Tuesday, 28 April 2015

Taking a view on PatentVue

Bruce Berman (Brody Berman Associates) has just drawn my attention to a blog that might be of interest to readers of IP Finance: it's PatentVue, the house blog of Envision IP, and it's written by Envision IP's Maulin Shah and Alex Lee.

Subtitled "A view at the intersection of patents, finance, and technology", PatentVue is a relatively low-volume blog (five posts so far for 2015); it concentrates on transactional issues involving patents -- mainly but by no means exclusively in the United States -- and it has an archive going back to May 2011.  There's also a substantially underused facility for posting readers' comments. This blogger wonders why it is that the IP community is so keen to share its thoughts via blogpost comments on some weblogs, but not on others. Ideas, anyone?

You can check PatentVue out for yourself by clicking here.

Friday, 17 April 2015

Brand extension: when the brand was too strong?

The election of Narendra Modi last year and the encouraging aggregate economic data that have been coming out of India recently have caught this blogger’s attention. In particular, they raise the question of whether we will a see an increase in the Indian version of SMEs (small and medium enterprises) to complement the presence of mega-conglomerates such as Tata Group Sons and Reliance Industries and how IP might fit into such economy activity. An interesting window to this was provided in a piece that appeared in the January 31, 2015 issue of The Economist.  Entitled “Symphony Solo”, it describes how a Gujarat-based company named Symphony (Gujarat being the state in which Mr Modi demonstrated his pro-business management mettle) weathered a near-fatal diversification strategy but succeeded in returning to its industrial knitting, namely air-coolers. Along the way, this article addresses some interesting aspects of how IP considerations contributed to the near collapse of the company.

According to the article, Symphony carved out a successful market for itself in the late 1980s and early 1990s in the market for air-coolers. Air conditioning units, while very good at what they do, work on the basis of compressing gas and tend to be expensive both to purchase and operate. On the other hand, air coolers work on the basis of simple evaporation and are much less expensive on all counts (this blogger grew up in Phoenix in the 1960s and can attest to the fact that air coolers can play a crucial role in providing adequate cooling at a reasonable cost). What Symphony succeeded in doing was to design and manufacture an attractive mass-produced alternative to the noisy, clunky units then on the market, at a price point that was manageable for Indians entering the consumer middle class.

Symphony quickly became the leading brand for air coolers and, with its success, came a reputation for innovative excellence. The company went public in 1994 and then, in the words of the article, the company’s woes began:
“Investors pressed it to bring its innovative flair to other appliances, such as water heaters and washing machines. The idea looked fine; they sold in the same outlets as air-coolers, the technologies were akin and Symphony’s main rivals had a wide product range too. That logic proved flawed because synergies in production did not extend to marketing. Consumers associated the Symphony too strongly to be tempted by its other lines. Richer competitors cut prices to prevent Symphony from gaining a foothold and used delays in product launches to copy its innovations. The air-cooler business was neglected. Sales dropped. The firm’s debts mounted. By 2001 Symphony was a ward of India’s bankruptcy agency.”
Fortunately for Symphony, it discontinued all its other lines of business and focuses once again solely on air-coolers, keeping the tooling in-house while outsourcing assembly. It has also found attractive export markets for its product. What is interesting is to try and understand how IP fit into this scenario. The key to Symphony’s actions in the 1990s was the notion of brand extension, always a risky strategy. The challenge was to maintain the reputation in the core product while convincing consumers that they should extend their brand loyalty, more often than not, emotive and subjective, to other products, no matter how related they may be.

Moreover, when one thinks of brand extension in connection with products of Symphony’s type, huge conglomerates come to mind. Each new product line requires a commensurate increase in design, production and marketing, something more easily managed by the likes of LG than an SME-scale company; stated differently, resources and manpower matter more than ever in such a situation. Given that these challenges are well-known, one wonders how it was that the CEO of the company, who had fashioned his initial successful strategy in the 1980s upon returning to India armed with a MBA from the US, nevertheless took on these risks.

Still, one observation in the article leaves this blogger puzzled: “Consumers associated the Symphony brand too strongly with air-coolers to be tempted by other lines.” What exactly is “too strong” a brand? The article does not further explain. The best that this blogger can manage is to suggest that what is meant is that the Symphony brand had in fact become a generic name for air-coolers, such that there was no goodwill in the brand qua brand to extend other products. The brand was the product. If so, the brand campaign strategy was doomed at conception. More generally, the Symphony saga should serve as a cautionary yellow for successful Indian SMEs as they seek to build their companies. Conglomerates such as Tata and Reliance still play by a different business playbook.

