Intellectual Property as a Strategic Asset

Published in LaZOOZ - Strategy, Marketing and Innovation Newsletter, Issue 70, July, 2005
By Ari Manor, CEO, ZOOZ

 
Many managers that we meet in Israel, especially if they are traditional industrial manufacturers, are very skeptical about the need to invest in registering patents, trademarks, and industrial design rights. These managers’ main claim is that if they invest a fortune in registering patents, it won’t really protect them from copyists anyway.

According to these managers – it’s difficult to register a patent in a way that it will be completely protected (“hermetically sealed”) and therefore, potential copyists will manage to find legal ways to bypass the patent. And secondly – and this is the more basic claim – they don’t have the resources to conduct lawsuits against copyists and patent violators – since a trial over a patent violation can last several years, take place in foreign courts, and cost a fortune.

They also claim that if they win one case, it will be too late, after years of being copied, and regardless they will have to deal with other copyists as well. So instead of registering patents, these managers prefer to invest in marketing their innovations, and believe that until they are copied they can reap the benefits of the innovations they developed, and move ahead and offer additional innovations.

In contrast to these managers’ approach to the issue of intellectual property, we recommend a completely different approach, which views intellectual property as a supremely important strategic asset that must be invested in and nurtured. Patents, trademarks, and industrial design rights are strategic assets for a factory, for the following reasons:

It raises the manufacturers' value

• An analyst examining the value of the manufacturer's company, a private or public investor, a company interested in purchasing the manufacturer's plant (during a merger and acquisition process) – will all base their decision on the value of the manufacturer’s intellectual property.
• In many cases, the intellectual property will be valued as worth more than the manufacturer’s other assets.
• Even if you are not planning on selling your factory in the near future, you can never know when you will need to raise money, or which tempting exit proposals you will be offered in the future.

 

Marketing advantage

• The demand for solutions that the factory provides will increase if they are protected by patents and industrial design rights. Many corporate clients, especially abroad, will prefer to buy from you rather than from copyists that may have violated your patent.
• Distributors abroad will prefer to work with you if your differentiation is based on intellectual property.
• Your sales people and their distributors will have an interesting “story” to tell, about the exclusive advantages of your patents.
• In general, your factory’s image will improve, as soon as the phrase “patent pending” or “trademark” appears on your products…

 

An answer to the competition

• Large and serious competitors will generally avoid copying your patent.
  
• If the competition decides to bypass your patents, it will cost them an arm and a leg. Therefore, the patents may be an obstacle for them.
• Alternatively, a competitor may decide to collaborate with you (buy products, patents, or the entire factory from you). This may turn out to be a very large business opportunity.
• In addition, registering patents and industrial designs will prevent you, in certain situations, from being vulnerable in the future to competitors’ lawsuits for violating one of their patents or industrial designs.       
• In this context, in any case you have to invest resources in checking that you are not violating a competitor’s patent. This is also important because should the factory require future investment, potential investors will verify that you are not violating others’ patents.

 

Organizational improvement

• A factory that invests in intellectual property attracts more successful R&D people, and talented managers and employees, in general.
• If you have international ambitions, and you want to recruit excellent managers and employees abroad as well, the importance of intellectual property has increased. In contrast to Israel, where employees excel in improvisations, and avoid formalities, in other countries they appreciate order, comprehensiveness and methodicalness, and therefore proper registering of patents.
  

If you’ve been convinced and have decided to invest in your intellectual property, here are a few guidelines to properly manage your intellectual property, to help you increase your factory’s value and develop long-term competitive advantages:

 

Form a policy to manage intellectual property

• Manage your intellectual property like you manage an investment portfolio.
  
• To start – conduct a workshop for management about intellectual property, so that everyone understands the different types of intellectual property, and the reasons to invest in each one of them.
• Afterward, decide on a budget and guidelines. The rule of thumb is to invest approx. 2% of the turnover in intellectual property. Out of this, allocate a budget for registering patents, trademarks, and industrial design rights, and also – put aside money for legal expenses…
•  Appoint a company manager to this topic that will continuously report about the developments in the field to management.

 

Register patents as long-term protection, and industrial design rights as short-term protection

• Make sure you register patents and trademarks, and industrial design rights in a balanced manner.
  
• Industrial design rights and trademarks will enable you to immediately recall, by court order, products of copyists that have copied you (including removing their products at a pavilion at an international exhibition).
• Patents will give you long-term protection for your innovations, and large compensation lawsuits for patent violations. There are even organizations whose main source of revenue comes from lawsuits against registered patent violations! You can also use patent walls to block competitors systematically, and thus achieve a viable long-term competitive advantage.

 

Save on expenses, where possible 

• It’s sometimes better to employ part time an intellectual property manager that is a patent attorney by profession, than to work with an external patent registration office. For the most part, the person you will employ will be fairly experienced, and over time, he will become specialized in your business, and consequently more committed to it. nt.
  
• A relatively inexpensive way to check whether your idea is already registered as someone else’s patent is described in the last column of this newsletter.
• In certain cases, it pays off to register a provisional patent and to put off registering the final patent for as long as possible. Firstly - you gain another two years in which you are protected at a relatively low cost; secondly – the patent will not be revealed and will not appear in the patent databases and therefore its secrecy will be kept; and thirdly – as part of the dialogue with the patent authority, you will be able to improve the patent due to the knowledge that you acquired before its final submittal for registration. However, this route entails risks as well.
• Decide ahead of time in what geographical arena you wish to operate. This can save you a lot of money later on. For example – if you want to register a global patent, there is a cheaper way to do it than registering in each country separately, and gradually.       

 

Register comprehensive patents that are difficult to bypass

• The more money your patent is worth, the more entities will try to bypass it legally. In other words – register “bypassing” patents. In order to prevent this, you should register more comprehensive and inclusive patents, regarding the solutions they entail, the claims, and the patent’s general wording.
  
• A comprehensive patent, which covers a wide variety of potential solutions to a given problem, can be registered once (instead of registering a series of patents), and thus save registration costs for more patents. With such a comprehensive patents, usually only a portion of the registered solutions are implemented, but even what is not implemented serves to protect the patent.
• In order to cover a wide and comprehensive variety of potential solutions in a given industry, you should seek an external consultant before registering an inclusive patent that is difficult to bypass. In order to expand and strengthen your patents, we recommend working with Ideation-TRIZ, the best technological thinking -tank in the world, that we represent in Israel. For information on Ideation-TRIZ, click here.
   
   

Good luck turning your intellectual property into a rewarding and strategic asset!

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The article was written by Ari Manor, CEO of ZOOZ Marketing & Organizational Consulting. ZOOZ conducts training for managers and employees. Send your comments to [email protected].