today’s go fast, go hard, go global business development and transaction environment which are integral to – underlie the knowledge (intangible asset) based global economy.
- unlike patents, trademarks, and copyrights, there are no certificates issued by the government that tell business owners and decision makers ‘these are your intangible assets’.
Ultimately, responsibility for identifying, unraveling, assessing, safeguarding, managing, mitigating risk, and lucratively exploiting a company’s intangible assets while being aligned with a business’ strategic plan, lie solely with company management teams. So, at minimum, understanding what intangibles’ are, how they develop as structural, intellectual, and relationship capital and the ability to consistently assess and promote their contributory value and commercialization (monetization) potential is paramount.
Yes, I am a strong advocate of engaging and utilizing intangible assets as comprehensively as possible. But, I caution readers to not characterize intangibles’ as constituting a proverbial silver bullet or assume they can be effectively captured by applying a one-size-fits-all template and assume success will be achieved.
So, unless and until management teams, boards, investors, stakeholders, and other business decision makers begin demanding that (their) company’s intangible assets ‘be taken out for a ride’, it’s likely a company’s intangibles will likely remain idle, taken for granted, and otherwise left unused, under-valued, and vulnerable to a global array of competitors and other forms of risk to acquire and use at their will.
As always, reader comments and perspectives are welcome here in St. Louis.
Michael D. Moberly May 23, 2014 ‘A long form blog where attention span really matters’.
Emergence and integration of intangible assets…
Intangible (non-physical) assets have quite literally transformed conventional business practices which had, certainly since the industrial revolution evolved around the production and utilization of tangible or physical assets. This economic transformation, i.e., from the tangible to the intangible became increasingly evident in the late-1980’s to the mid-1990’s as company decision makers, management teams, boards, and the innovation – R&D process globally found it in their interest to rethink and restructure their conventional business strategies to include exploiting internally produced or externally acquired intangible assets.
It was becoming clear that intangible assets, somewhat single handedly, were the real origins and foundations to most company’s value, their sources of revenue, and competitive advantages. More specifically, intangible assets had become the ‘building blocks’ for most company’s profitability, growth, and sustainability.
Thus, what ultimately is now referred to as the knowledge (intangible asset) based/driven global economy was an important facet to conducting business in the 21st century and intangible assets were playing increasingly integral and influential roles.
Professor Baruch Lev of New York University’s Stearn School of Business noted that (business) economic activity increasingly consisted of the exchange of ideas, information, expertise, and know how, all of which are intangible assets. Obviously then, a company’s collective competencies and capabilities to effectively develop and strategically exploit intangible assets, particularly intellectual, structural, and relationship capital was rapidly superseding the mere control over or use of physical – tangible assets and resources.
As more management teams have come to recognize the value of many physical (tangible) goods are increasingly based on the degree and/or how well intangible assets have been integrated in the products and/or services being produced, particularly high quality intellectual and structural capital that collectively morph into brand, creative presentation, and content, etc. So with the origins of company value and revenue showing convincing signs of moving from the tangible to the intangible globally, changers are obviously necessary.
This irreversible economic fact produces new risks…
One outcome of this irreversible change from the tangible to the intangible was that it became clear that while intangibles were being more fully integrated in company’s operational thinking, strategic outlook and planning, they were also having a strong bearing on the responsibilities of Corporate Security Officers. For example, CSO’s would become increasingly responsible for safeguarding and mitigating risk to intangibles which, when materialized tends to longer lasting, if not permanent adverse economic and competitive advantage affects. More specifically, the intangible asset side of a company’s business, i.e., its reputation, brand, image, goodwill, competitive advantages, sources of revenue, relationship capital, will likely experience the greatest impact.
Inevitability of intangible assets playing more significant roles…
So, it was inevitable that intangible assets would be playing increasingly significant roles in company operation, strategic planning, and the types of transactions and other business initiatives they routinely engaged. In other words, achieving consistent business success was now inextricably linked to the effective stewardship, oversight, management, and safeguarding of a company’s intangibles which includes the ability to:
- identify, unravel, and assess intangible assets collectively as well as their individual contributory value.
- sustain control, use, and ownership of the assets throughout their respective life, value, and functionality cycles.
- understand how to exploit intangibles’ contributory and collaborative elements and the competitive advantages they produce.
- monitor intangibles’ value, materiality, and risk in both pre and post (business transaction) contexts, and in designing and executing exit strategies.
