From the category archives:

IP strategy

IP Strategy (Post 1-What Exactly is IP?)

by Andrew Watson on 15 August 2011

What is an IP Strategy?

In this series of posts we wanted to give the ipVA perspective of what is an effective IP strategy?

To back up these posts we are going to post a white paper on the ipVA main site at the end of the series. This explains in fuller terms the ipVA viewpoint of key questions in this area, including one fundamental that we really should begin with—what exactly or even roughly is IP?

A community apart

In and of itself the IP community cannot seem to agree on this quite simple question. Some call IP terms that seem sensible when understood but by being proprietary, lack universal appeal and therefore adoption. Suffice to say, Intellectual Assets (IA), IP assets, intellectual capital (IC) and other such terms are designed to mean some or a part of the mix. But this small community does itself a disservice by failing to adopt a common definition.  

The compelling Craig Opperman (yes he does look like my older brother) has, to my mind, given the best explanation of why this is the case in one of my favourite expressions. I’m not sure whether this emanates from Craig’s native South Africa but this does seem to fit:

“If all you have is a hammer, all your problems look like nails”.  

So when your patent attorney says he is an IP strategist, he probably isn’t. He may be a very good patent attorney, maybe even a patent strategist if you’re really lucky, but that doesn’t mean he is an IP strategist. Surely that’s obvious isn’t it? Equally your IP lawyer (sorry USA, in Europe we have split professions between patent attorneys and commercial lawyers) are likely to be very good, if not excellent, at contractual IP law but won’t cover patents, at least not in Europe. Do I need to go on—trade mark attorneys cover trade mark filings and maybe trade mark strategy (but not somewhat confusingly brand strategy, though brand strategists will pretend to be able to manage trade mark strategies), knowledge management experts cover…I’ll stop should I? You get the general idea.

The true definition-in our bold but humble view

In ipVA we have gone as wide as we dared in defining IP. To us, IP is a colloquial term that means all of the business assets that are not tangible. Below I’ll explain why without I hope giving away too much of our own IP in the process. Why we adopted this came from looking at over 200 companies from our project experience. We came to realise that without the widest perspective, very important bits were missed out of the equation and from the responsibilities of what needs to be managed by a smartly managed IP company with a Chief IP Officer or Head of IP. At least if we pitch into a company on a project to build an IP strategy, the average CEO or fund client will put us into a box believing that we want to manage one of three things, Intellectual Property, Insolvency Practitioners or Internet Protocol. Ask for a meeting to help him/her to manage the business Intangible Assets or IC and I’ll guarantee from experience that the meeting, if obtained, will be very short.

In our perspective therefore IP means all of a business’ intangibles. To repeat it means all of a business’ intangibles.

I can’t remember where I was when I heard Jon Dudas, at that time Under Secretary of Commerce for IP and Director of the USPTO (and somewhat similar in looks to a pre body building Arnie) come out with this belter:

“IP represents 75% of the value of the S&P500”.

At the time having heard Ocean Tomo spin that self-serving line for a couple of years I thought to myself, that can’t be right can it? And after reflection I thought it might be better expressed so:

“Of the total value of the S&P 500, and indeed of any company or index nowadays, most of the value is represented by assets which are not tangible”.

A bit less sexy and reduced marketing spin (well this was I’m sure an Ocean Tomo event and those boys knew how to serve up very good champagne) but more accurate I’m sure.

The wider definition of IP

585 words into this post I hope that you’re still with me. All of the above is meant to explain that IP really means all of a business intangibles.

Which then begs the question of what are intangibles.  Now that is a good question. In our view, there are three parts to intangibles:

  • Humans—individually and collectively. These things are the creative spirit in a company.
  • Intellectual assets—the five formal IPRs which in and of themselves allow choice as to what to protect and how, formally, sometimes by registration and sometimes only by agreeing with each other not to tell somebody something.
  • Relationships—the external manifestation of intellectual assets, in the form of corporate and consumer relationships both individually and in groups.

