Intellectual Property Strategy – An Integrated Approach to Aligning your IP Assets with your Business Strategy

What is an Integrated Intellectual Property (IP) Strategy?

In the broadest sense, an Integrated IP Strategy refers to a comprehensive strategy that accounts for the specific details of a particular entity and its IP opportunities. This will be different for every company, creator, and IP owner because strategy is, in its very essence, built on market and resource heterogeneity, rather than homogeneity. Consequently, the optimal IP strategies for two different entities, technologies, market, or even business divisions within the same company will uniquely correlate with those circumstances that are unique to each situation.

Why is it Important to Align your IP Strategy with your Business Strategy?

An IP Strategy is simply part of the overall Business Strategy. However, it is commonplace to talk about an IP Strategy as though it is a separate thing. For most companies, unfortunately, this is because the IP Strategy is essentially disconnected from the Business Strategy.

When it is disconnected, the IP Strategy doesn’t “fit in” with the other pieces of the Business Strategy—it either tries unsuccessfully to fit in, or it might exist as though it doesn’t need to fit in. However, anything that does not coherently fit into a Business Strategy is simple “bad strategy” because it actually detracts from the focus of the Business Strategy, instead of enhancing it.

“We need patents!” is a common call from executives. But they can rarely explain why they need patents in a manner that provides any detailed coherence with the strategy and day-to-day actions of the business. Getting patents unnecessarily is not a strategic expense—it is a wasteful expense.

“We need to protect our technology!” is another general exclamation. Do you know if your patents actually protect your technology? Or do they protect against your competitors’ infringement upon your space, without protecting your own products. These are very different functions, and sometimes patents don’t accomplish either objective very well.

At the other end of the spectrum, some CEOs proclaim, “Patents are worthless—we don’t need them!” This might be the result of a straightforward bias against patents, generally. More often, it stems from a cautious finance or technology teams’ abilities to articulate the underlying justification for spending the money or employee’s valuable time on the patent tasks. In other words, they don’t know whether there is actually an IP Strategy, or how the patent costs actually fit into the overall Business Strategy.

If it’s not important enough to define the company’s IP Strategy or articulate how it fits into the company’s Business Strategy, then reasonable people might conclude there’s not a real need to spend money or allocate resources to it in the first place. Failing to protect your technology is, at best benevolent, and in a corporate setting, at worst, is an opportunity cost due to the unrealized asset, protection, revenue, or similar benefits.

Strategic alignment, however, is more than just a matter of actual costs and opportunity costs. A company’s IP Strategy is one “link” in the overall Business Strategy “chain.” The fact that it is a part of the overall business won’t be shocking, but how critical alignment really is—and what it means—might be new to many people.

In order for a chain to realize it’s full strength, the links must be connected and aligned. In a business, the various component divisions and parts are like the links. When sales are in alignment with engineering, and marketing is in alignment with finance, the company can run at optimal efficiency and productivity. However, when one division is disconnected from the others, the company will be subject to cost overruns, underutilization, wasted resources, and wasted opportunities.

When the IP Strategy “link” in the Business Strategy “chain” is not aligned, the chain cannot realize its full length. When the IP Strategy “link” is kinked or offset from the other links, the strength of the chain is undependable. Likewise, other component divisions or functions of the business can be misaligned, preventing optimization of the IP Strategy or other functions.

Gear systems provide another useful analogy for alignment. When gears work together, force is multiplied, impact is distributed, and efforts are magnified. Disconnecting a single gear from the system, and optimizing its size, tooth placement, and speed of rotation would be entirely meaningless if it is not fully engaged and aligned with the other gears in the system.

Although perfect alignment in a complex system like a business, which is constantly changing in size, focus, revenues, regulatory pressures, and labor resources might be an impossibility, there is still a great need for alignment. In fact, an imperfect and constantly changing system needs the most alignment that is physically possible, so as to minimize otherwise inevitable friction, wear, heat generation, and even binding and stoppage of the system. Thus, alignment is even more important in complex systems where each part is subject to constant pressures and change.