Acquiring the necessary capabilities…
Acquiring these capabilities and skill sets were rapidly becoming managerial imperatives, regardless of a company’s size, location, maturation, or industry sector and each needs a multi-pronged strategic roadmap which includes demonstrating how to…
- put intangible assets to work for one’s company effectively and profitably.
- safeguard the contributory value of intangibles throughout their respective functionality (life) cycle.
- provide effective stewardship, oversight, and management, and of a company’s intangible assets, not optional tasks, rather as fiduciary responsibilities that can no longer be dismissed, neglected, or relegated to the uninitiated, e.g., it will get done as time permits, when the resources become available, or, when competitors are observed doing it.
Home grown intangible assets…
To be sure, I recognize that most every company produces – possesses intangible assets which for the most part are ‘home grown’, i.e., internally produced, distinctively relevant, and company specific, irrespective of its location, size, industry sector, or maturity.
In many, instances, however, ‘home grown’ intangibles may not be particularly well suited to one-size-fits-all managerial or company culture circumstances in other words, it’s increasingly unlikely, in my view, that such intangibles would be readily transferrable. Certainly, there is ample evidence – examples strewn about businesses in many different sectors in which intangible asset transferability simply did not work or perform as desired. Instead, they may require nuanced modifications and handling aligned – commensurate with…
- achieving the most effective and efficient use.
- maximizing their contributory-collaborative value, and
- building and strengthening a company’s structural capital and competitive advantages throughout its supply-value chain.
- specific types of (business) transactions a company most frequently engages.
However, what fits best tends to work best…
To ameliorate the challenges associated with (intangible) asset transferability, Iadvocate very individualized approaches to assessing, utilizing, bundling, managing, and safeguarding. intangibles’. This, I refer to as my ’what fits best tends to work best’ strategy. More specifically, my own experiences (anecdotally) suggest that ’what fits best’ for a company and its operating culture will usually ‘work best’ and produce the best outcomes insofar as helping achieve its business goals, objectives, and maximize the use of its intangible assets.
What fits best doesn’t require company management teams to step outside their areas of expertise…
An important message to convey is that my ‘what works best usually fits best’ approach does notrequire management teams to step outside their primary areas of managerial – operational expertiseto understand and apply the various principles and strategies presented. Instead, this approach is designed to build upon management teams existing expertise, but it adds challenging, relevant, and forward looking dimensions to those areas of specialization and expertise.
Too, my experience clearly suggests the ‘what fits best’ approach respects achievements of management team members while helping companies proceed more effectively and quickly insofar as their value, competitiveness, and profitability. Too, it renders companies less vulnerable to the ever growing array of risks and threats which can rapidly materialize to literally sap the value from intangibles and undermine – erode the value, margins, and competitive advantages of potentially lucrative (intangible) assets.
The countless companies and management teams I have encountered over the past 25+ years, with no exceptions that I can immediately recall, each produces (internally valuable, revenue generating competitive advantages and numerous other ‘building blocks’ that can lead to growth, profitability, and sustainability. Let’s try it together!
Mr. Moberly welcomes and encourages reader comments.
Michael D. Moberly May 21, 2014 ‘A long form blog where attention span really matters.’
An inventors’ first call…
So, for the foreseeable future, inventors, researchers, companies, and institutions who engage in R&D, perhaps their initial call should not be to (intellectual property) legal counsel whose business model generally remain exclusive to (1.) patent prosecution, and (2.) patent litigation.
The reason is there is a lot of important work inventors/innovators should achieve before, during, and after a patent has been issued. The time honored inventor/innovator practice of, what I refer to as ‘patent and walk away’ is indeed a poor business strategy.
An intangible asset strategist and risk specialist can perform a valuable, process altering, and strategic function for inventors-innovators which is to identify, unravel, assess, and safeguard the enabling and contributory intangible assets and initiate a ‘what fits best will work best’ for the innovator, their circumstances and investors and the absolutely necessity to sustain control, use, ownership, and monitor asset(s) value, materiality, and risk.
Should be little question by now…
There should be little question in the minds of business management teams and investors today that intangible assets and their first cousin intellectual property (IP) are now integral forces to successful business innovation, operation, and sustainability. The reason, it’s now a globally universal economic fact that intangible assets now comprise 80+% of most companies real value and sources of revenue. In other words, intangibles are the ‘building blocks’ for most company’s growth, profitability, competitive advantage, and sustainability.
