1	Strategic Intellectual Asset Management Professor Nermien Al-Ali Franklin Pierce Law Center
2	Strategic Intellectual Asset Management This workshop will : Introduce you to strategic management of intellectual assets; Familiarize you with various forms of intellectual property & how to make protection decisions; Provide you with hands-on knowledge on how to structure models and choose tools for managing knowledge, innovation & intellectual property in your organization. Provide insights into how to align intellectual assets with business strategy.
3	Introduction Goal of strategic intellectual asset management: “to identify all intellectual assets throughout the whole organization in an economy where innovation drives business growth & enables competitive performance, whereby the intellectual assets are aligned with the business strategy”
4	Introduction: New Economy
5	Introduction: New Economy 78% of corporate assets of Fortune 500 companies in US* 70% are knowledge workers – process & apply knowledge to new situations Intellectual assets are the single most valuable asset of major corporations in the world *PricewaterhouseCoopers Report 1999.
6	Introduction: New Economy
7	Introduction: New Economy
8	Introduction: What if? “Silicon Valley legend”* Not know what they knew Steve Jobs visited Xerox PARC. ‘Borrowed’ ideas like the mouse and graphical interface for Apple and became a billionaire” *J. Krause, Will Xerox Shut PARC, The Standard 2000
9	Introduction: the HPP Industry Innovation-intensive: High growth – 5% Various markets: packaging, transportation, appliances components, home/office accessories, construction, industrial, textile Various technologies: heavy-duty coating, color measurement, new colors, laser/security printing, Growth opportunities: security printing, traffic signage, ink jet printing, special effects Challenges: performance, environmental safety, globalization pressures
10	Introduction: Intellectual Assets
11	What are Intellectual Assets Capital: Any intellectual capability and human brainpower/knowledge that enables value creation Assets: Any valuable codified knowledge that facilitates the innovation process Property: Any intellectual asset that is legally defined & protected A& P enable value extraction & maximization
12	What is Intellectual Capital Human: Employee knowledge skill & experience, core competencies Customer knowledge & feedback, customer base Relational: Networking with suppliers, customers, organizations, universities, maybe even competitors Structural: Modus operandi of a company, style & reputation Culture & values, Organizational vision & leadership
13	What is Intellectual Capital Value creation depends on transfer of HC to CC, CC to SC, HC to SC & vice versa Both intellectual assets & property created
14	What is Intellectual Asset Explicit codified knowledge Manuals Best practices Databases Codified R&D research Processes Reports
15	What is Intellectual Property A generic term for various rights provided by law to protect innovative effort & economic investment in it. Includes: Patents Trade secrets Trademarks Copyrights Designs
16	What is Intellectual Property : Patents Protects: articles, compositions or processes (utility). (Also plant varieties & designs) For: 20 years (14 &other) Provided: Idea is novel, useful, & non-obvious. Patent application contains an enabling disclosure of the best mode. Owned by: inventor unless has fiduciary duty, hired to invent, or assigns the invention.
17	What is Intellectual Property : Patents … Pros:strongest protection - independent creation & reverse engineering prohibited Cons: Strict novelty & publication: some applications after 18months High costs & fees. Territorial – foreign filing a must within a year or 30 months (PCT)
18	What is Intellectual Property : Patents … Strong if: Wide scope claims, Limited amendments during prosecution, Own improvement patents Beware of: Keeping lab notes to determine joint inventorship &first to invent. Any disclosure (commercial use or publication) prior to application. US law allows one year from date of disclosure Misuse: tie in provisions, term extension
19	What is Intellectual Property : Trade Secrets Protects: Any information that derives its commercial value from being (secret) not generally known to the public against appropriation by improper means For: Period of secrecy Provided: Identified (notice to employees) Reasonable security measures Not generally known, kept secret Owned by: originating entity
20	What is Intellectual Property : Trade Secrets … Pros: State & common law protection Injunctive relief available – GE case Cons: Reverse engineering permitted. Indirect costs involved
21	What is Intellectual Property : Trade Secrets … Strong if: Identified & codified, Of ascertainable value, Good security measures Employee awareness (protection guidelines) Beware of: Disclosure agreements or provisions Employing former employees, Dos & Donts of competitive intelligence
22	What is Intellectual Property : Trademarks Protects: exclusive right to use a term, logo, or dress to to identify the origin of goods & services For: Indefinite time Provided: there is use Owned by: user
23	What is Intellectual Property : Trademarks … Pros: Branding & goodwill, Strong protection for popular marks against dilution, May extend to domain names (Cybersquating Act) Cons: Common law and state/national registration Complicated search procedure for state marks Interstate Commerce requirement
