Transcript Title

www.oiprc.ox.ac.uk
www.sbs.ox.ac.uk
Organising IP Management
Dr. Robert Pitkethly
Handout available from : www.pitkethly.org.uk/RHPLECTURE.html
or: http://users.ox.ac.uk/~mast0140/RHPLECTURE.html
2
Intellectual Property Management
IP Law
Intellectual Property Management :
External
Internal
Licensing Tactics
Litigation Tactics
Patent Information Mgt.
Patent Application Tactics
Patent Filing Incentives
IP Awareness promotion
IP Tactics
Proactive: Licensing Policy
Learning Policy
Reactive : Litigation Policy
Internal IP Management Policy
IP Management Structure
IP Management Resourcing
IP Strategy
Strategic Management
© R.H.Pitkethly 2004
What needs Managing ?
Explicit
Embodiment of
Intellectual Asset
Increasing importance
of access to
Other ‘Complementary’
Assets
Increasing importance
of access to
Intellectual
Property Rights (IPRs)
Increasing importance
of access to
Embodiment of
Knowledge
Tacit
Low
High
Legal Appropriability of Intellectual Asset
Management of explicit, appropriable “Knowledge” or “IP” involves IPRs
© R.H.Pitkethly 2004
What is Strategic Management?
Careers - How to set & achieve objectives
Oneself
• Strengths
• Weaknesses
Skills, Personality
Interests, Values
• Opportunities
• Threats
OBJECTIVES
Requirements
Others
Competition?
Cooperation?
Opportunities
Introductions
Job Offers
• Environmental
Factors
The same thinking can be applied to Management Strategy....
© R.H.Pitkethly 2004
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What is Strategic Management?
Strategy
“Strategy can be defined as the determination of
the long run goals and objectives of an enterprise
and the adoption of courses of action and the
allocation of resources necessary for carrying out
these goals”.
Alfred Chandler (1962), Strategy & Structure
Organisations have a duty to make the most of the resources under their control
© R.H.Pitkethly 2004
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Objectives?
Added Value - Glaxo Inputs & Outputs 1990
REVENUE
MATERIALS
Materials
WAGES
&
SALARIES
Wages
&
Salaries
CAPITAL
CAPITALCOSTS
COSTS
ADDED
VALUE
INPUT
COSTS
Materials
COSTS
&
ADDED
VALUE
Interest
PROFITS
Operating
Margin
Net
Output
Kay, J. (1996).
Foundations of
Corporate Success.
Oxford, Oxford
University Press.
A key objective is the creation and appropriation of added value
© R.H.Pitkethly 2004
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Objectives?
The Value Chain
S
u
p
p
o
r
t
P
r
i
m
a
r
y
Research and Development / Design
M
a
Finance , Legal, Planning, MIS, Etc.
Human Resource Management / Personnel
r
Purchasing,
Inventory,
Sales
Customer
Materials Production Distribution
&
Service
Handling
Marketing
g
i
n
Porter, M. E. (1985). Competitive
Advantage. New York, Free Press.
Creation of added value requires attention to components of the “Value Chain”
© R.H.Pitkethly 2004
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What is Strategic Management?
Strategy does not occur in a vacuum
Analysing the Environment is also critical :
• Political
• Changes in government
• Legislation
• Economic
• Business Cycles
• Disposable Incomes
• Social
• Demographics
• Lifestyles
• Technological
• New technological developments
© R.H.Pitkethly 2004
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What is Strategic Management?
Analysing the Environment
Bernard Dixon in his book "The psychology of military incompetence" describes
how military incompetence can be characterised by a number of factors including
notably (emphasis in original):
3. A tendency to reject or ignore information which is unpalatable or which
conflicts with preconceptions.
4. A tendency to underestimate the enemy and overestimate the capabilities of
one's own side. ………
8. A failure to make adequate reconnaissance.
Dixon, B. (1994). On the psychology of military incompetence. London, Pimlico.
Similar considerations can apply to companies….
& to Intellectual Property issues
© R.H.Pitkethly 2004
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What is Strategic Management?
