Are you ignoring your 'IP Customers'?

Innovation is the creation of better or more effective products, processes, services, technologies, or ideas that are accepted by markets, governments, and society. A lot of the innovation is brought about by entrepreneurs. Entrepreneurs need to constantly innovate to be ahead of the competition and deliver improved solutions in a more cost effective manner to be ahead of competition. Innovation refers to the use of a new idea or method, whereas invention refers more directly to the creation of the idea or method itself. Inventions are fuel for innovation. Inventions are intangible when they are not converted into products or services, but invention typically precedes innovation.

The value of innovation is realized for customers through the tangible and intangible benefits of products or services they purchase, and the value of innovation is realized for entrepreneurs through their business model. The value of inventions can be realized either by converting them into innovation by delivering products or services that are valuable to customers, or by licensing them to other companies or organizations that will convert them into innovative products and services.

The first option is preferred by companies that have the capability to capture the market on their own throughout the cycle by investing in Research, Development, Product Management, Manufacturing, Distribution, Sales & Marketing etc in various markets worldwide. Smaller companies or startups often lack the capability to handle all of the above. Even if they are able to complete the cycle in one market, they lack the know-how to succeed in another market (e.g., in a different country). In a global economy, it is common for products to be conceived and developed in one country, manufactured in another country, and sold in various other countries.

For startup companies with innovative technologies and business models, their main value (about 70%)lies in their Intellectual assets. If these Intellectual assets are protected and licensed in various geographies, they become sources of revenue to their creators and owners. If these Intellectual assets are not protected, they become sources of revenue for competitors who copy and use them without having to compensate the creators or their employers. Time and money invested on identifying, developing and securing an intellectual asset is like time and money spent on identifying, developing and securing your product. Both investments help you acquire paying customers and generate revenues. Remember, if you do not value your IP sufficiently to protect it, you cannot expect your employees and your customers to value it either. Your competitors will try to hire your 'star' employees by offering them more money. Your customers and competitors will learn from you and your customers will switch to a competitor who can provide what you provide at a lesser cost (since the competitor did not have to invest time and money in creating intellectual capital).

Companies that use the Intellectual assets that were created or developed by other companies are 'IP Users.' When the IP is protected, the 'IP Users' can be made to acquire licenses and compensate IP owners. Thus, the 'IP Users' become 'IP Customers'. Otherwise the 'IP Users' would be making, using and selling products that incorporate Intellectual assets for free. If you do not give away products or services for free, why give away your IP that was created with substantial effort and cost? Make your 'IP Users' your 'IP Customers' by protecting, marketing and licensing your IP. Don't ignore your 'IP Customers', instead target them and cater to their needs just like other customers. You can get away with giving away your product for free for even a year, by charging after that, but once you have given away your IP for free (by publishing it or by making your product publicly available), you lose the right to patent it. Thus, your 'IP Users' will never become your 'IP Customers' because they already have access to your IP and they can use your IP for free.

Even competitors can be 'IP Customers'. Microsoft is making more money from Android phones than from Windows phones, thanks to patent licensing. For example, Microsoft will generate $444 million in revenue from Android patent deals for fiscal year 2012 (started in July 1, 2011, ends June 30, 2012), according to a note from Goldman Sachs's tech analyst team. Goldman estimates that Microsoft is getting $3-$6 per Android device sold from Samsung, HTC, and others. Microsoft made $15 a unit for every Windows Phone sold during the second quarter, with 1.4 million units sold. That comes to a grand total of some $21 million in revenue. Even though Microsoft only makes $5 for every Android phone sold by HTC, with 12 million units sold the company walked away with $60 million. The numbers may be a little off, due to the fact that analysts have previously suggested HTC sold 12 million devices total in Q2 (not just Android phones). Nonetheless, the numbers are huge. Even if all the Windows Phone devices sold were from HTC, that would still mean $5 a unit for over 10 million units sold–leaving Microsoft with $50 million in revenue from Android phones, or $30 million more than what the company made from Windows Phone.

