Chartered Management Institute companion Ian Harvey, chief executive of BTG, urges companies to forge a proper strategy on intellectual property.
Natural selection takes care of chief executives who don't understand the difference between profit and cashflow. And we are moving into an era where CEOs who cannot explain to their board the difference between patentability and freedom-to-use will go the same way (for the answer, see below). Today, intellectual property (IP) should be at the heart of most corporate strategies. Yet 95% of CEOs - even those that lead technology-based companies - have a poor grasp of it.
Over the past few years, UK corporate growth has come from the knowledge-based industries - at the last DTI review they accounted for about 70% of the value of UK quoted equities. And an OECD study shows that the largest component of economic growth in the G8 countries between 1970 and 1990 came from innovation and technology developments.
The knowledge stemming from innovation is one of the most precious corporate assets. Yet until it is encapsulated in a legally protectable form - through patents, copyright or trademarks - it can walk out of the door, it can be copied or just plain lost.
In today's interlinked world, IP is one of the few competitive tools that can be enforced in court. Technology and the IP that complements it have a central role in helping companies to develop, compete and create wealth. With trade barriers coming down, it's hard for UK businesses to compete on price against low-cost, high-quality manufacturers from East Asia. But a competitive edge can come from innovation and effective marketing, and this is exactly what IP rights can protect so effectively.
There are two key questions in developing an IP strategy. First, why have one? Is it to protect your own technologies in the market and to stop others? Or is it to license your erstwhile competitors and take revenue from the entire market? Second, how can you use IP to greatest strategic effect? Are there gaps in your IP, which could be filled by acquiring other IP or companies with a suitable IP base?
As an example, after Microsoft was forced to pay dollars 30 million to IBM following a patent dispute, the company reassessed its previous reliance on copyright to protect its software. Eight years ago, Microsoft owned just 30 or so patents. Now it has about 300, with a further 4,000 in application.
Several years ago, it paid dollars 425 million for Web TV, a start-up, to gain access to 35 key patents covering Internet content over television. These were 'business method' patents, which - you could argue - are not patentable in Europe and therefore not relevant to a UK company. …