The LCAG or “SWOT” model
External Appraisal
Internal Appraisal
"SWOT"
Threats and
Opportunities in
Environment
analysis
Key Success
Factors
Creation of
Strategy
Social
Responsibility
Evaluation
and Choice
of Strategy
Strengths and
Weaknesses of
Organisation
Distinctive
Competencies
Managerial
Values
A variant of the “LCAG Model” from :
Learned E.P., Christensen, C.R., Andrews, K.R., Guth, W.D. (1965)
Business Policy Text & Cases in Mintzberg, H., Quinn, J. B. , (1996),
The Strategy Process : Prentice Hall Inc., New Jersey.
One needs to consider both internal and external factors
© R.H.Pitkethly 2004
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What is Strategic Management?
Industry Structure Analysis
SUPPLIERS
Bargaining Power of Suppliers
ENTRANTS
Threat of new Entrants
INDUSTRY
COMPETITORS
Rivalry among
existing firms
Threat of Substitutes
SUBSTITUTES
Bargaining Power of Buyers
BUYERS
From : Porter, M. E. (1980). Competitive
Strategy. New York, Free Press.
Perfect Competition & Eroded Profits => Search for Imperfections / Barriers
© R.H.Pitkethly 2004
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“The Resource Based View”
13
What is Strategic Management?
Resources
• Company Staff
(Human resources)
• Financial resources
• Tangible assets
(Buildings and equipment)
• Intellectual Property (Intangible Resources)
"Lets use IPRs as the fourth resource of business as well as People, Things and Money."
Where do the returns to these resources go?
© R.H.Pitkethly 2004
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What is Strategic Management?
The Value Net
Customers
Substitutors
Company
Complementors
Suppliers
Nalebuff, B. J. and A. M. Brandenburger (1997). The
Right Game: Use Game Theory to Shape Strategy.
Seeing Differently: Insights on Innovation. J. SeelyBrown (ed.), Harvard Business School Press.
How is the value added to be divided amongst the players?
© R.H.Pitkethly 2004
What is Strategic Management?
Appropriability
Appropriability
•
•
•
Legal Appropriability & Complementary Assets
Deciding the % of returns players appropriate
How much of the cake - RADIANS
Strategic Appropriability
•
•
•
Ability of a given player to maximise returns
Deciding the returns a player appropriates
How much of the cake - RADIANS
& How large a cake - RADIUS
R
How can one use control over IPRs to increase the returns ? - eg by licensing IP
© R.H.Pitkethly 2004
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What is Strategic Management?
Competitive Value Map
Environmental
Constraints
a.
b.
Costs
Company
Added
Value
COMPANY
c. Supplier’s Added
Value
f.
e. Collaborators
Competitors
& Substitutes
Collaborators’
Added Value
d.
Suppliers
a.
Maximise Company’s added value
b.
Reduce Company’s costs
c.
Capture Added Value from Others
d.
Reduce Others’ costs
e.
Capture market share and value
from Competitors & Substitutes
f.
Expand markets to fully exploit
resources
Buyers
Buyers’
Added
Value
Pitkethly, R. (2003) “Analysing the Environment” Ch. 9 in ‘The
Oxford Book of Strategy’. Oxford, Oxford University Press
The key question in most cases is how to maximise value appropriation
© R.H.Pitkethly 2004
IPRs & Strategy
IPRs & Strategy - I
IPRs role in strategy involves :
• Defining resources
• “Appropriating” returns
(in conjunction with complementary assets)
• Time
IPRs Impermanence & The Flow of Technology
Controlling and assisting the flow of IP
(through litigation and licensing policy)
Long Term IPR Strategy cannot be static & defensive
© R.H.Pitkethly 2004
IPRs & Strategy
CAT Scanners
•
•
•
•
•
•
•
•
1967 G.Hounsfield invents the CT X-ray Scanner files first patent application
1972 first patent granted
1972/4 customers waiting 12 months for delivery
1975 250 systems sold 85% in USA
Sales = £20m pa 800 people hired
1975 GE enters market
1977 Sales in Japan via Toshiba under licence
1977 EMI share of US market drops to 50%
1978 purchasing restrictions in US slow sales
EMI has applied for over 500 patents
• 1979 Sales decline further, companies fail
• 1979 EMI merged with Thorn Electric
G.Hounsfield receives Nobel prize
EMI Medical Electronics sold to GE
EMI needed more than just patents...
