Licence to Bill: Protecting Company Know-How: Directors Are Charged with Effective Governance to Ensure Freedom to Operate and Maximised Asset Value Contribution. but When It Comes to Intellectual Property, Which Factors Influence Freedom to Operate? and How Can Directors Deal with Infringement Risk? Frik De Beer Provides the Answers

Article excerpt

TOO hard? Awaste of time and money? Directors who avoid intellectual property (IP) issues sometimes discover the hard way that neglected IP will always end up at board level. That's because performance will be affected by the resulting limitations on freedom to operate. Smart directors are finding it is more cost-effective to proactively work to detect and avoid threats to an organisation's most productive asset--its intellectual property.

Despite publicly recognising the value of IP, less than half of New Zealand organisations have an IP voice at board level. According to a survey by IP lawyers and patent attorneys AJ Park, serious questions also exist about board understanding of the possible effects of third party IP on the business and too few resources are allocated to maximise the commercial potential of company IP.

Boards with a last century mindset focus on protecting, exploiting and developing physical assets. In today's information and knowledge age, however, there is growing recognition that creativity, scientific inventiveness and commercial innovation are companies' major and most enduring competitive assets. According to researchers at Washington University's Economics Department, these collectively comprise between 40 percent and 70 percent of company value.

Organisations wanting to make the most of the strategic value of their IP and to minimise the risks associated with its mismanagement, are now ensuring that IP management specialists are included at senior executive and board level.

Organisations can achieve IP freedom to operate through conscious risk management. This involves:

1. ASSESSING RISK LEVELS

A company at risk of IP infringement typically owns an invention with a high R&D cost; has solved a difficult technical problem; or has an inexpensive, simple and highly effective product or process. Competitors may want to share in this success and use the owner's unique IP--with or without permission.

Infringers typically copy low-tech consumables or components and then move on to sophisticated items. IP infringement risk is affected by the length and complexity of the manufacturing and distribution chain. Imitators depend on busy companies not prosecuting on small sales volumes in 'difficult' legal environments.

2. IMPLEMENTING SYSTEMS TO DETECT POTENTIAL INFRINGEMENT

An organisation without IP identification and protection systems and records is not likely to know its own--or its competitors'--IP, and may be suffering losses or be vulnerable to accusations of infringement. Avoidable potential losses and risks to freedom to operate imply likely negligence, justifying accountability at company board level. What to do?

Conduct an internal IP audit Create an inventory of company IP assets. Conduct a structured IP audit to establish an IP asset baseline. Include trade secrets and IPR: patents, trade marks, copyrights, design rights, domain names, licence agreements and collaboration agreements. Organisation handbooks, training material, employment contracts, and business and licensing agreements must also be audited.

This audit should result in an IP database listing. Include in this the owner of the intellectual property asset, class of asset, inventors or authors, when created or acquired, the asset's status (pending or issued patent, registered copyright, trade marks, domain names), ongoing maintenance issues (payment of fees for patents, collection or payment of licensing fees), and expiration or renewal dates.

Encourage early disclosure Create a culture of controlled communication and disclosure so that there is trust in fair dealing, objective IP proposal assessment, timely feedback and reasonable rewards. Use template documents to make IP disclosure as easy as possible. IP managers must be visible, trusted, technically competent and approachable.

To help avoid premature disclosure--especially by academics--include compulsory internal review of research publications, conference posters and presentations so that IP protection can be obtained before information goes out to a wider public. …