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In my last post I raised a question that my mind has been dwelling on ever since…

Why do some organizations manage IP primarily as legal instruments, while others handle them like business assets?

In fact, I realize that the question is incomplete. This is because there are a whole host of other organizations that view intellectual property (particularly patents) primarily as technological artifacts. The short answer in my post was that it was an outcome of who was tasked with managing them.

I have observed over the years that when lawyers are in charge of IP, the legal perspective prevails and legal processes dominate the agenda (filing, prosecuting, defending, and asserting). When managers are in charge the focus is on leveraging, practicing, and monetizing the IP in the business operations and strategy of the company. For that matter, people with a technical focus universally seem to view patents as packages of technical achievement, and processes supporting technological achievement and innovation rule the day. I have also spent a fair amount of time with economists and business thinkers who tend to see IP as economic artifacts acting as vectors of value and innovation.

It seems that IP is one of those things which establishes its identity wholly within the eye of the beholder. It’s sort of like a Rorschach Inkblot test, where perception is heavily (if not entirely) conditioned. Of course, IP is really ALL of those things - a legal instrument, a business asset, a design or technical expression, and an economic entity. It’s no wonder there are so many differing views and interests, so much controversy, and such mystery and confusion surrounding intellectual property rights.

For me, this is a very relevant issue because this challenge confronts me on a daily basis. My work focuses on adding business processes to the management of IP. This can be easy to do when you are working with an organization that already thinks of IP as business assets to be managed and exploited like any other valuable assets. It can be virtually impossible when the organization has always viewed IP as “something lawyers do”, or even “something inventors do.”

When you look at IP, what do you see? Who do you think should be responsible for IP in an organization?

The short answer: it’s a lot of things, and a lot of people need it.

I’ll just say it… The concept of managing intellectual property is a bit elusive. For that matter, the idea of intellectual property itself is often a bit vague for many. This can make explaining what IP management software is to those with little knowledge about IP extremely challenging. But it may surprise you that it can be just as difficult to describe IP management software to people who are experts in the field of IP. Why is this? I think it’s because there are a lot of different things that various people do with IP and a lot of different people involved. My goal here is to break that down into some very simple categories to make it easier to understand what IP management is and what kinds of software you can get to support it. Before we can do that, I have to explain a few things…

First, IP means different things to different people. Just Google the term “IP Management Software” and you will see what I mean. For starters, you will see that “IP” itself has multiple meanings. For instance, to a bunch of people out there IP stands for “Internet Protocol”, and they have their own management software to help them do whatever it is they do. Beyond that you will find software for the media and entertainment industries, software for lawyers, and even software for software companies among a variety of other things. It almost feels like “IP Management Software” is a grab-bag: reach in and you never know what you might find!

Secondly, there are multiple kinds of intellectual property: patents, trademark, service mark, registered designs, trade secrets, and more. To complicate matters more, intellectual property has even become a kind of catch-phrase associated with corporate innovation and competitiveness and is often used almost interchangeably with the word “innovation”. At this stage in the computer “revolution” it should surprise no one that there is a software application for just about everything and therefore we are not surprised to find “management software” for virtually every flavor of intellectual property, as well as for virtually every role and activity associated with it.

Lawyer or No? At my company, we get a lot of calls and email inquiries about our IP management software from people who are actually looking for something completely different. I can usually tell right away which ones are actually interested in “Internet Protocol” management and happily inform them of their wrong turn. However, for a long time I had a more difficult time determining whether the rest has found the right place or not. That is until in desperation one day I seized on a simple diagnostic which I now use every day that helps immensely to organize this mess. It is a simple question that divides the IP (intellectual property) world into two major camps. I simply ask, “Are you an attorney or patent agent?” If the answer is no, then it is possible that have found the right place and a few follow-up questions will easily determine if they have. If the answer is yes, it is almost certain that they are in the wrong place.

A bit of background helps… Historically intellectual property was always primarily a legal process. It was something lawyers do. IP is a legal entity. Filing, amending, prosecuting, maintaining, litigating - these have been the processes people associate with IP for generations. Companies and other organizations have almost universally thought of IP as a legal process, and therefore responsibility for it was almost always given to the general counsel’s office. The main purpose of having IP was to protect the competitive position of the company’s products and markets.

Then, something happened: people started to make money directly on IP. Of course this was already happening in media such as music and movies and in software among others. But other people got in the game. For instance, universities started to make money licensing their patents. And their “commercialization” efforts led to the Bayh-Dole act and a lot more “technology transfer”. In industries where IP is relatively more important such as pharmaceuticals, patent licensing has become a major industry and has earned sometimes stunning amounts of money for the inventors and their employers. Small technology companies have come to see this as a viable business model in its own right. Trademark licensing is now a big and sophisticated global industry. Suffice it to say that a whole range of business processes have grown up to support making money on IP.

The 2 Kinds of IP Management Software

So, that’s how I divide the world of IP management software: it is either designed to support legal processes or it is built to enable business processes. This makes a lot of sense anyway because these processes are quite different. But, you might say, they both ultimately serve the same purposes and must be integrated in some way to be effective. This is absolutely true. It is impossible to imagine including IP considerations in the business decisions, strategies, and even business model of the organization without that having a direct and profound impact on the legal processes: which IP to obtain, what types, in what jurisdictions, how much, and so on.

However, I think it becomes clear that these decisions are precisely what the business processes of IP ought to support. Therefore, the managing IP is really just whatever the business does to make smart decisions about IP that support the organization’s key objectives and strategies. Said another way, managing IP is all about integratinge the legal processes of IP with your business strategies and objectives.

