Can your board articulate answers to these questions about IP?


Can your board articulate answers to these questions about IP?

We regularly hear that modern businesses are based on intangible assets, with as much as 80% of company value coming from intangibles. Yet most IP is not reflected on the balance sheet, and so the dilemma drives CEOs and boards to focus on the “old” metrics of tangibles, potentially neglecting what drives the business.

Boards should therefore at least be able to clearly communicate answers to the following questions:

  • How does our IP contribute to P&L?
  • Are we using IP to protect our investment in R&D and new product developments?
  • How does our IP strategy protect our position for today and tomorrow?
  • Do we manage IP risk sufficiently well, and are we prepared to react to threats and opportunities?

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Linking IP to P&L

Does your business understand how its IP contributes to the P&L? Implicit in this question is do you know what IP you own. Do you have a record of patents, or an IP register? Do you have a register of trade secrets? Do you have a database of know-how?

If you do keep your own registers, do you know when the business last performed an IP audit?

An IP audit in itself is unlikely to provide any business benefits. Unless you’ve categorised those into core, non-core, not-used; created a monetisation strategy for the non-core, allowed some to lapse, licensed or sold others, then it’s a passive list.

The results must be used for something, whether that’s identifying gaps in existing portfolios or risks from competitors, or establishing a monetisation programme to sell unused / non-core assets.

Are we using IP to protect our investment in R&D and new product developments?

How do you know that the IP you have protects your investment in new product development? Unless links are formed between R&D and IP which are actively managed and tracked it is likely that as product developments progress gaps will inevitably form between the state of the IP and the R&D. These gaps will become risks to the product and the business is not managed.

Do you understand how you can use IP to influence relationships with suppliers, customers, and competitors?

Placing a value on your IP allows you to use it as leverage in commercial negotiations with suppliers and customers. IP valuation is an art not a science, but having no concept of value exposes the business to lost opportunities where IP could have contributed.

How does our IP strategy protect our position for today and tomorrow?

Understanding your own IP and that of the main players in the landscape gives you valuable business intelligence to spot trends, to identify weaknesses and to build IP ahead of product roadmaps – maximising the value from your R&D. You should be regularly asking yourself questions like:

  • Do we have an IP strategy? When was it last reviewed, and by whom?
  • Do we make financial provisions for new business cases for future licensing costs?
  • Do we understand the IP landscape in which we operate?
  • Who are our real competitors and where do the IP threats come from?
  • How do we plan to mitigate / manage these risks and opportunities?

If you’ve not asked yourself all of these questions recently, or can’t reach for the answer, it is probably time to do so.

Be prepared to react to threats and opportunities

It is impossible to develop modern, complex products without infringing IP. The key challenge is to understand who owns that IP and what they will do with it – this is IP risk management.

As a business you must be able to quantify the IP risks associated with your products. Include IP risks on your risk register, and actively manage them.

It is inevitable that you will have gaps in your own IP as both the IP landscape and your own product / service portfolio moves forward. Such gaps may represent threats of assertion from competitors; or they may represent opportunities to acquire IP from third parties.

When faced with opportunities such as technology transfer, technology licensing or acquisition you need to understand your appetite for such ventures. Knowing before hand how to value IP and how to qualify acquisitions will let you make informed decisions based on consistent approach.

A full and clear view of the IP landscape in which you operate allows your business to develop contingency plans based on an understanding of the associated risks. IP audits, patent landscaping, competitor analysis, IP strategy development are all useful tools, but we believe they must be deployed in a manner that ensures they are fully aligned with the business strategy and product roadmap.

IP must not be dealt with as a parallel activity, void of context, and for this reason we encourage C-level engagement with the topic. Cubicibubc regularly runs training and awareness seminars to build a common level of understanding with senior decision makers. If you think you need to look more closely at your IP, and would benefit from expert support please get in touch.