Intellectual Asset Management Best Practices for Small Companies

Small companies can face large financial hurdles on the way to securing intellectual property (IP) protection, particularly with patents. Accumulated patent lifecycle costs can exceed $125,000 for one US & one PCT filing (see Figure 1). This cost may include prior art searching, patent drafting, patent prosecution, and maintenance fees.

Figure 1: Accumulated patent lifecycle costs. Note this cost can vary based upon the complexity of the technology.

In addition to the high cost of patenting, a small company must weigh the cost of its IP investments versus the many other mission-critical activities required for the business (see Figure 2). In pursuit of commercial success, IP protection may be necessary, but it's rarely sufficient. IP investments are imperative for companies with a clear commercialization strategy. However, an IP investment has uncertain returns for companies lacking a proven business model or money-making logic.

Figure 2: IP is one of many critical pieces of a small company

When faced with competing demands for limited resources, a company can utilize certain "best practices" to protect its intellectual assets. By studying the behavior of small companies that have succeeded in leveraging IP, a set of these best practices have been collected and are presented here to assist other small companies in their need for business protection through IP. The top areas include (1) Seeking IP education; (2) Solidifying agreements; (3) Leveraging experts to develop an IP strategy; (4) Documenting potential inventions; (5) Using alternate IP vehicles; (6) Strengthening filings; and (7) Conveying an IP Story. Certainly other aspects of IP development and management can be utilized as well; however, a respectable, cost-effective IP position can be developed by addressing these minimum areas.

1. Seeking IP Education: IP education is critical in providing the belief and support required for the use of IP in business - this applies both to the management team and other employees. Management can be trained to recognize the power of IP in business deals, for negotiation, positioning in deals, and in value creation. Providing "how to" IP training to engineers, scientists and technicians can be a useful tool to (1) motivate productive behavior around IP development, (2) encourage creativity, and (3) enable the team to conduct IP research and patent reading. Additionally, companies may also want to consider mentoring programs. Mentors can provide a terrific boost to the invention development process by spending time with more junior inventors. They can show them the basics of IP development, including invention capture (inventor notebooks), drafting invention disclosures, the patent application process, and the patent prosecution process.

2. Solidifying Agreements: Both internal and external relationships are vital considerations for start-ups and early stage companies seeking to protect company confidential information. Some key considerations include:

• Employee Agreements: Documents should include non-compete provisions (considering both time and jurisdiction restrictions); non-disclosure provisions (effectively defining company confidential information); and "right in work product" provisions (protecting ownership of inventions, concepts, and ideas) to ensure confidential information is being safeguarded and remains the property of the company.
• Supplier and Vendor Agreements: Companies should be aware of suppliers and vendors building inventions stemming from the company's technology base. Companies can avoid IP battles by maintaining agreements with suppliers and vendors which clearly spell out ownership rights around the technology created during the term of the agreement, and further, what happens with regard to IP once the relationship ends or is terminated.

3. Leveraging Experts to Develop an IP Strategy: Small companies' staffs are notoriously lean, and thus most employees need to be adaptable and serve multiple functions or roles in the company. An employee with sufficient motivation and aptitude can leverage intellectual asset management (IAM) training and/or support from an outside expert so that companies can develop and in turn execute an IP strategy that maximizes return on limited resources.

   For example, the company might enlist an outside expert to help gather key inputs for development of the IP strategy. One primary input is a "map" of the business that depicts the landscape of competitive IP. Another key input is a facilitated collaboration with business leaders, marketers, engineers, and legal counsel. There are many sources of input that vary depending upon the specific technology area, and the business objectives of the company. The desired output is an actionable strategy that aligns IP goals with the company's overall business direction, as opposed to an ad-hoc plan with inconsistent or selective (e.g. only technical and/or legal) inputs.

4. Documenting Potential Inventions: Documentation of inventions, preferably as enabled technical disclosures, is one of the key steps in building an IP portfolio. It provides a company with the ability to capture and record ideas and potential inventions which can later be pursued as publications, trade secrets, or patent applications. In order to efficiently capture ideas, companies should design guides for inventors explaining how to go about documenting potential inventions, what are the required components of a technical disclosure, and ensuring that inventors are thinking broadly across the technology spectrum when writing.

   As disclosures are written and collected, a company must have a process to filter inventions for best relevance to the company's present and future business interests, especially when working with limited resources. Some filters might include how the invention assists in partnership development; what are the disadvantages of pursuing the invention (likelihood of inventing around the invention); and/or which portions of the invention could be leveraged with competitors etc. These filters may then allow a company to determine whether the best disposition of the invention is to publish, patent, or maintain as confidential/trade secret. This decision can potentially save tremendous costs for unnecessary patent filings and maintenance fees. An estimated cost of filing a single patent in the US and PCT can be found in Figure 1.

5. Using alternate IP vehicles: Alternates to patenting, as mentioned above, can provide excellent modes of IP protection without the high cost of patent development. Many small companies are familiar with the benefits of patenting, but few consider the potential protection offered by much less costly IP vehicles, such as trade secrets and defensive publications. Trade secret protection has no expiration if the company actively limits access, but trade secrets are highly vulnerable to reverse engineering. Defensive publications place inventions in the public domain to create prior art that can prevent competitive patent issuance. While enabled publishing also forfeits the exclusive rights of patent protection, publishing is a valuable tactic for expanding the company's freedom to operate on top of its key patented invention(s). Shrewd use of these IP vehicles, where appropriate, provides high benefit at reduced cost to the company.

6. Strengthening Patent Filings: Conducting invent around sessions before filing patent applications can help a company expand and capture the breadth of an application. Using invent around techniques, companies can build a "picket fence" around existing technology and potentially block competitors. This is particularly important for small companies, where given the cost of filing and prosecution, each patent should be as broadly protective as reasonably possible. Invent around sessions may not only broaden a given patent applications, but can also yield valuable areas for additional patent filings, publishing and trade secret documentation, for IP portfolio enhancement.

7. Conveying an IP story: For many small companies, value-building and rounds of investment are required to achieve the next level of commercialization. The ultimate exit or business objective may be focused heavily toward licensing, or merger & acquisition. Presenting IP to other companies in a licensing or "marketing" situation can be a challenging effort in these situations. Creating an IP "story" that depicts the connection between the IP and technology is a way to explain the key value points in a neutral manner. The IP story can be used to support raises of capital, or to demonstrate the relevance and importance of the IP to the technology and company's value proposition. It is also possible to craft the IP story in a manner to tell the story and create the opportunity without mentioning the other company's (e.g., potential licensee's) patent claims. For more information regarding creating an IP story, please see IPCG's article entitled "Friendly Licensing in the Aftermath of MedImmune."

These seven best practices are offered as ways to achieve cost-effective IP protection, given a small company's limited resources. Further, these practices are also designed to maximize the potential return on IP investment. The combined effort to optimize both the cost-effectiveness and return on investment for IP should result in improved business positioning and decreased risk for those businesses that take advantage of these practices.

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