Comprehensive intellectual capital management phần 6

144 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT The IP Audit and Portfolio Creation—Not a Legal IP Audit IP legal audits have been used for decades by organizations for a multitude of reasons, for exam-ple, due diligence, to check legal compliance, to discard unused IP, and as a form of stock taking for mergers and acquisitions. The difference of an IP audit performed for business, rather than legal, purposes is that the audit (or stock taking) is performed to assess the commercial value and competitive use of the IP by respective businesses. Another difference is that while an IP audit for legal purposes lists all forms of IP owned by an organization, a business-oriented IP audit collects information about the primary form of IP and is therefore patent, trademark, or copyright spe-cific. A legal audit lists all forms of IP and considers their legal status (e.g., expiration, licensed or not, registration and maintenance dates and fees, etc.). A business-oriented audit focuses on how the primary IP form is being used in relation to products, services, market segments, its con-nection to sales, whether used in a strategic alliance, and its expected (business) life cycle. We deal here with the business IP audit only. The audit is the preparatory step to creating the IP portfolio. It should reveal the potential uses of the IP for strategic purposes, whether to generate revenue or to strengthen a competitive posi-tion. To do that, information should be gathered from the various businesses regarding the use of IP in business, its current and planned use, and possible commercialization opportunities as well as threats from IP owned by others that may undermine its value. This data should then be used by the auditing group to create a portfolio that presents a bird’s-eye view of the strengths, weak-nesses, opportunities, and threats associated with the primary form of IP. In cases in which the organization competes through using more than one form of IP (e.g., some software and con-sumer products organization that focus on both patents and copyrights), a shadow portfolio should be created for the other primary IP forms, again with reference to their use in business. Chapter 13 provides guidance as to undertaking the audit and creating a patent, trademark (brand), or copyright portfolio. It should be mentioned here, however, that every portfolio, regardless of the primary form of IP, should include reference to trade secrets, that is, know-how related to the various IP in the portfolio. An IP portfolio provides insight in two major ways that are crucial for any IPM program under the CICM approach. First, they reveal the strengths and weaknesses of the current IP base of an organization, and hence provide a sketch of the organization’s competitive prowess. Second, they provide a preliminary assessment of the opportunities and threats that the IP portfolio poses for business management and growth. These two purposes should be kept in mind in creating the IP portfolio, and well before that, in designing the audit exercise. To that effect, the audit questions should uncover the current and expected uses that IP is being put to by the various businesses. This provides a preliminary assessment of its value for business and guides future plans. Dow Chemical followed this methodology in its audit of its 29,000 patents. The auditing team required every business to classify the patents they have under three groups: most valuable patents related to high growth business, patents that had no current or planned use but are still of value to others, and patents that are unlikely to be used. The first group was left for the business unit competitive purposes, the second group offered for licensing, and the last either donated or abandoned. The purpose of these and similar classifications is to facilitate IP portfolio management. In general, there are a number of guiding rules for portfolio management: • Leveraging strong IP • Combining weak IP with strong ones • Divesting low-performing IP, or donating it for nonprofit organizations to claim tax deductions20 THE INTELLECTUAL PROPERTY MANAGEMENT STAGE 145 The same rules apply to managing any IP portfolio regardless of the form of the primary IP. Proc-ter & Gamble’s (P&G) trademark/brand portfolio can be used for illustration. Following an audit of its brands, P&G leveraged strong brands like Crest and Tide by introducing a number of brand extensions, combined weak brands with strong ones (e.g., White Cloud and Charmin), and sold low-performing brands (e.g., Lava Soap). In addition to the general rules of portfolio management, there are a number of IP strategies that an organization can devise to utilize IP for competitive positioning and commercialization purposes. IP Strategies Defining the Focus of IPM Armed with the knowledge gleaned from the IP portfolio, top management should then formu-late the IP strategies to strengthen the organization’s IP portfolio in a way that enhances its com-petitive position and revenue-generation ability. Though there is some literature on the use of patent and branding strategies, there is no work that discusses the use of IP strategies for the dis-tinct purposes of competitive positioning and commercialization. Most of the literature on patent strategies focuses on whether to patent or trade secret and the countries in which to patent. Despite a number of recent books on the use of IP (meaning patents) strategies21 for competitive purposes, only slight mention was made of trademark strategies and none of copyright strategies. It is important for IP strategies to distinguish between the uses of IP for competitive as opposed to commercialization purposes, since the two are based on conflicting contentions. For competi-tive purposes, IP is used to gain entry into a market and prevent competition from securing a stronghold in a particular market segment, where