Defining Strategy

Before diving into the specifics of Integrated IP Strategy, it’s worthwhile to designate a common definition of the term “strategy.” While it generally relates to long-term goals, rather than short-term actions (or tactics), a discussion of goals alone is insufficient. Also notable are the variety of academic frameworks discussed over time, including some of the most prominent approaches such as Michael Porter’s Five Forces and Jay Barney’s Resource Based View (RBV).

For our purposes, we utilize a definition that is more aligned with the RBV approach to strategy, because IP assets are clearly internal resources that can be deployed for valuable purposes. And it seems more appropriate to consider one’s own proactive control of its IP assets as a determinant for its actions, rather than reactively responding to the IP assets it does not control (although competitive assessment is very useful in other situations).

We define “strategy” as “a plan to deploy resources in alignment with business objectives for a sustainable advantage within a competitive environment.” It might be helpful to see this definition separated into its five component parts:

• A plan
• To deploy resources
• In alignment with business objectives
• For a sustainable advantage
• Within a competitive environment

For the sake of focus on the topic of Integrated IP Strategy, we don’t need to resolve any more detail of the component parts of this definition. However, it’s clear that each component part can be discussed in much more detail (e.g., plans require action sequences, deploying resources requires procurement of ownership or other deployment rights, alignment requires first understanding business strategy, etc.).

Sub-Types of Integrated IP Strategy

Let’s consider several different types of integration that might be achieved with IP portfolios. Optimal alignment would account for all possible types of integration. However, from a practical perspective, some types of integration might contribute minimally to any given company’s deployment of its IP assets. Consequently, in some instances, detailed assessment of less impactful types of integration might be omitted from preliminary evaluations, without significant detriment to the overall integration analysis.

1. Integrated IP Strategy across IP Instruments

At a basic level, an Integrated IP Strategy encompasses valuable IP assets from a variety of IP regimes: utility patents, design patents, industrial designs, trademarks, copyrights, trade secrets, joint ventures, enforcement rights, patent pools, and other negotiated agreements. Each regime has its benefits for various types of intellectual property. And, to some extent, IP instruments will vary by legal jurisdiction, in terms of availability, predictability, and enforceability.

Different ventures will have a different mix of IP instruments, depending on each venture’s operating business model. A tech startup focused on consumer hardware will have a very different optimal mix than a company focused on government-funded, futuristic and speculative technologies. The tech startup might seek protection of its technology with utility and design patents, protection of its consumer-facing brand using visual trademarks, protection of its supply-chain-facing brand using word trademarks, and freedom-to-operate assurances through proactively negotiated agreements. In contrast, the R&D company might have little need for brand protection, but will be substantially impacted by cost-sharing agreements, ownership and licensing rights, trade secrets related to its research techniques apart from any “products” it develops, and a bulk arsenal of speculative utility patents.

2. Integrated IP Strategy across Legal Jurisdictions

The optimal mix of IP instruments becomes geometrically complicated as you consider: 1) the types of technology that can be protected in different legal jurisdictions (often by country or region), and 2) the types of IP instruments that are recognized in different legal jurisdictions.

In regard to technology, there are a number of countries which do not recognize patent rights for various types of technologies. Some of the common “questionable” technologies in different jurisdictions include:

• Software
• Business models
• Medical procedures or methods of treatment
• Applications involving indigenous practices
• Biopharmaceuticals
• Agricultural innovations
• Food, medicine, and drug substances

Depending on an IP owner’s business objectives, it might require creativity in defining patent rights in these countries. Alternatively, IP owners may be required to resort to different IP instruments to fill the gaps that are otherwise protectable in different countries.

In addition to considering patentability of different technologies, different legal jurisdictions allow specific types of IP protection (and, therefore, disallow other types of IP protection). Examples of some of the IP instruments available in some countries, but not others, include:

• Provisional patent filings
• Utility models
• Industrial rights
• Moral rights

Further, some countries implement legal requirements and/or penalties that impact the practical implementation of IP protection and transactions due to:

• Export controls on certain technologies (including very broad definitions of “export” that include domestic disclosures to foreign nationals)
• Criminal prosecution of inventors who file first in foreign countries
• Invalidity of rights for unauthorized foreign disclosures
• Compulsory technology licensing
• Mandated inventor compensation arrangements

Given these jurisdictional distinctions, it becomes necessary for IP owners to carefully select the mix of countries in which to use certain types of IP instruments to protect specific types of technology or other intellectual property.

