IP Strategy

Buisness Objectives

A sound ip strategy is the prerequisite for the success of a business plan

The ultimate goal of a business is not only to create value for others, but also to capture at least a part of this value as profits. The motivation for an entrepreneur for spending extra money for R&D, for taking risks, such as introducing a new product into the market, not knowing if the market will accept this product, is to have the prospect to gain larger profits than by just producing and selling a product that is already on the market for a long time. Over the time, the more competitors sell a comparable product; the profits will sink to the average profit rate in this industry. With an increasing number of competitors the competitors have to lower their prices to compensate for lost market shares. Only a product that provides a unique selling proposition may attract new costumors. But economic success will also attract the competitors to tailgate for collecting a share of the cake.

The objectives of an IP strategy

Several mechanisms are known in a business strategy for capturing the created value, such as the first mover advantage, that turn a unique selling proposition in a quasi monopoly, which will allow profits higher than industry average. Especially huge investments for R&D have to be carefully supported by a capturing strategy to avoid freeriding of followers and imitators on the tail of the enterpreneur. A very effective protection meachnism are intellectual property rights. However, IPR is not one size fits all. Depending on the sector of the industry, the strength of the competitors and other factors the IP strategy has to be tailored carefully to the needs of the client.

An enterpreneur entering a new market, or have been there for a long time without caring for IP might need a quick ramp up where the quality of his patents is secondary to the number of patents in his portfolio. A client with a well structured IP portfolio may be very selective and focus mainly on key patents. His strategy could be agressive to maintain a leading position for him alone or he may have an open license policy to benefit from his competitor's sales.

A strategy is a plan of actions to achieve a defined goal. This should be never confused. "Holding a strong IPR position" is a goal (and it may be part of a business strategy) but it is not the IP strategy itself.

An IP startegy may comprise the following general actions:

  • Allocating a seperate budget for building and maintaining an IP portfolio
  • Raise IP awareness in the R&D department by training personnel or giving incentives for invention proposals
  • Set up a patent commitee to decide which patent proposals should be persued
  • Reviewing and adapting the IPR portfolio on a regulary basis

In order to establish an IP strategy it is crucial to know the conditions

  • What is the current position ?
  • What is the position of the competitors?
  • What is the goal and what is the time plan?

to formulate specific actions. Such specific actions may comprise the decision to acquire a patent portfolio or to license a technology.

However most intellectual property rights do not come for free and are quite expensive. In order to optimize expenses versus return on investment different aspects of intellectual property rights should be balanced:

  • Which IP rights suit the business object best, e.g. support the business model.
  • How many IP rights are required and which quality is needed (IP portfolio management including patent tactics).
  • Which countries should be chosen for protection (filing strategy) as the projected turn over / profits may not even cover the costs in certain countries where the market is not sufficiently big.
  • Does the company need a quick patent or is a patent with a wide scope of protection the means of choice? (prosecution strategy).
  • How should the intellectual property rights be exploited? Shall a patent portfolio be used to build a monopoly or may the returns be even higher if the product is licensed to competitors?