exclusivity of use is the main enabler. Manag-ing IP for commercialization purposes, however, aims at offering it for use by others as widely as possible to generate revenue, hence the importance of providing guidance from the top on when and how to use IP for the conflicting purposes, and which purpose should be the strategic focus of the business unit and why. The CICM model incorporates the two types of IP strategies, referred to as competitive and commercialization IP strategies. The main goal of IP competitive strategies is to block competi-tion from undermining the organization’s competitive position, and from gaining a strong com-petitive position themselves, as well as to deactivate the competition’s IP-related competitive tactics. They are also used to carve new competitive positions where the organization can set new market standards, and thus mark out the rules of the game. While competitive strategies look at IP as a competitive weapon, commercialization strategies look at it as a business asset, and hence aim at investing in it to use it for revenue generation. How to cultivate and exploit IP as a busi-ness asset is the concern of IP commercialization strategies. It should be mentioned that although licensing is used as a tactical tool under competitive strategies (i.e., to create a specific effect), it is used more as a strategic tool under commercialization strategies, as will be explained below. IP strategies, whether competitive or commercialization, mean different things to different organizations, depending on the primary form of IP and the respective industry. Patenting strate-gies are intrinsically different from trademark/branding strategies, and both are different from copyright strategies. While patent strategies focus on technological wars, brand strategies focus on winning consumers through making promises, and copyright strategies focus on capitalizing on popularity of authored works. The same goes for commercialization strategies. Though all commercialization strategies are based on level of resource invested in pursing deals and oppor-tunities, they are operationalized differently, depending on the primary form of IP. That being said, I developed two blueprints that are used as the basis for competitive and commercialization strategies related to the primary IP form—be it patent, trademark, or copyright. 146 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT A BLUEPRINT FOR COMPETITIVE IP STRATEGIES—OF WAR Competitive strategies comprise the following: • “Design around” strategies create a number of IP rights around a major IP of the com-petition, in order to weaken the competition’s ability to use the IP as a competitive weapon. Also used to strengthen the organization’s bargaining power in cross-licensing or other IP-based transactions. • “Build a fortress” strategies acquire a number of IP rights around one’s own IP to create a strong competitive position and build a fortress that is hard for the competition to pen-etrate, hence preempting the competition’s use of “design around” strategies. These strategies always involve the aggressive use of litigation to deter competition from com-ing close to the “fortress.” • “Mapping” strategies map all IP activity in a certain market segment or field to map a road for developing new IP in a new area to secure market leadership. These strategies involve heavy reliance on competitive intelligence and overlap to a certain extent with the organization’s innovation strategies. As shown in Exhibit 8.1, while “design around” and “build a fortress” strategies are used in heav-ily protected areas and market segments, “mapping” strategies are used to find undiscovered ter-ritories where market leadership can be established. Below is a detailed account of how this blueprint can be used with patenting, branding, and copyright strategies. In addition, there is a competitive strategy that applies to all forms of IP: • “Value Transference” strategies are used to augment the competitive position or market share of the primary form of IP through the use of secondary forms of IP. This strategy A A A A A A A B A A A A A Design Around Mapping A A A A A A A A A A A – Organization B – Competition IP of others Build a Fortress EXHIBIT 8.1 Blueprint of IP Competitive Strategies THE INTELLECTUAL PROPERTY MANAGEMENT STAGE 147 leverages the competitive power of the various forms where value of the primary form is transferred to another secondary form to lengthen the business life cycle of the product. Patent Strategies—Of Technological Wars If patents are the “smart bombs” of tomorrow’s business wars, then companies that fail to develop offensive and defensive strategies for their use will do so only at their peril. —Kevin Rivette and David Kline22 Technological wars turned organizational patenting into a frenzy, with the most successful filing up to 5,000 patent applications23 and receiving over 3,000 a year.24 In 2001, the U.S. Patent and Trademark Office (USPTO) received a record 344,717 patent applications, a 21.4 percent increase over applications filed in 2000.25 A war it is, where patents are the most powerful com-petitive weapons. “What to patent” forms the core of the organization’s competitive strategy since it determines not only the areas in which the organization competes, but “how.” In the “how” lies the key to using patenting as a war strategy by deciding whether to design around, to build a fortress, or to map a technological road. Under “design around” strategies, patents are used to barricade the technological field covered by another. The key to these strategies is to spot the competition’s domineering patents and file for patents on improvements to it. The competition will soon discover that though it owns the domineering patent it cannot introduce desired improvements that are already patented by another. The competitive force of this strategy is that the owner of the improvement patents enhances its bargaining