Business IP and Intangible Asset Blog, Michael D. Moberly

Islamic Law: Intangible Assets and Intellectual Property

August 17th, 2012. Published under Intangible asset protection, Intangible asset strategy, Intellectual Property Rights, IP strategy.. No Comments.

Michael D. Moberly   August 15, 2012

I certainly do not consider myself an expert in Islamic law pertaining to intellectual property and other intangible assets.  However, I do possess a very genuine desire to learn key practicalities of Islamic (and Sharia) law related to engaging in – conducting transactions in which intellectual property and other intangible assets are in play.

In an excellent paper by Silvia Beltrametti, (The Legality of Intellectual Property Rights Under Islamic Law, The Prague Yearbook of Comparative Law 2009. Mach, T. et al. (Eds). Prague, 2010. pp. 55-94), while I did find many answers, I also concluded there are numerous questions remaining insofar as the actual application of Islamic law to IP (intangible asset) conventions.

Ms. Beltrametti, a JD from the University of Chicago with an emphasis in IP, states that intellectual property rights are not regulated by Islamic law and jurisprudence per se. Rather, the issue, she says, is whether the principles of Islamic law can be constructed in a way to provide support for such protection?

Beltrametti’s paper further discusses the extent to which Islamic law has an impact on the protection of intellectual property.  She does this initially by presenting Shar?’a’s main sources; the Qur’an, the Sunna, Ijma and Qiyas.  I should not that the term Shar?’a, as applied throughout Beltametti’s paper, is synonymous with Islamic law.

Very appropriately, Beltrametti points out, tensions and challenges remain between (a.) the predominantly Western, and (b.) the Islamic views on intellectual property, as well as (c.) the role of economics within Islamic law and society.  That said, an intriguing suggestion Ms. Beltrametti offers is that a Shar?’a based system is flexible and adaptable, and such flexibility can be used to address economic realities of the day, e.g. 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability reside in – evolve from intangible (IP) assets.

Another equally good paper, titled ‘Can TRIPS Live in Harmony with Islamic Law: An Investigation of the Relationship between Intellectual Property and Islamic Law?’ written by

Chad M. Cullen (Baker Botts) provides much additional insight and is certainly worth one’s time to read and study.

Both authors/researchers, in their respective style…

• agree that intellectual property (rights), per se, are not particularly new concepts to Islamic rule. Some IPR’s were actually strengthened by Islamic rule, others were never explicitly formulated (as law), instead, they evolved as accepted social norms.
• point out that since the advent of Islam, the concept of intellectual property has expanded to include trademarks, patents, and forms of copyright.  A commonality is that they grant limited exclusive rights in exchange for the commercialization of original creations that benefits society.  They also allow the owner (presumably the originator) to stop any unauthorized use, e.g., presumably acts such as counterfeiting, piracy, infringement, etc.
• agree that Shar?’a does not refer to Islamic legal rules only.  Rather, Shar?’a encompasses a timeless concept of justice and fairness that is best understood as constituting a higher rule of law with a divine connection.

After reviewing numerous (other) sources, it’s reasonable to conclude, in my view, that (a.) there is latitude insofar as interpretation and application of IP and intangible asset matters under Islamic (Sharia) law, and (b.) such laws are not being aggressively enforced, i.e., infringement and product piracy in the Middle East contributes to substantial losses of revenue for major companies relying on such (IP) rights.  It’s important to point out that such transgressions pose significant problems globally, not just in the Middle East.

Cullen, as well as Beltrametti note that an Islamic WTO member state is obligated to uphold the requirements of TRIPS.  Under Shari’a, this has led many Islamic states to enact intellectual property laws meeting the minimum standards of TRIPS.  Thus, being a signatory to TRIPS essentially verifies (operationalizes) the belief that IPR’s are compatible with Shari’a and related Islamic notions and concepts.

