In today’s business and technology climate, many companies have experienced a value shift from tangible to intangible assets. From the C-Suite through engineering and beyond, innovation has become the driving force and companies are leveraging their intellectual property (IP) like never before.
Rapidly growing domains such as artificial intelligence, blockchain and the Internet of Things have seemingly unlimited potential and scale. Companies are realizing the rewards of these innovations which can include rapid revenue growth, significant competitive advantage and market domination.
At the same time, the core ideas behind these innovations need to be protected. Capturing and leveraging these assets has become critical to industry leaders and to those entering the market. In the United States, utility and design patents, copyrights and trademarks are some of the key tools to protect various forms of intellectual property. Each of these entitles inventors and owners of IP with rights to prevent or enforce penalties on those who infringe upon them.
To patent or not to patent?
While these protections are essential, they have limitations — for example, a utility patent has a lifespan of 20 years. That may seem like a long time to have a protection over an invention, especially in the context of technological development, but there is a tradeoff with public exposure. Once submitted, a patent application will be made public within 18 months. This provides potential competitors with information around which they can innovate.
Consequently, sometimes it is a better business decision to keep an idea confidential, rather than to seek out legal protections for it. Such trade secrets, broadly defined as confidential business information that provides a competitive advantage, are an alternative to publicly sharing ideas. They can include inventions, processes, strategies and even lists of suppliers and clients. There are “well-known” trade secrets for everything from Internet search algorithms to soft drink recipes.
IP risks and challenges
Companies can reap the benefits from IP assets, but along with these rewards comes increased responsibility, complexity and risk. For example, deciding between a patent versus a trade secret is rarely a simple “either/or” choice, and must be made in the context of an overall IP strategy. Moreover, both local (e.g. United States) and international IP laws may need consideration.
Unfortunately, many organizations, lack a clearly defined a strategy or guidance for managing intellectual property and trade secrets. Employees may be unaware of IP, its role in the organization and what is expected from them. This results in the inability to identify, capture and properly protect IP.
The risks of both insider threats and external cyber breaches has become the new normal. The increased value of intellectual property has made it a key target for nefarious activities, with estimated losses to the US economy from trade secret theft at tens to hundreds of billions of dollars annually.[1]
The impacts from these losses go beyond financial damages. There is often associated damage to brand or company reputation from the mismanagement or lack of protection, and the loss of competitive advantage. Moreover, the unapproved use of third party IP may result in litigation. For example, the use of software and code obtained from open source communities with unfavorable terms and conditions can result in the loss of IP and company developed code.
Strategies and solutions
Given the shift from tangible to intangible assets, and the increasing importance and value of intellectual property, organizations need to make sure that they can protect their IP and sensitive business information in a digital world with ever increasing threats.
Organizations should consider the following steps in addressing these challenges:
1. Identifying and quantifying the risks: An initial review of an organizations’ intellectual property approach and activities, including strategy, identification, management and protection. This includes prioritizing threats to its intellectual property.
2. Evaluating intellectual property governance: Assessment of the policies and procedures in place to manage organizational and third party intellectual property, including review of policies and procedures against industry leading practices, to evaluate the completeness of the program.
Once the current state and risks are identified, a plan of action should include:
3. Optimizing strategy to identify and protect: A continuous process of aligning and optimizing the IP strategy to meet the organizational goals and tactics, encompassing the appraisal and prioritization of developing intellectual property with current and emerging risks.
4. Developing an enterprise-wide awareness program: Knowledge and awareness of intellectual property must to be one of the top priorities in changing the way the business operates. From top executives through all functions of the organization, employees must understand what intellectual property is, its value to the company, the risks, protection, employee roles and obligations.
The overarching goal of such efforts is to be proactive, rather than reactive, to intellectual property opportunities and risks.
