I spent a lot of time talking to others in the conference about their work in nanotechnology and commercialising their efforts. A lot of the posters in the hall outlined some very basic research which is probably years from commercialisation, but there was also a fair share of small start-up companies (often from universities) who were looking for business (and often investment). The understanding of intellectual property issues varied tremendously. One conference speaker from a company based in Santander highlighted the importance of good patent protection, not only in Spain but also in other countries. She emphasised the need to get good IP advice from the very beginning.

Another speaker (who shall remain nameless) talked about the success his company was having but failed to deal with any questions about how the technology was protected. His company has no patents (at least none published on the ESPACENET database) and some of the technology seemed fairly easy to reverse engineer (but I’m only a mere Physicist and not a real Nanotechnologist). In that case one wonders how the company is protecting its long term value in intellectual assets

Walking around the exhibition and poster wall was fascinating. Some of the people I talked to really understood the value of the intellectual property developed. Others noted that they thought a patent had been filed or that they’d filed a description with a notary to protect their ideas. There seemed to be little appreciation at the conference of the need to identify and review the intellectual property developed and the most appropriate form of protection.

A patent application is only of value if it really protects the business model of the company. Filing a patent on a process so that competitors receive full details of the process (as one company has clearly done) without thinking through and protecting use cases, licensing programmes and business opportunities is often a waste of money and resources. Traditionally some companies had filed details of their ideas with a local notary and relied on these deposits to “prove” that they have prior rights to an invention. That may have been a good strategy when markets are local – but in a global business strategy it has little role to play. Prior use of an idea in Spain does not protect a company from an alleged patent infringement in the United States (or even in France). And it is also not a substitute for a functioning trade secrets policy in which a company polices its disclosure of confidential information.

One research institute revealed that they had been somewhat surprised to find that a former student had put software developed at the institute into the Internet, apparently without permission. They had been looking to commercialise some of the work and if the software continued to be available free of charge there might be little incentive for anyone to take a licence.

There were a few bright spots. Rob met an old acquaintance from German-based seed company Technostart who is involved in the EU’s ProNano project which aims to take thirty ideas through to commercialisation. She’s well aware of the need to ensure that a company’s intellectual property is well-developed. I was also there in my role as Co-Chair of the Licensing Executives Society International’s (LESI) Electronics, IT and Telecommunications committee. LESI runs a number of educations programmes on the bsuiness of intellectual property which are suitable for smaller companies. Together with his friends Jose Miguel Lissen, a patent litigator at Spanish IP firm Gómez-Acebo & Pombo, and Dario Santander from Bardehle’s Barcelona’s office, we’re looking at what value membership of LESI could offer nanotech entrepreneurs in the commercialisation of intellectual property.

A view. To try to make this simple to understand.

To call Nathan or IV a troll is incredibly simplistic.

IV has built one of the Worlds most sophisticated businesses and it has the potential to have substantial direct and indirect returns for its shareholders. IVs people are amongst the brightest IP and business minds you could wish to find anywhere. And what they have done is combine lots of the smartest and newest ways of creating value from IP into the same entity in a patent and IP play on an absolutely massive scale.

 They are an invention house, and have adopted and reinvented leading edge patent strategies to create a portfolio of their own IP which, in its own, would be of high high worth.

 In combination they have acquired patents, hard to say how many as they are very private, but lots of patents on an unprecedented scale. Some say they have 30,000 patent families, but it is impossible to know exactly how many. What is believed though is that this number puts them in the Premier league (up there with IBM, Nokia, Qualcomm and others) in terms of IP influence. The buying has not come cheap but they’ve worked hard on starting with buying anything to moving to buying quality.

 And along the way they’ve worked hard on their IP reputation. Ask people who know anything and they’d say that if IV breathes in your direction, take a license. Perfect in the US world of IP where licenses are cheaper than litigation so companies like Acacia Research, a genuine troll, can prosper. But they don’t want to see seen to be litigators…that’s bad for reputation so they outsource that part to others who aren’t so bothered about what the outside world thinks of them.

