How to make the most of your Intellectual Property Assets
26 October 2012
The creation, maintenance, defence and enforcement of intellectual property rights is a costly business, so the investment has to generate a return. That can only be achieved by full exploitation. Few companies have the luxury (or liability) of a portfolio of rights that extend well beyond what they can expect to exploit themselves, a brief case study of CellFactors plc is however a good example of what can be achieved. All companies should consider whether they have assets that could be put to work on behalf of the company. To capitalise on the value of such assets there must be a process in place to capture, record, and consider for exploitation every technological development that is generated.
To produce a return on investment in intellectual property assets, a company should take the following steps:
- Identify and evaluate the company assets.
- Work out how they can be used .
- Assess the freedom to commercialise without a threat of infringement and possibility of an injunction preventing sales.
- Make a financial plan to manage the assets.
- Fully exploit non-core assets.
- Enhance product development by in-licensing third party intellectual property .
What are the Company Assets?
Core assets are those that protect (directly and indirectly) the products and processes being developed by the company at the moment. Areas of potential future interest, however remote, should be distinguished from technologies or aspects of the core technology that will never be developed in-house and that would be non-competing if developed by a third party.
You should consider all types of existing and potential assets including patents (and any extension rights), designs and design rights, trade marks, domain names, know-how (skills), materials, database rights, copyright, and regulatory data exclusivity rights. The strongest rights are those that can be legally registered, such as patents, registered designs and trade marks, but unregistered rights such as know how and materials (such as the Coca Cola recipe) can also be very valuable and it is important to control them through careful management and documentation, restricted access and/or contractual arrangements.
Assets are created continuously in a research-based company and the identification and evaluation process should reflect this. It is also important to consider all collaborative arrangements and whether the rights belong to the company outright and if not who owns them and/or has the right to exploit them.
An initial audit is a useful first step to ensure everything the company owns has been identified and considered for protection. Internal reports and lab notebooks are an extremely valuable tool in this process as are procedures for recording ideas for evaluation. Explaining the value of research to staff in the context of the business and the importance of its protection will often uncover hidden aspects/intellectual property assets of the work in the company. Checking company publications and websites often identifies missed opportunities, so procedures for publication clearance are essential to ensure valuable assets are not thrown into the public domain without consideration.
How can Company Assets be Used?
Determining which assets are core and which non-core requires careful correlation with the business plan. Core rights should be given top priority with regard to budget and resource, in terms of their generation and maintenance as well as their defence and enforcement.
Protection for your lead products should be offensive (ie protection for the product itself, formulation, its main use, and production); cover that the company is confident can be enforced and that will enable it to retain its market. Defensive protection is also important and should cover related compounds, alternative uses and processes for preparation. These rights serve two purposes—they create a buffer zone around the product and potentially extend the patent life post expiry of the main product patent.
Freedom to Commercialise
Your freedom to commercialise is vital to success. Searches and reviews must be undertaken if the investment in developing a technology and its associated intellectual property is to be able to realise a return without a threat of infringement and possibility of an injunction preventing sales. If you intend to licence your technology, it is just as important to identify a clear path to market; a development partner is far less likely to entertain a late-stage deal at high value if it identifies potential third party threats that were not known to the company.
These searches should identify any third party patents that might be infringed by the marketing of your product. The searches should cover the key markets and should be undertaken using comprehensive databases. Any patents identified should be reviewed carefully by a patent attorney to determine the risk of infringement.
If a patent is valid, it may be challengeable and failing that a licence may be required if available or the product re-worked to avoid infringement. However, it may be necessary to terminate the project before further investment is made.
You should budget for the management of core and non-core assets. There should be a separate budget for the non-core assets and their exploitation so that the business fundamentals are not put at risk by overspend on non-essentials.
Budgeting is a key aspect of the process as failure to secure adequate funds for the process can mean a need to cut back or to make critical decisions regarding the future of certain intellectual property.
Exploit the Non-Core Assets
Aspects of core technology such as its application in an unrelated field can be usefully exploited. It is important to retain control of the asset in these circumstances as the rights are often embodied in one filing. However, if the patents can be divided (split into separate applications) during prosecution they will be easier to licence. Even if this is not possible, through judicious negotiation and drafting these rights could be licensed exclusively in defined fields or non-exclusively to a third party for their exploitation.
Technology that is not core and never will be developed could be sold outright, thus releasing funds and relieving the company of the liability of the on-going prosecution and maintenance costs of the rights protecting the technology. Try to enhance/sweeten the deal with any know-how, materials, and data that will make the package more attractive, such as a training package on how to use the technology or analysis reports.
Collaboration arrangements where, for example, intellectual property and technology are supplied by one party and the resource to develop is supplied by another, can be a very good method of generating medium to long-term value from surplus intellectual property. There is less likely to be a significant upfront payment, but milestones and royalties can be lucrative and it may be possible to at least offset the cost of maintaining the current assets.
If you hold intellectual property that could be of benefit to a competitor, consider a trade. An ability to barter (cross-licence) if you identify a potential threat will increase your chance of getting that all-important licence.
In–Licensing Third Party Intellectual Property
Enhancing your own product development by in-licensing can help shorten development times to the exploitation of your technology and thereby the exploitation of its own assets. In-licensing can certainly help to reduce risk and may remove the threat of infringement.
A Case Study
CellFactors plc based in Cambridge is a small private company in the cell-based therapy field. It has a significant portfolio of broad patent filings in the field that has for some time presented as much of a liability to the company in terms of the cost of its upkeep, as it has the asset on which the company was founded and continues to prosper. The company has recently taken the step of turning intellectual property into a fourth product stream with a view of making it self-financing within 24 months. It intends to achieve this through the out-licensing or sale of non-core intellectual property with, where appropriate, materials, data and if necessary access to the skills for development of the technology. It will also be pursuing exploitation of non-core aspects of its core technologies, through non-exclusive or exclusive field-of-use licenses that will not impinge on its core activities.
Leveraging the value in intellectual property assets to generate a return on investment not only reduces the liability and risk of this costly investment to the company but makes eminent commercial sense. Treating intellectual property as a product stream within the company places in the right commercial context to achieve this aim.
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