3. Integrated IP Strategy over Entity Funding/Growth Stages

A static mix of IP instruments would be inadequate to protect intellectual property rights over the life of a business or even the underlying technology itself. Not every business venture moves steadily through the various growth stages that are possible between ideation and successful enterprise. Additionally, some businesses seem to spend only moments in certain stages before accelerating further along the growth spectrum. Nevertheless, at each growth stage, the business should assess and optimize the proper mix of IP instruments for that stage of business growth and corresponding budget allocation.

Additionally, depending on your path from one stage to the next, it might be beneficial to begin implementation of specific IP instruments early in order to coincide with the projected advancement from one stage to the next. In fact, putting certain IP instruments in place might be a catalyst, in some situations, to help push through a difficult stage to the next stage. Just picture any of the TV show Shark Tank investors interrogating a team of founders, “Do you have a patent on that?” as they try to advance into a scalable distribution stage of their business. Often, adequate IP protection acts as a gatekeeper, or a significant benefit, for companies who advance through a fundraising round.

4. Integrated IP Strategy through Business Process Impact

When you stop to consider the impact IP has on business processes, I think you will be stunned.

Yes, stunned!

Whether procuring, enforcing, avoiding, or accounting for intellectual property, it impacts every business process within a company:

• R&D teams create IP through innovation.
• Marketing teams rely on IP for creating engagement and narratives
• Sales teams use those narratives to generate revenue.
• Executive teams use the revenue story to attract investment funding.
• Investors provide the funding for scalable growth.
• Operations teams deploy the operations which utilize the systems and processes made possible by the IP.
• Finance teams account for all these transactions and, often, rely on IP for favorable expense and tax treatment.

All of these business units are ‘stakeholders’ in the IP assets created, controlled, and commercialized by the business. And, not to be forgotten, the general public is expected to be a beneficiary of the advancement gained through the IP incentives by corresponding laws, regulations, and even the U.S. Constitution.

5. Integrated IP Strategy addressing Market Participants

Michael Porter suggested that companies encounter five forces when analyzing a company’s competitive industry. Porter’s Five Forces, as it is known, position a company relative to:

• Direct Competitors
• New Market Entrants (or anticipated entrants)
• Suppliers (who doesn’t have a love/hate relationship with their suppliers?)
• Customers
• Substitute Products

Although probably not intended by Porter, this conveniently provides a viable starting framework for potential patent claim targets. Savvy attorneys don’t just describe inventions—they target claims toward specific market participants. There’s no reason to wait until claims are issued to begin producing claim charts toward anticipated competitors, suppliers, customers, and so forth.

Some market participants are more likely to be ‘targets’ in an adversarial sense than others, so it’s also helpful to outline desired outcomes to be achieved with each type of market participant. The illustration below provides a simplified perspective of Porter’s Five Forces, augmented with outcomes you might use as a starting point. Your objectives will be different, depending on the business strategy your company implements.

6. Integrated IP Strategy over Technology Life Cycle

When considering an individual technology, instead of a broad portfolio, there are several different ways to look at the stages of technology life cycle. The Department of Defense uses a scale called Technology Readiness Level (TRL), which estimates the maturity level of a technology. Unfortunately, the TRL scale can be difficult to implement. NASA developed the TRL scale for procurement of supply chain and R&D activities. Similar scales, calculators, and models have been implemented by the US Air Force, the US Army, and other organizations.

• TLR1: Basic principles observed and reported
• TLR2: Technology concept and/or application formulated
• TLR3: Analytical and experimental critical function and/or characteristic proof-of concept
• TLR4: Component and/or breadboard validation in laboratory environment
• TLR5: Component and/or breadboard validation in relevant environment
• TLR6: System/subsystem model or prototype demonstration in a relevant environment
• TLR7: System prototype demonstration in a real-world environment
• TLR8: Actual system completed and “qualified” through test and demonstration
• TLR9: Actual system “proven” through successful mission operations

If this scale seems a little complex, or like you need a team of government bureaucrats to interpret it, you might consider a simper perspective based on new product development.