In practice, however, intellectual property laws have not been well-received in Islamic states in that a percentage of Muslims believe the concept of intellectual property itself, particularly innovations (IP) associated with advanced technologies, originates in the West, and not from their religious sources.  This perspective serves to elevate reluctance for broader acceptance of IP.

Too, while many Islamic states have stringent IP laws and regulations in place, some remain ineffective or experience particular problems related to enforcement.  Appropriately, one question is whether this is a governmental choice rather than enforcement issue.  Taking this perspective several steps further, some assume that forcing WTO membership and TRIPS upon Islamic states through threats of import/export restrictions and high tariffs, the perception of intellectual property rights as constituting another facet of Western oppression, has grown so strong that many Muslims perceive intellectual property infringement not as a legal wrong, but instead as a means of seeking revenge against the West.

So, how should all of this be interpreted by businesses wishing to engage in business transactions in predominately Muslim countries when there is significant IP and other intangible assets in play?  In my judgment, the best course of action is to closely examine the various posts made to my blog that encompass intangible asset due diligence and risk assessments.

(I am very grateful for the work/research produced by Silvia Beltrametti and Chad Cullen in the development and writing of this blog post and I encourage readers to read their respective papers.)

ACTA’s Rejection By European Parliment…Not The Presumptive No-Brainer…

July 23rd, 2012. Published under Intellectual Property Rights, Personal Privacy, Product counterfeiting.. No Comments.

Michael D. Moberly   July 23, 2012

Admittedly, I took somewhat of a passive approach to the passage of the Anti-Counterfeiting Trade Agreement (ACTA) by the European Union’s Parliament, earlier in July, because I believed it to be a ‘no brainer’.   Was I ever wrong!  In hindsight, I did not give the groundswell opposition the attention or credence it deserved and ultimately misjudged the influence such sustained, diverse, and intensive lobbying efforts would come to have on the EU Parliament.

Today, the ‘nanosecond communication environment’ contributes to fewer and fewer legislative ‘no brainers’ whether it is proposed legislation in the US or EU.  Subsequently, less can, and probably should, be assumed or taken for granted.

Certainly, there’s no argument that global product counterfeiting poses substantial adverse economic impacts to every industry sector, not just the music side.  Aside from the largely subjective, but nevertheless, increasing guesstimates of economic losses attributed to infringement, counterfeiting, and product piracy, it’s quite correct to portray each as now being an entrenched and extraordinarily lucrative  global industry that comprises substantial (and rising) percentages of many countries GDP, sources of employment and personal income, and manufacturing base.

So, every business today, whether it’s based in the EU or the US, is well advised to conclude that IP infringement, counterfeiting, and product piracy have moved well beyond merely being annoying probabilities to increasingly costly inevitabilities if left unchecked by either practice or laws.  (For additional perspective please see July 8^th blog post titled ‘Intangible Assets and Counterfeit High-End Apparel).

But, that doesn’t appear to be the primary rationale behind the opposition that ultimately led to the rejection of ACTA.  Instead, opposition to ACTA, according to Chris Brogan, Managing Director, Security International, who has an extraordinarily experienced track record in such matters, points out that ACTA’s demise was largely due to it being framed as both a privacy and human rights issue.

Brogan says, no one should get the opinion that the European Parliament is not supportive of international efforts to curb piracy.  However, in large part due to the vagueness and breadth of ACTA’s intended coverage, privacy and human rights lobbyists felt that individuals and small businesses, as well as large commercial concerns, would be laid open to draconian legal measures of enforcement.

The privacy – human rights based opposition, Brogan says, evolve around three key issues…

1. respect for privacy, i.e., many individuals share their choice in music, but not for commercial gain.
2. freedom of expression which has to be balanced against any harm to another individual/organization, and interestingly,
3. the right to a fair trial which opponents argued ACTA provided too much legal power to organizations to enforce their proprietary rights.