 This is IP genius on a scale never seen before and which would be hard to come close to replicating again in a generation given what IV has successfully done. If you imagine or remember one of those days when the idea you had could change the world. Amazingly though almost nobody outside of the IP community and largely outside of the US has a clue that this is going on. Which it has been for 10 years.

The full impact of this is to be seen. What Nathan though appears to realise in his public statements is that all things intangible make up a large and unexplained part of shareholder value. The accountants don’t explain it, shareholders don’t ask about it, most business leaders don’t understand it. It still amazes me that people don’t even ask! IV is playing an arbitrage game; it knows what is valuable and it knows the value to it of what its buying. The sellers do not.

 This is grand and to be complimented. It will be hugely successful.

 Andrew

xkcd is CC-BY-NC by Randall Munroe and at http://xkcd.com/670/

In short, this corporate reporting practice has been looking at moves to put IP on the balance sheet from the angle of accountants, while we examine ways to make IP more relevant to the business from the perspective of the legally trained. Each approach takes into consideration the other (we look at ways to move IP assets on to balance sheets and they consider the impact of the different IP rights, for example), but I think it is safe to summarize the approach in this way.

Some thoughts and questions that came out of this conversation:

• Often the view is that if not in the financial statements then not important – both a part of the reason IP gets ignored and a reason to find ways to move it onto the balance sheet.
• In small cap companies, the relationship is often more “personal” and so people will be looking beyond a “I-Capital statement” anyway.
• How do you build confidence (internally and externally) around the forecasts in an I-Capital statement?

Incidentally, through this conversation I was made aware of World ICI (WICI), which with my other hat on, specifically sparked my interest in data.  They are working on, in part, data frameworks for corporate reporting through XBRL frameworks. XBRL stands for eXtensile Business Reporting Language and is way to, put simply, make business reports machine readable so that machines can do all sort of neat stuff with them.

In approaching these themes, they also expand on the role of IP at a national level, and in so doing compare IP to oil:

The U.S. is currently the Saudi Arabia of IP reserves. American companies control 33% of the world’s triadic patents… . By comparison, Saudi Arabia has only 20% of known oil reserves. And IP has an enormous beneficial impact on our balance and terms of trade.

Which incidentally make me wonder about where then lies IP’s “pipeline politics” – perhaps the evolution of TRIPs at the WTO? They also go on to compare the US position with its (supposed arch-rival in IP), China:

But the rest of the world is nipping at our heels. China, for example, is not content to serve as the world’s low-cost manufacturing hub. It has set its sights on IP as its next chief driver of economic progress. In 2007 the chief scientist for China’s Academy of Sciences, Niu Wenyuan, called intellectual property rights “the No. 1 strategic reserve in the 21st century” and added that their “significance is not inferior to any other strategic reserve, be it food or energy.”

Regardless of whether IP is as significant as energy or food, I do think that the “stuff” IP protects (call it intangibles or intellectual capital or just innovation) definitely makes a significant driver of growth for both individual companies and nations as a whole. China’s quite right to explicitly consider its role internationally. Indeed, innovation is one of the great strengths of UK plc, and unlike oil, the UK has significant reserves: So let’s go about getting better at recognising, exploiting and protecting it.

How does the panel believe that a business’s CEO can be required to take IP seriously?

The answer we believe involves how the business as a whole views Intellectual Property, as reflected in its business structure.

Personality types

We drew inspiration for some of our thinking in this area from the Insights Discovery Learning System, which breaks down personality types into distinct groups (based on Jung and as those ideas have evolved), and grouped by colour:

• Blue – Accurate, Ordered, and Cautious
• Green – Team player, Patient, and Reliable
• Red – Decision maker, Risk taker, and Results Driven
• Yellow – Innovative, Sociable, and Dynamic

We took these colour types and applied them to “business personalities” based on the types of structures we’ve seen working for investors and directly for companies to help build IP into their business.