World IP Day

World Intellectual Property Day is observed annually on April 26. The event was established by the World Intellectual Property Organization (WIPO) in 2001 to raise awareness of the role of intellectual property in our daily lives, and to celebrate the contribution made by innovators and artists to the development of societies across the globe. April 26 was chosen as this was the date on which the Convention Establishing the World Intellectual Property Organization entered into force in 1970. This year, in 2010, the theme is “Innovation - Linking the World.” On world Intellectual Property day 2010, it is again time to remind ourselves that:

Intellectual Property is an asset – An asset is something that puts money in your pocket. Protecting your IP is like protecting your land, cash, or jewellery. If you don’t invest in protecting it, it can be lost or stolen.

IP is intangible, but most valuable – You cannot touch or feel your Intellectual Property the way you can touch your building or furniture, but products of the mind based on creativity and innovation create maximum value (70%-85% of the value of corporations, depending on which report you read) for businesses worldwide.

The IP system is not only for inventors or innovators – If you have a technology or business problem and you are looking for an innovative solution, someone else anywhere in the world might have already devised a solution. Moreover, that solution might be published in a patent document and searchable on an electronic database on the internet. If it is not protected in your market (country) of interest, you can use the solution for free.

Even a simple non-technical idea can lead to a valuable patent – You need not be a domain expert in a particular technical field to come up with a breakthrough invention. If you think differently from how a typical person from that field would think, you are more likely to arrive at a non-obvious invention that will make a product more commercially viable.

You do not need to commercialize your invention yourself to monetize it - You can take the assistance of domain experts, designers, investors, mentors etc. There are companies to whom you can even outsource your prototype development, and government funds are available. However, before you can partner or collaborate with these people, you have to protect your rights so that can focus on sharing, developing and marketing without worrying about your rights being stolen.

IP is not just for the lawyers or legal department – IP is first and foremost an asset and IP rights are first and foremost a business tool. Trade marks enhance the uniqueness and exclusive value of brands and prevent dilution. Patents provide competitive advantage and increase profit margins. Business, technology and finance persons need to understand the basics of the IP system to leverage it, and not just leave all IP related decisions to the legal folks.

IP is a great career – A career in Intellectual Property is intellectually stimulating, challenging, as well as rewarding. People with a technology, business, or legal background can switch to a full time career in Intellectual Property, which requires skills from all of these. The demand for IP experts is rapidly increasing, and there is a shortage of qualified and experienced professionals who can deliver. IP related jobs are available in companies, outsourcing, law firms, and consulting firms. There is also scope for entrepreneurs to enter this developing field and create value.

Strategic Patent application preparation and filing

The factors that go into the preparation and filing of a strategic patent application include

1) Awareness of the state of the art

2) Analysis of competitors patents, products and initiatives in various markets

3) Identification of strategic patentable features to be covered in the patents

4) Preparation of the patent applications based on the above in the legal language with necessary technical details

5) Preparation of formal drawings that comply with patent office regulations to avoid subsequent penalties and delays from the patent office

6) Preparation of required forms and computing the fees to be paid to avoid subsequent penalties and delays from the patent office

7) Filing the patent application in person with fee at the concerned patent office of jurisdiction

Benefits of strategic Patent Protection

The benefits that companies can derive from strategic patent protection, include

1) Protection for the invention by securing priority date
2) Confidence in disclosing to 3rd parties – clients, business partners, investors (with or without NDA)
3) Enhanced Brand image
4) Enhanced Valuation of company
5) Licensing revenue
6) One time sale – Assignment
7) Competitive edge
8) Security from potential lawsuits, bargaining tool in licensing or litigation negotiations

These benefits can be realized only if the patent is prepared and filed in a strategic, detailed and timely manner. The process of patent application preparation has to be based on a thorough application of technology, legal as well as business concepts to provide the above mentioned benefits.
The patent contains technical information and drawings, is drafted in legal language, and is leveraged as a business tool for competitive advantage and licensing revenues.