It turns out that although this is really a very simple concept, it is easier said than done. There are a number of things businesses do when they “manage” something that have historically been foreign to IP. Management requires a lot of visibility and control over the object of management. For instance, managers typically want to know things like: why do we need it, what will it cost, what has it earned (or will it earn), what business objectives does it support, who is using it and how, who else has some, and even, what it is worth? Questions like these are not easily answered by lawyers. They’ll be happy to give you their best guess of course, and they are used to doing it because so few companies can answer these questions for themselves, but it’s really not what they exist to do.

The 2 Kinds of IP Management Software Customers

From my experiences with Knowligent, organizations that are shopping for intellectual property management software generally fall into 2 categories. To determine which they are, when a customer contacts us I will always ask the following question before we even start the conversation: “Does your organization have internal patent attorneys, or do you rely on outside patent counsel?”

The reason I use this question is that almost universally the companies that have in-house patent attorneys are looking for software to support their legal processes. I don’t know exactly why, but it seems that when a company is conducting it’s own patent prosecution, this process seems to take center-stage and command the focus and attention of the organization. Or it may be the other way around. In any case I have found that companies doing their own patenting tend to think of it as primarily a legal process. There is no particular reason why these organizations don’t need to integrate it with their business decisions, but they generally don’t seem to think about it in that way.

In contrast, organizations that contact us who rely on outside patent counsel for their legal processes are almost always looking for software to better manage those processes from a business perspective, and to integrate it into their overall strategies and objectives. Sometimes they are focused on controlling or justifying the cost, and other times they are interested in increasing IP-related revenue, or (rarely) both. Whatever their goals, any organization that is outsourcing patent prosecution simply doesn’t need software for managing the minutia and legal details of IP. If they use outside counsel, it’s a safe bet they are looking for business IP management software.

It has been a consistent trend over the past decade or so for organizations to move the legal processes of patenting out to outside attorneys and agents. This may be because it has become so much more complex to obtain global IP protection, or it may be part of a larger trend toward outsourcing based on efficiencies. Either way, it means that fewer companies need legal IP management software, and more are ready to understand the value of business IP management software.

One note of caution: Most IP management software vendors will describe their offerings as containing both legal and business processes. To an extent this is true. Most IP management software contains some elements of both. However, in essence they all cater to one side or the other. If the offering is designed to support “docketing” (which is a common term for the legal processes), its other functionality will not be oriented to non-lawyers, and the reverse is also true.

In a future post I will present my own survey of the field of IP management software.

There’s a terrific post and debate over at the IAM Blog about the apparent collapse in the intangible values of companies. This arose out of both a very stimulating blog post by Pat Sullivan on the fallacy of the common intangible value concept derived from corporate securities pricing, and also an article in this month’s IAM by Nir Kossovsky about what that does or does not mean about the collapse of securities recently. As company valuations collapse in the current recession, does that say anything about the real value of IP? It’s a great question, and one that I think is ready for a serious answer. The blog post is great but the comments (by many leading thinkers in this field) are even better.

I personally think this forces all of us to think in a much more realistic and sophisticated way about what IP value is and how it is defined, created, realized, and transferred. That has to be a good thing.

I have a lot of perspectives on this myself that I will try to articulate in future posts. In particular, I have some interesting and unique data that seems to indicate that market valuations of IP are strongly cyclical - that is, they do go down in recessions. But that is for a future post. For now, I am appreciating the frank and probing conversation started by Sullivan and Kossovsky and carried on by many others. Bravo!

Yesterday a federal appeals court ruled against a patent on a business idea (here is the Yahoo story), and the decision has significant implications. Bernard Biliski was seeking a patent for a method to hedge against the risk of weather-related impacts on business. The focus of the decision was that the application did not meet the definition of “process” as defined in patent law and precedent. The patent application had already been denied by the USPTO and the decision on Thursday merely affirmed the patent office’s denial as correct.

The 11 judge panel was split 9-2 and the most fascinating thing to me were the dissenting opinions which argued that the decision might lead to the disruption businesses or industries that rely on other such patents. I find this argument astonishingly irresponsible. Considering the significant intellectual and economic forces that are currently challenging the very foundations of the existing IP regime, I do not know how one could advance this as a justification for maintaining any kind of patent. In response, I would offer the following four points:

1. Patent decisions always disrupt businesses or plans. To argue that courts should not invalidate patents if it will disrupt businesses or industries would have much farther reaching implications. If this were a vaild standard then I would guess that there would be few invalidations. I don’t think that the degree of disruption should ever be a consideration in deciding the validity of a patent (though it may be an important consideration for the appropriate remedy).

2. The argument that entire industries are based on business method patents is questionable. However, even if it is true it would then only serve to provide further justification for even more careful consideration of the validity of these patents.

3. One of the biggest dangers with business method patents - and it is true in this specific case as well - is that the patent will embody methods or processes that are already widely in use in business. The real potential for trouble is when a business method patent disrupts existing businesses. Invalidating that kind of patent is essential. (Here is another current example.)

4. Finally, business method patents are perhaps the most controversial element of an increasingly controversial patent system. To argue that we need to maintain them primarily because invalidating them would disrupt some businesses essentially justifies the position of the opponents of IP and undermines the logic of a system for protecting intellectual property.

In part 3 of my interview with Mark Johnson, co-author of The Innovator’s Guide to Growth, I ask him about the common misconceptions of disruptive innovation and particularly the way people confuse disruptive innovation with novel or radical technology.