24	What is Intellectual Property : Trademarks … Strong if: Highly distinctive Generic Descriptive Suggestive Arbitrary Aspirin ParknRide Browning Bag BASF, Bayer Apple Beware of: Naked licensing Genercizing use (Escalator, Cellophane, Xerox)
25	What is Intellectual Property : Copyrights Protects: expression when fixed in tangible medium. Right to make reproductions, & derivative works For: 75 years &life, 95 years from publication, 120 years from creation Provided: Fixed in tangible form Owned by: Author except work for hire doctrine unless stated otherwise
26	What is Intellectual Property : Copyrights Pros: Automatic protection. No notice required Cheap easy registration. Cons: Only covers artistic features (weak for software). Not infringed by independent creation Strong if: Work contains few functional elements Can be reproduced in various medium Beware of: Contractors work (website)
27	What is Intellectual Property: Costs
28	Strategic Management Three stages: I. Knowledge Management: Knowledge Audit: Know what you know & leverage it II. Innovation Management: Idea generation: Use brainpower to innovate Competitive Intelligence: Monitor your customer, market & competition III. Intellectual Property Management: Strategic/Competitive positioning: Protection of intellectual assets decisions Exploitation: Commercialize intellectual property
29	I. Knowledge Management Goals of KM 1. Audit - Know what you know and leverage it. A study: organizations use only 20% of the knowledge they have. (O’Dell, 1998) 2. Create – Identify strategy to fill knowledge gaps 3. Leverage - Encourage employees to use their brainpower to process & apply information to work situations, share knowledge & create know-how
30	I. Knowledge Management: Audit Source: Frappaolo, “What’s Your Knowledge IQ”, www.intelligentkm.com/feature/08/feat1.shtml
31	I. Knowledge Management: Create Explicit Knowledge How to work on knowledge gaps in knowledge base “Follower strategy”: lower knowledge acquisition cost curve by reverse engineering & acquiring state-of-art knowledge (Daniele, 1997) Specialization strategy: Know what you know better Diversification strategy: know more
32	I. Knowledge Management: Create Tacit Knowledge Arrange as core competencies to identify gaps- Xerox listed core competence in 28 knowledge areas How to cover gaps: Recruitment policy - personnel idea: type & characters of employees to be aligned with vision & culture Invest in targeted training: (10% inc. educational level) resulted in 8.6% increase in productivity as compared to 3.4% increase of investing in equipment (Source 1995 Study by National center on Educational Quality of the Workforce)
33	I. Knowledge Management: Leverage How to create knowledge-sharing culture Recognition as an expert Connect it to productivity Criteria for promotion (PWC) – part of performance appraisals. Job design & description: % of time (3M) Financial/other reward for transfer of best practice. TI - NIHBIDIA Award, annual sharing day 1996
34	I. Knowledge Management: Tools Create & Discover: data warehousing & mining, content analysis Sharing: idea banks, knowledge centers, virtual R&D (Dupont), computer conferencing, bulletin boards, Encourage communities of practice: Intranets, Cross-organizational meetings, Best Practices database, expert pools (BP) General: knowledge mapping, inventory, measuring effectiveness
35	Strategic Management Three stages: I. Knowledge Management: Knowledge Audit: Know what you know & leverage it II. Innovation Management: Idea generation: Use brainpower to innovate Competitive Intelligence: Monitor your customer, market & competition III. Intellectual Property Management: Strategic/Competitive positioning: Protection of intellectual assets decisions Exploitation: Commercialize intellectual property
36	II. Innovation Management: Definition Two main types: Exploit change: Analysis of changes & opportunities they bring Create change: Prediction & introduction of changes (breakthrough)
37	II. Innovation Management: Definition Degree of Change
38	II. Innovation Management: Processes Two main processes: Idea generation: Empower employees in the innovation process, and Provide a pool of new ideas Assess & implement Competitive intelligence: Monitor (& exploit) change in market trends, customer expectations, & competitive landscape Detect threats, opportunities & developments Gather, process & distribute information to aid decision-making
39	II. Innovation Management: Ideas Dana Corporation 48 000 employee worldwide Every employee from CEO to new hire on plant floor: 2 ideas per month on better ways in all areas of business Light Vehicles Structures Division in PA (3600people): total idea submission: 8941(1991) to 63981 (1995). Goal: 80% idea submission & implementation. Implementation rate 90-95: 77% Profitability 40%+, productivity 13%+, morale: high - “feel empowered” Source: Morcott’ “Igniting a Firestorm of Creativity”, in Straight From The CEO, 2000
40	II. Innovation Management: Processes Two main processes: Idea generation: Empower employees in the innovation process, and Provide a pool of new ideas Assess & implement Competitive intelligence: Monitor (& exploit) change in market trends, customer expectations, & competitive landscape Detect threats, opportunities & developments Gather, process & distribute information to aid decision-making