Brogan adds, as an experienced participant in privacy legal issues for 25+ years, “I understand the difficulty that non-Europeans have with Europe’s strong advocacy for strengthening the privacy laws, and presumably any legislation, which on its face, appears to limit or otherwise modify expectations of privacy”.  Brogan also points out that Europe’s previous experience with Facist and Communist states that purposefully curtailed citizen freedoms through (draconian) legislation and law enforcement remains an impetus to oppose legislation that contains language that could be interpreted as curtailing human rights and personal privacy.

Similarly, an official of a European institution stated that ACTA had been rejected due to the presence of a strong movement of concerned citizens who feared that their civil rights were in jeopardy.  In addition, this source described unprecedented lobbying by thousands of EU citizens in the form of street demonstrations, e-mails and calls to MEP’s and a petition, signed by 2.8 million citizen’s worldwide, urging ACTA’s rejection.  Even some, the source said, characterized ACTA as a new form of dictatorship in which authorities and companies would have too much control over the Internet and the possible restriction of access to generic medicines, if it were to be passed.

The European institution source goes on to suggest there is a growing and influential anti-EU movement in Europe today, one claim of which is that ‘Brussels is ruling everything’.  Both the European institution source and Mr. Brogan agree that ACTA’s language appeared vague, and thus susceptible to being misinterpreted.

Thus, in an environment where such strong sentiments exist regarding privacy and human rights, and having been confronted with a strong and like-minded public lobby, the EU Parliament overwhelmingly voted against ACTA. Proponents of ACTA suggest the MP’s vote was not based on facts, rather one on sentiment.

Still, Mr. Brogan and the European institution source agree a strong need remains to find alternative ways to protect intellectual property. And, in today’s increasingly irreversible knowledge-based global economy in which 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability evolve directly from intangible (IP) assets, finding common ground whereby those assets are respected and accordingly safeguarded is critical!

China’s IP Transition and Explosive Growth In Innovation…How Much Of It Has Really Been Indigenous…?

May 16th, 2012. Published under Analysis and commentary, Business Transactions, Economic Espionage, Intellectual Property Rights. 1 Comment.

Michael D. Moberly    May 16, 2012

I recently read a National Bureau of Asian Research report titled, ‘China’s IP Transition: Rethinking Intellectual Property Rights in a Rising China’ and found it to be an insightful strategic window into China’s national intellectual property (innovation agenda) policy.

The reports’ executive summary and main argument reads as follows…

China’s drive to promote indigenous innovation has given IP its creation, utilization, management, and protection a prominent position in the nation’s policy agenda.

In conjunction with its ambitious policies to support indigenous innovation, China launched a major IP strategy in 2008 to support the creation, utilization, management, and protection of IP.

While I do not wish to dispute the thoroughness of the research which the reports’ authors obviously conducted and articulated so well, I do find the word indigenous disconcerting in the context of applying it as a broad descriptor of how China has achieved and intends to sustain its innovation strategy – policy agenda.

I was in China (Shanghai) in 2008 when that policy ‘went public’.  It was the lead story on (English language) CCTV for several days with extended segments devoted to showcasing various, presumably government sponsored, gatherings to convey awareness for this ‘transition to intellectual property’.  Most of the events appeared to be held in Beijing.  Interesting to me, in several of the CCTV stories, large scale education initiatives about intellectual property were being planned.

As most anyone knows who has visited China in this decade, one does not have to walk far in a city to see evidence of entrepreneurism and entrepreneurial thinking which could understandably be characterized as – assumed to be indigenous. However, my work, research, and writing on information asset protection and economic espionage issues for 25+ years influences me to suggest that the term predatorial is also a relevant and objective descriptor of – contributor to China’s innovation policy agenda.

It is not my intent that the term predatorial, as I have chosen to apply it here, be interpreted as anti-China!  Rather, I am merely suggesting the term predatorial should also be applied because of its indigenously embedded nature over a 3000 – 5000 year span of developing a (business) culture.  At minimum, the word predatorial serves as, at least, a partial explanation for China’s phenomenal and rapid business – economic – innovation growth which some western researchers – writers describe as the world’s largest and most rapid transfer of wealth.

