Are You an IP Hoarder?

I think all organizations have intellectual property in some way, shape, or form.  Whether their big or small, for profit or non-profit, mom-and-pop shops to giant multi-nationals, IP is everywhere.  Even restaurants have their secret sauce.

Lots of companies recognize their IP and track it.  In fact, they track the heck out of it.  If the company acknowledges its existence, then there is a database and files somewhere.  Someone has a list of serial numbers and dates.

Some actually manage it.  The management team cares about IP and its impact on the business.  They have employee education and policies directed to protecting their IP in a bigger way.  They implement IP monitoring programs to manage risk.  The company looks for ways to use it to boost their business.  They set goals and metrics to see if they’re doing a good job managing it.

A few companies really use their IP.  They actively engage in intellectual property licensing and/or IP litigation activities.  They search out and stop counterfeit goods.  They work safely with third parties on joint projects.  These companies use their IP as a true business asset.  And let me be clear.  There’s a difference between using the technology disclosed in the patent and using the patent.

Unfortunately, most companies don’t move past the tracking phase in the IP Administration process.  Most organizations identify their IP pretty well.  They spend money protecting and tracking it.  And what does all of this lead to?  In the end, the company sits on it, filling filing cabinets with folders and paper, and databases with numbers and dates.

I refer to these organizations as ‘IP Hoarders’.  They systematically rack up big legal bills accumulating lots of patents and trademarks.  Then, they stockpile it.

They just don’t know any better.  These companies set out on this path long ago.  ‘I invent therefore I patent’ is their motto.  It’s what they’ve always done.  They honestly believe they’re doing everything they can (and should) be doing to protect their intellectual assets.  I think they would be surprised if I told them that they were doing only half the job.

If your business is investing its hard earned dollars into patents and trademarks, ask yourself: what are we doing with these assets?  If your answer is ‘nothing’ or ‘I don’t know’, then it’s probably time to take a hard look at why you are spending money on a business asset you don’t really use.  It might be time to review your current strategy and make some important changes.

If I compulsively spent lots of money on large amounts of stuff that I never plan to use and it clutters up my home, what would you call me?  A hoarder.  Well, what would you call a company that builds up its IP portfolio for the sake of simply having a portfolio?

You’ve got 3 guesses, and the first two don’t count!

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Avoid This Trap to Build a Strong IP Portfolio

It starts out fairly innocently.  You’re a start-up: 2 people with a great invention.  You want to protect that invention, so you call a patent attorney.  The patent attorney drafts and files a patent application and your company is off and running.

You start selling a product with a snazzy name, so you get some trademarks.  Your company is successful.  You grow.  You invent more.  You call your patent attorney more often.

Before you know it you’ve got 20 employees, some great products, and a small intellectual property portfolio.  And this is where you fall into a trap.

The trap is thinking what you have been doing to protect your IP is enough.  The trap is thinking ‘we invented, we patented, so we’re done’.  It’s the idea that all you need to do to create a strong IP portfolio is get the patent or register the trademark.  Like that’s all there is to it.  But there is so much more.

This is not a trap you want to fall into.  Protecting your IP is not an event, like ‘We got the patent.  Check that off the list.’  Getting the patent is the tip of the ice berg.

There’s a lot more to creating a successful IP portfolio than just securing patents and trademarks.  In fact, capturing your intellectual property is just 1 (out of 12!) component for maintaining a strong IP portfolio.  It’s actually #5 on my list!

So how do you avoid the trap?

The best way is to build a strong foundation for managing your intellectual property assets so that you can increase the return on the investment your making would be a good place to start.  (IP is a business asset that needs to be managed, remember?)

How do you build a strong foundation?  Implement the first 4 components of the IP in Focus IP Management System.

1.  IP Administration, Organization, and Budget.  At the start, you should decide what role IP will play in your company.  What do you want it to do for you?  What is the organization willing to do and who within the organization needs to do it in order to build a strong, successful IP portfolio?  How much are you willing to spend to make that happen?  You need to set goals, establish rules, and put the proper team together to make sure those goals are met.