Intellectual Property - A Career

One of the questions that I am asked often when I introduce myself is, why and how did I choose a career in Intellectual Property (IP). Perhaps the origins of my interest in IP lie in my interests in law. While at college, I noticed that while my skills in my subject of specialization (Chemistry) were about average in class, my other skills such as written and oral communication, debating, making presentations, intrapersonal and interpersonal skills etc were substantially better than average. Also, on being exposed to the USA, I found that law is a highly respected and economically viable profession, as compared to engineering and science. All this made me think seriously about a career in law in the USA.

Further, among the various specializations in law, I thought that Intellectual Property was the only one in which a degree in science or technology would be a major advantage, and not just an additional paper qualification. Typical choices that were available to me on graduation included further studies in the same subject (usually in the USA), a job through campus placements (usually in software), and further studies in management (by appearing for entrance exams). I chose not to opt for either of them, as a conscious choice. Instead, based on a recommendation from my guide who I worked with on my Masters thesis (the convener of the patent committee), I joined the division that handles IP (among other things) at the university. As such, I did not get much training on IP (or salary), but the job gave me some confidence (that I could learn on my own) and exposure.

As a student from a reputed institution where grads are assured of jobs with high salaries, working as a research assistant (very much like an intern) was not easy for me to digest, especially when my (less talented) peers were earning much more. But I told myself that I could either have a sustainable career in my chosen field (Intellectual Property) OR a high-paying job, but not both (at least not right away).

There are some fields that require analytical skills, not much specialized knowledge, and minimal training (e.g., software and KPO). Fresh graduates from reputed institutions can easily find high paying jobs in such fields and continue to grow further (just based on their analytical skills or on newly acquired management skills) without investing in acquiring specialized knowledge, however IP is not one of those fields. Without specialized knowledge, one can get a job (even a high paying one) related to IP, but not sustain a career, as the lack of specialized knowledge leads to stagnation in the (initially) high-paying job. Some of the requirements to build a sustainable career in IP (particularly patents) include
1) The ability to grasp new technologies and applications quickly
2) Excellent written communication skills
3) Ability to understand laws, read bare acts and rules and apply them in practical situations
4) Interpretation of techno-legal documents
5) Thinking and reasoning like a lawyer (which is different from thinking like a scientist or engineer)
6) Analytical skills (particularly in patent analytics)
7) Reading comprehension (including ability to discriminate between relevant and irrelevant)
8) Attention to detail
9) Training by an experienced IP professional
10) Practical experience to realize and internalize the training

Among these requirements, the ones that can make the maximum amount of difference to an IP career are 9 & 10, namely training by an experienced IP professional and practical experience to realize and internalize the training. 9 & 10 can save several years of struggle for entrants to a career in IP, and even help cultivate 1 to 8 quickly. To illustrate this point, US patent attorneys who possess all qualifications on paper (degrees in engineering + law + maybe management + passing the patent bar exam and being registered to practice before the USPTO), may have a hard time finding a job. However, once they acquire about a year’s experience with a reputed firm, they are offered six figure salaries. The difficult part is getting that one year experience in that first job with a reputed firm without any relevant job experience.

The only route to getting that first job with a reputed firm that can provide 9 & 10 is internship (to work for substantially less pay) and train under an experienced IP professional. Most experienced IP professionals are reluctant to provide training on the finer aspects of patent prosecution to others, as the training is the distinguishing factor between IP professionals. I happen to be one of those rare and lucky individuals who got training from a US patent attorney who has worked at the top US patent prosecution firms, as well as practical experience in prosecuting US patent applications at a US patent law firm, while working from India. I intend to provide opportunities to select candidates to receive that kind of training, which will enable them to create a sustainable career in IP for themselves, through internships.

IP Services - an overview

IP services are traditionally perceived to be only in the domain of legal services. Even today, legal services continues to be a primary and essential aspect of IP services, however in addition, there are other services that include:

1) Research and analysis
2) Training
3) Business consulting
4) Miscellaneous support services

Of these 5 types of services, the business consulting and training targets companies that do not have strong in-house IP teams or that do not have local IP personnel at R&D centers. The legal services and research and analysis target companies with as well as without in-house IP departments. The miscellaneous support services target companies that have established IP departments, but which prefer outsourcing specific functions.