© R.H.Pitkethly 2004
IPRs & Strategy
IPRs & Strategy - II
Appropriability :
IPRs are not the only means of appropriation :
• Importance of other means of appropriation
(Levin et al. 1987; Mansfield 1981)
• IPRs effectiveness varies by industry (Taylor & Silberston 1973)
• Complementary Assets (Teece 1986)
• First mover advantages (Lieberman & Montgomery 1988)
• Complexity / Uncertain Imitability
(Lippman & Rumelt 1982)
• Learning curve advantages
• Secrecy
Appropriability is not just about IPRs
© R.H.Pitkethly 2004
IPRs & Strategy
What is the purpose of "Intellectual Property Rights" ?
• “A patent does not give you the right to do make something or to do anything
except to appear in court as the plaintiff in an action for infringement”
Earl of Halsbury House of Lords 20/2/85
But IPRs can :
• Protect
-
an invention from use by others
• Appropriate
-
the returns / profits from an invention by using
IPRs and any necessary complementary assets
• CONTROL
-
how an invention is exploited
IPRs are not just a matter of protecting IP
© R.H.Pitkethly 2004
IPRs & Strategy
Block - Run - Team-Up
Block
The
Innovative
Firm
Run
Team-Up
May be pursued in combinations & at different stages of the value chain.
Based on Afuah, A. (1998). Innovation Management. OUP.
How sustainable is the strategy?
© R.H.Pitkethly 2004
IPRs & Strategy
IPRs & Strategy - IV
Using IPRs and firm resources to :
• Recognise
• Appropriate
• Control
• Exploit
the IP resources and assets of the company
© R.H.Pitkethly 2004
Two Cases of IPR exploitation - II
• Penicillin
– Neither penicillin nor production methods were patented by
the discoverers Fleming and Florey for legal and other reasons
– Production methods were patented by scientists in the USA
• Andrew J. Moyer - Method for Production of Penicillin
–
US Patent Nos. 2,442,141; 2,443,989; UK Applications 45/13674-6 Etc.
– Fleming received $100k from US Penicillin Manufacturers in 1945 to fund medical research
• Cephalosporin-C
– In 1957, Abraham and Newton isolated cephalosporin-C, the first cephalosporin
antibiotic. This was patented.
– The E P Abraham Research Fund and the Guy Newton Trust, funded by royalties
support medical, biological and chemical research in Oxford.
– Cephalosporin patents generated gross revenues of over £150m
If an organisation doesn’t control its IP someone else will
© R.H.Pitkethly 2004
Valuation
Patent Value Distributions from Interview Data (Scherer 1997)
Little worth Lots - Lots worth little
© R.H.Pitkethly 2004
Valuation
IP Valuations
•
•
Brand Valuations
– Nestlé’s bid for Rowntree 1988
Damages
– Litton Systems Inc. v Honeywell 1996
• award of $1.2bn damages : “pure fantasy”
• External Transactions
– Licensing / Purchase / Sale / Joint Ventures
– Raising Finance
– Valuing IP for use as security for debt
• Internal Management
– Internal IP Management Decisions
• First Filing, Foreign Filing, Examination,Renewal
IP valuations ought to be as objective as possible
© R.H.Pitkethly 2004
Valuation
The relative importance of the option value changes over an IPR’s life
100
% of
Value
Option Value
Conventional
DCF Value
0
Time
For further details see: Pitkethly, R.H. "The Valuation of Patents : A review of
patent valuation methods with consideration of option based methods and the
potential for further research", WP 05/99, OIPRC Electronic Journal of Intellectual
Property Rights, <http://www.oiprc.ox.ac.uk/EJWP0599.html>
© R.H.Pitkethly 2004
Ownership
http://www.admin.ox.ac.uk/rso/policy/intpol.shtml
Intellectual Property Policy
-----------------------------------------------------------------------Research Services
The following documents set out the University's intellectual property policy and the procedures
which are used to administer it:
*
Oxford University's Intellectual Property Policy
*
Procedures for the administration of this policy
Research Services staff will be pleased to help with any queries you may have regarding this
policy.
