The Patent Files

By Conlin, Jan M.; Schutz, Ronald J. | Chief Executive (U.S.), June 1998 | Go to article overview
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The Patent Files


Conlin, Jan M., Schutz, Ronald J., Chief Executive (U.S.)


Trade secrets. Patented technology. Copyrights held. What's in your company's idea bank? And how do you keep it there or sell it off for a tidy profit?

In a world where a single employee can walk out of a corporation's front gate with assets worth millions in his pocket-or in his head-what's the definition of corporate security? It's tough to keep an idea under lock and key. All the physical protection you can build or hire-gates, guards, and security codesjust won't cut it. And yet, as the U.S. has moved from an industrial economy into the Information Age, a company's intellectual property (IP) often proves its most valuable asset.

Increasingly, both the courts and corporate leaders are recognizing the issue of protecting intangible assets-and making headlines in the process. When General Electric and Hitachi began using magnetic resonance imaging (MRI) medical equipment technology invented by Raymond V. Damadian, the founder of Fonar, Inc. fought back against his powerhouse competitors with a patent infringement lawsuit. Hitachi settled, but GE decided to take its chances in court. The gamble cost them 5103.4 million, which Fonar, then a $15 million company, put toward funding research and development and expanding the company.

Roger Beach, chairman of Unocal Corp., also has an eye for revenues in Unocal's intellectual property. "If it happens, it'll be fantastic," said Beach of the possibility that Unocal would win a patent infringement suit against six of the biggest oil companies in the U.S. The jury subsequently awarded Unocal 5.75 cents per gallon for infringement of its patent on clean-burning gasoline formulations. Royalties for past infringement alone could top $200 million.

And patents aren't the only kind of intellectual property that IP-aware companies deem worthy of protecting. When the recent launch of Viagra, the new impotence drug from Pfizer, was followed by the introduction of two similarly named products, the company quickly defended its investment in the Viagra name by filing suit for trademark infringement.

Unfortunately, too many CEOs still fail to view I P assets-patents, trademarks, copyrights, and trade secrets-as corporate resources that confer competitive advantage and revenues. In fact, many companies, especially non-high-tech firms, leave IP assets inadequately protected, risking harm to revenue and shareholder value.

Perhaps one of the biggest mistakes that CEOs make is to vest responsibility for intellectual property issues in others and then assume they are being managed. Without a CEO who understands IP issues and can focus and motivate vigorous defense of intellectual property, management of an IP portfolio can easily falter. That direct involvement by CEOs and other high ranking corporate officers pays off is evidenced by the case of Honeywell Inc. taking on the world camera industry in the early 1990s. The CEO's delegate, thenCFO Christopher Steffen, was a present and constant force in the case, which provided a total return of nearly 5500 million in damages and licensing fees from other companies in the camera industry.

But the best security starts with prevention, not prosecution. Unless enforcement of intellectual property rights is made a strategic consideration and is tied in with business goals, IP portfolio management can sink to defensive monitoring and prosecution, rather than creative initiatives to boost return on investment. This is most common at companies with semiautonomous divisions where IP assets are not visible above the division level and the company as a whole does not know how to identify or properly value its intellectual property. As a result, these firmsoften middle-tech companies with few patents, but still enough to assemble a portfolio-miss out on opportunities to use intellectual property to enhance revenues and earnings.

Protection begins with identifying the corporation's valuable intangible assets and developing an integrated IP strategy that dovetails with business goals.

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