Foundation for building a valuable business

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Identifying the value and purpose of an IP asset at any point in its lifecycle is critical to creating improvements to a company or law firm's operation, argue Cary Levitt and Luke Curran (formerly) of Dennemeyer Group.

One of the most costly phrases and precarious lines of thought in the business of law is “we’ve always done it this way”. The management of intellectual property is no exception.

Whether at a firm or company, IP operations must find a balance between internal capabilities and effective use of outside sources. To find this balance, from trademark to patent portfolios, the first step is to examine the management of the lifecycle budget and the first question to ask is “why do we own this asset?” From there, firms and companies can re-align IP assets with business strategy to create improvements to internal operations—saving time, resources and ultimately reducing costs.

Trademark operations
The development and management of IP has transitioned from a predominantly legal matter into a strategic agenda. Whether in-house or at a firm, trademark practice groups’ operations are in a constant state of transformation due to four key driving trends:

1. The demand for globally oriented capabilities;
2. Increased complexities in brand protection;
3. The balance of outside and internal resources; and
4. Cost controls.

The ability to navigate through these driving forces requires continually adapting and critically evaluating marks throughout their lifecycles. At the 2016 Dennemeyer IP budget management forum, panellists highlighted several considerations when reviewing a trademark portfolio and prosecution practices.

These included whether it is a primary or secondary brand; how broad the use is; how long it will be used for; how to manage global prosecution; defensive registrations v failing to pre-empt squatters; and reducing costs when portfolio ‘pruning’.

Trademark operations must adjust to address these questions and to manage the accelerated marketplace changes, such as the growth in emerging markets (eg, Africa, Iran, and Cuba), sunrise services for premium brands, adverse publicity issues with cease and desist letters, and the dynamic between US federal courts and the Trademark Trial and Appeal Board.

Fill in the gaps
To contain costs in light of these changes, the first step is to conduct regular reviews to identify and fill in portfolio gaps and excise marks that are no longer needed. A fundamental understanding of what spurs the need for transformation better equips departments with the ability to reduce budget while expanding capabilities. It also helps define what responsibilities are best retained internally and which are better suited for outsourcing.

In addition to re-evaluating marks to modernise service delivery — striking a balance between in-house and outside counsel — it is important to be proactive on the front end of the trademark process. A robust trademark education programme can act as one of the strongest cost-saving mechanisms. Marketing and business units drive most trademark actions. Eliminate unnecessary activity by educating departments and even clients on the legal process, cost structure, and potential consequences of selecting particular marks. Foster a secure IP culture through internal policies that streamline both brand development and communication.

With increased global risk, the demand for global capabilities, and new intricacies in brand protection, only innovative approaches to service delivery structures will thrive.

Patent operations
With continuous top-down cost pressure on patent departments and the shift to a globalised business environment, firms and companies alike are continually challenged to develop means to increase overall effectiveness of IP management. Accordingly, to appraise the commercial and competitive value — regardless of the size of your organisation — it is also important to regularly conduct audits of patent portfolios, which provide a blueprint of how the technology is being represented (or should be).

The first question to address is whether you are seeking to exploit the asset internally (i.e. safeguarding products or processes) or externally (i.e. licensing, selling or enforcing). It is essential to determine exactly why you own this patent right and the underlying purpose it currently serves.
At the Dennemeyer forum, panellists also stressed that when creating a value hierarchy to map patent management decisions, consider:

1. Whether the patent in question is related to the business and covers core products (e.g. proprietary);
2. Whether the patent does not have current use, but is acting more as a ‘safety blanket’ protecting ideas from third party use (e.g. defensive); or
3. Whether the patent is being used as ‘window dressing’ in order to secure equity backing (e.g. leveraging).

While value is not necessarily assessed strictly in dollar figures, it is vital to discern the purpose of the investment throughout its lifecycle, as opposed to seeking and maintaining protection simply because it has always been the practice. These investments should act as a fulcrum for the objectives underpinning the business strategy.

Although organisations that yield more IP from research and development may receive funding and credibility, and open doors for strategic alliances, it is essential to constantly reassess the value hierarchy to align with business objectives relative to the asset’s lifecycle. Aggressively protect the innovation and constantly re-evaluate the portfolio. In other words, aggressive in and aggressive out. Decision-makers must be armed with this vital information in order to traverse the increased risks and new complexities in cross-border law practice.

Profitable portfolio
In order for departments to develop concurrently with the globalisation of IP, behind-the-scenes actions of IP operations must be continuously re-examined. From outsourcing of legal process to adopting hybrid approaches, companies and firms that achieve noteworthy improvements to IP operations enjoy a vibrant and profitable portfolio.

Being able to identify the value and purpose of the asset at any point in its lifecycle is crucial to creating improvements to operations. It is essential to understand how the innovation or brand that is being evaluated works, whether you are building a portfolio around it or are attempting to help a third party’s innovation to stimulate growth. As the IP market continues to develop, new models are emerging that afford departments and practice groups the ability to create a customised service structure that is fit to compete in today’s globalised market.

The article was first published by World Intellectual Property Review in June, 2016.