2.  IP Reporting and Communications.  IP progress or setbacks must continuously be communicated to anyone in your organization that needs to know.

3.  IP Education.  You need to continuously tell your employees why intellectual property is important to you and your business.  Your employees need to understand what role they play in the IP process, and the rules they are expected to follow.  (Don’t assume they know.)

4.  IP Auditing.  You need a behind-the-scenes process that continuously identifies your intellectual property no matter where it resides in the company.

At some point, you need to move from merely capturing your IP to managing it.  Why?  Being more proactive allows you to get the most return on your investment in your intellectual property.

Capturing your intellectual property will always be important, but just capturing it will only get you so far.  As you grow your business, you need to change your behavior and approach your IP differently.

Be more proactive. Set IP goals, rules, and expectations, then work diligently to accomplish them.

The Last Refuge of a Troubled Company

There is an unfortunate trend in American business today. With yesterday’s news of the AOL patent auction, I can emphatically state that the last refuge of a troubled company is their patent portfolio. Kodak, Yahoo!, and now AOL are all leveraging their patents in an attempt to turn their fortunes around, increase their stock price, and get some much needed cash, be it through outright sale (AOL) or through patent litigation (Kodak and Yahoo!). Unfortunately, it’s a strategy that will fail. Not because their patent aren’t valuable, but because it’s too little too late.

In the latest incarnation of the trend, AOL sold 800 patents to Microsoft for over $1billion, and kept 300 key patents and patent applications for future use. The beleaguered internet company saw its stock price hit a 52 week high on the news. In a statement about the patent sale, AOL’s Chairman and CEO, Tim Armstrong, stated:

“We continue to hold a valuable patent portfolio…The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value.” (Emphasis added.)

Congratulations to AOL on finally realizing that their patent portfolio is a business asset, has value, and can be leveraged. In fact, good for them for leveraging it in such a way that they were able to sell off some of their chaff and keep some wheat. They now have cash and a better stock price today because they sold some patents, but it doesn’t fix their underlying problems.

Unfortunately, this sale didn’t really improve the long-term future of the company. As Ben Popper reported in Venture Beat:

“While it’s true that AOL still retained some patents and will be able to license them to other players, this seems like a one time deal that represents a large portion of the value AOL held in its patents. The emphasis on returning the money to shareholders seems to indicate that AOL is hoping to goose its stagnant stock price with the promise of a payout, giving Armstrong more breathing room as he looks to turn the media/advertising business around.” (Emphasis added.)

AOL has time and money, but will it get them a ‘product’ that people want to invest in? I mean, isn’t that the only ‘real’ solution to AOL’s woes?

Shame on AOL (and Kodak and Yahoo!) for not recognizing the value in their portfolio sooner! The truth is AOL needed to use its IP years ago when it still had the chance to build the business. Now it can only use its patents as a stopgap measure to boost share price in the short term. They’re too far down the proverbial rabbit hole for any patent to help them out.

The real inquiry is ‘what should these troubled companies have done with their patents’? Why weren’t they using their valuable portfolios already? Seriously, why wasn’t their intellectual property part of their business strategy from the very beginning?

Of course that’s a rhetorical question. I already know why. They only cared about getting the patents. No one told them that possessing patents isn’t enough. It’s how you use them that matters.

Could the fates of Kodak, Yahoo! and AOL been different had they leveraged their IP portfolios before the ‘writing was on the wall’? You can never know for sure given the multitude of decisions that go on in any company. Maybe at one time AOL could have used their patents to achieve their business strategy, and found success, but I think that time is over. Their patents can’t save them from their past mistakes and their lack of strategy.

UPDATE: On April 23, 2012, Microsoft announced that it sold some 650 patents and applications it acquired from AOL to Facebook for $550 million in cash. Facebook will also license the remaining patents (~275 assets) that Microsoft obtained in the AOL deal.

I Have a New Role Model

It’s Spanx Founder Sara Blakely.