You’ll have to wait for the white paper to see the detail. This has taken us several years to perfect so it doesn’t come free of charge.

Why is this important as a distinction, and why you should avoid the hammer-only sellers?

On a strategy assignment in 2010, the head of R&D of a client which has been a major patent filer asked an excellent question, posing this scenario—I quote:

“I’d like to run a scenario where the business has no patents—what difference would it make?”

That question took a good 24 hours to think through. It is a very good question isn’t it? After all, patents done well take an awful lot of management and people time and effort, and no small amount of cost. And, the smartphone and other inter-galactic wars aside, do they really make that much difference?

The answer we came out with was something along these lines:

“ intangibles are a soupy mix of a lot of fuzzy assets*, all of which together make up a measure of competitive advantage or sustainability. At some point in the future someone may be able to formulate the relative value of each category for each company, but for now removing one probably important ingredient has an unknown impact on the overall taste of the soup. Better express it the other way round, if patent processes and patents are perfected, are there ways in which these  can be used to add to competitive advantage?”

*soupy mix and fuzzy assets are words and word combinations all of my own, I did sense Rob squirming at the hearing of them but, language difference aside, I think they convey the right message.

So beware your average hammer seller. He may well only have one tool whereas your machine may need someone with many more tools to build you a perfect IP machine. Somewhat cynically, watch in particular for the patent hammer seller—this is a very honourable profession but by definition the patent hammer seller only makes money if you file patents, and then take those patents to remote geographies. You may need one of these, and very good ones are hard to come by, but our advice is to be well informed yourself. Know what you want and what you need, as with all professional advisers, including IP strategists like us.

But I digress. Can’t help myself. I could and do regularly bore poor housewives at dinner parties about this.

To finish therefore on question 1, let’s summarise:

  • IP is best treated as a colloquial term,
  • In its true definition, it should be viewed as meaning all of a business’ intangible assets,
  • All of these assets can be managed, and should be managed, indeed they are secretly managed by all of the best companies,
  • If managed for competitive advantage, that is heading towards the direction of strategy.
  • For which you will need an advanced hammer supplier, preferably with a multi-tooled toolbox.
  • And these I’ll assure you are in very short supply worldwide.

And the quicker the business world moves to understanding this, the better for all of us.

In part 2 we will move on to defining the second question—what is strategy and what are the components of IP strategy and tactics that should be considered in your strategy discussion.

 

 

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What does Nortel mean for the winners and losers?

by Andrew Watson on 20 July 2011

Try these two tables. Who individually wanted it the most, that is, semi-speculatively, who put up the most individual money?

Amounts committed, or who wanted it most?

Company Amount
Google $2.5bn
Apple $2bn*
RPX consortium $1.5bn
Intel $1.5bn
RIM $770mn
MSFT (est) $500mn
Sony (est) $500mn
EMC $400mn
Ericsson $340mn

 * reported in Business Insider on 21st July to have been $2.6bn–not totally material in the context of what follows–what’s $500mn between friends?

As a proportion of cash reserves, or who needed it most though, the story is quite different. We accept that this is a highly rudimentary analysis but telling nonetheless:

Company Proportion of Cash Reserves
Intel 37.5%
RIM 26.6%
EMC 7.5%
Ericsson  7.4%
Google 6.4%
Sony 3.9%
Apple 3%
MSFT 1.4%
RPX Consortium  N/A we think, special bid situation

 

We can only idly speculate about the others in the auction. Huawei seemingly joined up with RPX (odd combo though RPX’s larger members are listed above). Nothing much known or reported about ZTE, Qualcomm, IV and others. We’ll have to hack a few phones (joke I promise) or keep our noses close to the ground to find out.

In summary, Google, in terms of gross cash, probably wanted it most badly but couldn’t find enough friends to play with. Apple wanted it second most but allied even with old foes to be able to win.

Intel and RIM were prepared to commit the largest proportion of their cash reserves to win it suggesting that both needed it most.