Members of the University may also find it useful to browse the web site of Isis Innovation Limited,
the University's technology transfer company, for further information about the exploitation of
intellectual property arising from University research.
Check Employment and Consultancy contracts to retain
ownership of IPRs. …..Get it in Writing….
© R.H.Pitkethly 2004
Employee Incentives
Direct Financial Incentives
% of Companies with Financial Incentive
0
20
40
60
80
100
on
Filing
on
Grant
on
Use or
Licensing
Japan
UK
UK-IPD
Significantly more financial incentives exist in Japan - but what are the rewards?
© R.H.Pitkethly 2004
Employee Incentives
Japanese Patent Applications
National Patent Applications filed by National Applicants 1945-1994
400
000's
300
Japan
200
100
0
USA
UK
45
50
55
60
65
70
75
80
85
90
© R.H.Pitkethly 2004
Employee Incentives
Patent Application/Researcher
Japanese filing rates increased in the 1980s
Japanese Applications per Japanese Applicant
0.8
0.75
0.7
0.65
0.6
0.55
0.5
0.45
0.4
('70 & '71 averaged due to law change)
65
70
75
80
Year
85
90
95
© R.H.Pitkethly 2004
IP Awareness / Training
IP Department Structure
IPR Training
• Involves : IP Department Professionals
& R&D Staff
& staff throughout the Co.
• IPR is a company wide issue
• In Fujitsu, since at least the mid-1980s, all new staff are given 2-4 hours
basic training about the company’s patent operations and basic details of
the patent system.
IP Training should involve the whole company
© R.H.Pitkethly 2004
Communication
Communication & Patent Systems
Resolution of the Vienna Exhibition Congress of 1873:
"In consideration of the great inequality of the existing patent legislation, and
in consideration of the altered means of international communication of the
present time, there is great want of reform, and it is very desirable that the
Governments will initiate an international understanding on the patent
protection" (Coulter 1991).
Mr. Paul Hartnack (UK Patent Office Comptroller General and Chief Executive)
“Arguably the main driver of the trend towards harmonisation of the world’s
patent (and trade mark and design) systems over the last 50 years has not
been WIPO, or the EPC, or the GATT, massive though their contributions
have been. Arguably, it has been the demands of a global market driven by
the wonders of modern communications technology.” (Hartnack 1996)
© R.H.Pitkethly 2004
Communication
IP Department Structure
Inter Departmental Coordination
IP / R&D liaison at Toray
Japanese companies put a heavy emphasis on developing
links between the IP department and other departments
© R.H.Pitkethly 2004
Communication
Where to locate IP dept. personnel?
•
Cross functional communication is key
–
•
Facilitate formation of cross-functional teams which include IP Staff
Balancing administrative, financial, managerial & operational efficiency
–
Administratively - IP depts are easier to staff and run in a capital city
–
Managerially
- IP depts may need ready access to Senior Management
–
Financially
- Location outside a capital city would be much cheaper
–
Operationally
- IPR creation needs Integration with Innovation
IP Dept may need a variety of Offices - but IP and IPR creation need integration
© R.H.Pitkethly 2004
Information
Patent Information Management - Uses
Use related to general management strategy
i)
ii)
Basic analysis of technological trends& special fields
Assessment of future growth trends and developments
Analysis by Companies and Technical Fields
Assessment of entrants to new fields
Assessment of strengths of competitors over time
Analysis of inventors by name and numbers
Analysis of Industry Groupings via joint applications
Use related to the research process
i)
ii)
Prevention of duplication of research
Technology crevice strategies
(Analysis of patents may reveal room for me too products or developments)
Use related to patent applications
i)
ii)
Removal of wasted applications
Improvement of patent applications by prior art searches.
JIII Patent Management Research Committee
PIM is something for the whole company
© R.H.Pitkethly 2004
IP Personnel
Who to recruit to the IP department and from where?
•
•
Internally? Or Externally? Or Both?
Legally Or Managerially Qualified Or Both?
•
Current Shortage of Patent Attorneys
=> In-house training scheme - once organisation large enough to support it?
•
•
•
Use of graduate training scheme - probably not sufficiently specialised
Possibility of losing expensively trained staff - compensated by lower cost of in-house
staff in training?
