Intangible assets such as goodwill, know-how and Intellectual Property Rights (IPRs) generally make up an increasingly larger proportion of the total value of companies, and for many companies more than 80% of the total value of the company can be attributed to intangible assets. An Intellectual Property (IP) strategy should therefore form an integral part of the business strategy for a company.
On perhaps the most general level, an IP strategy can be considered a plan for how IP should be used to create value for the company. To be effective, an IP strategy should be used in a company as part of its business strategy. An IP strategy should hence be agreed on with business and research departments of the company as well as with the company’s top management prior to being deployed in the company.
Having an IP strategy is not only important for comparatively large companies, but also for small and medium-sized enterprises (SMEs). For example, the fact that an SME has a well thought out IP strategy can provide a strong indication to potential investors that the SME has a systematic and strategic approach for how IP shall be used to create value for the company, which for the investors can increase confidence in the company and thereby willingness to invest in the company. Further, even if it would not be feasible for an SME to enforce its IP (e.g., due to prohibitively high costs), IPRs may still be very important for the company to have if the company is seeking collaboration with others or is looking for an exit strategy.
Different types of companies need different types of IP strategies
Unfortunately, there is no feasible ‘one size fits all’ approach for how to make an IP strategy for a company. For each company, an IP strategy should be made based on the company’s business strategy in order to support the business strategy and create value for the company. This will include achieving an understanding of which types of IP are most important for the company’s business and formulating a well thought out plan for how that IP shall support the business strategy. A good IP strategy goes beyond merely securing registrations of IPRs for the company but also helps aligning IP with the business strategy to increase the value of the company.
A company should make an IP strategy based on features of the company itself, including its turnover, the type of products or services which are provided by the company, the type of research and development carried out by the company, and the company’s existing IP if any. This may however in general not be sufficient to establish an effective IP strategy. The company may also need to consider external factors, including the company’s competitors and their business activities, any IP of other parties such as the company’s competitors, the state of the relevant market, and the state of the relevant technology. Considerations of such features and factors will enable the company to choose an appropriate plan for how IP shall be used to create value for the company. Some examples are provided in the following.
Companies wanting to keep their products exclusive
According to one example, for a company that develops, manufactures and sells products which very much stands out on the market and are clearly distinguished from competing products, for example in terms of performance, versatility, product lifetime, etc., the company may opt for a type of IP strategy according to which the company strives to keep its products exclusive, in order to try to increase the company’s market share and allow for relatively high sales prices for the company’s products. Such a company will most likely be very much aware of what the stand-out features of their products are, and the company can focus on (or possibly even only focus on) such features when building its IP portfolio by applying for and registering IPRs and when managing the IP portfolio. Therefore, for such companies, the size of the IP portfolio may be kept relatively small.
Companies wanting to sell their IP as products
However, for other types of companies it may not be feasible to build up of their IP portfolios only by focusing on certain features of products, and the size of the IP portfolio for such companies may need to be (much) larger. This may particularly be the case for companies that sell their IP as products, i.e., companies which license their IP to others in exchange for fees or royalties. While companies that primarily strive to keep exclusivity for their products may focus primarily on what they are doing themselves in their field of technology when it comes to building and managing their IP portfolios, this is usually not enough for companies which are, or are intending to, sell their IP as products. Such companies will need to put more focus on trying to anticipate what others who are operating in the field of technology will do with the technology and then try to cover such solutions when building their IP portfolios by applying for and registering IPRs and when managing the IP portfolios. The IP portfolio of such companies should be reviewed on a regular basis to determine whether the IP is still relevant, e.g., if the patents are still covering all relevant technical solutions. Companies which opt for an IP strategy that is primarily focused on selling the company’s IP as products often operate in fields of technology for which there are technical standards, e.g., video coding and telecommunication.
Companies wanting to use IP as a marketing tool
In particular, companies which provide products that stand out in the market, and which primarily strive to keep exclusivity for their products, the companies may also use their IPRs such as patents and trademarks for marketing purposes, e.g., in connection with a launch of a new product. A company’s IPRs such as patents and trademarks can be used for demonstrating to the market how inventive or technologically advanced the company is. In turn, this may enable the company to increase its market share and allow for relatively high sales prices for the company’s products. In fact, the primary purpose for applying for and registering IPRs might for some companies be to use the IPRs for marketing purposes. For companies which opt for an IP strategy that focuses primarily on using IPRs for marketing purposes, it may be sufficient to only have a relatively small IP portfolio. In order to convincingly demonstrate to the market how inventive or technologically advanced the company is, it might be sufficient for the company to have IPRs registered in only a one or a few select countries. It may often be generally desirous for a company that for any patents of the company which cover one or more of the company’s products, the scope of protection of the patents is as large as possible so that the company to be able to target as many potential infringers as possible. However, from a perspective of using IPRs primarily as a marketing tool, it may be sufficient for the patents to only have a relatively narrow scope of protection (while still covering the product). Patents having a relatively narrow scope of protection can in general be obtained more quickly – and hence be used as a marketing tool faster – and at a lower cost compared to patents for which the scope of protection is as large as possible. While it may be sufficient for a company to have only a relatively small IP portfolio if the company primarily seeks to use IPRs for marketing purposes, it may nevertheless be important for the company to have patents covering as many products of the company as possible in order to be able to demonstrate to the market how inventive or technologically advanced the company is. For a company which seeks to use IPRs primarily as a marketing tool, this could entail that the company tries to obtain several patents, with each of the different patents covering one or more respective ones of the products of the company but may have a relatively narrow scope of protection, rather than instead trying to obtain a single or a few patents with a (much) broader scope of protection.