Wednesday, 15 April 2015

IP risk management: process and system

Recently the IP Finance hosted a guest post from Donal O'Connell (Managing Director, Chawton Innovation Services Limited) on the assessment of suppliers from an IP perspective (here). We are pleased to host another piece from Donal, this time on the risk management process, which contains several useful bullet-points and checklists for anyone concerned in the assessment of risk and who then has to decide whether, and if so what, to do anything about it. This is what he writes:

IP Risk Management: Process & System

Risk is the chance of something going wrong, and the danger that damage or loss will occur, whereas risk management is the process of analysing exposure to risk and determining how best to then handle such exposure. Risk mitigation means that you do something about it. By its very nature, there are both rewards and risks associated with intellectual property (IP). This paper explores the IP Risk Management process and how the right system or tool can help underpin this process.

IP Risk Mitigation

IP risk mitigation is about ensuring that the business really understands its IP related risks, and then mitigates pro-actively. The rationale for this may be driven by the need for freedom to use technologies already in use or being considered for use in the company’s products, but there are many other reasons why businesses need to take IP risk mitigation seriously.

The focus should be on risk mitigation and not just of risk evaluation. Risk mitigation covers efforts taken to reduce either the probability or consequences of a threat. Risk mitigation efforts may range from physical measures to financial measures.

IP Risks

The obvious IP related risk is that a business may infringe the IP rights of a 3rd party. However, there may also be IP related risks associated with (among other things)
• Having too narrow a definition of IP, and ignoring potentially valuable IP assets

• The IP terms and conditions in some development or commercial agreements with 3rd parties

• The publishing activities of the business

• Embracing open source software

• Being involved in certain interoperability standardisation activities

• Getting involved in some open innovation initiatives

• The use of subcontractors

• One's own IP out-licensing program
To help readers conduct risk assessment in a structured manner, I suggest that there are a number of specific areas which need to be analysed when considering IP related risks, and from where IP related risks may originate...
• The activities of your own company and its people

• The activities of entities within your company's own eco-system (suppliers, partners, distributors, customers)

• The activities of one's competitors

• The activities of other entities such as NPEs

• The activities of illegitimate entities such as hackers and counterfeiters
IP Risk Management Process

A process is an interrelated set of activities designed to transform inputs into outputs, which should accomplish your pre-defined business objectives. Processes produce an output of value, they very often span across organisational and functional boundaries and they exist whether you choose to document them or not.

A process can be seen as an agreement to do certain things in a certain way and the larger your organisation, the greater the need for agreements on ways of working. Processes are the memory of your organisation, and without them a lot of effort can be wasted by starting every procedure and process from scratch each time and possibly repeating the same mistakes.

At a very top level, the IP Risk Management process involves the following key phases:
• Identification

• Analysis

• Review

• Mitigation

• Monitoring
IP Risk Mitigation Techniques

There are a variety of IP risk mitigation techniques available, but of course their effectiveness will vary from one business to another.

Some of the IP risk mitigation techniques are listed here, but this list if not exhaustive by any means …
• Leveraging technical cooperation with others

• Using Standards with fit for purpose IP policies

• Obtaining indemnities

• Participating in patent pools

• Licensing IP

• Designing around

• Finding prior art to invalidate 3rd party IP

• IP acquisition

• Taking out IP insurance
It is important that a company builds up a good understanding and appreciation of the various IP solutions which exist, and if and when they should be deployed. 
IP Risk Management System

“Good Risk Management fosters vigilance in times of calm
and instils discipline in times of crisis.” Dr. Michael Ong 

An IP Risk Management System is only part of the solution. I suggest that the components of a good IP risk management solution are as follows:
• IP and IP related Risk awareness and education

• IP Risk Management process

• IP Risk Management system / tool

• Data (IP related risks, actions, documents, reports)

• IP Risk Mitigation solutions

• IP Risk Management resourcing (people, budget)

• IP Risk Management governance
 
With Awareness and Governance being like the bookends, keeping everything else in proper order. That said, a good IP Risk Management System helps ensure that the process is an efficient and effective one. It can improve data integrity as well as better support how IP risks are articulated and reported.

IP Risk Management Tool

A Risk Management Tool is commonly used in business in such areas as project management and organisational risk assessments. It acts as a central repository for all risks identified and, for each risk, includes information such as risk probability, impact, counter-measures, and risk owner and so on. It can sometimes be referred to as a 'risk register' or 'risk log'.

An IP Risk Management Tool is no different and is an essential tool to be able to manage this particular risk area. It initially provides a way to articulate the various IP related risks in a very structured manner. It then acts as an important tool for the ongoing management of these IP risks.

 
Typically an IP Risk Management Tool should contain...
• A description of the IP related risk

• The impact should this event actually occur

• The probability of its occurrence

• Risk score (the multiplication of probability and impact)

• A summary of the planned response should the event occur

• A summary of the mitigation (the actions taken in advance to reduce the probability and/or impact of the event)

• Links to any associated documentation
 
In a "qualitative" risk tool descriptive terms are used: for example a risk might have a "High" impact and a "Medium" probability. In a "quantitative" risk tool the descriptions are enumerated: for example a risk might have a "$1 Million" impact and a "50%" probability.