Need for specialised technical knowledge
=> In-house training of ex-R&D staff - benefits may outweigh losses due to
leavers?
•
•
May give specialist skills
May allow better links with former R&D colleagues and facilitate cross-functional groups.
© R.H.Pitkethly 2004
External IP Management
Use / Exploitation of Technology
• In-House Exploitation of technology
– development and marketing of own products
• Licensing Out of technology developed in-house
–
–
–
–
–
for revenue
for lack of resources to fully exploit it in-house
to entrap licensees
to allow use by others under patentees control
for cross-licensing purposes
• Outright sale of technology
– exit from technical field
Consider as many options as possible but remember their consequences...
© R.H.Pitkethly 2004
External IP Management
Licensing Attractiveness
Consider Not Just : Competitive & Financial Costs/Benefits
But also : Time & Learning Potential
Increasing attractiveness
of Licensing In to
Licensees
High
High
Competitive
Advantage
Gained by Licensee
Ceded by Licensor
Low
High
Learning
Potential for
licensee
Low
Low
Increasing attractiveness
of Licensing Out to
Licensors
High
Low
Financial Cost to Licensee
Financial Revenue to Licensor
Licensees want to : Pay little, Catch-up a lot, Learn a lot
Licensors want
But Licensing need not always be a zero-sum game …..
: the opposite
© R.H.Pitkethly 2004
External IP Management
Cross-Licensing Attractiveness
High
Low
Change in Relative
Competitive
Advantage
between
Cross-Licensees
Low
Increase in Absolute
Competitive Advantage
High
High
Low
Increasing attractiveness
of Cross-Licensing
High
Low
Net Financial Cost / Revenue
Licensing involves Learning
© R.H.Pitkethly 2004
External IP Management
Patent Portfolios are not new…...
“It seems obvious that the best defence (of market and technology
position) is to… maintain such a strong engineering, patent, and
commercial situation... as to always have something to trade against
the accomplishment of other parties.... Ability to stop the owner of a
fundamental and controlling patent from realising the full fruits of his
patent by the ownership of necessary secondary patents may easily
put one in position to trade where money alone may be of little
value”.
AT&T's J.E.Otterson memo of 1927 (Noble, 1977)
Not just Complementary Assets but Complementary IPRs are critical
© R.H.Pitkethly 2004
Conclusion
IPR Administration - some essentials
Recognising
•
Close contact between Patent Agents and Inventors
•
Ability to assess value of inventions and IPRs
•
Being aware of your IPR environment (eg avoiding infringing other’s IPRs)
•
Excellent information acquisition and dissemination
•
Liaison between Patent Agents and Product managers
Appropriating
•
Preserving all one’s own IPRs, not just patents (eg :don’t forget TMs & Brand Mgt)
Controlling
•
Controls over licensing department and decisions
•
Remembering that Licensing involves Learning
Exploiting
•
Planning for both IPR Costs and Revenues
© R.H.Pitkethly 2004
Conclusion
How might an IP dept progress as the Company expands?
• Resolving the Legal or Managerial function debate :
– Balancing Synergy via Integration / Economy via Division of labour
• Developing IP Dept’s role in the Organisation :
– Independent but Integrated
– Integration via Responsibilities, Committees/Cross functional Groups & Location
• Bring specialised, synergy offering functions in-house
• Out-source commodity functions (eg Patent Renewals, Translations, Etc.)
• Provide Incentives to produce IP
– The business depends on generating IP - provide incentives to generate it
• Clarify ownership of IPRs
– Avoid bottlenecks for IP<=>R&D communication - direct links needed
• Provide Cross-Functional IP Portfolio Management Groups
– X-Functional groups will each need to run their own section of the overall IP portfolio
© R.H.Pitkethly 2004
Conclusion
Prioritising Issues :
Divide Issues into :
– those that eat up cash and those that are cheap
– those have to be done now and those that can wait
Eat Cash
Must
Do Now
Can
Wait
Cheap
1. HAVE TO
FIX NOW
2. FIX
NOW
4. FIX
LATER
3. CAN FIX
LATER
© R.H.Pitkethly 2004