After all, we do live and work in an increasingly knowledge (intangible) asset based global economy wherein 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, wealth creation, and sustainability evolve directly from intangible assets, of which IP is just one.

I assume ‘indigenous innovation’ is a phrase Chinese policy makers carefully selected and cultivate.   But, I believe the term predatorial used to describe how countries supplant – achieve rapid growth in innovation is applicable to numerous global actors, not just China.

China, in my view, is now immersed in what I respectfully call the ‘third quarter of a generation that recognizes]/ private property, let alone intellectual property’.  But, in China, as in numerous other countries with communist – socialist legacies, there is virtually no intellectual property legacy to follow.  And, China, like many other countries, has countless ‘legacy free players’, a phrase I first saw applied in Thomas Friedman’s books.  While I am certainly not positioning myself to be an arbiter of Friedman’s work, I have consistently used this phrase in a context of describing various countries’ and actors who have yet to fully embrace and consistently practice what I  refer to as an ‘intellectual property rights protection and respect ethic’.

China is no doubt, moving in the right direction, with respect to intellectual property rights. But, it has a ways to go yet for me to broadly use the term indigenous to describe the paths and strategies they have taken to achieve the intent and spirit of the language found in their national innovation agenda.

I encourage all those interested to read the report and draw their own conclusions at…

www.nbr.org/publications/element.aspx?id=520.

IP (Intangible) Asset Theft-Loss: Sobering Business Realities!

April 11th, 2012. Published under Economic Espionage, Intangible asset protection, Intellectual Property Rights, Trade secrecy.. No Comments.

Michael D. Moberly    April 11, 2012

Let’s be clear, I am not advocating a protectionist view here.  I am however, a strong proponent of Article I, Section 8 of the U.S. Constitution that states (paraphrased), ‘if one invents a new product and/or technology, etc., and has been issued a patent, trademark, or copyright by the U.S. Patent and Trademark Office (USPTO) they, and only they, should reap the economic benefits from their efforts’.

Once IP has been issued, the holder essentially has the sole responsibility for sustaining the much coveted exclusivity and executing the necessary protections, which frankly, are dependent on numerous factors, but primarily whether the IP holder:

• consistently engages in best practices to effectively safeguard their IP, and
• has the resources to consistently monitor  and aggressively (legally) pursue any attempts to misappropriate, infringe, or steal their IP.

A very relevant business reality for IP holders to consider is that not all cultures, countries, or individuals embrace or interpret the largely western dominated view regarding IP exclusivity.

For example, in McAfee’s (2009) report titled ‘Unsecured Economies: Protecting Vital Information’, the subject matter experts who responded to the survey agreed (not surprisingly) that if an enterprise (country, company, organization, etc.) can (illegally) appropriate R&D for example, at minimal cost compared to legitimate competitors and then go on to produce a comparable product (albeit it a product developed from infringed IP) at a far lower cost, basic economics dictate that the manufacturer of the (infringed) product will, in fact, win space in the marketplace.

Thus, the global incentives for state sponsored, companies, or individuals to engage in industrial – economic espionage, i.e., appropriate others’ intellectual property, remains high, particularly in markets (countries) where:

• there are few, if any, well established brands and corresponding consumer (brand) loyalty, and
• there is an abundance of ‘legacy free players’ (Thomas Friedman) in which private property ownership remains a relatively new concept as does the ownership of intellectual property..
• the business transaction environment is ultra-aggressive, competitive, predatorial, and winner-take-all.

While the realities conveyed above are well understood within the information asset protection community, there remain a significant number of companies that express an attitude of dismissiveness, not only about IP risk, but developing effective policies, procedures, and practices to mitigate this global and costly reality.