A clever feature is to allow some calibration of the tool as different levels of impact and probability will differ from one company to another

 
Final thoughts

The skills needed to succeed with IP risk mitigation do not match exactly those needed to be successful with the other key IP processes, such as IP creation, IP portfolio management, IP exploitation and IP enforcement. The mind-set is just different for those charged with IP risk mitigation.

Who should be interested in IP Risk Management? Anyone…
• Operating in an IP litigious environment

• Coming up for exit or listing

• Anxious to get IP risk management under control

• Whose executive management team are demanding visibility of IP related risks

• Experiencing major business changes

• Facing a major IP risk and realising that they are unprepared

• Interested in proper governance of IP
Finally it is important not to underestimate or exaggerate the risks associated with IP. As IP relates to innovation and creativity, it can sometimes be an emotive subject and some care is needed.

“When dealing with people, remember you are not dealing with creatures of logic, but with creatures bristling with prejudice and motivated by pride and vanity.” ―Dale Carnegie
Graphics in this blogpost are all taken from the Alder IP Risk Management Tool

Readers might want to add some further bullet-points and observations of their own, providing an even more useful asset for anyone coming to the subject for the first time or seeking to improve an existing perspective on it.

Thursday, 2 April 2015

Assessing a supplier from an IP perspective

The following thoughtful piece is a guest post from Donal O'Connell. Donal is Managing Director, Chawton Innovation Services Limited. As usual, readers' comments are invited. Writes Donal:

Assessing a supplier from an IP perspective 
Supplier Relationship Management 
Good supplier relationship management is the discipline of strategically planning for, and managing, all interactions with third parties that supply goods and/or services to an company in order to maximize the value of those interactions. In practice, it entails creating closer, more collaborative relationships with key suppliers in order to uncover and realize new value and reduce risk.

Good supplier relationship management involves the systematic enterprise-wide assessment of suppliers’ assets and capabilities with respect to the overall business strategy. The output from such an assessment should determine what activities to engage in with different suppliers. The focus of supplier relationship management is to develop two-way, mutually beneficial relationships with strategic supply partners to deliver greater levels of innovation and competitive advantage than could be achieved otherwise.

Successful supplier relationships require a win-win. It is important that there is understanding of the costs and value along the entire supply chain. A true partnership leverages these costs and value to both parties' advantage. Both parties have to accept accountability. Appropriate service levels and metrics need to be built into the Agreements. Equal time needs to be spent aligning incentives and penalties. Critical information should be shared between the two parties as early as possible as information is the grease that makes an integrated supply chain work. It is crucial that there are plans in place for exceptions and major contingencies. Expect and reward honesty and make relationship meetings meaningful and value adding. 
IP must be part of the assessment 
All that said, many supplier management exercises fail to properly assess the intellectual property (IP) situation of the supplier, despite the fact that the importance of intangible assets including intellectual property is growing, often equaling or surpassing the value of physical assets for a company. The state of the intangible assets of a company can determine their share and corresponding influence on the market. The way a company is now valued has changed considerably with intangible assets making up approx 80% of the value of the company. 
The challenge dealing with IP 
The challenge I see is that many Sourcing / Procurement people do not have the skills, experience, process or methodology to properly access the IP maturity and sophistication of suppliers (either hardware or software) and properly assess the supplier from an IP value and risk perspective. They lack a broad definition of IP. They do not know how to determine the maturity of the supplier from an IP perspective. They are unaware of how to judge the IP environment of the supplier. They cannot plot where the supplier sits of the 'level of IP control' axis. They do not understand the different ways in which IP adds value.

Simply put, they do not know what questions to ask, and how to interpret any answers received back.

I am being unfair. A few do, but most do not. Yes it is important to consider obvious issues like the implications of 3rd party IP rights but this is only one of many IP issues which should be considered when dealing with suppliers.

I would even go so far as to to say that many IP professionals lack the skills. process and methodology to conduct such supplier assessments from an IP perspective. 
What should be assessed from an IP perspective 
The ideal of any supplier assessment is to identify deficiencies with the supplier’s processes and procedures before they impact. Of course, the purpose is also to identify opportunities. These two equally important objectives apply just as much to the IP portion of any supplier assessment.

Effective questions are questions that are powerful and thought provoking. Effective questions are open-ended and not leading questions. Behind effective questioning is also the ability to listen to the answer and suspend judgment. This means being intent on understanding what the person who is talking is really saying. What is behind their words?