Where does your IP strategy ‘hook’ into these technology development stages? At what stages are you, or should you be, protecting your trade secrets? Where do critical agreement provisions fit in to protect your IP, to claim ownership to your IP, or to allow enforcement of your IP? And what types of IP instruments can you rely on at each stage?

In addition to technology development cycles, consider the stages of technology adoption within a market. Geoffrey Moore has a well-accepted model that outlines five stages, or rather consumer segments, that every technology hopes to capture:

• Innovators love new technology and are considered technology leaders
• Early Adopters are the ever-important ‘first followers’ that can bring a crowd to the Innovator leaders
• Early Majority are practical consumers who will adopt trusted technology
• Late Majority wait for the bugs to be resolved and the track record to be established, or perhaps they prefer to buy from established distributors who only carry mass-produced, bug-free technology
• Laggards avoid buying new technology and simply ride the coattails of every other consumer segment

Although Moore focuses on the adoption chasm between Early Adopters and Early Majority, this technology adoption cycle can also be used to adapt IP strategies to different consumer segments and their corresponding technology maturity levels, competitors, marketing messages, and distribution channels.

7. Integrated IP Strategy across Geographic Distribution Channels

One of the early lesson patent drafters learn is that the claims must be tailored to the potential infringers. Infringement can include several unauthorized activities, including making patent products, using patent processes, selling or importing patented devices, and using patented systems and methods.

Similarly, your integrated IP strategy should consider all of the geographically diverse locations and jurisdictions where you might be able to obtain and enforce different types of IP instruments. The initial reaction is to seek patent or trademark protection, for example, in every jurisdiction where a company operates. However, that is often a cost-prohibitive proposition, in many ways—seeking protection in various countries, employing legal counsel or other means to monitors activities in those countries, maintaining IP rights through annuities and renewals, and enforcement of rights against any party who appears to infringe (because the failure to enforce IP rights that you’ve obtained can result in laches, which is the effective loss of your right to enforcement)

A more efficient approach to IP protection involves strategic selection of important domains that effectively protect major manufacturing markets, distribution channels, and customer segments.

Consider where the ‘market bottlenecks’ exist for your patented technology. Are their very limited material suppliers or specialized manufacturing skills for your invention? If so, concentrating protection and enforcement in specific manufacturing countries might be sufficient to effectively shut down block downstream infringing activities. Would protection of major market geographies be sufficient to limit market penetration to a point that it would not be attractive to otherwise infringe in the remaining markets? Then protection and enforcement might be concentrated in the same primary market geographies. Are there limited cargo/transportation routes that physical products must travel between manufacturing or assembly and customer distribution? Then seeking protection and enforcement at major ports of entry might be “import”ant (you’re welcome for that silly word play). What about locking down major markets for distribution of intangibles? If a product or service must be advertised worldwide via the internet or other means, or cannot easily be modified for unique implementation in different countries, then you might effectively block worldwide use with IP in select countries.

The exact implementation of an integrated IP strategy across different geographical regions doesn’t simply mean seeking protection in as many countries or regions as possible. You can intelligently protect broader markets with some simple planning and execution if you thoughtfully seek out protection and counsel in the “market bottlenecks” for your industry and product or service.

8. Integrated IP Strategy across Portfolio Granularity

In the most counterintuitive way possible, it’s important to understand that the strategic profile of an individual IP asset is entirely different from the strategic profile of a portfolio of IP assets. When helping technology ventures assess their portfolios, we begin with the business strategy profile. Before discussing any IP assets or portfolios, we initially establish a business strategy profile that can be referenced as the “north star” or “guiding light” for all of the IP assets.

Once the business strategy profile is established, we can assess the alignment of individual IP assets with the business strategy profile. On an isolated, individual basis, each IP asset will ideally align perfectly with the business strategy profile so that there are no strategic gaps between what an IP asset ideally achieves in support of the business strategy and how an IP asset actually supports the business strategy. In practice, there are always gaps, for various reasons.

