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Business News/ Opinion / Aligning business and IP strategy
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Aligning business and IP strategy

While IP has been catapulted into the mainstream financial decision-making process, there are still gaps that are costing companies more than they know

Illustration: Shyamal Banerjee/MintPremium
Illustration: Shyamal Banerjee/Mint

Around the world, successful corporations, large and small, have come to recognize the importance of intellectual property (IP). Many recent global acquisitions and business deals will stand testimony to that. However, not all such companies have been able to optimize the value of their intellectual assets by ensuring that their IP strategy is aligned with their broader business strategy. In an increasingly globalized world, while IP—from being something of a niche subject—has been catapulted into the mainstream financial decision-making process, there are still gaps that are costing companies more than they know. Strangely, while innovation is a priority with organizations, many IP strategies are not designed to leverage maximum returns on such innovation.

Those who have little knowledge of IP often equate it simply with having to “protect" ones ideas in order to prevent them from being stolen or misused. That is a very basic view of IP which underestimates its full commercial potential. IP has a much bigger role to play in any business, among which fostering innovation is but one.

In spite of the increasing awareness in the business community of the value of IP, many companies develop IP strategies as more of a risk-aversion measure that meets their basic business needs. While this may help gain short-term IP and competitive advantage, it does not really address the long-term opportunities—and can also ignore or underestimate the inherent value of IP.

IP has business implications at many levels across the enterprise—from targeted innovation in research and development, to licensing opportunities in business development to cost accounting and royalty accruals. However, such benefits are often overlooked because IP is treated as a legal matter rather than a strategic business issue. Is it the focus on short-term results that inhibits the development of long-term strategic and more sophisticated processes? Often, companies will be focused on meeting their elementary IP needs in terms of managing their record-keeping (docketing) as well as the periodic renewals of their IP assets—and simply don’t have the time, wherewithal or inclination to consider longer-term business issues and value creation. However, in an increasingly competitive economic world, many other companies are recognizing that IP needs to be put at the heart of strategy and planning. Organizations need to move beyond prosecution and maintenance to address broader business-level needs—tracking and managing IP-related opportunities and being aware of what is new in the market—or in development—in order to keep abreast of the competition. This will enable organizations to identify what their prize technology is and where they may have gaps in their IP portfolios; as well as which IP assets are no longer core to the business and can generate greater value through licensing or sale. In this way, organizations are able to develop a more effective IP strategy that is better aligned with their commercial strategy.

A recent survey commissioned by CPA Global on The State of the IP Industry has thrown up a lot of incisive facts and data. More than 1,600 IP professionals from corporates and law firms around the world responded to the survey. Over 52% of the corporate respondents clearly indicated that failure to align business strategy with IP coverage was one of the key risks to their company’s IP assets.

Reflecting greater global recognition of the value of IP and a trend towards more strategic IP management, corporate respondents report that (other than budget/resource pressures) the factors which are having the most impact on their work include the need for greater alignment of IP with business strategy (59%) and increased pressure to optimize/monetize IP portfolios (49%). Other main risks identified by corporate respondents include litigation from competitors (50%) and limited budget (48%). While many of these issues can be addressed by sound IP management solutions, the findings underline the crucial need for organizations to comprehend the importance of aligning IP strategy with business strategy.

Another strong theme in this year’s IP survey results is that the IP landscape is continually evolving. There is constant pressure to meet clients’ and colleagues’ changing expectations. Going forward, only those organizations prepared and able to adapt can be expected to thrive.

Patent filings continue to reach new heights, according to the World Intellectual Property Organization (WIPO). WIPO’s full-year figures for 2013 show that the number of international patent applications under the Patent Cooperation Treaty (PCT) surpassed 200,000 for the first time, with the biggest increases coming from the US and China. With over 57,000 PCT filings, the US exceeded its previous record that was set before the global financial crisis in 2007.

The picture is similar for trademark filings. The number of applications under the Madrid system for the International Registration of Marks rose by more than 6% in 2013 to 46,829. Of those, almost 10,000 related to computers and technology followed by business and technological services.

The sheer pace of change and the volume of applications being filed provide a useful lens through which to view the results of the survey. With rapid growth come opportunities, but considerable challenges as well.

The dramatic upsurge in IP activity is evident in Asian countries too. China’s State Intellectual Property Office recorded 825,000 patent filings in 2013, up 26% on 2012. The country is definitely determined to play a key role in the knowledge-led economy.

South Korean technology giant Samsung Electronics Co. Ltd was the top corporate patent filer at the European Patent Office in 2013. In terms of international patent filings, the top three companies—Panasonic Corp., ZTE Corp. and Huawei Technologies Co.—are all from Asia.

As the economy becomes more globalized, IP inevitably follows suit.

The days when IP was once seen purely as a cost centre are long gone. The trend one sees when looking at some of the most successful organizations in the world is that they have a strategic approach to IP, and it is closely aligned with their core business strategy. In many cases, this can be counted as one of the single biggest determinants of their competitiveness and success.

The past few years have been a period of transformation and growth for the IP and legal services industry. The current economic climate, coupled with the pace of change in the sector, is driving demand for innovation and new solutions to address business challenges.

The CPA Global IP survey reflects IP’s status as an invaluable asset. It underlines the importance of IP as a growth engine for companies and economies around the globe—and how strong, well-managed IP portfolios are a key differentiator and source of competitive advantage for organizations—both now and in the future.

Anand Sharma is a member of the global board of directors and executive management board of CPA Global, the world’s foremost intellectual property management and IP software specialist, and a leading provider of outsourced legal support services.

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Published: 11 Dec 2014, 07:42 PM IST
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