Too, many companies still do not have an integrated (enterprise-wide) approach to address the persistent challenges associated with IP theft, infringement, and/or misappropriation, which minimally requires…

converging the expertise of information asset protection, HR, IP counsel, IT security, risk management, marketing, and R&D as a starting point to address c-suite fiduciary responsibilities for ensuring control, use, ownership, and value of a company’s intangible (IP) assets are sustained for the duration of their respective value and functionality cycle.

 Of course, to achieve this on any semblance of consistency, it’s absolutely essential today that:

• there is an on-going dialogue among a company’s various professional disciplines regarding risk to IP assets
• each disciplines’ perception of (IP) risk will be recognize
• consensus is reached on what actions (policies, procedures, practices, etc.) are necessary to prevent, deter, and/or mitigate the risk.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Faculty Inventors: Transferring Valuable Intangible Assets and IP To Countries With Weak Intellectual Rights

December 6th, 2011. Published under Enterprise risk management., Fiduciary Responsibility, Intangible asset protection, Intellectual Property Rights. No Comments.

Michael D. Moberly   December 6, 2011

In the current intangible asset – IP dominated (knowledge-based) global economy and business transaction environment, there is, unfortunately, little insight about how or whether those assets can be adequately safeguarded when filing patents and the subsequent invention exposure (public disclosure) in countries with weak and/or non-existent enforcement of intellectual property rights (laws).

This subject is rapidly becoming routine action items on c-suites and boardroom agendas globally as a fiduciary responsibility, not just for mega-multinationals, but very much relevant to small, medium-sized enterprises, start-ups, and university-based spin-offs as well.  

The subject is often presented as if most asset exposures/vulnerabilities are already known and the probability that a company (asset owner/holder) will incur a significant and irreversible loss, i.e., in the form of value, market share, competitive advantages, etc., due to infringement, theft, and/or counterfeiting is merely a risk of doing business.  I don’t subscribe to this view!

One key question every technology transfer manager, entrepreneur, start-up company, and university spin-off management team should ask is at what point (timing) will the risks and potential for disputes and challenges (i.e. vulnerabilities) to a company’s intellectual properties and intangibles, if left unchecked in the globally predatorial and winner-take-all R&D and business transaction environment, become inevitabilities? 

Other key questions to consider (factor) include:

• what is each parties tolerance for risk and/or loss to their IP and intangible assets?
• if IP – intangible asset losses and/or compromises occur, how quickly will the adverse effects be felt, i.e., asset value, market share, competitive advantages, and revenue streams, etc.

In other words, if a country’s IP rights protections and enforcement is so weak or non-existent to the point inventions – technologies cannot be satisfactorily safeguarded throughout their life-value cycle; how should those issues be factored into the invest – don’t invest equation? 

This argument of course presumes that the value, sustainability, defensibility, and projected returns of IP and intangibles developed and/or brought into a country with weak IPR’s, will experience lower projected returns.

There are a growing number of instances, in which companies have actually elected to withdraw operations and their intellectual property from country’s found to be especially weak in intellectual property rights enforcement.  It’s difficult to ascertain whether those firms action to  exit a country to protect its IP were exercising and overly risk averse strategy or whether the decision was influenced by a single (significant) loss or compromise of their IP?

That said, a 2004, University of Minnesota study/survey of U.S. headquartered companies titled ‘Doing R&D In Country’s With Weak IPR Protection: Can Corporate Management Substitute For Legal Institutions?’ reasoned that:

• technologies developed in weak IPR countries will be used more for internal purposes
• companies conducting R&D in weak IPR countries will likely have tighter IP-asset protection measures in place to compensate

Transferring faculty generated research (technologies, intellectual property, intangible assets) to countries with weak intellectual property rights protections is an important consideration, not to be taken lightly by faculty researchers-inventors and university technology transfer managers. Substantive questions to consider are:

• if the decision is made to conduct IP bearing R&D and/or bring IP into a country in which a significant percentage of that country’s GDP is linked to – dependent on the production, distribution, and sale of infringed or pirated (IP) products, it’s likely the newly introduced IP will experience the same or similar fate?
• the presumption that any faculty researcher can invent and produce intellectual property faster than economic and competitive advantage adversaries can steal or infringe it or be dismissive or nonchalant when it does occur because of its presumed the technology/IP will incur rapid obsolescence and therefore hold little, if any, market value, why devote resources to its protection and preservation, beyond the minimum?.

