CIP is 20 years old this year. What are the major changes that you have seen in the IP world over the past 20 years?
During all my years working in IP, people have told me that IP is becoming more important in business. It’s like one of these “eternal truths” – at least among IP professionals. I actually believe it is true, the more knowledge-based the value generation in our society is, the more important a factor IP is and will be. I do think I can observe this ongoing change. But, when looking back, I sometimes wonder why we have not moved further in supporting business with IP.
We are moving however, looking at the changes last 20 years, I would probably highlight the development of balanced technology licensing structures, the growth of more business-driven IP management, and the shifts of the IP services market.
There has been a lot of efforts from different stakeholders over the years, negotiations as well as fights, which has led to the establishment of fairly recognized common structures for licensing of networked standard technologies, in particular for telecom and communication equipment, through standard essential patents and FRAND agreements. This is an important foundation for balanced approaches serving the “common good” through IP in the future structures in a yet more digitalized and connected world.
As the world of IP licensing has a quite tangible financial side, in contrast to other ways to create value through IP, it is also a natural meeting point for business and IP. As such, I believe it has in many ways also served as a good inspiration for business-driven IP management also in other industries. With this said, I believe it is often overlooked, that a business model based on technology licensing and monetization of IP differs very much from a traditional product and services-based business model, where the revenue base – and the return on investment in R&D – is typically provided by sales of products and services.
I have over the years seen more and more initiatives and a deeper understanding of how to use IP to gain control and shape the business and competitive landscape better, in addition to traditional “exclusivity” strategies. I have also seen a stepwise movement within – I think – most industries, away from more of an “old-fashioned” reactive IP management, towards more of proactive management of intellectual property, driven by strategic business needs.
I can see the attitude of IP professionals also moving, step by step. More IP professionals want to become strategic business partners, not “only” distinguished experts in IP. Just look at the growth of the number of professionals using the title “IP Strategist”. In parallel, I also see the profession is moving in higher knowledge and understanding of business and a more refined view of how IP does and – does not – impact the business.
There have always been people acting in the borderlands between business and IP. I think the number has grown though and I believe we also see the shaping of a professional role in between the traditional IP attorney and business management roles and “on the same level”.
When looking at IP services, we have seen more specialized service providers growing and competing through offshoring, economies of scale, and technology in services such as patent information, filing management, and translations. I do however believe that we are only at the beginning of a shift here. Many buyers of IP services still have quite some unfulfilled expectations.
What do you see as the major IP changes or challenges for the next 20 years?
Given the background that more and more of the value-generating assets of the world can be counted as intellectual property, one of the fundamental needs I see for the future is to secure a better-combined understanding of IP and its effects in a business context. In my view, the most critical bottleneck for better strategic use of IP is that too few persons understand enough of IP effects on business situations. Too few business decision-makers have a full understanding of the impact of IP on those decisions. And – not least – too few IP specialists fully understand the business and the business effects of different IP decisions. If we can bridge this gap and even create more of a true overlap in the understanding between business decision-makers and IP experts, I am sure that we, as a society, will be able to make better decisions and create much more value.
As we see IoT impacting more and more “traditional” industries, there are a number of “new” challenges affecting more and more companies. The “old truths” in many industries are challenged. We start seeing more of separation of on one hand components in connected technologies and, on the other hand, the patent protection of functionality provided by such components in use, into parallel supply chains. It’s no longer self-evident that you will automatically receive an unlimited indemnification from a component supplier. You may need to get licenses elsewhere depending on the use you intend to have from the component or product you have bought. This is a new and troublesome concept for many industries.
There are also quite some challenges in setting the rules and business terms for the next level of technology licensing in industries new to this game. I see a situation where there is a big difference between what licensors expect in license fees and what licensees are ready to pay without challenging the terms. It would not surprise me if a number of court decisions are needed to set the balance and the basic rules for future licensing of connected technologies.
The area of AI and its implication on development on development processes is also an interesting challenge for IP protection in the future. What can and should be possible to protect?
When it comes to IP services, I believe cost and activities spent on administration will be put under further press. Management of large patent portfolios is an administratively heavy and thus quite costly activity. Clients will demand more transparency and efficiency, and I do believe a new “rebalanced” ecosystem of IP service providers lies ahead of us. The IP service provider landscape is changing and the IP law firm, as a traditional one-stop-shop, will be more and more challenged. With further digitalization, workflows can be improved, efficiencies can be gained, and better control can be achieved. I believe specialized service providers addressing certain parts of the IP value chain, will drive a transformation of the IP industry further through digitalization, AI, blockchain, and other opportunities of modern IT technology.
What advice do you have on how to manage IP in times of crisis?
The first item in my book is always to understand how the crisis is impacting the business strategy and to adapt the IP strategy in response thereto. For an in-house IP department, the word “crisis” often translates “cut IP cost”. But before addressing such cuts, it is important to understand if the crisis has an impact on the strategy and the priorities. And not least, it’s important to understand the relevance of cost cuts in IP in relation to cost cuts in other areas, even though fast decisions will have to be made.
In situations of crisis, the organizations that have full control of the connection between different IP activities and their respective business value creation can quickly prioritize and reduce costs in a smart way – or actually, defend any relevant IP budgets. Companies not having this control will always have issues in crisis management and must be prepared to face higher risks and uncertainty in cutting IP costs.
In any case, you’ll, of course, need to prioritize the best possible way to achieve the best possible cost reduction with the least negative impact and you have to realize and accept that risk as such is unavoidable.
Even though the fastest path is to reduce volumes of activities and to downsize portfolios, you should of course also review your cost structure. “Never waste a good crisis”! A crisis – however disturbing – is a good opportunity to make more drastic changes to the cost structure. For many companies, there is still a lot of further efficiencies to gain by improving the cost control of its suppliers and by reviewing what kind of providers are used for different activities. All opportunities to “do more with less” should of course be considered in this regard.
Will this current crisis create changes in how IP is used or managed and, will it last beyond the crisis?
One key effect of the corona crisis – and I believe we have all observed this – is that our digital maturity, in a few months, has moved forward by years. This in turn has led to – and probably will keep leading to – faster adoption of available technologies. I would assume that this will also provide a further boost to innovation in certain technologies.
From an IP services perspective, this will most likely also further push the ongoing digitalization of IP management. Past Corona, buyers of IP services will have even higher expectations on a good digital experience and highly automized cost-efficient administrative processes.
I am also a bit curious about the lasting effects from a more political perspective. I believe the ongoing efforts to provide the world with a vaccine against Covid 19 – in a somewhat unusual combination of cooperation and competition between countries and companies – will go on for yet a while and will be remembered even longer. The role of IP in this pursuit is likely to be scrutinized and the later perception of how helpful, or not, IP will have been for the general good, may well have an impact on the political climate and shape the future development of legislation and regulations.
About Hanns Hallesius’ role
After more than 20 years of managing IP teams in law firm and in-house environments, I am presently exploring other ways to add value to the broader IP ecosystem. In this pursuit, I have started a consultancy focusing on intellectual property strategy and management. I am also exploring ways to improve the management of IP in partnerships together with different service providers, who are or strive to be in the frontline of their service area.