A Business Leader’s Guide to IP – Part 6: What a Weak IP Position Communicates to the Market
Editor’s Note: This article is part six of a seven-part series titled “A Business Leader’s Guide to IP”, in which we will focus on the strategies, opportunities, and impact you can achieve by integrating IP as a core element of your overall business and innovation strategy. As each article is published, we will update links here:
- A Business Leader’s Guide to IP: Part 1 – Understanding Your Potential Risks
- A Business Leader’s Guide to IP: Part 2 – Sound Strategies to Mitigate Your Risks
- A Business Leader’s Guide to IP: Part 3 – Combating Theft of Your IP Assets
- A Business Leader’s Guide to IP: Part 4 – Shore Up Your Market Position
- A Business Leader’s Guide to IP: Part 5 – Protecting and Growing Your Market Share
- A Business Leader’s Guide to IP: Part 6 – What a Weak IP Position Communicates to the Market [this article]
A Business Leader’s Guide to IP Part 6
What a Weak IP Position Communicates to the Market
Intellectual property is one of the essential strategic cornerstones of an innovation-driven enterprise. As a result, protecting your IP needs to be a top priority. This is true not only to ensure the value of your IP assets but also to communicate a strong IP position to your target markets and competitors alike.
What does a weak IP position look like? There are a number of answers to this question, but some of the attributes can include:
- Important innovations and brands are not protected by patents or trademarks.
- Inconsistent or unduly restrictive filing for IP protection (e.g., not filing in key jurisdictions or obtaining patents that narrowly define the scope of your innovation).
- Unintentionally allowing patents and trademarks to go abandoned for non-payment of fees.
- Failing to pursue protection for design, brand, or trade secret assets.
- Not pursuing legal action when others infringe your IP.
- Routinely failing to bring innovations to market and letting your IP fall fallow.
What these incomplete actions or inactions communicate to the marketplace can be severely damaging. Competitors and customers alike may perceive that your company is in a weak financial state or is not a leader in its industry. Perhaps your organization doesn’t fully understand the potential of the innovations you’ve developed and therefore may find your technology overtaken by a new entrant to the market (think of how researchers at XEROX invented the graphical user interface but it wasn’t until Apple came along that the technology was ultimately delivered to the market).
In addition, neglecting to protect your innovations or your brands, or failing to enforce your patents or trademarks, will likely encourage infringers and counterfeiters to take advantage of your weak IP position – and the threat of counterfeiting is very real. Global trade in counterfeit and pirated goods has risen steadily in the last few years. In fact, this holds true even as overall trade volumes have stagnated. As of 2019, counterfeits stand at 3.3% of global trade, according to the Organization for Economic Co-operation and Development (OECD).
Another unique challenge you’ll face with a weak IP position is the risk that other parties will overtake the space you’ve carved out, claiming rights that should belong to you as their own. If you pay scant attention to protecting the IP you’ve already developed, keep in mind that your competitors may be able to not only copy what you’ve developed but potentially may also be able to protect it themselves, leaving you with little or no rights of your own.
Imagine finding yourself in the position of defending your company against a competitor suing you for infringing a patent on an innovation you actually developed first. Upside down as that may seem, it’s entirely possible in countries that, like the United States, follow a “first-to-file” rule for patents. Simply put, that means, whoever files the application first, retains the rights — regardless of who developed it first.
Finally, a weak IP strategy communicates low value to your most important audience — your customers and prospects. Companies that have mastered the development and protection of both technological innovations and the brand protections that align with them, are overwhelmingly the leaders in most technology-driven markets. This is because the market associates the value of the brand and the utility of the technology together – think Apple and the iPhone.
Patenting a design but failing to trademark the brand you use to identify it in the market, can lead to a weak market position as other companies come right up to the edge of your brand position and crowd the landscape. This, in turn, dilutes your brand in the eyes of your customers and often leads to reduced market share, meaning fewer dollars available to reinvest in future innovation discovery and development.
A cautionary tale in this category is Kodak, which was once a brand legend but ultimately allowed both the company’s innovations and its brand strategies to fall fallow. In the end, Kodak sold the majority of its patents at “fire sale” prices to a collection of shrewd buyers including Apple, Google, and Facebook (companies that all invest intensively in brand development and protection).
Here’s a helpful way to think about patents. A patent protects ownership rights over your technology similar to how a land deed protects your ownership rights to a plot of land. Simply discovering the land does not give one the right to build there. It may well be that someone else had discovered it first and possesses the deed to that piece of land. That owner will prevent you or others from developing that land, perhaps even taking possession of the building you’ve built upon the land they own. Damages paid to patent owners as a result of a successful infringement claim work much the same way.
To further the comparison, the owner of a plot of land may well decide to buy up neighboring plots in order to prevent others from crowding his property with obtrusive structures which likely devalue it. If that owner does nothing to secure the perimeter of his property, he may soon find squatters settling on the edges, greatly diminishing the value of that property and muddying his ownership rights to it. Similarly, a robust patent strategy should work to capture broad coverage of one’s technology and be asserted over attempted copycats and counterfeiters that profit from your innovations and create confusion of your brand in the marketplace.
Each of these realities demonstrates the intrinsic value inherent in a strong IP protection strategy, and why it’s important to identify, mark, and vigorously protect your IP territory over time. Doing so protects the value of your investments, maximizes your operating flexibility, and ensures that you have the greatest possible opportunity to leverage IP successfully for the growth of your enterprise.
This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. The opinions expressed in this article are those of the author only and are not necessarily shared by Dilworth IP, its other attorneys, agents, or staff, or its clients.