There are various types of firms that address one or more of these services, to different levels of focus, quality, and efficiency. Given that IP services is a very specialized field and that IP is critical to technology companies, quality is of paramount importance. To maintain quality in a specialized field, focus is essential. Also, costs (without compromising on quality) should not be prohibitively high, hence efficiency is required. Some of the types of players in the IP services market are:

KPOs – They are not focused on IP. For these companies, IP is just one of the things that can be done at a lesser cost in India. Their services are restricted to those that can be done in large volumes by engineering graduates fresh out of college with little or no training (e.g., patent search). Lack of legal expertise and inadequate training leads to poor quality. They are run by business savvy people, and may be efficient due to segmentation of groups focusing on particular tasks and technology areas. However, in IP services, the cost of quality tends to be much higher than temporary savings from efficiency.

LPOs – These provide a wide spectrum of legal services at lower costs than foreign law firms, of which IP is just one, hence the focus is not there. They have a team of lawyers who work on non-IP matters, but the IP work that is outsourced to these LPOs is done by engineers, who are mainly fresh graduates or those who have previously worked with KPOs. Quality of work might be marginally better than KPOs; however, their business focus is on the cost arbitrage and not on value addition through IP services.

US patent law firms with presence in India – These are highly focused on US patent prosecution. They provide only legal services, and act as external service providers only. Their quality of work in US patents is much better than that of KPOs or LPOs. They are led by US patent attorneys, who have degrees in technology as well as law, and are among the most qualified and highly paid IP professionals. However, they have had limited success due to inability to significantly take advantage of their India presence, and scale their operations utilizing the Indian talent pool. The India team of these US patent law firms is trained by the US patent attorneys to handle support services such as detailed description writing and patent illustrations, however the legal aspects (claims writing) are done by the US patent attorneys themselves. This model requires a US patent attorney for every 3 engineers, and is not scalable due to the difficulty of getting US patent attorneys to live and work in India. Patent engineers that do get trained by US patent attorneys to prepare high quality US patent applications have a restricted career path, unless they themselves become US patent attorneys. Since they are already capable of preparing high quality patent applications, they can choose positions from various in-house positions or IP services companies that have a large demand for people (US patent attorneys or not) who can prepare high quality patent applications. Hence these US patent law firms have a high rate of attrition among patent engineers that keeps them from scaling operations and increasing efficiency. Also, being law firms, they have various restrictions and cannot be run like a pure business like other IP services companies.

Indian IP law firms – They are focused on IP law. Their work quality may be better than KPOs and LPOs, but not as good as US patent law firms. They provide only legal services, act as external service providers only, and do not provide support services. Also, they have restrictions from the bar council on promoting their business. They face the same attrition problems from patent engineers and agents that are faced by US patent law firms due to restricted career paths for non-lawyers.

IP services and consulting companies – These companies are neither law firms, LPOs, KPOs. They may have been started by patent agents, lawyers, or combinations of these. They have the potential to be run like pure businesses, providing a wide variety of services such as research and analysis, IP training, Business consulting, and Miscellaneous support services. However they mainly focus on one or two for which they have the capabilities, such as training and support services. They do not provide legal services, which is a primary and essential aspect of IP services. Unless their personnel have received training in best practices of US patent law firms, they have problems with maintaining quality.

In-house v/s Outsource

Technology Companies require IP professionals (in-house or external) to execute various aspects of their IP Strategy, such as product clearance, identifying and cataloging ip assets, ip creation, protection, maintenance,management, licensing and enforcement. Further inputs from IP professionals may required for business intelligence, through a patent landscape, competitor patent analyses etc. Also, research may be optimized based on analysis of the state of the art and identifying gaps for potential IP creation.