41	II. Innovation Management: Competitive Intelligence Steps Plan the search: what sources to monitor Notice & Collect data (lawfully) Process - perceptual filtering Sense-making: transform to insight : “so what” test Dissemenate to decision makers Formulate strategy www.scip.org
42	II. Innovation Management: Competitive Intelligence Gather Critical Business Information: Strategic analysis & scenario planning: Environment forecasting; acquisition targets, location of new plants, supplier evaluation Marketing planning Industry analysis, competitor analysis, new product introduction, product portfolio, pricing Sales & marketing Sales cycle management, database marketing, sales forecasting, promotion campaign assessment Source: www.skyrme.com/insights/9mkis.htm
43	II. Innovation Management: Competitive Intelligence
44	II. Innovation Management: Tools
45	II. Innovation Management Tools: Citation Mapping
46	Strategic Management Three stages: I. Knowledge Management: Knowledge Audit: Know what you know & leverage it II. Innovation Management: Idea generation: Use brainpower to innovate Competitive Intelligence: Monitor your customer, market & competition III. Intellectual Property Management: Strategic/Competitive positioning: Protection of intellectual assets decisions Exploitation: Commercialize intellectual property
47	III. IP Management: Strategic Tools Use IP as strategic tools for Competitive Advantage: Determine competitive position compared to others in your industry & other industries with same technology Block competition Increase Market share
48	III. IP Management: Strategic Tools Block Competition Generate Revenue Use certain technology License technology Riding on goodwill Franchise & Merchandise Copying work Create derivative work Use valuable info. Reduce cost & license
49	III. IP Management: Value of Trademarks
50	III. IP Management: Value of Copyrights 1997 Singer/songwriter David Bowie issued $55 million in bonds securitized by albums he recorded before 1990 Walt Disney grew from $2 to $22 billion in ten years Microsoft intellectual assets valued at $148 million in 1997
51	III. IP Management: Gillette Sensor Shaver Developed 7 designs of mounting the twin independent blades for closer shaving Patented the design which could give strongest protection Communicated to consumers the feature that most portrayed the brand image Choose a container that “had the proper masculine sound and feel when ripped”! *Rivette& Kline, Discovering New Value in IP, HVRBR 54
52	III. IP Management: Gillette Shaver Patents to cover the twin blade mounting design Trademark to cover its trade dress, brand, & advertising slogans Copyright to cover product description Trade secrets to cover unpatented know-how
53	III. IP Management: Processes Competitive positioning: Determine your FTO Determine goal of protection: design around, exclude competition, save costs, improve goodwill Decide on level & type of protection: decision-making aids Identify desired position & draw future (Patenting & branding strategies) Exploitation: Know your IP: Audit & portfolio creation Evaluate strength & value of IP Determine level & scope of investment Police, Enforce & Capitalize
54	III. IP Management: Positioning - FTO What: Acquire preliminary assurance that R&D activities are not in areas protected by others How Define broadly field/areas covered by third parties & distinguish activity if necessary Assess parameters of innovative activity: assess patents to design around; assess © work to use functional elements; assess TM to exploit if abandoned or weak More than IP searches
55	III. IP Management: Positioning - FTO Why - Benefits: Create a culture preventive of infringement Saves development time Avoid investment losses in creating/acquiring IP Guard against infringing third parties IP –
56	III. IP Management: Positioning - FTO Damages in Patent cases
57	III. IP Management: Positioning - Protect
58	III. IP Management: Positioning - Protect Factors to consider Market success Benefits of different types of protection Risks assessment International filing – China (for patent & TM) Investment decisions
59	III. IP Management:Positioning - Protect
60	III. IP Management: Positioning - Protect
61	III. IP Management: Positioning - Protect
62	III. IP Management: Positioning - Protect Decision making tools: Expert opinions Decision trees Future scenario generation Patent analysis Market & consumer surveys
63	III. IP Management: Positioning Strategies Patenting strategies Patent-Enabled Grow - reinforce patent wall around a technology thru M&A - acquire all that is available (Cisco & TI) Patent-Enabled Sell - sell dying business by finding who is using its related patents Patent-Enhanced Fix - surround (maturing or aging) products with patented accessories (Canon) (Source: Rivette & Kline, Rembrandts in the Attic) Consider value transference here
64	III. IP Management: Positioning Strategies VALUE TRANSFERENCE BETWEEN IPs STRATEGY
65	III. IP Management: Positioning Strategies Branding should always be considered Determine ‘critical drivers of customer retention’ in your business (experimentation stage) Determine the brand promise or image Train & empower employees as ‘brand ambassadors’ (employee satisfaction, service provision) Align points of customer contact with the brand promise