What do I love about her?  Her passion for her “crazy idea”.  She lets nothing get in the way of building her business.   She learns what she needs to know to move her business forward.  She rolls with the punches.  She thinks outside the box.  She’s an amazing problem solver.  (Heck, that’s how she came up with a product that’s made her a billionaire!)  Her energy and spunk amaze me.   (If only I had half her gumption.)  She just has the right attitude to be a successful entrepreneur.  She is a great combination of a great idea, passion, and a willingness to just go for it.

Check out her story in these videos on Inc. Magazine’s website.  For those who are unfamiliar with her and her product, Ms. Blakely is a self-made billionaire (yes, that’s with a ‘b’).  She made her fortune selling her unique line of women’s shape wear.  I first read her story in an article in Forbes Magazine last month.  Then, I found the videos.

To top it off, she tells 2 great intellectual property stories on video 1.  First, she talks about how she wrote her own patent(!) and second, how she came up with the name Spanx.  She actually did IP research.  I just about fell of my chair when she talks about her experience on the US Patent Office website.  If only all entrepreneurs could be this IP-focused.

She inspires me to be a better business woman.

I hope you enjoy these videos as much as I do.

The First Step is Admitting You Have a Problem

I sometimes joke that my IP in Focus Program is a “12 step program for IP Recovery”.   The 12 parts all work together to turn an ailing IP portfolio around.   In the end, the organization has healthy IP and a custom-made management system ready to be leveraged when the time is right.

In any ‘recovery’ program, the first step is usually admitting that you have a problem.  Let’s look at some red flags that indicate that you might have an IP problem.

1.  You don’t have any (or not enough) intellectual property assets.  You know you should have filed that trademark registration, but you just haven’t gotten around to it.  You’ll worry about applying for that patent later.  Next time you update the website, you’ll tell the developer to add a copyright notice. If you are putting your IP off today, so you can deal with it tomorrow, you have a problem.

2.  No one is minding the store.  Someone in your organization will deal with an IP issue when it comes up, but there is no one person designated as the go-to IP guy or gal.  This can lead to red flag #3.

3.  You put an assistant in charge of your IP.  You put someone (an administrative assistant, engineer, property manager) in charge of tracking serial numbers and dates and other administrative tasks, but s/he has no authority to make decisions.  This often leads to red flag #4.

4.  You have trouble making IP decisions.  Your patent attorney calls and sends letters to remind you about upcoming deadlines, but you don’t answer them.  This usually happens because the person in charge of IP has no authority to make a decision and can’t get the real decision maker’s attention.  Unfortunately, you’ll probably be paying more money to the patent office to file that response because of it.  If you are guilty of #2 or #3, then you aren’t making quick decisions and it’s probably costing you.

5.  You haven’t thought about your IP in a long time.  If you only think about your IP when your attorney comes around, then you aren’t thinking about it enough.  And if you’re saying, ‘if my attorney’s not around, why should I think about it?’, then you definitely have a problem.

6.  You don’t actively monitor for infringers or search for opportunities.  You received your patent and your trademark, and you filed them away.  You think to yourself, ‘OK we’ve got our IP in order’, and go on your merry way without a second thought.  Stop wasting your money!  IP management doesn’t end when your patent is granted.  Some people might say that’s when the real work begins.  No one wants to go looking for trouble, but there are times that it’s better to find out that you have a problem, or an opportunity, sooner rather than later.

7.  You don’t have an IP policy.  If you don’t have an IP policy establishing your organization’s rules for controlling the intellectual property, then you are leaving your IP vulnerable to mishandling, misappropriation, and outright theft.  Just like other corporate policies, your organization needs to spell out the expectations it has for its employees when it comes to IP.  And the only thing worse than not having any rules is having rules and not enforcing them.

So, do you have an IP problem?

Why Do You Want to Protect your IP?

To all entrepreneurs and start-ups…to all research institutions and universities…to all high tech companies around the world…to all of the VPs, GCs, Directors, CEOs, Trustees, if you are on your company’s management team, what do you want your intellectual property to do for your company?  What’s the goal?  What do hope to accomplish in the end?

Do you want to license?

Do you want to give your knowledge away to the world?

Do you want to avoid risk?

Do you want to own your space, your market, your territory?

Do you (not) want to be a ‘bully’ or a ‘troll’?