Although it may vary greatly depending on the exact nature of the product or service being supplied and how critical this supplied item is for the company, I would propose that the IP portion of the supplier assessment explore the following issues …
1. What is the supplier's IP awareness level?
2. What is the supplier's definition of IP and good IP?
3. Where is the supplier on the IP Maturity Ladder?
4. Where is the supplier in their eco-system from an IP perspective?
5. What is the supplier's comfort level on the 'Level of IP Control' axis?
6. Describe the IP Portfolio of the supplier
7. How is IP adding value to the supplier?
8. What are the IP risks facing the supplier and describe IP risk mitigation activities?
9. What IP resources are available to the supplier (internal & external) and how are they deployed?
10. Describe IP Governance by the supplier
These ten questions listed here are high-level abstract questions as such and much more detailed check-lists exist that describe individual components of each of these ten. I should also state that the first question listed, namely IP Awareness and the last question listed, namely IP governance, are like bookends keeping all of the others properly in place.

The purpose of this IP portion of the supplier assessment is to determine the overall sophistication of the supplier from an IP perspective, and to identify IP value and risk. 
Final thoughts 
Legal and intellectual property text books typically describe intellectual property and patents in particular in somewhat negative terms. For example, a patent is not a right to practice or use the invention, rather, a patent provides the right to exclude others from making, using, selling, offering for sale or importing the patented invention for the term of the patent, which is usually twenty years from the filing date. A patent is, in effect, a limited property right that the government offers to inventors in exchange for their agreement to share the details of their inventions with the public.

However, the legal aspects of intellectual property sometimes get too much attention, while the business aspects suffer. It is as if when looking at a tree, all we saw were the roots. Yes, the roots of a tree serve an important role to anchor it to the ground and gather water and nutrients to transfer to all parts of the tree, and for reproduction defence, survival, energy storage and many, many other purposes. However, it is the trunk, the branches and especially the leaves of the tree which capture our attention.

This more enlightened view describes intangible assets and intellectual property in particular as a means to build innovation as opposed to block. Innovation including collaborative innovation with a supplier is reliant on some form of management and control. Intellectual property is the means to manage this process as knowledge and technology needs to be managed as transactions of objects in the development stages as these objects may now be as valuable as or even more so than the resulting products and services. Intellectual property in this regards can be seen as a means to objectify knowledge so it can be properly managed. Without an understanding and appreciation of intangible assets and intellectual property, technology development becomes prohibitively difficult.

This is a fresher way of viewing intellectual property, namely as a management system for knowledge-based business instead of a legal right to exclude others.

Saturday, 28 March 2015

Filling the YouTube Gap: Ongoing Financial Support for Small Creators Through Crowdfunding

This blog has discussed crowdfunding in many different contexts, including for basic research and large scale video game development.  A relatively new crowdfunding platform brings together the very best of crowdfunding: the ability of people to choose to support what they love through essentially a gift (with benefits); a source of funding for interesting projects, particularly ones that may not get accomplished because of a lack of funding; and bringing people together to support a common venture—with a sense of community.  Crowdfunding and the technology that enables it lowers the barriers that exist for people to join together to support one another financially for what they believe are worthy projects—and now for a potentially long term relationship. 

Enter Patreon (A clever trademark as well.).  In a recent article published March 28, 2015 by CNBC titled, “Starving Artists No More: Meet the Kickstarter for Music, Arts,” Trent Gillies discusses Patreon, a San Francisco startup crowdfunding platform for supporting dance and theater to animation to music to comedy.  The article notes that revenue from a source such as YouTube is insufficient to support “small” creators and Patreon moves in to fill the gap.  How does it do that?  It allows people to pledge ongoing monetary support for creators—another revenue source.  People are able to become “patrons” of specific artists.  Patreon appears to also allow the donation of funds for one-time projects as well, but the promise of funding on a long term basis could allow creators to actually quit that daytime job waiting tables (or at least cut down on some shifts) and spend the majority of their time and energy on their creative work (including promoting it).  A nice silver lining is that the ongoing patronage will not only lead to the works being created, but also to better quality works.  The artist has a nice incentive to keep up the good work and to improve it.  Of course, creators who use other sites such as Kickstarter have a similar incentive even if they are seeking funding project to project.  But, I imagine that the stress may be lower for the beneficiaries of, at least, the pledge of ongoing support and because of the good feelings behind the supporters commitment to their work inure to the benefit of the creator. 
So, how well is Patreon working so far?

Patreon says 250 thousand patrons are donating small amounts of money to 14 thousand active creators. According to the website, it is sending $2 million dollars a month to artists, and the average payment creators are receiving is $9 a month.

And, as the article notes, this is despite the fact that much of the creator’s existing work is already available “for free.”
I think Patreon is a worthwhile endeavor for sure.  I do wonder if ongoing support will create a greater expectation of “control” over a creator’s future work by funders.  What do you think?