What Nortel means for IP and the IP Community

by Andrew Watson on 21 July 2011

I was out for a delightful lunch last week with Obi-wan Kenobi lookalike Ben Goodger (linked picture post beard) and two of his colleagues from EAPD’s London office, the excellent and charming John Olsen and a good friend David Ramm, a secret IP squirrel who is little known for having the vision to attempt to set up an IP trading exchange in around 2000.

Over lunch Ben described the Nortel auction as a Tipping Point for IP. The phrase Tipping Point comes from the intriguing first book by Malcolm Gladwell of the same name, used to describe the point at which a series of small and often unconnected events give rise to a seachange of attitudes towards something previously little recognised.

Gladwell uses examples like the Murder Rate in NYC and the rise of Hush Puppies to explain his theories on the stories behind the shifts.  It’s a good question. Is Nortel a tipping point for IP? Will it take IP out into the light, where business leaders, boards, financiers and generalist strategists will demand sight of the business’ IP strategy and take a good hard qualitative look at the IP owned by the business, and how it compares to best practice in its IP risk management processes?

I was described by another good friend in the IP world, Matt Dixon of HGF, as carrying the scars of being an entrepreneur in the European IP world, on my back. And that’s why instinctively I’m not so sure as Ben that Nortel is a tipping point all on its own. No doubt another milestone along the way, like RIM and NTP another good story to tell, but not to my mind the one great event that makes every CEO of even a telecoms or networking business put IP in its top ten list of must-dos for his or her business on return from Summer break.

On the positive side it is great to see insightful commentaries on the auction in pretty much all of the business press. The FT ran this very good piece the Monday following the auction result being announced and then this piece on Google’s patent weakness a few days later. The WSJ ran this piece, the Guardian this piece, the BBC this one and Forbes this one. Lots of good comment and lots of attention. I liked this sidebar piece on InterDigital’s share price rising as it emphasised its own patent stock by comparison to Nortel’s (overtaken by events as Google is now in talks to buy InterDigital).

But is this a mainstream press wave? Or is it IP’s latest 15 minutes of attention, before the World reverts back to what it knows and has learned at business school?  That is, not IP.

We, unfortunately for my own retirement planning, think the latter. It’s a milestone and there are many more of these to come before the business world wakes fully up. Which, if true, and I do sincerely hope that Obi-wan Goodger  (here with beard, very very similar as you’ll see) is right, means that we need to think about what the next milestone could look like?

For us there are two major events to happen. Event 1 is the adoption of common reporting standards and valuation standards for IP. We’re going to ask another old friend, Kelvin King at Valuation Consulting, to write us a guest post summary on the current developments in that field.

The second is the adoption by the IP world of a common language to make sure when we say IP we all mean the same thing. And, associated with that, the expansion of the definition away from the patent-centric US litigation style of IP monetisation as being THE way to view the IP world and to profit from IP. I heard of an anonymous but highly respected IP officer commenting at IPBC 2011 how this US view of the IP world is putting the US at a competitive disadvantage. I’d probably go a step further and say that the inability to widen the perspective and view of IP within the IP community damages and taints the view of it outside of the IP community in the real world.

We’ve blogged on this theme before, but a refresher on what IP really is, and what a good IP strategy looks like, will be the subject of our next post.

Thanks finally to Nortel. You gave Charlie and I some real fun over the last few weeks and we will not forget you. But you’re under new and obscure ownership now and we’re unlikely to see you out in public again any time soon. We’re moving on too, but we’re going to leverage you as much as we can as you’ll make a good starter topic for a year or two yet.


{ 2 comments… read them below or add one }

Nick White 07.21.11 at 10:28 pm

Whilst I have the utmost respect for Ben, like you Andrew I have the scars (older and deeper!) that say otherwise. I recall a beer or two with you and Ben when he and I we were both at Rouse and IPVA was just a gleam in your eye. The challenges we saw then are still the same nothing seems to move that quickly in the IP world. Thinking about Gladwell’s “The Law of the Few” we are too few!

A tipping point requires an epidemic; there has to be contagion. Nortel cannot be that contagion and in many respects this type of IP event whilst getting some attention and excitement from various quarters actually has a negative impact on what you and I seek.

How have we obtained our scars? By trying to convince many companies below the rarefied levels of the Apples and Googles of this world and mostly outside of the US that IP matters and can create value. What I have come to realise is that this is a significant challenge for two reasons. Ignorance and disbelief. Many of these companies have deeper and more psychologically damaging scars than we have. Many have lost or have never had faith in the IP system and do not believe that they can secure the same value per patent as say an Apple or IBM. So is the view worth the climb? We live in an asymmetric IP world distorted by the US perspective on IP. Very many companies and innovators around the world are deterred by these large patent portfolios, the behaviour of these 800 Ib gorillas and the flaws in the system. Deterred in two ways. Deterred from inventing/ innovating and entering markets and secondly from even attempting to secure their own IP. I have come across surprisingly large companies in this space who will simply not enter the US market not because of known risks but because of unknown risks. It’s not the Trolls that worry them it’s the unpredictable Gorillas.

The world of IP is increasingly polarised as in many other aspects of commerce. What the Nortel sale is doing in my view is polarising this world even further. Just imagine what the patent map on Nortel looks like, all the potential companies that could be impacted. The vast majority are not 800 lb gorillas and they had zero influence over the Nortel IP sale. They may have known where they were with Nortel but what now? Most will see zero IP influence as zero IP value and walk away from patents. As you have seen many more companies now look to trade secrets and a regression to pre-patent system behaviours. Whilst this may benefit them in the short term it is detrimental to the global economy in the medium to long term. It is increasingly damaging to the US.

If you are looking for a tipping point you are looking in the wrong place. Try here it has all the elements http://bit.ly/nMXNDE

It’s a refreshing idea that the primary function of patents is to secure monopoly rights on inventions. So the place to start in securing IP value is with invention and invention exploitation. You couple that with the simple idea that all can take part. Now that’s contagious.

Nick White 07.22.11 at 10:16 am

An addendum on disbelief.

We have moved on from finding Rembrandts in the attic to picking them up for a relative song at fire sales.

The Nortel patent portfolio numbered 6000+patents and was valued through auction at $4.5 billion.

Despite this it’s highly valuable IP position did not save Nortel. In order for this “value” to be realised Nortel had to die. Only then was it apparent that they had Rembrandts in their midst.

I can see my average technology SME CEO saying “So, how important is my portfolio of 10 patent families? How can you argue that IP is so vital to my business? Masses of IP did not save Nortel so what’s different for my business? Will it only be my creditors and others, when my business goes down the tubes, who will see the true value of my IP investment?”

Nortel reinforces disbelief if all you do is focus on IP.

Here’s the rub. You then have to move away from IP and talk about the other important factors for business survival. When you do that it transpires that IP per se may not be as important to success and survival or as valuable as some may think.

There is more than one way for a point to tip. There is another tipping point I see. An almost total rejection of conventional thinking on IP; the epidemic is going the wrong way! We in the IP world are only too aware of the significant contagion around that point and Nortel just throws fuel on that fire whilst hardly making a positive ripple in the wider community in the other direction.

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