Step-By-Step Guide

Following is a step-by-step guide on how to implement the main processes.

Process 1: IP Audit and Portfolio Creation

As mentioned in Chapter 8, this is not a legal audit or a simple inventory-taking exercise, but one designed to discover the value of the various IPs to different business purposes and needs. Depending on the structure of the organization, the audit step can be undertaken at the business unit level or across the whole organization.

Step 1: The Audit.
The audit step should be targeted at creating a portfolio of the primary form of IP, the driver of value in a particular industry or line of business. Other forms of IP are included only when they are used in their support. Trade secrets, being a blanket protection over codified know-how, should be covered regardless of the primary form of IP. Examples of trade secrets include: negative information relating to patents, marketing know-how relating to brands and creative methods relating to copyrights (part of the source code for software programs). Trade secrets are the shadow protection of every primary form of IP and hence should be covered in any audit of the primary IP.

The following steps are a guide to the audit exercise and the creation of the portfolio regard­less of the form of primary IP:

1. List current and pending (for patents and trademarks) primary IPs and the business unit where they are primarily used. A classification should be used to group the various IP assets by reference to business use for patents, by reference to product categories and market segments for brands, and to market segments and type of media for copyrights.

2.       Whenever possible, tie the sales revenues to the various groups of IP and indicate their competitive significance.

3.       List any IP assets that do not satisfy the criteria under 2 above but that are believed to be of possible value to other business units across the organization or to strategic part­ners - suppliers, distributors, and customers.

4.       Indicate any IP under 3 above that may be of value to competitors, and indicate how it can be used without j eopardizing the competitive position of the business with which it is associated. Competitive intelligence is required here to reveal other players in the related field of the concerned IP and future implications.

5.       List any IP that has been licensed in or out.

6.       List any IP that is being used as the basis of business transactions.

7.       Estimate the business life cycle of the IP in question as well as the expiration date (not for trademarks). Include maintenance fees and dates for patents and trademarks.

8.       List any factors that may affect the strength or the scope of strategic IP assets, particu­larly issues relating to validity. The scope of the competition's IP should also be con­sidered here to determine its effect on the organization's IP status.

Step 2: Create the IP Portfolio.   
Collect the information required under step 1 and present the facts in a portfolio to represent a snapshot of the organization's primary form of IP. Exhibits 13.2 through 13.4 show the portfolios that can be created for each of the primary forms with examples from organizations in the chemical, consumer products, and entertainment industries. The main areas that an IP portfolio should reveal for IPM purposes are:

•   Strategic IP assets that are the basis of a competitive advantage for businesses, which should be used for competitive purposes

•   Valuable IP assets, the commercialization of which will not have a harmful competitive effect and thus should be proactively commercialized

•   IP assets that are of no considerable value to the business and thus can be sold, donated, or abandoned

The three portfolio types are described as follows:

1.      Patent portfolio.* The patent portfolio should indicate the groups or family of patents that each business unit acquires and uses. The portfolio depicted in Exhibit 13.2 shows the portfolio across the whole organization so that top management can appreciate the strengths and weaknesses of its technological base and hence adopt the appropriate short- and long-term strategies. While the weeding-out process should be performed across the whole organization, plans for strengthening the patent portfolio for competi­tive and commercialization purposes should be done at the business unit level. The num­bers and groups of patents should be indicated under each of the boxes.

2.      Brand portfolio. A brand portfolio should be created to show the horizontal expansion of a brand across product categories (brand extensions) and the vertical penetration along the value hierarchy (i.e., the brands used in each product category). A number of Nestle products are taken as an example here (see Exhibit 13.3). Sub-brands are indi­cated to show the level of branding involved (i.e. use of corporate name, then a product brand, then a sub-brand, etc.). Strong brands should be leveraged competitively by introducing brand extensions along new product categories. They should be leveraged also through merchandising agreements into product categories that the organization does not manufacture itself. However, brands created to expand into other market seg­ments across the value hierarchy (i.e., low price entry level to high price/quality luxury brands) are more competitive in nature and, hence are useful for short- and medium-term competitive purposes. Such brands may later be sold if they serve no further com­petitive purpose. They can also be combined with other brands along the value hierarchy, or combined with the corporate or other product brands to save on marketing and advertising expenses and leverage the brand equity. Of course, to do this, the organ­ization needs to assess how such actions will affect the brand promise. 3. Copyright portfolio. A sample portfolio using some of Disney's works is shown in Exhibit 13.4. The portfolio shows the different works and the media/market segment in which they were introduced. The same copyrighted creative content is leveraged across the various businesses. Similar to a brand portfolio, reference must be made to the suc­cess of the work and its revenue stream in deciding whether to leverage it across other media, use it as a basis for more reproductions, or commercialize it through merchan­dising. All the works used in the sample in Exhibit 13.4 have been merchandised in offerings of toys, games, and apparel. Strong works like The Lion King, for example, can be further leveraged through sequels.