Properly deployed, IP and intangible asset strategy is the not so secret weapon for capturing business value
IP and intangible asset strategies are a critical feature of ALL businesses regardless of size, product or customer. But why? Put simply, leaders need to be comfortable that their companies have the mechanisms in place to capture the value that you see possible from the venture. Without foresight and action, other businesses will be able to capitalize on the first/early mover’s advantage.
This happens often when a US company develops a new product, as well as the market for the product, and ex-US companies come in with a lower priced product to take the market away from the first mover. I have also seen customers (that is, big box or other consumer facing retailers) actually instigate the knock-offs: when the first mover demonstrates that a market exists for a product, the retailer will reach out to an Asian manufacturer to create a private label product with the same consumer benefits as that of the innovator’s product. The retailer is motivated to do this because it can gather all of the profit margin associated with a successful product, instead of having to share the proceeds with its supplier. If the innovator does not have some form of legally enforceable protection, such action is not only legal, it makes good business sense for the retailer.
Sometimes (but not as often as people think), patents are the strong way for the innovator to capture value in the long term. Other times, we look at alternate forms of IP and intangible assets like trademarks/branding, contracts, employee incentives etc. In the product example above, effective patent protection that prevented or greatly restricted the retailer from making an non-infringing alternative would have likely done the trick because in a cost benefit analysis, the retailer would see reduced profit margins for the product as preferable to the costs of redesign and/or patent litigation.
However, patents are not the only source of protection for product innovators like those in my example. If the innovator had a supply or other form of contractual agreement in place, it would have been more difficult for the retailer to outsource to an alternative manufacturer even in the absence of strong patent protection for the innovative product. Although not many patent lawyers would admit to this, it is far less costly and complex to litigate a contract claim than a patent. It follows that a strong and enforceable supplier contract may be a preferable form of intangible asset protection if the goal is to capture first mover advantage found in strong product placement in a retail environment. Continue reading →
Why the IP Law Firm Business Model is Broken And What I Am Doing About It
Business model innovation in IP legal services is only just beginning.
As a former IP law firm shareholder and senior corporate lawyer, I know all too well the expense required to start and maintain an IP law practice. Not only are IP lawyers of all levels of experience paid handsomely, but so are the highly skilled paralegals, docket clerks and administrative professionals traditionally required create the infrastructure needed to handle the myriad of details involved in an IP law practice. Of course, this expensive infrastructure must be sustaining, so while a lawyer serves today’s clients, her eye must also be on finding the next client because payroll and rent obligations don’t take a holiday when clients do.
This “feed the beast” nature of the IP law practice model was a primary reason that I decided several years ago that I would not again work in the traditional practice of law. How could I? The standard legal service framework required me to build and maintain a business model where the product offered is obtaining patents for clients. However, over the years I discovered that often the client does not need the very product that sustains the IP law firm business model. What I perceived as an inherent conflict between my business interests and those of my clients made it impossible for me to continue practicing as I had for many years in the traditional model. Instead, I moved in a different direction in becoming an IP Strategist where, for the last 5 years, I successfully built a business model where I could focus on building and maximizing IP value for my clients independent of any need to build and maintain the expensive “bells and whistles” of a functioning IP law practice. In other words, I have figured out how to get paid for saying “no you don’t need a patent.”
Certainly, clients appreciate the ability to provide IP advice given independently of any need by me to generate legal fees from patent drafting. Nonetheless, many clients have expressed disappointment when I cannot provide them with additional patent services beyond that of IP strategy consulting when we do determine that a patent is the right course of action. Even though I choose my referrals very carefully, when I have to bring lawyers with more traditional legal services models in to service my clients’ patent drafting needs, I have found that the normal pressures of maintaining an IP legal services business appear. As a result, costs to my client start inching up even though I worked to avoid this at the front end of the engagement. I strongly believe that the cost of obtaining IP legal services is too darn high, even at law firms that portray themselves as being willing to use “alternative billing” structures. Put simply, the IP legal services model is broken and tweaking of billing structures and the like can only amount to the proverbial “rearranging deck chairs on the Titanic.” Continue reading →
Posted in: Commentary, ip, IP Strategists, Law Firm Management, Legal Costs, Patent Staffing.
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