Do you need money?  Respect?  Leverage?

IP can do a lot for your business, but you have to decide what you want it to do for your business.  Before we go any further, it’s time for you to turn inward and really think about what your IP is doing for you now, what it could do for you, and what you want it to do for you.  To do this, you need to know what assets you have, your markets, your risks, your competitors (and what assets they have), and yourselves.  You need to know what you value (and don’t value) as an organization.  Only with this knowledge can you properly manage your portfolio.

IP management occurs when an organization uses processes and systems to take charge of its patents, trademarks, copyrights, know-how, and trade secrets, allowing for their continuous and efficient capture, as well as their effective use.  You can easily capture IP, but in order to effectively use your IP, you need a goal to manage to.  Your goal will determine your strategy.  Your strategy will determine the tactics you choose to achieve that goal.

My goal is to get you to think about how you use your IP.  Too many companies feel the ultimate goal is to get the patent.  There’s a prevailing attitude that you must get a patent because you invented something.  WRONG!  You need to stop thinking about patents as an award for innovation.  Intellectual property protection is too expensive and time-consuming to waste your money on an award.  Intellectual property is a business asset.  What do you want that business asset to do for your business?

As you start acquiring and protecting your intellectual property assets, it is so important to know what your IP mission is.  Ask yourself, why are we pursuing patent protection?  If you are not clear about your objective, how do you know you even have the right IP for your business?

Choose a path.  Choose a direction.  Choose to use your IP.

Why Strategy & Tactics Ensure IP Management Success

“Strategy without tactics is the slowest route to victory.  Tactics without strategy is the noise before defeat.”  – Sun Tzu

I love this quote.  To me, it sums up everything that is wrong with the way so many organizations handle their intellectual property today.  A lot companies have patents (an example of tactics), but no strategy.  Too many organizations (I’m looking at you, university tech transfer offices) have a strategy (e.g. licensing their IP), but bad tactics.  Under Sun Tzu’s rule, the outcome is either drudgery or defeat, and neither outcome sounds good to me.

The good news is, with a good IP management program, both strategy and tactics can work together to achieve the desired end result.  IP management occurs when an organization uses processes and systems to take charge of its patents, trademarks, copyrights, know-how, and trade secrets, allowing for their continuous and efficient capture, as well as their effective use.

As I said in my recent blog post, there are 12 elements of a comprehensive IP management program.  Those elements exist in a definite order starting with the ‘The 4 Fundamentals’.  Without these 4 basic building blocks, you won’t have a foundation to build on to achieve success in the future.

‘The Fundamentals’ govern:

  • Who is in charge of intellectual property,
  • When and how IP needs are addressed,
  • Your IP message, and
  • How much it’s all going to cost.

In a nutshell, the Fundamentals are:

1. IP Administration, Organization & Budget.  This is where you establish your organization’s rules for intellectual property.  At the beginning, you must decide what, when, how, and why you do what you do with your IP.   Some of the actions steps you must take include: drafting your IP policy, establishing procedures and forms to capture IP, identifying decision-makers, and establishing a budget.  If you implement only one of the 12 elements in the program, this is THE one.

2.  IP Reports & Communication.  What message are you sending to your employees where IP is concerned?  The organization must communicate a consistent message that sets the tone for the internal IP discussion and sets forth what it expects from its employees to ensure everyone understands their role in the process.  This includes IP news, the IP policy, basic training materials, etc.

3.  IP Audit.  You cannot manage it, if you don’t know it exists.  All intellectual property assets owned or controlled by an organization must be accounted for and catalogued in a central data base.  It’s that simple.

4.  IP Education.  Everyone in the organization should have a basic working knowledge of what intellectual property is and what the organization wants you to do with it.  If employees are unaware of their IP obligations and responsibilities, they cannot participate in the process and IP will be missed.

If you master these fundamentals, you will improve the overall understanding of intellectual property throughout your organization.  This essential understanding ensures that everyone in your organization has a basic working knowledge of IP and knows what IP means to your business.  Implementing these 4 elements ensures that your strategy and tactics align for success.