But, before we delve further, let’s be respectfully frank. When it comes to IP (patent) counsel, let us not assume all are made from the same cloth. That is, with 25+ years of experience in the intangible asset arena and partaking in literally hundreds conversations with otherwise extraordinarily intelligent and resourceful entrepreneurs and innovators, I remain amazed that such a substantial number recognize one option which they assume will secure their work product that is, a patent.
Anecdotally, I am confident that many, if not most entrepreneurs and innovators, not unlike most business leaders and management teams members assume if one graduates from a professional school, be it law or medicine, etc., most are equally competent in the respective area which they have chosen to specialize, that is, unless something adverse is learned preceding or subsequent to an engagement. Ironically, this constitutes a pedestal of sorts, which we do not reserve for nor convey nearly as quickly, for example, to plumbers, carpenters, and the myriad of other craftsman which we are probably more likely to have direct and often times personal contact are able to observe and assess the outcome of their work, often immediately, compared to say the quality of patent prosecution and issuance. For the latter, it may take months, or even years for ‘quality’ to be assessed or tested relative to (a.) one’s motive for initially seeking a patent, and/or (b.) the litigation, disputes, challenges, etc., which unfortunately, seem, in some sectors, to be a growing inevitability of merely doing business when intangible assets such as IP are in play.
Entrepreneurs, innovators, investors, management teams, boards, and D&O’s who still consider IP in general, and patent prosecution – issuance in particular, as merely constituting an occasional service function that can be (a.) completed with equal excellence, and (b.) sustain the rigors of global competitiveness and litigiousness. In other words, those clinging to such views, are, in my judgment, behind the aggressivity and predatorial aspects embedded in 2014+ business curve and the instantaneous global business transaction environments in which the mantra is winner-take-all.
Howery Survey Of Investor Attitudes on IP Protection
In fact, most respondents to a former Howery law firm ‘Survey of Investor Attitudes on IP Protection’ assert that companies that lack an effective IP (intangible asset) strategy can have a substantial detrimental effect on company performance. I couldn’t agree more.
Again, in today’s go fast, go hard, go global economic – business transaction in which IP and other forms of intangibles are routinely comprising higher percentages of company’s value and aspired success, investors and financial analysts are attaching more credence to intangibles, particularly those in the form of intellectual and structural before making their ultimate invest – don’t invest decision. In fact, one in four of the Howery Survey respondents stated they have actually turned down investment opportunities due to a company’s ‘inadequate approach to IP’ which could encompass many things, including patent quality!
Fully 95% of the Howery survey respondents reported that it is no longer sufficient, in the context of investment decisions, for a target company to merely own IP. But, in addition, the IP should be both
The respondents also reported, in substantial numbers, that before a favorable investment decision would be made, the (asset) due diligence should determine and assess whether the target company has specific (best practice) strategies in place, to not only exploit the assets, but also ensure they are tactically and strategically aligned with asset safeguards and competitive advantages.
The bottom line, in my view, in conjunction with the Howery Survey findings, is this; companies that presume conventional IP enforcement protections somehow equate with patent prosecution quality and are thus singularly adequate to attract investors are finding instead, those enforcements, as advertised, are no longer sufficient (standing alone) to favorably satisfy prospective investor demands vis-a-vis their invest – don’t invest decision criteria.
In other words, to elevate the probability of attracting serious investors, companies should also have in place (a.) comprehensive and well defined and integrated strategies to effectively safeguard the key and contributory intangible assets to reflect and mitigate when – where necessary, today’s increasingly aggressive, predatorial, and winner-take-all business transaction environment, and (b.) seamlessly integrate same into a viable competitive strategy for utilizing and exploiting the assets. (Adapted by Michael D. Moberly from the work of Howery, Simon, Arnold & White’s Survey Of Investor Attitudes on IP Protection.
Patents are suitable for framing…
It’s important for entrepreneurs and innovators to recognize that patents are one of four types of intellectual property, i.e., trademarks, copyrights, trade secrets, (and patents) each of which is a subset of intangible assets. The primary difference is that a patent, once issued by the U.S. Patent and Trademark Office (USPTO) can assume a tangible or physical property insofar as the issuance certificate can be framed and hung on an office wall as a testament to an inventor’s – innovator’s hard work and being first to file. Too, having a patent issued conveys a sense of usually well warranted personal achievement that is immediate and very personalized, i.e., manifests as professional expertise and credibility.
But frequently, much to the chagrin of the intangibles’ profession, intellectual property, patents particularly, represent a presumptive and much revered brass ring which technology transfer managers, researchers, inventors, and legal counsel routinely set their sights. Anecdotally, having served in academia for over 20 years, I am inclined to believe this may be so, merely because there is no intangible asset strategist and risk specialist available to effectively articulate lesser expensive and more protectable options that can achieve the same desired outcome.
