IP management for SMEs

IP management for SMEs
2018/05/04
Many small and medium-sized enterprises (SMEs) are aware that intellectual property is an asset that needs to be part of their business strategy, but, at the end of the day, only a fraction manages to actually implement it.

Reasons for having an IP strategy and filing patents are many – the primary reasons being copyright protection, freedom to operate and increasing the value of a IP portfolio. However, there are many more reasons to consider, such as improving one’s negotiation position, better chance of financing, licensing revenues, cross-licensing agreements, in-licensing new technologies e.g. from universities, marketing a ‘pat. Pending’ to increase customer awareness, etc.

In Europe, a large portion of patent applications filed are coming from SMEs, which shows that innovation is one of the most important drivers of growth. For many SMEs, research and development was not part of the company’s original DNA, but has been developed as part of a changing business, where machine shops and factories have experienced a paradigm shift, and the slow movers have been generally eliminated, while the frontrunners adapted high-tech solutions to overcome the challenges. Idea generation is a natural discipline for companies that needs to reinvent their business, which also naturally leads to the filing of patents, once a new technology forms the base of the path forward. For these companies, the main focus has clearly been to protect their own technologies and prevent others from copying them. Once these companies have stepped into the arena of patenting, it is a natural next step to implement strategies to exploit its full potential, but a lack of experience and motivation in management is often the cause for not doing so. Secrecy and a lack of published case studies to back up the importance of patent strategies also explain why many managers are not more focused on unlocking the potential of companies’ IP portfolio. Below a list of strategies and reasons for implementation in the business strategy is presented.

Platform strategy: Once a patent application has been filed, it also indicates that a potential business is to be exploited, since the patent is meant to protect this business. If the patent is part of the company’s core IP, it may be necessary to implement a platform strategy to an extent, and keep on protecting the business. A platform is everything that defines a product and the manufacturing thereof. Hence, patent strategies for platforms may also include embedded technologies, production, user interfaces, sales channels and even aftersales products.

Non-core patent strategy: As part of a company’s R&D, the benefit of out-licensing new inventions should not be ignored. R&D often produces results that are not beneficial to core products of the company but may be used by other parties outside the company. There are several ways to exploit the potential of such non-core patents – like through licensing agreements with third parties or by making spin-offs.

Out-licensing: Even core patents may be exploited through out-licensing, since it may benefit the business in the longer term to include partners or provide open platforms for others to continue the development. There are many examples of how opening up platforms and providing tools for development to third parties have benefitted the business of the company where the technology originated – from Intel (CPU platform) to Epic games (unreal game engine). Also, the opposite situation exists, where companies failed due to a lack of openness – like Nokia (mobile phones) and IBM (PC).

Financing: Whether it’s investors or stocks, everybody likes a good story. The number of filed and issued patents is a clear indicator of a success story that will help increasing the valuation of the company or raise its stock value. The patent should be of value itself or this will only be a short-lived effect, but awareness of the patent strategy should be deeply incorporated into the corporate communications plans.

Cross-licensing: Make use of the IP-portfolio to in-license technology that is useful to the company product pipeline by sharing the company IP. This way the product cost will be lower and improve its competitiveness compared to other products that use the same technology. However, there are many other good reasons for cross-licensing that companies are better at defining themselves based on the business strategy.

Back-licensing: If a company continues to develop every technology itself, it may end up getting caught in a dead end. In order to broaden the IP-strategy and make space for new technologies to replace old ones in the future, a back-licensing strategy could be used. Make it possible for other companies to explore and continue developing the company’s IP with an agreement to back-license any future developments.

University IP: In many cases, it will be possible to find IP from universities that can be licensed at a low entry-fee. In some cases, it will even be possible to explore the potential of the technology before entering into a final agreement. Most universities are not only commercially focused but will also look at other values generated in collaborating with companies. Financing continued research and collaboration on educational programs are other ways to make university IP available to the company.

 

In conclusion, SMEs in general would benefit from using IP-strategies as a measure to increased revenue and valuation and there are many different ways to accomplish this. Experience and case-studies should be examined to understand how other companies succeeded by using IP-strategies to leverage growth.