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Interview with Olav Jaeger: Risk Management and IP

1. How important is it that companies actively work with the intellectual property? To keep track?

There are many reasons supporting the argument to actively work with its IP. Still it seems useful to give some broad definition of IP in the above context.

IP is –as we at Zacco see it- a form of structured capital, an asset which does (or at least should be) not depend on the skills, knowledge or experience of an employee but owned by the organisation. Simply said it is a well-documented intangible asset, including for instance guidelines, policies, working manuals, inventions, design etc. An IP right is the most rigid form of structured capital in this sense as it is protected by law. Our approach is to that extent much more broadly and holistic than the classical conventional view to consider IP just as patents, trademarks or designs and tends more towards information management than just simple IP consulting.

Starting from the above definition, an active use of IP enables an organization to identify, asses and ultimately mitigate their business risks as well as properly identify and capture business opportunities. For example, not having a clear guideline (which every employee is aware of) on how to collaborate with a potential development partner may result in an undesired loss of ownership of IP of the development results. Another example is a CRM database (client relationship management), the key tool for any sales or supply chain organization. The concept of capturing an invention to protect a product or service is a third example and probably well known. Interesting to note in this regard is that SME often have a more restricted view, e.g. only IP rights are considered as IP and are not aware of the examples above.

An active utilization and pursue of its intellectual property can therefore add significant value to the organization. Actively utilized and pursued IP is a business enabler and is not unusual that in the start-up phase of SME’s, most value lies in the IP and IP rights and actively pursuing those.

2. Has the significance / importance of intellectual property issues increased in recent years? (depending on e.g. globalization, that young companies more often decide to expand operations to new countries and sell abroad, illegal copies ...)

Yes it definitely has. The importance of brands and trademarks was already acknowledged in the business even before new millennium. Coca Cola was and is one of the most known and valuable trademarks in the world, and with the raise of the information age new brands, like Apple, Facebook or Google became the new champions. One can say that particular in the start-up phase branding is everything and a brand/trademark associated by the targeted audience with a good reputation is often a key factor in a company’s rating.

But also other IP rights became more and more important for the business: Designs often become associated with a certain representation or shall display a certain status in view of the customer. They are seen as an evidence for Innovation. Consequently, design play a much larger role in recent years, particular in situations, where a design is a key differentiator between competitors and an important buying factor in consumer products. The European Union takes the raising significance of IP with several regulations and directives re the creation and enforcements of such rights into account. One among those is regulation 608/2013, which offers right owners a relatively simple way to seize –upon request- IP rights infringing good being imported into the Union.

Probably most important when it comes to utilization of IP rights is nonetheless the patent. Patent rights are not just used to protect their own products, they are actively used for various purposes. Licensing patented technology out  is just one aspect, most notable the telecommunication industry, wherein significant effort is made to create so called standard-relevant patents. Other companies use their IP portfolio as trade-off or as marketing instruments in potential collaborations.

The increases significance however has of course a down –side. IP owners are much more aware of the market situation and the competitor environment and tend to protect their market more rigidly. Particular for smaller SME this may constitute an issue. When the try entering a market with a new product or a new market, the effort for them to evaluate the existing IP environment is a larger burden for them compared to larger organisation who do IP landscaping or Product clearances on a more frequent and regular basis.

3. Classic errors/problems that can occur if you do not have an eye on the company's intellectual property assets (eg wrong strategy, no strategy at all concerning intellectual property, sheer ignorance)

If you do not have an eye on the company's intellectual property assets, or simply said, if you do not actively pursue them, you will fail sooner or later to capture business opportunities and run into the risk of unintentionally losing your assets. Still, just pursuing them in the sense of question 1 may not be sufficient. We also often found that organizations had IP strategy, which were disconnected from their company strategy or their vision and mission. Very often different units do not see the effects of IP on their business and communication is lacking. Among other disadvantages, -like IP assets becoming unusable, not suitable to protect or support the business-, the disconnection to the company strategy certainly results in larger costs, reduced efficiency (costs vs. benefits).

One example we experienced was a worldwide unspecified filing and prosecution patent strategy, which turned out to be very expensive but the desired results were doubtful.  We were able to prove the disconnection by indicators clearly showing loss of market share in several key markets despite the efforts made there. The change proposed reduced the costs by more than 2/3 and targeted the competitors more directly.

The example shows, an holistic approach starting from the very foundation of an organization and including all stakeholders to identify the proper IP strategy and the tools to achieve the goals is paramount. It’s necessary to continuously follow up on such process as the IP environment constantly changes.