Nourishing ‘patent only’ strategies…
Anecdotally, I suspect, the personal reverence attached to an inventor’s or organization’s patent (only) ‘thinking’ is rooted in an absence of operational understanding and appreciation for the increasingly critical practices and operational preludes which are now necessary to sustaining control, use, ownership, and monitoring the value, materiality, and risks to the intellectual and structural capital embedded in any patent application (prosecution).
Respectfully, contributing to patent only strategies, is the flawed and very unrealistic assumption that an issued patent constitutes a standalone deterrent to, or safe harbor from the ever growing global cadre of would be infringers and purveyors of economic – competitive advantage espionage. Too, the costs associated with defending patents in disputes and challenges are considerable, making a ‘patent only’ tract, in my view, potentially even more risky. Too, conventional patent only strategies can literally be out-of-reach for frugal inventors and innovation regimes, absent committed and deep pocketed investors.
Too, its quite fair to say that in today’s increasingly aggressive, globally predatorial, and winner-take-all (global) R&D and business transaction environments, patents, like most intellectual – structural capital based assets, are in persistent states of risk to infringement, counterfeiting, misappropriation, theft, etc., from a host of legacy free players, independent (information asset) brokers, and assorted state-sponsored entities most of whom are engaged in some form of economic (industrial and competitive advantage) espionage.
Faux affirmation of patent only strategy…
Venture capital forums are usually private events in which inventors and prospective investors, i.e., venture capitalists meet. Those who have participated in such events know that inventor’s are seeking investment, a critical component of which is inventors making the proverbial ‘elevator pitch’ to an audience of prospective investors, in which the inevitable question, i.e., ‘what is your IP position’ will be asked.
In most instances, prospective investors prefer to hear inventors state that they have already secured a patent, or, in the alternative, a patent application has been filed. The primary reason is that prospective venture capitalists and investors perceive patents to be somewhat of an insurance policy for the invention they may be considering investing. That is, an issued patent provides both the inventor and the company with (legal) standing to pursue infringers and defend against challenges and disputes.
Every inventor I have witnessed presenting at a venture forum, their answer to the ‘what is your IP position’ question is consistently in the affirmative because they fear, if not stated, it’s assumed to be a deal breaker to any subsequent ‘invest – don’t invest’ decision. In this context, patent prosecution is an expensive obligation levied against the inventor which (a.) presumably conveys faith in their invention, and (b.) which furthers the notion that a patent only strategy is a requisite to invention investment attractivity. But, in my view, this question is a faux affirmation that a patent only strategy is the preferred and necessary option. I suppose however, at the 30,000+ feet strategic altitudes which prospective investors – venture capitalists tend to function at such early stages, a very conventional insurance policy is meaningful.
But, my own experiences suggest that, with few exceptions, there are few researchers – inventors working or operating at the same 30,000+ foot altitudes as prospective investors and venture capitalists. Instead, most researchers/inventors are working, quite literally, at ground floor levels, and should come to realize that the ‘gatorades and royalties’ (University of Florida, 1965) are really few and far between.
Again, patents are expensive to obtain, maintain, and defend. And, even if the entire patent prosecution process goes smoothly, the real value of – underlying foundation of an issued patent lies in the invention teams’ intellectual, structural, and relationship capital, i.e., intangible assets. Regardless of being issued a patent or not, those intangibles, I can assure readers, remain very much at risk, risks which the presumed deterrents’ and enforcements associated with conventional intellectual properties fall short.
Many opportunities to stumble…
Any research product, i.e., an issued patent and the underlying and contributory intellectual and structural capital can become entangled and/or ensnared in a sundry of legal disputes and/or challenges, anyone of which can, in addition to civil action, cause investments to be withdrawn or altered significantly thus minimizing furtherance of the invention.
Intangible assets are the enablers of IP…
In far too many instances, I find the intangible asset offspring, which I refer to as the enablers of IP. e.g., patents, are overlooked, dismissed, or overshadowed by the assumption that the time honored practice – strategy of pursuing conventional intellectual property, i.e., patent applications, provisionals, issuances, etc., are perceived as either the best or only option. Of course, I disagree!
To that point, an analogy may be in order. When one seeks the guidance of SEO (search engine optimization) firms for example, to promote one’s website and/or blog, etc., without fail, every SEO I have encountered, ther business development – marketing lead statement is consistently some variation of the following, ‘we’ll get you on page one of Google’!