66	III. IP Management: Processes Competitive positioning: Determine your FTO Determine goal of protection: design around, exclude competition, save costs, improve goodwill Decide on level & type of protection: decision-making aids Identify desired position & draw future (Patenting & branding strategies) Exploitation: Know your IP: Audit & portfolio creation Evaluate strength & value of IP Determine level & scope of investment Police, Enforce & Capitalize
67	III. IP Management: Exploitation Steps: 1. Audit & create IP portfolios 2. Police – how not to misuse & lose 3. Enforce – litigation decisions 4. Capitalize on IP: strategic alliances & licensing
68	III. IP Management: Exploitation - Audit Why Traditionally used for acquisitions to assess total market value of company Can be enterprise wide or business related - depends on profit centers Weed out those not needed for business for assignments or donations (Dupont $64M, Dow $50M) Create a portfolio to enable portfolio management & analysis
69	III. IP Management: Exploitation - Audit How Look for patents (issued or pending), Processes & practices (trade secrets or not), TMs (common law or registered), (C) are ideas being expressed Trade secrets are a special case - legal requirements for protection Create Portfolios: product line, customer profile, IP type – remember to note the competence to include as know-how & service
70	III. IP Management: Exploitation - Portfolio Analysis Portfolio criteria: Expiry dates or life cycle In & out licenses, grant back provisions Franchises, merchandizing agreements Royalties rates Core or non-core IP Use portfolio analysis to Keep track of what you have Identify the strength, scope, life cycle of IP Aid decision making re enforcement & licensing
71	III. IP Management: Exploitation - Portfolio Analysis Dow Chemical portfolio analysis: 51% Most valuable - direct application to high growth businesses (crown jewels) 36% No direct use in current/planned products but valuable to others 13% Unlikely to be used - abandon or donate
72	III. IP Management: Exploitation Steps: 1. Audit & create IP portfolios 2. Police – how not to misuse & lose 3. Enforce – litigation decisions 4. Capitalize on IP: strategic alliances & licensing
73	III. IP Management: Exploitation - Police Goal: to prevent loss of IP rights through unscrutinized business tactics or transactions - Protection from inside Patents: Misuse; Antitrust Trademarks: Naked licensing or acquiescence; Genercizing Copyrights: too many functional elements; Antitrust Trade secrets: leakage (billions); Unreasonable security measures; Computer hacking Risk to reputation or corporate image: use of suppliers & distributors; Public announcements
74	III. IP Management: Exploitation Steps: 1. Audit & create IP portfolios 2. Police – how not to misuse & lose 3. Enforce – litigation decisions 4. Capitalize on IP: strategic alliances & licensing
75	III. IP Management: Exploitation - Enforce Goal: to prevent third parties from free riding on the strength of your IP. Protection from outsiders Monitor infringing activities of competitors: Internal unit- IBM Specialized outside third parties - some CI firms Rely on customers feedback Enforcement decisions: To litigate or Not to litigate
76	III. IP Management: Exploitation - Enforce Protection from outsiders: Litigation decisions: Assess strength of IP, scope & coverage, and market position - ie value IP Effect of litigation on image or reputation, Any legal or other ramifications e.g. adverse effects on working relations Effectiveness - probability of success & possible remedies Weigh costs involved against expected award of damages Alternative measure: offer (cross) license, arbitration, settlement
77	III. IP Management: Exploitation Steps: 1. Audit & create IP portfolios 2. Police – how not to misuse & lose 3. Enforce – litigation decisions 4. Capitalize on IP: strategic alliances & licensing
78	III. IP Management: Exploitation - Capitalize IP-based strategic alliances Merger & Acquisitions Outsourcing R&D Collaborative agreements with universities Spin-out: to establish a company/business wholly focused on exploitation of a certain technology (Eastman Chemical)
79	III. IP Management: Exploitation - Capitalize IP Licensing: Adopt active licensing strategy License to: Expand the business by entering new markets both territorially and field-wise Market IP to competitors for non-competing uses and to non-competitors Create merchandize (excluding patents & trade secrets) Generate revenue (IBM, Dow ) Improve your technology: cross-licensing & grant back Get customer feedback through technical assistance
80	III. IP Management: Exploitation - Capitalize Types of licensing: Technology licensing: patents & trade secrets Software licensing: (C), TM Franchizing: TMs, trade dress, trade secrets, (C) Merchandizing: right of publicity, character TMs, design (C)
81	III. IP Management: Exploitation - Tools IP Search systems: uspto.gov, IP Inventory & tracking systems: pl-x.com, dennemeyer.com, thetso.com IP M&A tracking: competitive intelligence, thedeal.com, chi.com, patentinvestor.com, mergerstat.com IP Valuation & licensing tools: IP E-Bays: IPEX.com, Yet2.com, patentvaluepredict.com
82	"THANK YOU" THANK YOU