Companies wanting to use IP as a defence
For companies which primarily strive to keep exclusivity for their products but also for other types of companies, IP can (e.g., additionally) function as a type of defence. This may occur in situations when another party approaches the company with an allegation of infringement by the company of the other party’s IP, and a request that a license to the other party’s IP is taken by the company to avoid that the other party initiates infringement proceedings against the company for the alleged infringement. In such situations, the other party is usually one of the company’s competitors. If the company would previously have built and managed its IP portfolio so as to have IPRs which are commercially relevant to the other party, the company might then use such IP in negotiations with the other party to try to avoid the need to take a license to the other party’s IP, e.g., by means of negotiating a cross-license agreement with the other party pertaining to patents relating to a certain technology. The company may have previously built and managed its IP portfolio to ensure it holds IPRs which are commercially relevant to the other party by opting for an IP strategy according to which focus is put on what others who are operating in the relevant field of technology are doing when building and managing the IP portfolio. Thereby, when being approached by another party with an allegation of infringement of the other party’s IP, the company may use its own IP portfolio as a negotiation tool to try to escape the need to take a license or be involved in costly court proceedings. Thus, even if it would be unfeasible for financial reasons for a company to enforce its IP against others, having an IP portfolio built and managed according to a well thought out plan may still be very important for the company.
Companies wanting to use IP as assets
According to another example and perhaps most importantly for start-up companies, IPRs can be used as assets to provide value to a company, by enabling the start-up company to establish partnerships, joint ventures or other types of cooperation with others, or to be awarded funding from investors. A start-up company will most likely, at some point, need to go through a due diligence process, which will cover any IP of the company. Such a due diligence process might be performed in relation to a potential investor that may consider investing in the start-up company or in connection with any merger and acquisitions involving the start-up company. From the perspective of an investor, it may not be unusual for the investor to consider that the start-up company will be likely to struggle to run its business and be hesitant to invest in the start-up company if the start-up company does not have any IP for protecting its core technical solution or other core aspects of its business. In the light of the foregoing, for companies intending to primarily use their IPRs as assets it may be quite useful to focus on the commercial interests of potential businesses partners and try to tailor the building of their IP portfolios by applying for and registering IPRs and managing of the IP portfolios to those interests.
Once a chosen IP strategy has been made and deployed in a company, the IP portfolio can then be exploited in accordance with the IP strategy. An IP strategy should not be considered as a static product, but rather as an ongoing process. This means that if features of the company and/or external factors such as mentioned in the foregoing would change, it should then be assessed whether the IP strategy for the company needs to be adjusted. If needed, the IP strategy should be adjusted accordingly.
In the foregoing, some examples have been provided of how a company may consider features of the company itself as well as external factors for determining what type of IP strategy the company wants to opt for depending on how the company wants to use IP. Naturally, there could be some overlap between these different examples (as well as any other examples which have not been covered in this blog post). For example, while a company may opt for an IP strategy that is primarily focused on selling the company’s IP as products, the company may not solely focus on such aspects but may further want to try to build and manage its IP portfolio in order for it to also function as a defence, as described in the foregoing.
Some further aspects of IP strategy to be considered
Naturally, there may be further aspects of IP strategy to be considered other than those discussed in the foregoing. Such other aspects include the strategy for filing applications for IPRs such as patents with respect to geographical coverage, and timing for such filings. Different filing strategies can provide different degrees of flexibility with respect to keeping options open and possibilities for changing choice of countries or regions in which to file. The need for flexibility may depend on the primary focus of a company’s IP strategy. For example, for companies which primarily strive to keep exclusivity for their products, the need for flexibility may be less compared to companies which primarily sell their IP as products, i.e., companies which license their IP to others in exchange for fees or royalties, or companies which primarily want to use IP as defence.
Another aspect is the strategy for enforcing IP against others if needed, or in other words how to react to any infringement of IP. If infringements of a company’s IP are not followed up and if needed appropriately reacted to by the company, there may be a risk that the company’s IP portfolio will be considered weak by the company’s competitors.
Yet another aspect is the strategy for handling any relevant IP of other parties. It will firstly need to be decided if IP of other parties should be actively searched for. If it is decided that IP of other parties should be searched for, it will then also need to be decided how potentially problematic/hindering IP of other parties that has been identified should be reacted to.
In this regard, a company may be well advised to monitor its competitors’ patenting activities, particularly if the company is operating in a very competitive market. Such monitoring can include monitoring patents and patent applications from competitors as they are published. Based on such monitoring, patent documents such as a European patent application that is soon to be granted by the European Patent Office (EPO) or an already granted European patent may be identified for which the scope of protection might be relevant or even potentially hindering/problematic for the company’s business. It may be part of the company’s IP strategy to, in such cases where patent documents are considered to be potentially hindering/problematic for the company’s business have been identified, consider options for challenging the validity of an already granted European patent or to file observations concerning European patent application that is still pending at the EPO. Such observations may include arguments and any prior art documents concerning the patentability of the invention to which the European patent application relates. For a more detailed discussion of such procedures, the interested reader is referred to our previous blog posts “Challenging of European patents” and “Intervening in the Examination of Competitor’s European Patent Applications”.
In the foregoing, some considerations for making IP strategies have been provided for informative purposes. If you would like to have more information or specific advice on how an IP strategy could be made for your company, please do not hesitate to contact us.
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