University – Corporate Research Consortiums: Are More Safeguards Necessary…

November 21st, 2011. Published under Corporate - University Research, Intellectual Property Rights, University R&D. No Comments.

Michael D. Moberly    November 21, 2011

Within the university research community, there remain spirited and polarizing debates about the openness in which research is conducted, that is, the freedom and ability of faculty researchers to disseminate, communicate, collaborate, and publish at will, which incidentally, have long been recognized as the hallmarks of university-based research.

On one side of that debate stand those who favor retaining the long legitimated hallmarks of academic freedom. On the other side of the debate stand those who encourage safeguards be put in place to limit, set parameters for, if not prohibit some of the at will or discretionary freedoms conveyed in the former view.

There’s nothing particularly new about these opposing views. They have been espoused in essentially the same context since the 16th century. Experience suggests there is little middle ground on which to frame a consensus, bar one. That is, to dispassionately factor into the university-corporate research protection equation the realities embedded in today’s hyper-competitive, predatorial, and winner-take-all global R&D environment.

This can be particularly interesting in instances in which faculty generated research and/or an inventions produce special insights and findings that lead to valuable (business) competitive advantages that may extend not just to the primary corporate (research) sponsor, but eventually to other companies in that industry sector.

So, a key question for corporate – university research collaborations are the above realities sufficiently persuasive to ensure the inclusion of information asset safeguards to mitigate university generated data/research be overly vulnerable to theft, infringement, or compromise stemming primarily from sophisticated state sponsored global business intelligence collection operations.

These are acts which, if even reasonably successful will most certainly dilute if not irrevocably impair the research’ strategic value to the inventor and research sponsor. It can also allow competitors (globally) to gain substantial advance insights to permit them to achieve economic, competitive, and market entry advantages.

Walk me through-a-day-in-the-life of university research…An analogy may be useful as a potential starting point to advance this principled tug-of-war. For example, when company representatives go before a venture capital firm to seek funding, one of the series of questions (scenarios) a venture capitalist (VC) will invariably pose to obtain a better sense of the usefulness and viability of the product or service being pitched. Routinely, they will ask a company representative to ’walk them through’ a-day-in-the-life of a (target market) company in which the product or service being pitched is not currently in use.

The VC’s follow-up questions will then be framed as:
• is there a noticeable difference?
• will the company be better off?
• if so, what and how will those differences manifest and are they exploitable insofar as delivering economic and/or competitive advantages to benefit the company?, i.e., to become more profitable?, gain/retain customers?, create efficiencies?, improve morale?, etc.

It’s conceivable that a comparable, but objective and dispassionate ’walk me through a day in the life’ approach would be useful to advance the time honored academic freedom debate about faculty generated research and inventions.

Key (objective) questions that could be posed then to a faculty researcher such as:
• consider their ability to sustain unchallenged control, use, ownership, and value of their invention throughout its value-life cycle
• what does the researcher, research sponsor, and the university consider to be minimum foundation(s) for retaining viable options for (future) licensing and/or technology transfer?

IP Education: A Requisite To Business Management!

July 27th, 2010. Published under Intellectual Property Rights, IP strategy.. No Comments.

Michael D. Moberly   July 27, 2010

Increasingly important questions for entrepreneurs and SME’s is the extent to which their management teams and boards are (a.) familiar with and making effective use of the intellectual property system, and (b.) if not, are there particular barriers that either prevent or inhibit them from doing so?