The reality is, there is no guarantee that getting a website or blog post on page one of Google will produce (business) conversions that website dependant business persons mistakenly assume will evolve merely because something one has written has successfully maneuvered its way through the ‘Google algorithm gods’ and eventually found it’s was to page one, temporarily. The presumption is, that when Internet searches are initiated, seldom does the searcher go beyond page one of their search.
Yes, entrepreneurs can rationalize that all it takes is one good (the right) ‘conversion’ to kick start a company down the path to riches and sustainability. But, reaching ‘page one of Google’ may not be all that a startup company really needs to achieve in order to achieve the necessary level of (financial) sustainability.
Inventors and early stage firms, spinoffs and startups will also need a well-coordinated and focused strategy that effectively utilizes an array of internet resources and social media that presents many different options for an innovation’s exposure and conversion potential, not merely ‘getting on page one of Google’.
This post was inspired by a May 15, 2014 webinar produced by the Intangible Asset Finance Society with speakers John Kepler and James Singer, moderated by Jonathan Salem Baskin.
Michael D. Moberly May 4, 2014 ‘A long form blog where attention span really matters’!
Having been in academia for 20+ years, I found that most, if not all, university research (whether basic or applied) and the subsequent innovations – inventions produced potentially valuable, and certainly equally important intangible assets.
In early stage research, intangible assets often compliment and/or serve as supporting foundations to the invention – innovation and ultimately the intellectual property (IP), should that be the path and/or strategy the tech transfer office deems appropriate and worthy of the necessary resources. IP, after all, is what most technology transfer managers, faculty researchers, inventors, research administrators aspire often times to the chagrin of intangible asset strategists and risk specialists.
In far too many instances however, an inventions – innovations underlying and often facilitating intangible assets, particularly intellectual, structural, and relationship capital are overlooked, dismissed, or utterly overshadowed by the time honored and emotion laden predilection associated with acquiring conventional IP, typically the issuance of a patent.
Unfortunately, but quite realistically, today’s road to successful technology transfer is increasingly protracted, and strewn with costly and embedded with asymmetric risks of the type which can readily undermine asset value along with its competitive, attractive, and potentially lucrative components. Collectively, this suggests the prospects for developing the next high royalty generating Gatorades’, as was the case at the University of Florida are few and far between. Since U of F achieved this research feat in 1965, the landscape of the R&D environment as a whole, has changed significantly in terms of now being global aggressive, competitive, predatorial, and certainly winner-take-all.
But, that shouldn’t and doesn’t keep faculty researchers from continually trying!
After all, it’s an economic fact though, that 80+% of most university-based invention’s value and foundations for generating revenue, especially faculty researcher generated (university-based) inventions, evolve directly from intangible assets. This economic fact now makes it all the more prudent to factor into technology transfer processes, intangible assets!
Why?, because in most instances, intangible assets underlie, are embedded in, and are valuable by-products of scientific innovations. To consider intangible assets as after-thoughts or subordinate to intellectual properties relative to technology transfer invention assessments leaves potentially lucrative (licensing) opportunities and value on the proverbial strategic planning and negotiating tables!
Similarly, narrowly conceiving university research, inventions, and technology transfer processes through conventional IP (patent – licensing) only lens often diminishes our inclination to genuinely explore options for exploiting the potential value and competitive advantages generated fromintangibles already embedded in most every invention – innovation.
When intangible assets are overlooked or not properly factored into the technology transfer processes, their supportive and contributory role – value, and even possibly their defensive role for enhancing and sustaining the invention (research) and aspired IP will likely be irrevocably lost. Increasingly, this bodes well for global economic and competitive advantage adversaries who have the where with all to identify, acquired, and exploit (monetize) those assets for their benefit and profit at the rightful owners’ expense.
There are multiple other benefits that can accrue to university technology transfer teams and faculty inventors’ when they acquire an operational familiarity with intangibles which includes identifying, unraveling, and leveraging the intangibles associated with an invention versus lumping them or dismissing them into the ‘catch all’ goodwill bucket. In other words, intangibles can and should be integrated into an inventor’s technology transfer strategic plan.
So, with 80+% of an institution’s value and sources of revenue residing in intangible assets, every university inventor and technology transfer office should engage the intangibles now!
While visiting my blog, you are encouraged to browse other categories which you may find relevant. Too, I welcome your comments and inquiries at 314-440-3593 or firstname.lastname@example.org