power and can force its entry into the market by forging an IP-based transaction with the market leader for a cross-license or a joint venture. Japanese companies used “design around” strategies in the 1970s to catch up with U.S. companies in certain technological areas, with demonstrable success.26 “Build a fortress” strategies can be used defensively to disarm the competition’s design around strategy by feverishly patenting around one’s own domineering patents. Offensively, these strategies are used to force competition out of the area by keeping ahead of the competi-tion in patenting improvement to one’s own domineering patents. Under this strategy an organ-ization should patent very heavily in the targeted technological area, making it nearly impossible for the competition to infiltrate the fortress. This not only secures its competitive position but also opens gates of opportunity where the IP can be leveraged to enhance a com-petitive position even further. An example is Dell Company, which obtained 42 patents to cover its business method of providing custom-built computers while keeping its inventory at a mini-mum. Dell leveraged this strong position in cross-licenses with IBM, giving IBM access to its method, while freeing itself from paying tens of millions in royalties for using IBM’s compo-nents27—a move that would have been impossible if Dell did not own every patent that can be owned to cover the business method. “Mapping” strategies are used in searching for the “largest” patent territory in an existing or new technological field away from all the patent empires and territories. This strategy is used when the organization wants to create another battleground (platform innovations) where it sets the rules of the game and defines standards. The use of patent intelligence tools are essential here as well as future scenario planning to enable the organization to anticipate future needs and trends. But beware of vanity—any technological position no matter how superior can be defeated if the owner does not succeed in making it a market standard. While ahead, the organization should license the technology widely to establish it as a market standard. Indeed, licensing to a network of suppliers and distributors should be part of the investment plan, under this strategy. An example is Sun Micro Systems’ offer of Java script for free, despite the hefty development 148 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT cost, to establish a network of users. A lucid demonstration of this also is the case of VHS and Betamax. While Betamax had a more superior technology for videotapes, it had a strict policy against broad licensing. VHS licensed its technology widely to manufacturers and had a wider market presence, which later facilitated the market’s adoption of VHS technology as the market standard.28 Savvy IP organizations use the three mentioned strategies in various combinations to create a set of defensive and offensive competitive tools. An outstanding example are the patent strategies developed by Ronald Myrick, General Electric Chief IP Counsel, as a guide for the patent depart-ments and attorneys at GE to strategize the use of patents both defensively and offensively. Myrick defined four patenting strategies29 for GE where patenting strategies are utilized as busi-ness strategies for patent-intensive businesses. These four strategies are 1. Benign neglect 2. Live and Let Live 3. Freedom of action 4. Exclusion Benign neglect strategies are based on an assumption that the technology can be licensed in, if and when needed. They are used in cases where the prospective invention is of no strategic importance for the concerned business. Under these strategies, however, patents may be filed for such inventions to avoid a turn of luck, lest unexpected market changes give the invention added significance. Live and let live are largely defensive strategies where patents are “secured to be placed on the shelf” just in case they are needed. They can be used defensively whenever the competition poses a threat to the business’s competitive position, by threatening one of its patents or products. Freedom of action strategies, in contrast, involve broad patenting activity in many technolog-ical areas, in order to license them out or use them to leverage the position of the business in cross-licensing or joint venture transactions. As such these strategies use patents as competitive tools to force entry into new markets. The use of these strategies requires strong competitive intelligence to assess the direction of the competition. Exclusion strategies are purely offensive and are used to secure strong competitive positions in defined market segments. Under these strategies, licensing the technology out is discouraged, at least until a strong competitive position is established in the market. The main motivation for this strict exclusion is to provide price sup-port to the products of the business, or at least add cost to competitors. Myrick explains that patents should be managed as a business, and hence the patent strategy chosen should both support and be aligned with the competitive strategy of each business unit. Thus, variations and combinations of the four and other strategies are to be used in devising the competitive strategy according to business needs. Now let’s see how the competitive IP strategies blueprint translates into branding strategies. Trademark/Branding30 Strategies—Of Wars Over Consumers’Hearts Fighting brands can be meant as warnings or deterrents or as shock troops to absorb the brunt of a competitive attack. They are also often introduced with little push or support before any serious attack occurs, thereby serving as a warning. —Michael Porter31 Equally effective in competitive wars are branding strategies, but the war is of a completely dif-ferent nature. It is not about technological supremacy and patent “lands,” but about promises and ... - tailieumienphi.vn