Intangible assets, such as intellectual property, can make up over 80% of a company’s value. However, intellectual property (IP) strategy has traditionally been left for the legal department and not well integrated into the rest of the business. A PwC report revealed that many senior leaders are aware IP is important—yet 70% of them treat IP as a legal issue. Changes are needed to help senior leaders and board members understand the importance of IP strategy.
I caught up with Marc Schouten, former Head of IP Creation and Strategy at NXP Semiconductor.
According to Marc, “protecting your product is not a good enough answer. The reason they [senior leaders] should look at IP is similar to why senior management look at supply management, HR, manufacturing and sales. It should be one part of everything else they are looking at.” But how can you explain IP strategy to senior leaders in an effective way?
Marc explains his 4-step approach for effectively communicating IP information and strategy with senior leaders.
- Speak their language
- Visualise important patent information
- Show how a good IP strategy can increase ROI
- Explain how your IP strategy compliments the company objectives
Speak the language of senior leaders
Most senior leaders and board members have a financial background and are looking for ROI. Explain the importance of IP strategy by translating IP data into their terms. IPC classes and other jargon won’t resonate with them—important parts of your IP strategy may be lost. Marc says, “Essentially you need to talk the language of senior leaders. You should stay away from the legal and technical terms such as scope of claims etc. It’s all nice and useful for your colleagues that are experts in the area, but senior management is looking for ROI. You need to translate IP in those terms.”
Explain how your IP strategy will increase the return of investment (ROI). If you’re discussing filing patents that fall under a different IPC, avoid explaining the technicalities—focus on what value the business will gain from doing so.
For example, instead of showing senior leaders a list of different IPCs covering technologies your competitors are filing patents in, you may want to simply explain that your competitors are diversifying their portfolio.
Visualise key patent information
Patent visualisation can help communicate large and complex patent information in an easily digestible format. According to the former director of IP at Nokia, Donal O’Connell, visualisations (in terms of IP risk visualisations) are good for getting important messages across to the C suite executives and allows them to prioritise and highlight appropriate risks for immediate attention. However, it’s important that you do not go into too much detail. Marc says, “I would say try to keep total information to senior leaders as limited as possible. If you go into too much detail you are losing the message. You need to explain things like ‘This is what we are doing. This is from a landscaping point of view. This is what we see that our competitors are doing. This is why we should change and get more aligned with our competitors so we are on a level playing field.’”
A simple example could be a visualisation comparing patents with your key competitors.
The image below is a landscape of Medtronic’s (red) and Boston Scientific’s (blue) patents. This visual format can instantly help you identify which technology areas your competitors are filing patents in that you aren’t.
Show how a good IP strategy can increase ROI
Explaining ROI of patents is challenging. You don’t have immediate proof of the ROI. It typically takes a year for a patent to be granted, and the return from protected inventions can take longer—usually 3-5 years.
However, patents can be useful for generating profits for the bottom line. Patents can be used for negotiations with suppliers and subcontractors, licensing deals or to attract investors. Explaining this is a good way to demonstrate how you can immediately increase the ROI with patents. Marc says, “A patent is expensive, you need to be able to make sure that it’s plausible that the investment will pay off. The main problem is proof. The other is the time scale… Why would we spend this money now while I may have some return 5 or 10 years from now?…You need to get buy in from senior management on a couple of ways on how you can use patents. Are you using it for licensing income? Negotiations with suppliers or subcontractors?”
IBM follow a similar strategy. They license some of their patents to get a high ROI. IBM’s aggressive annual patent licensing program gives them $1 billion per year—a recurring net revenue stream that goes straight to the bottom line. IBM would have to sell $20 billion worth of additional products each year to match the net revenue stream they get just from licensing royalties.
Explain how your IP strategy complements company objectives
A good IP strategy involves adapting to business objectives while increasing IP awareness throughout the organisation. Which means you need to align IP with business objectives. Business objectives of an SME may be different to the objectives of an enterprise size organisation. A start-up may want to attract investors whereas a more established company may want to diversify their offering—requiring different strategic approaches to IP.
Marc says, “If your approach would be to enhance the image of company to attract talent and investors, then a sizable number of patents might be okay. If you really want to protect a product, and don’t care about anything else, you probably can live with a small number of patents but they have to be very specific and well written.”
Effectively communicating how your IP strategy will help the business meet its objectives will result in buy-in from your senior leaders. If your business strategy is to out-compete another company, your IP strategy should reflect that. An example of this is when S3, a small chip design company, knew that Intel’s patent wall would eventually stall its high-performance graphic chip business. S3 needed a work-around to out-compete Intel. S3 fixed the problem by outbidding Intel to acquire the patent portfolio of Exponential Technology. In doing so, S3 obtained a patent that predated Intel’s Merced chip patents—a patent that could potentially hold intel’s next-generation processor business hostage. Intel were backed into a corner and had to cross-license its patents to S3 in exchange for the rights to that patent. S3 outsmarted Intel by having a solid IP strategy that reflected their company goals.
About Marc Schouten
Marc is the former Head of IP Creation and Strategy at NXP Semiconductor where he was responsible for the creation and maintenance of its IP portfolio. He successfully aligned NXP’s IP portfolio with the business and IP strategy and managed an international team of patent attorneys and patent experts. Marc also spent a large amount of time at Philips Intellectual Property and Standards, counselling various businesses on aspects of IP agreements, including M&A and litigation.
LinkedIn: Marc Schouten