Intel ended up choosing what looked like the wrong partner, but when viewed against the ability to negotiate the IP rights it needed in a consortium of what would have been seven, probably took the right decision to partner with Google.

RIM is a standout for us. With a meagre (relatively) $2.9 bn of cash reserves and a rapidly declining market share and (so they say) future, this is a staggering amount of money to commit. RIM really really needed it, and we wonder whether this would have been authorised but for a rather rapid ROI in the form of relief from license out-payments.

And, equally interestingly, who do we think is most affected by having to renegotiate its cross license agreements? We believe that Nokia and Qualcomm should be expecting knocks on the door in the coming weeks from Apple and RIM seeking to renegotiate their current cross license terms. Nokia is likely the largest loser unless and until it can benefit from a license to the Nortel portfolio from, most likely being acquired by, new best friend Microsoft.

In short, lots and lots of behind the scenes dynamics, both direct and indirect.

Winners

Company  & Executive Summary of Auction Performance Benefits
A very smart move. Played the auction very cleverly. Was not willing to bid as much as Google on its own but won by finding friends and foes with similar motivations or maybe a common motivation to stop Google winning.Is there any truth in the rumour that Bill Gates personally holds a large share in Apple? A bigger and more influential seat at the Standards tables.The opportunity to renegotiate its current cross license deals with (probably and immediately) Nokia and others.The opportunity to redefine the way that Standards bodies operate. Less cartel, more collaborative.The opportunity to increase its cash pile, should it desire by seeking out its own license deals for the Nortel portfolio, to the extent that it is currently unlicensed.
Another very smart IP move by MSFT. Knows that product revenues alone will likely not maintain its market position. Has made the shift to high margin IP contribution inside a technology generation by hiring some of the best IP minds. Its first seat at the Standards tables.The hedge of knowing that whichever way the markets go, it will be a net IP winner. From all product revenues to partly and growing IP revenues, MSFT will be a net winner. It has learned very very fast.The ability, unless constrained by the private agreements, to sub-license to its mates, including new friend and M&A target Nokia.
Under extreme product pressure and risks becoming another Psion, loved by a few but not loved enough by the masses. We believe that its primary motivation was financial and immediate, to relieve some of the out-payments it makes under cross licenses.  An immediate ROI in terms of its ability to renegotiate several of its cross license deals.We also believe an increased seat and influence on the Standards bodies.

Seems to have got what it wanted. We would be surprised if Ericsson didn’t get a defensive license to the Nortel portfolio through its acquisition of the Nortel business units. If so, this was strategic and value-adding
A larger seat at the 3G, 4G and LTE Standards tables. Moving it away from the over-dependence on the now becoming legacy 2G essential patents.
Seems to have been a combination of IP strategic and product strategic. IP strategic like its investment in Intertrust with Philips. Product strategic as known to be due to release a folding tablet device, its first 3 &4G enabled tablet, in Q1 of 2012. Product defence from being subject to new cross licenses when its folding tablet comes out.IP strategic in giving it a first time seat at the Standards tables.
With EMC, we can only take the reports on faith that EMC has acquired a part of the Nortel portfolio dedicated to data storage. Not a known IP aggressor but has committed a sizeable amount of cash to being part of the victory parade. More to follow. Really not known.

For intrigue, we also wondered if the consortium has thought about how it will use its new and respective Standards seats collectively? Or indeed if this is allowed?

And the losers?