4. What should you consider as a company when it comes to IP?

A couple of question come up when you start thinking about IP. Despite the definition of IP, the key questions is very often, what do you want to achieve with the IP in view of your overall business or company strategy. Where are the risks, the challenges and the opportunities. While it suitable for SME to probably start from the back-end, e.g. How do I protect my key invention, my service or my brand properly, at some point we suggest to turn the question around and start a bottom-up approach, e.g. what risks/opportunities are affecting or affected by the company strategy and what/how are my intangible assets connected to those risks and opportunities. In the long run, we believe, the costs involved with IP will be reduced and the benefit increased.

The above is a more strategic approach. Of course, detailed questions, like how can I protect my IP in foreign markets and what are the costs involved with it are valid questions by themselves. Still, these questions can result in different answers when taking into the strategic context compared to when answered alone. For instance, it doesn’t make much sense to file a community trademark or an expensive EP patent, when the intended key markets are only Sweden and Danmark.  

5. What part of IP can a company take care of, when to call a consult/patent agency about?

Generally it is a matter of costs and benefits. We have seen all kinds of different approaches. Some large companies have huge internal patent departments dealing with various aspects of IP utilization, that is prosecution and enforcement. Other, even larger companies very much rely on external counsels to advise them. It is not uncommon for Scandinavian companies to “rent” an external attorney, thus becoming part of the internal department, while others prefer to only work with internal attorneys as employees. This relates to all kinds of attorneys including patent attorneys, trademark attorneys and general lawyers. Some issues related to very specific legal questions may involve specialised attorneys, i.e. anti-trust, which are almost always external lawyers. For tasks outside Scandinavia an agent is required by matter of law, who then represents the organization before said foreign authority.

Generally it is advisable for SME’s to use external attorneys as a starting point, simply because the amount of IP related tasks is in the beginning rather unstable and less predictable and a full-time employee is rather expensive. An IP law firm normally has the organisation to handle all kinds of IP related aspects including administrative tasks, which are often underestimated. We –at Zacco- advise our clients on all matters of IP and information management using the above mentioned bottom-up approach, including from advise on strategy, identifying and capturing IP, risk assessment and mitigation advise to simple IP right prosecution and enforcement.

6. Myth to work with intellectual property is expensive?

Yes and no. IP is certainly not the cheapest asset. However it needs to be put into context.

A typical example is the so called product clearance or freedom-to-operate opinion. Those work products are -simply said- aimed to identify and assess potential threat for a client’s product or service. The costs and efforts put into opinions may vary quite a lot and can get up to several 100k€. However that depends on the product involved. Consider a medical product, whose development costs were 300m€ and its expected turn-over is considered to be 50m€ per year in Europe. So spending 100k€ to ensure no-one else has a patent which could be used against the product is definitely worth the money.

On the other hand, a product only marketed in Sweden with an expected turn-over of 100ksek per year in Sweden is not worth such large effort.

A similar argument applies for the creation of IP rights. Very often the cost upfront, i.e. the creation of a patent for instance should be a low as possible. However, take over life-time the cost for creating the right are not that expensive. We experienced many examples, in which the cost pressure resulted in an application, which turned out to be difficult to get granted or -even worse- not enforceable against an alleged infringer. Still, as usual different approaches are applicable. One may favor a so called shot-gun approach focusing on the sheer mass of smaller IP rights, while other tend to spend more money on the creation an individual extensive IP right. The right approach depends on many aspects, for instance the IP strategy associated with said business or organization.

7. What relationship is there between "Information and IT-security" and risk management of IP? More close connected that one would think?

Definitely, we at Zacco basically see it as two sides of the same medal or even more basic consider IP risk management to be a form of information management.

It all starts with intangible assets. Information management is about identifying intangible assets relevant for the respective organization, identifying threats  and opportunities affecting the assets and then evaluating those threats and opportunities. Generally risk management is a tool for dealing with any threat (and opportunity) related to the intangibles assets. IP is –as said above- a structured form of an intangible asset, but its nevertheless derived from it and hence IP risk management is nothing else of risk management on a very important subset of intangibles. If we talk about an IP right, we can see that as a form of legal protection of intangible assets. In this context IT security is another form of protection, maybe more physical (e.g. restricting access, encryption etc).

Consequently, information management (which includes risk management of information as well) has procedures and tools to protect all kinds of intangible assets by various means. For us it is the very foundation and without proper information management in place, IP management or risk assessment being  an important part of it, an organization will lose any competitive advantage it may have gained by its product or services in the first place. 

 

This interview was made by Anders Edström Frejman for Våra Nya Affärer/Dagens Industri and a shorter version in Swedish was published on April 22, 2016.

The interview can be downloaded as PDF below.

 

interview_with_olav_jaeger_in_swedish.pdf