Protecting your intellectual property

One of the signal developments in business this century is the increasing reliance on intellectual property (IP), both for competitive advantage and enterprise value.

The need for the effective management of your strategic IP - the IP that is likely to have a significantly important bearing on business performance - cannot be over-emphasised. For example, if patents lapse for a blockbuster drug, trading $5bn or more per year, the loss of even one jurisdiction could mean hundreds of millions of lost income and profits. Even worse, it could provide a toe-hold for a competitor. In short, the loss of strategic IP can undermine margins, business strategy, asset value and even overall business models and banking covenants.

Here are some key considerations to bear in mind when protecting your firm’s strategic IP:

1 Identify your ‘top-slice’ IP assets

In recent years there has been a gradual realisation among businesses that their IP estates are asymmetric, with a minor percentage of IP in a strategic ‘top slice’.

Clearly the protection of strategic IP needs to be addressed, with a level of stringency based on the high consequence dimension of risk, not from its low probability. However, businesses’ management of their IP processes often fails to make the necessary distinction between top-slice IP assets and other, less valuable, ones.

There is understandable in-house difficulty in defining a strategic top IP slice for consistent special treatment. The main considerations are whether it is practical to (a) provide a resource to monitor the flow of IP into and out of the strategic category, and (b) devote additional resources specific to monitoring strategic IP assets which, purely in quantitative terms, are minor.

2 Assess and process the risks to which strategic IP is exposed

Essentially your business - working closely with external IP advisers - needs to employ protocols that are designed to (a) assess current approaches to identifying risks to your strategic IP, and (b) process the risks to which that strategic IP is exposed.

3 Minimise IP process risk

IP process risks are the largest to which IP is normally exposed. Research indicates that 2.5% of US patents inadvertently lapse. Legal cases in Europe show examples of poor process design, inadequate process management and unsatisfactory staff competency.

IP processes, from those implementing patent renewal to those managing attorney actions in obtaining/maintaining patents and trademarks, are crucial to IP management. But they are seldom built around ‘6-sigma’ principles, and have a capacity to fail: they are part of a real-world balance between risk and cost control.

4 Create a bespoke plan tailored to suit your company

As in all specialist areas, risk management solutions are context-dependent. Therefore, your business should define specific protocols that will adapt to individual portfolio needs, including:

• creating strategic IP definitions fitting client contexts;
• devising filters for segregating strategic IP;
• setting up review processes to cater for change;
• designing basic risk oversight models; and
• implementing agreed oversight tiers.

Malcolm Lawrence is chief executive of patent attorneys Avidity IP