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Strategizing IPM

Managing IP at the strategic level involves undertaking an audit of the primary form of IP to cre­ate an IP portfolio, based on an assessment of the individual strength of the audited IP. Creating a portfolio aims at making sense of the IP wealth of the whole organization by presenting it in a snapshot showing the relationship between the IP and its use by various businesses and in vari­ous market segments. Following that, top management should decide on the IP strategies to lead the organization's efforts in maximizing the value derived from IP by using it as both a competi­tive tool and a business asset.

The IP Audit and Portfolio Creation - Not a Legal IP Audit

IP legal audits have been used for decades by organizations for a multitude of reasons, for exam­ple, due diligence, to check legal compliance, to discard unused IP, and as a form of stock taking for mergers and acquisitions. The difference of an IP audit performed for business, rather than legal, purposes is that the audit (or stock taking) is performed to assess the commercial value and competitive use of the IP by respective businesses. Another difference is that while an IP audit for legal purposes lists all forms of IP owned by an organization, a business-oriented IP audit collects information about the primary form of IP and is therefore patent, trademark, or copyright spe­cific. A legal audit lists all forms of IP and considers their legal status (e.g., expiration, licensed or not, registration and maintenance dates and fees, etc.). A business-oriented audit focuses on how the primary IP form is being used in relation to products, services, market segments, its con­nection to sales, whether used in a strategic alliance, and its expected (business) life cycle. We deal here with the business IP audit only.

The audit is the preparatory step to creating the IP portfolio. It should reveal the potential uses of the IP for strategic purposes, whether to generate revenue or to strengthen a competitive posi­tion. To do that, information should be gathered from the various businesses regarding the use of IP in business, its current and planned use, and possible commercialization opportunities as well as threats from IP owned by others that may undermine its value. This data should then be used by the auditing group to create a portfolio that presents a bird's-eye view of the strengths, weak­nesses, opportunities, and threats associated with the primary form of IP. In cases in which the organization competes through using more than one form of IP (e.g., some software and con­sumer products organization that focus on both patents and copyrights), a shadow portfolio should be created for the other primary IP forms, again with reference to their use in business. Chapter 13 provides guidance as to undertaking the audit and creating a patent, trademark (brand), or copyright portfolio. It should be mentioned here, however, that every portfolio, regardless of the primary form of IP, should include reference to trade secrets, that is, know-how related to the various IP in the portfolio.

An IP portfolio provides insight in two major ways that are crucial for any IPM program under the CICM approach. First, they reveal the strengths and weaknesses of the current IP base of an organization, and hence provide a sketch of the organization's competitive prowess. Second, they provide a preliminary assessment of the opportunities and threats that the IP portfolio poses for business management and growth. These two purposes should be kept in mind in creating the IP portfolio, and well before that, in designing the audit exercise. To that effect, the audit questions should uncover the current and expected uses that IP is being put to by the various businesses. This provides a preliminary assessment of its value for business and guides future plans. Dow Chemical followed this methodology in its audit of its 29,000 patents. The auditing team required every business to classify the patents they have under three groups: most valuable patents related to high growth business, patents that had no current or planned use but are still of value to others, and patents that are unlikely to be used. The first group was left for the business unit competitive purposes, the second group offered for licensing, and the last either donated or abandoned.

The purpose of these and similar classifications is to facilitate IP portfolio management. In general, there are a number of guiding rules for portfolio management:

•   Leveraging strong IP

•   Combining weak IP with strong ones

•   Divesting low-performing IP, or donating it for nonprofit organizations to claim tax deductions

The same rules apply to managing any IP portfolio regardless of the form of the primary IP. Proc­ter & Gamble's (P&G) trademark/brand portfolio can be used for illustration. Following an audit of its brands, P&G leveraged strong brands like Crest and Tide by introducing a number of brand extensions, combined weak brands with strong ones (e.g., White Cloud and Charmin), and sold low-performing brands (e.g., Lava Soap).

In addition to the general rules of portfolio management, there are a number of IP strategies that an organization can devise to utilize IP for competitive positioning and commercialization purposes.

IP Strategies Defining the Focus of IPM

Armed with the knowledge gleaned from the IP portfolio, top management should then formu­late the IP strategies to strengthen the organization's IP portfolio in a way that enhances its com­petitive position and revenue-generation ability. Though there is some literature on the use of patent and branding strategies, there is no work that discusses the use of IP strategies for the dis­tinct purposes of competitive positioning and commercialization. Most of the literature on patent strategies focuses on whether to patent or trade secret and the countries in which to patent. Despite a number of recent books on the use of IP (meaning patents) strategies21 for competitive purposes, only slight mention was made of trademark strategies and none of copyright strategies. It is important for IP strategies to distinguish between the uses of IP for competitive as opposed to commercialization purposes, since the two are based on conflicting contentions. For competi­tive purposes, IP is used to gain entry into a market and prevent competition from securing a stronghold in a particular market segment, where exclusivity of use is the main enabler. Manag­ing IP for commercialization purposes, however, aims at offering it for use by others as widely as possible to generate revenue, hence the importance of providing guidance from the top on when and how to use IP for the conflicting purposes, and which purpose should be the strategic focus of the business unit and why.

The CICM model incorporates the two types of IP strategies, referred to as competitive and commercialization IP strategies. The main goal of IP competitive strategies is to block competi­tion from undermining the organization's competitive position, and from gaining a strong com­petitive position themselves, as well as to deactivate the competition's IP-related competitive tactics. They are also used to carve new competitive positions where the organization can set new market standards, and thus mark out the rules of the game. While competitive strategies look at IP as a competitive weapon, commercialization strategies look at it as a business asset, and hence aim at investing in it to use it for revenue generation. How to cultivate and exploit IP as a busi­ness asset is the concern of IP commercialization strategies. It should be mentioned that although licensing is used as a tactical tool under competitive strategies (i.e., to create a specific effect), it is used more as a strategic tool under commercialization strategies, as will be explained below.

IP strategies, whether competitive or commercialization, mean different things to different organizations, depending on the primary form of IP and the respective industry. Patenting strate­gies are intrinsically different from trademark/branding strategies, and both are different from copyright strategies. While patent strategies focus on technological wars, brand strategies focus on winning consumers through making promises, and copyright strategies focus on capitalizing on popularity of authored works. The same goes for commercialization strategies. Though all commercialization strategies are based on level of resource invested in pursing deals and oppor­tunities, they are operationalized differently, depending on the primary form of IP. That being said, I developed two blueprints that are used as the basis for competitive and commercialization strategies related to the primary IP form - be it patent, trademark, or copyright.

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