As an example, if we were to rate patent assets with “high,” “moderate,” and “low” designations depending on their strategic alignment, we would initially hope that every individual patent asset achieves a “high” rating. Superficially, this sounds like the ideal result. However, it is not practical and, counterintuitively, not necessary the ideal result for the entire portfolio.

In the graph above, the black dashed line represents an ideal portfolio curve (for a given business strategy profile) across ratings 1-5, with 1 representing a “high” designation and 5 representing a “low designation. Initially, you might think that every asset should have a “high” designation, or a rating of 1. That type of portfolio would be one-dimensional and would only be applicable to a one-dimensional business strategy. Since business strategies are necessarily complex aggregations of multiple, unique, heterogeneous factors that give strategic advantage (hopefully) to a company within its specific industry and market positioning, IP asset portfolios also have multi-dimensional characteristics that result in a breadth of ratings for different reasons. Thus, even though you would like to have every patent asset achieve the highest rating individually, you cannot lose sight of the necessity for a more sophisticated portfolio profile.

9. Integrated IP Strategy Alignment with Business Objectives

What is your company’s business objective—your most fundamental emphasis? No doubt you seek to do everything well, but when the hard decisions must be made, what is the leading objective that trumps all other considerations? Once you identify your primary business objective, you will be able to identify different IP strategies that align with and accentuate that objective.

Business objectives can be segregated into internal and external objectives. Internal objectives relate to the operational emphasis of your company, like the tension between innovation and operational efficiency. External objectives relate to the impact you create on your market—do your customers buy your product because it is the highest quality or the lowest price? Although this two-dimensional framework of internal and external objectives over-simplifies sophisticated approaches to strategy, it offers a good starting point for an initial assessment of IP strategy alignment.

Where do you really excel as a business from an internal perspective—what is your business known for achieving really, really well? Is your company focused on standardizing and cost-cutting operations? Or are you focused on providing the most innovative solutions to customers, even though innovative approaches are often less efficient from an operations perspective? Identifying your position on this spectrum will help you understand your operational leadership contribution.

Separately, from an external perspective—what do your customers feel is your greatest strength? Do they buy from you because you offer the most widely adopted product across industries? Do they think your product or service is the most customized for their specific needs? Or do they like your affordability more than the specific features of your product? Identifying your position on this spectrum will help you understand your market leadership contribution.

In some industries, business objectives are related to competitive advantages. Although there is a technical difference, a company’s competitive advantage usually directly correlates to its primary business objective. If you find that your IP portfolio doesn’t align with your competitive advantage, then it’s likely it doesn’t optimally support your primary business objective either.

10. Integrated IP Strategy through Cross-Functional Team Dynamics

Innovation teams usually include a mix of personalities, perspectives, and purposes. The mix, or heterogeneity, is what allows new ideas to incubate and cross-pollinate into inventions and innovations. But having a mix also creates potential for confusion, if team members are not aligned in their understanding and intentions with their intellectual property.

The role of creation refers to inventing new products and innovating new services and delivery modes for the customers. Exploitation can involve many different types of product uses of intellectual property assets. For example, internal IP assets can be used to support product sales or service delivery. External exploitation, in contrast, can including in-bound or out-bound asset purchases or technology licenses. The information role is often part of a feedback loop, in which managers or executives receive dashboard statistics about the IP assets and, in turn, provide further direction or vision to the creative team.

In addition to understanding these differences in roles, it can be important to create:

• ‘Safe Zones’ in which each role can operate effectively
• Tools to enable each role to perform
• Incentives for each role to promote the right types of activities

Equally important is the need to create a balance among the activities of these roles. The creation of IP assets without a corresponding level of exploitation becomes a financial drain on a company. Exploitation of IP assets without information from the executive team leads to unintended business models or, worse, a business model void. Likewise, the lack of information or direction provided from the executive team to the creative team leads to unproductive innovation that cannot be exploited by the sales team.

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Legal Disclaimer: This general information does not establish a legal relationship with any attorneys or law firm without a written and signed legal representation engagement agreement.