The larger question perhaps, according to Bill Payne of the Kauffman Foundation, is how many SME’s elect to not pursue conventional intellectual property (IP) protections, i.e., patents particularly, because they recognize, in advance, that they do not have the (internal) resources to rigorously defend their patent position(s) should challenges or disputes arise, or pursue the infringers and/or misappropriators that are all but certain to evolve?

Operational familiarity with IP has become, in my view, an essential business management skill set particularly among SME’s in all industry sectors.  Though, while creating and capitalizing on – exploiting innovation to achieve a business (competitive) advantage can become a key differentiator for a company, it can materialize generally only if a company’s management team and board have the necessary foresight to put in place best practices to ensure control, use, and ownership of the assets can be sustained, but not solely through subjective assumptions about the deterrent affects of conventional IP.

Where does this leave the 20+ million entrepreneurs and SME management teams and boards who are essentially faced with many, if not most, of the same complexities and challenges as their larger Fortune 5000 brethern, in terms of being able to effectively safeguard, utilize, and exploit their IP?  The reality is that SME’s, are often without the resources compared to their larger counterparts and find themselves managerially, administratively, and fiscally stretched insofar as overseeing their IP and the ability to accommdate the complexities and expense associated with IP processes and procedures.

It’s important to recognize also that we’re operating in knowledge-based global economies, in which 65+% of most company’s value, sources of revenue, and future wealth creation lie in – are directly related to intangible assets.  This makes achieving a certain level of familiarity and competency in IP management (oversight and stewardship) matters a necessary underlier to not merely achieving success and profitability, but sustainability!

It’s useful then, for SME management teams and boards to frame their IP (and intangible assets) as strategic business assets, not merely the product of a research activity to remain stagnant or hidden, and otherwise not put to good efficient use.

Unfortunately however, most higher educational (business management) programs and academic units approach intellectual property, patents particularly, as a narrow legal specialization only to be acquired through law school.  I hardly believe that’s how we should proceed to build and sustain a strong and sustainable entrepreneurial and SME pipeline.

(This post was inspired by IBM’s The Inventors Forum, Global Innovation Outlook project.)

The ‘Business IP and Intangible Asset Blog’ is researched, written, and produced by Mr. Moberly to provide insights and additional and sometimes alternative views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

Developing IP In Countries With Weak IPR’s…?

February 18th, 2010. Published under Analysis and commentary, Intellectual Property Rights. No Comments.

Michael D. Moberly   February 18, 2010

In the current global, knowledge-based economy and business transaction environment in which intangible assets and IP are routinely in play, there is, unfortunately, little direct insight about how or whether c-suites and boards assess and/or attach concern about doing business in country’s that do not have, apply, or enforce intellectual property laws and protections. 

Admittedly, I know several instances in which this issue is not only a routine fixture in c-suite and boardroom agendas, but is deliberated in the context of known vulnerabilities-probabilities, i.e., those left unchecked, ill-considered, or ill-conceived will surely become inevitabilities!

A key second question those company’s seek consensus is (a.) their (business, strategic) tolerance for IP – intangible asset risk, and (b.) if losses – compromises to those assets occur, how quickly will either begin to erode, dilute, and/or undermine company value, market share, competitive advantages, and revenue?

In other words, are that countries IPR’s protections (enforcement scheme) particularly weak or sufficiently strong enough to satisfactorily protect a company’s IP for the duration of its admittedly, abbreviated life-value cycle.  This argument presumes, that the value, sustainability, defensibility, and projected returns of IP developed and/or brought into a country with weak IPR’s, will experience lower projected returns.

I am aware of a few instances, in SME and SMM arenas, in which companies have actually elected to wholly withdraw operations (and their IP and proprietary competitive advantages) from a country they found to be especially weak in IPR’s.  I can’t say for sure whether those company’s were exercising particularly forward looking or risk averse strategies on behalf of their investments in IP and intangible assets, or whether their decision was influenced by a significant loss or compromise?