Thus IP Strategy and management is a complex job, and requires a substantial budget. Given a particular IP budget, how can a technology company derive the maximum benefit from it, and utilize it most efficiently?

The budget may broken down into mainly:
1) Salaries and benefits of in-house IP personnel
2) Consulting and service charges of consultants/service providers
3) Official IP registration, prosecution and maintenance fees

Then comes the question - which IP functions can be performed in-house and which can be outsourced? The costs associated with having an in-house IP team include recruiting, training, managing, and retaining. Further there are additional allowances such as for insurance, PF, health etc. Some of the types of IP professionals are:

1) Patent Attorney - Has at least bachelors degrees in science/engg as well as law (L.L.B). Is a registered patent agent, as well as a member of at least one state bar, and has experience to handle patent litigation before appellate boards and courts.
2) Patent Agent - Has at least a bachelors degree in science/engg, and has passed the qualifying exam conducted by the Indian patent office to be listed in the register of patents. Does not have a law degree, but is qualified to handle patent drafting, filing, and matters before the patent office related to obtaining patents, as well as legal opinions on matters concerning validity and infringement of patents
3) Patent Paralegal – May have a degree in law, but not necessary. Handles correspondence with the patent office in various IP matters, maintains records and status of IPRs (docketing). Also may do transcription.
4) Patent Analyst – Typically has a science or engg degree – Is trained in performing patent searches (e.g., patentability, invalidity) and analyses (e.g., competitor analyses, claim charts). Also is skilled at reading and understanding patent documents.
5) Patent Engineer - Typically has a science or engg degree – Is trained to draft detailed descriptions, summary and abstracts of patent applications. At an advanced level, may also draft claims and architect figures under supervision of a patent agent/ attorney.
6) Patent Illustrator - Typically has a science or engg degree, and is skilled at using software such as MS Visio, Corel Draw, and Auto CAD. May have taken a course in technical drawings. Has a working knowledge of patent office rules on drawings, and the types of rejections of patent drawings. May be trained by a patent agent/ attorney in complying with patent office requirements.
7) IP Lawyer - Has at least a bachelors degree in law (L.L.B). May have specialized in IP through diploma courses or an L.L.M in IP. Has experience in drafting IP licensing, technology transfer, open source, employee, confidentiality etc agreements and contracts. Handles registration of copyrights, trade marks etc, appears before the IP office, as well as does litigation in various IP matters.
8) Trade Marks Agent - Has a bachelors degree (in any discipline) and has passed the qualifying examination conducted by the Trade Marks office. Handles registration and prosecution of trade marks.

Different IP functions require different levels of expertise, and are linked to different levels of qualifications and compensation packages. Each type of IP professional does a certain type of IP work, and has a different compensation level. A particular IP function may require a combination of two or more IP professionals of different types woking together as a team to be performed efficiently.

The question is - Does a technology company (whose core focus is technology) have the time and money to hire, train, manage,and retain a cross functional IP team? However big the technology company, it is not their core expertise to recruit, train, manage, and retain a cross functional IP team of various types of IP professionals.

Further, the main challenge even for such a cross functional IP team is to influence the management (help make business decisions), and align IP efforts to business objectives. This might be too much to ask from even an in-house team of patent agents, attorneys and various technology specialists, who do not receive this kind of training from their education, or even from their experience in law firms or LPOs.

Coming back to the question of what IP functions are to be performed in-house, and which ones to be outsourced - The strategic aspects should be done in-house, and the remaining support services (patent prosecution, litigation, illustrations, docketing, searching and analysis) should be outsourced. The strategic aspects should be handled by a competent in-house IP counsel, who is part of the management itself (a Chief IP officer), and not just from the legal department. However, in the absence of a specialist Chief IP Officer, the management itself should collectively take on this responsibility with the assistance of an external IP strategy consultant.

5 worst IP mistakes made by technology companies

1. Incorrectly estimating that IP does not qualify for protection

If you are in the business of technology, your most valuable assets are perhaps your team, and the Intellectual capital developed by your team. Any material developed by your team during the course of their employment, including product specifications, software, processes, manuals, presentations, logos and content is your proprietary IP, which can be protected as patents, copyrights, trade marks and trade secrets.