Company  & Executive Summary of Auction Performance Benefits lost
Could not find enough friends. Wanted it badly, probably the most, but its terms of joining together were either unattractive or it is not trusted enough. Once in a business cycle lifetime opportunity to join the IP grown ups by acquiring a portfolio. We do wonder though whether, doing the maths, Google simply maxed out the benefits it could see from the portfolio and carried out a simple cost-benefit analysis to calculate that it simply wasn’t worth it. Does anyone know by the way if Google indemnifies Android adopters against IP risk in using the platform as part of the license terms? We doubt it but it is fascinating to know. 
Not enough of a cash heavyweight to win solo despite really wanting it, and probably really needing it as the world migrates from Intel chip-enabled devices such as PCs. Not able to negotiate what it really needed with the Rockstar consortium so took its chances with Google. A credible effort and well played. Taking Eduardo Sanchez on faith, really wanted it and probably really needed it. But not weighty enough to get it.
The Chinese didn’t appear to take this opportunity seriously enough. Huawei and RPX appear to have combined but Huawei should have combined with ZTE and the Chinese government to bid.  An opportunity lost. Will now find RIM, Ericsson and even Apple knocking on their doors to negotiate old or new licenses. Should have bid seriously. Maybe did but the truth is yet to come out.
A loser despite not even being a player in the auction. Does this add even greater motivation to find itself a new home within MSFT?  Either immediately or over time will be the recipient of calls and approaches to renegotiate license deals.

 

Of the patent aggregation funds, we don’t see RPX as either a winner or loser. It played and played seriously enough but its members had larger strategic interests than in backing a co-bid via RPX.

And, finally, what of IV? Strangely mute throughout. Is this heavyweight losing its sparkle?  A rare opportunity to bid for Standards essential patents seems to have gone begging without a thought or even a bid. Very odd.

To reiterate a question, one I’ll post on Twitter too:

Does anyone know by the way if Google indemnifies Android adopters against IP risk in using the platform as part of the license terms? We doubt it but it is fascinating to know.

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To Protect in China – or not to Protect

February 9, 2011

We’re always being asked whether it is now “worthwhile” filing for patent protection in China or not. “They’ll only just copy our ideas” is the standard response, “and we can’t enforce our patents”. That may have been a reasonable policy ten years ago – but since then the Chinese patent system has progressed tremendously. An […]

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Nanofutures – the future of Nanotechnology IP?

June 16, 2010

It’s been a couple of interesting days in Oviedo, Spain, at the first Nanofutures conference launching the European Technology Integration and Innovation Platform (ETIP) in Nanotechnology. The ETIP is designed to be Europe’s forum for research and commercialisation of nanotech products and the conference was well attended by a number of European Commission officials and […]

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Patent Pending

May 1, 2010

Denis Crouch over at the Patently-O blog has done an interesting piece of calculation showing that the average pendency of patents in the USPTO is around 4.1 years for those patents not claiming priority to a US provisional application. Now there’s a number of companies out there who are happy that their patents take a […]

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Spinal Tap and listening to your customers…

December 17, 2009

Capturing the feedback and results from your innovation is a crucial part of designing and implementing any good IP strategy . The brilliant webcomic xkcd reminds us that innovation involves directly listening to your customers. Giving them what they want isn’t just about coming up with new ideas and getting patents — sometimes it’s all […]

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eBay and Skype-settled

November 9, 2009

It is reported overnight on the newswires that the Joltid and eBay dispute has been settled with the two former Skype founders taking a stake in the new Skype vehicle in return for dropping their claims. It seems like a common sense end to the disputes and Skype v2.0 (or is it 3.0) will no […]

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A second week in the life of this IP strategist

October 26, 2009

Let’s try the highlights of week 2. I realised that week 1 was a little ambitious to repeat week on week. If nothing else it could get a little repetitive. As a variation, I thought I’d pick up on the highlights of week 2: 1. A blog post on the Apple and Nokia spat. We […]

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A week in the life of this IP strategist

October 19, 2009

I thought it would be interesting to start recording a typical week in my life as a lead consultant in ipVA. I’ll try to be true to keeping a weekly record but the ambition may be beyond me. Or if this becomes too mundane or repetitive I’ll stop it. But I do think what we […]

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IAM 250: The long tail of strategists

September 15, 2009

So it’s no surprise just by looking at the map of the IAM 250 list of IP strategists that the US leads the list for strategists-by-country. It’s a big place, a leading global economy, and one that has made IP and innovation a priority. But it’s not clear just how much the US leads the […]

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