A 2004, University of Minnesota study/survey of U.S. headquartered companies titled ‘Doing R&D In Countries With Weak IPR Protection: Can Corporate Management Substitute For Legal Institutions?’ reasoned that (1.) technologies developed in weak IPR countries will be used more for internal purposes, and (2.) companies conducting R&D in weak IPR countries will likely have tighter IP-asset protection measures in place to compensate, and therefore, try to take advantage of such gaps across countries.  

Insofar as whether ’doing R&D in countries with weak IPR protection’ is a relevant action item for c-suites and boards, prudent starting points for either to consider are, (1.) if the decision is made to conduct IP bearing R&D and/or bring IP into a country in which a signficant percentage of that country’s GDP is linked to – dependant on the production, distribution, and sale of infringed or pirated (IP) products, it’s likely your company’s IP will experience the same or similar fate, and, (2) the presumption that my company can invent, innovate, and produce IP faster than others can steal or infringe it, and even it it does occur, the stolen/infringed IP will rapidly become obsolete and therefore hold little, if any, market value; therefore, why devote extraordinary resources to its protection and preservation, beyond the minimum?, is likely ill-conceived.

Intellectual Property Rights Enforcement Act – IPREA

October 9th, 2009. Published under Analysis and commentary, Intellectual Property Rights. No Comments.

Michael D. Moberly   October 9, 2009

There’s an analogy to be drawn to the passage of the IPREA (Intellectual Property Rights Enforcemet Act in 2008 and the Immigration Reform and Control Act of 1986 (also known as Simpson-Mazzoli).  In the latter, federal legislators believed that to be effective, immigration law should contain provisions to discourage domestic ’demand’ for undocumented workers, i.e., (a.) make it illegal for U.S. employers to knowingly hire or recruit undocumented workers, and (b.) require U.S. employers to attest to their employees’ immigration status.

It’s reasonable to suggest then that the IPREA should have included comparable provisions, not so much directed to diminishing ‘demand’ for infringed counterfeit-pirated products as that is far beyond the control/influence of legitimate businesses.  Rather, inserting provisions that would have placed more responsibility on U.S. business management teams to secure quality training and engage in best practices to effectively safeguard their IP, know how, and intangibles, as requisites to engaging in business transactions in which those assets are in play – part of a deal.   As advocated here, such training and best practices would reach well beyond conventional IP protections, i.e., patents, trademarks, copyrights.  The objectives of such provisions (training) would be clear; that is, to increase the probability company’s would be able to effectively protect (sustain indeterminate) control, use, ownership, and value over their hard earned and valuable intellectual property, intangible assets, and proprietary know how!

After all, the ultimate managerial – enterprise wide weapon (defense) to mitigate and/or prevent the costly adverse affects of infringement, misappropriation, and product couterfeiting and piracy is education and training that measurably elevates awareness, alertness, and accountability of the developers, owners, and holders of their assets.

It also seems there is a large business – economic reality that the IPREA either overlooked or did not convincingly convey.  That is, 65+% of of most company’s value, sources of revenue, sustainability, and foundations for future growth and wealth creation lie in – are directly related to the production and utilization of IP and intangible assets.  This means that now, for most business deals and transactions, a company’s IP, intangibles, know how, competitive advantages, etc., will be in play in one form or another.

Any presumption that the IPREA will produce a greater sense of deterrence among the growing global cadre of sophisticated and organized infringers and product counterfeiters and pirates is shortsighted, or worse, merely ‘window dressing’ and conveys little, if any, genuine appreciation for the concept of deterrence.  While the passage of the IPREA and the supporting (largely political) rhetoric deservedly raised the ‘hue and cry’, it falls short of fully conveying how IP infringement and product counterfeiting have become culturally, politically, and economically embedded in – integral to many county’s GDP.  Any presumption these realities will favorably change merely as a consequence of IPREA is optimistic at best.  So, training and education remain the key for those company’s that wish to experience unchallenged profitability and lay foundations for sustainability and future wealth creation.