Even in the event of critical team members leaving your organization, the IP created by them during the course of employment belongs to you, and if you do not identify, catalog, and protect it, it is lost.

The requirement for an Intellectual asset to qualify for protection, and the scope of the protection that can be obtained is often not estimated best by Intellectual asset creators, who tend to focus on technical issues. A skilled IP strategy consultant who places the business strategy first can identify and obtain a broad and high level of legal protection for often overlooked technically non complex improvements that, however provide a competitive advantage for your company, and are hence worth protecting.


2. Not having an adequate budget for IP

One of the worst mistakes that companies can make related to IP is by viewing IP as a cost, while it is an asset. If IP is not identified and protected early on, as soon as it is generated, it is lost. IP is like part of the family for an organization, and the cost of losing overlooked IP is typically much greater than the investment of identifying and protecting it. IP can be lost by

a. Not identifying IP, or identifying it after it is too late to protect.
b. Incorrectly estimating the value of the IP
c. Incorrectly estimating the scope of protection that can be obtained
d. When critical team members leave the organization, they take their IP with them, unless they were encouraged or given incentives to disclose, document, protect, and assign the IP during the course of their employment as part of the company IP policies.

Not devoting sufficient time and money to IP that belongs to your company is like not devoting sufficient time and money to members of your family. IP that is not protected and utilized is lost.

3. Not taking IP into account (own IP as well as IP of competitors) in business strategies and plans

Every company has a strategy for meeting business objectives such as securing a competitive advantage in the market. The top management is typically occupied with finance, marketing and operations strategies to reach out to a wider market, improve productivity, and cut costs, so that they can compete better in the market and increase sales and profits. Barriers to entry such as distribution of market share, and economies of scale are considered into building a business strategy, but even IP can be a barrier to entry. Entering a new market without awareness of the existence of IP belonging to competitors and a strategy to overcome potential barriers due to IP, can be disastrous. Also, other business models that can generate revenues on their own that are possible only due to IP are often overlooked.

4. Regarding IP as solely a function of the Legal Department or Service Provider

Often, when companies start out, they are busy with developing products or delivering services, marketing and sales. And they do not bother about IP until they reach a certain size, and their further growth is restricted, or their business is threatened due to some legal issue relating to IP.

Then they look to their own internal legal department, or an external legal service provider to start filing for patents, trade marks etc as a defensive strategy and preventive measure. When this happens, the options of the legal service provider are limited by the immediate requirement (which is often to file a patent before a specific bar date) and there is little time to think of a strategy beyond the short term.

Due to time restrictions, the legal service provider (however qualified and skilled) can only do the basic minimum of filing and obtain a patent issued within the stipulated time. However, the value of such a patent, which is drafted and filed without a strategy, is limited even as a defensive tool.

IP is a core function of the management and not the legal department. Decisions relating to IP should not be left as default to the legal department or the legal service providers, who can only do the bare minimum due to time and budget restrictions.


5. Not having a Global IP strategy

Whereas it is usually best for a company to first serve the local market before entering other markets, when it comes to IP protection and commercialization, this may not be true. Currently, the maximum value for IP can be obtained by obtaining IP protection in countries such as the US, European countries and Japan. Whereas Indian law may require a patent to be filed first in India (unless permission to file first elsewhere is applied for and granted by the Indian patent office), International treaties such as the Patent Cooperation Treaty (PCT) make it easy to simultaneously designate multiple countries and buy time to file for patent protection at various countries.
Even if your company is not planning to launch your products or services in other countries, obtaining IP protection in these countries helps you obtain additional revenues by entering into licensing agreements with foreign companies or subsidiaries, and earning royalties.
It is critical to have a global strategy even while filing for an Indian patent or a PCT application, if it is to serve as a priority document for US or European applications. It may not be allowable to amend poorly or narrowly written claims later, and what is patentable subject matter in one country may be not be patentable in another.