Blue IP

We saw that businesses tend to take a “Blue” approach to IP in their organisational structure and their approach to protecting and exploiting IP. And so the typical approach to IP looks something like:

IP is a purely legal function that is several layers down from the CEO and so hard to grab his or her attention, especially when competing those “above” the CEO, such as Investors, their board, and so on.

Red/Yellow IP

The Chief IP Officer suggestion – a C-suite exec in charge of IP – isn’t a new idea (though it is a good one). We’re building on the CIPO role and the conversations around it to think more broadly in terms of structure and attitude of the business.  Our alternative suggestion: Make IP a “Red/Yellow” function within the business in order to be more “innovative with IP”.

Through this, acquiring and maintaining IP rights – prosecuting patents, renewals, and so on – remains a Blue (Accurate, Ordered, and Cautious) function within an overall Red (Decision maker and Risk taker) and Yellow (Innovative and Dynamic) framework. IP as a business function rests with the Chief IP Officer (CIPO) or similar title reporting either directly to the CEO, or through more the more Red/Yellow channels of strategy or sales/marketing.

Of course this focus has been on IP, which we define pretty broadly (protecting “intangibles”). I know that there is a discussion to be had about this type of thinking with using the term intellectual capital and the perspective that brings as being much more inclusive than IP at first instance.

For more, and more in-depth, on our thoughts, see the full article in Managing IP.

What do you think?  Any feedback?

Special thanks and a tip of the hat to Don Jarrell of Digital Thinking, the good people at Insights for permission to use their graphics in MIP and for their conversations on this topic, and to Peter Birkholm of Into The  Zone for their contributions and discussions on drafts of the article.

Cut its prices for all drugs in the 50 least developed countries to no more than 25% of the levels in the UK and US – and less if possible – and make drugs more affordable in middle-­income countries such as Brazil and India.

Put any chemicals or processes over which it has intellectual property rights that are relevant to finding drugs for neglected diseases into a “patent pool”, so they can be explored by other researchers.

Reinvest 20% of any profits it makes in the least developed countries in hospitals, clinics and staff.

Invite scientists from other companies, NGOs or governments to join the hunt for tropical disease treatments at its dedicated institute at Tres Cantos, Spain.

While all of these initiatives are laudatory, the cynic in me thinks that this is just one huge dose of “Corporate Social Responsibility” as a way to counter negative publicity (the article mentions The Constant Gardner and AIDS treatment pricing in developing countries as examples). Beneficial, but still ultimately self-serving. On the IP front, the patent pooling is no exception (though again, can definitely be a Good Thing).

Why? Because as I understand it, “neglected diseases” are neglected because of basic commercial reasons – finding a cure or treatment doesn’t represent a significant financial opportunity. These diseases aren’t likely in the core scope for GSK’s future blockbuster drug research, and so pooling these patents doesn’t impact their future commercial plans. The upside for GSK in sharing these patents (and perhaps the know-how behind them) is that they may lead to a cure or treatment and thus lead to more positive PR for GSK.  The upside for humanity is that previously neglected diseases may see cures/treatment.

Sounds like a win/win.

This also leads me to note that thinking about open innovation could include ways to spin out or transfer IP for effects beyond simply generating revenue. Here, GSK uses IP it has already developed to derive a different kind of benefit. It follows what I see as the core thought behind open innovation:

Don’t only look within your company as part of your innovation/business strategy.

What do you think?

[T]hat corporate intangible values in the US … have collapsed over the last 12 to 18 months, from a median of 70% of market capitalisation to under 50% now.

This calculation (looks to me) to use the difference between cost of physical assets and the stock price of the company – broadly any intangibles.  IP makes up part of these intangibles, as does things like confidence of investors and reputation of the company. Pat Sullivan (in the comments and in another upcoming IAM article) proposes a different way of calculating the value of IP, based on its worth to the company.

My perspective it doesn’t matter how you calculate its value: IP is an underutilised and too often unmanaged asset. Calculating the number is an interesting exercise, and useful in a number of contexts, but the actual % still doesn’t change this fact.

So to the IP lawyer, open innovation means transactional IP – buying, selling, licensing in, and licensing out. How these transactions get done (and under what “open” label) is where the fun starts.

Please post a comment at IP Finance or contact me directly with your thoughts.

Why do some people achieve so much more than others? Can they lie so far outside the ordinary? What is the secret of their success?

He found the answer in Fleetwood Mac and a Hamburg strip club.

The popular story, as Gladwell told it, of Fleetwood Mac says that serendipity led to the band’s great success through a series of random events that resulted in Stevie Nicks joining the band and their immense commercial success that shortly followed. Gladwell pointed out that the truth was that the band had years of experience under the belts with lots of experimentation of different musical styles and forms. It was that large body of experience and expertise that flowed from years of trying, failing, and trying again that allowed them to achieve success in the end.

Similarly, looking at the history of the Beatles, it was the intense amount of time playing together as a band (playing 8 hours a day at times) crammed into a short period playing the strip clubs and pubs of Hamburg that honed and refined their skills so that when Beatlemania hit, they were already seasoned musicians.

We may like to think that the successful originate from a random collection of events and some extraordinary traits that somehow all fall into place. But Gladwell surmises from the experience of Fleetwood Mac, the Beatles (and many other examples) that the secret of success is mostly hard work and little to do with chance.

No secret there that hard works play a role, but he does note a 10,000 hour rule: Spend about 10,000 hours doing something and you can become an expert in that thing. When you combine time spent plus the willingness to experiment and persistence even after failures and setbacks, that’s where he sees the most innovation, and as a result, the outliers – those that lie outside of the normal set (the Bill Gates’s or Richard Branson’s).

Around the 10,000 hour rule and examples ranging from American Football to Mozart, Gladwell made a few observations:

• Taking the financial markets as an example, he noted that in many cases people with too little experience and training get thrust into roles that need a higher level of expertise (part of the problems leading to the current financial crisis).
• As a related point, the increasingly complex and specialist nature of areas such as finance often means less meaningful oversight. We should think more about how we train, encourage, and compensate expertise — particularly when thinking about research organisations, either as part of universities or in think tanks and industry (and I’d add expertise by government regulators).
• Those that work harder as a result of compensating for a setback (anything from dyslexia, low IQ, socio-economic factors, perceived low ranking such as a degree from a low ranked university) often end up out-performing those that go down more established paths.
• Innovation through persistence happens more often than innovation through a flash of insight (with the solution of Fermat’s Last Theorem as an example).

I’m wondering about innovation and entrepreneurship, particularly in the UK and the last point about persistence and his wider point on expertise. I’ve heard that having tried and failed in past businesses can be a plus to investors in Silicon Valley when looking at an entrepreneurs background, and that the culture there of “try and try again” has contributed greatly to its success. VCs look at past ventures and unpack the reasons for failure and if the experience taught the entrepreneur anything.

In contrast, I understand that often in the UK, investors and business generally does not reward (and may even punish) those that try, fail, and get back up and try again, having (hopefully) along the way learned some valuable lessons and gained quite a bit of experience. I’m not talking about those that fail because of malfeasance — rather those that experimented unsuccessfully but that experimented all the same.

The feeling I get from people here in the UK indicates that this may be changing. I’d submit that both encouraging experimentation and accepting that the risk of experimentation is setbacks and outright failure is crucial to developing further innovative businesses. Similarly with IP and IP strategy as in any field, trying new approaches to protection, enforcement, and building value with those innovations is crucial to developing the business.

Any thoughts?