Taking the Pulse of IP: Changing Market Conditions Lead to New IP Considerations
Editor’s Note: As part of Dilworth IP’s continuing series of Counsel-to-Counsel Idea Exchange events, we summarize key findings and insights shared by our peers across the field of intellectual property (IP) strategy, law and business leadership. This article summarizes some of the latest considerations as discussed in the firm’s June 2020 Idea Exchange with senior in-house IP practitioners at leading companies across multiple industries.
The business of IP strategic and legal practice finds itself at a crossroads, as new considerations guide in-house IP practitioners and corporate leadership to evaluate IP differently. Some of the key areas of consideration in this unprecedented time include the role of cybersecurity; the challenges and opportunities associated with remote working; and the nature of changing R&D priorities.
Cybersecurity and IP: Vigilance Expands from Physical to Virtual
News reports indicate that ransomware, phishing attempts and cyber attacks continue to rise dramatically in the age of COVID-19, thanks in no small part to the sudden dispersal of workforces at all levels into hastily arranged home office environments — often without appropriate safeguards in place. Companies with a history of combatting these threats remain vigilant, especially those who engage directly with business partners in China.
Some firms have implemented app restriction policies (against apps such as WeChat and also against products with a history of security vulnerabilities such as Zoom). Others are restricting the use of easily penetrated filetypes such as PDFs or Microsoft Word documents, for example, so that they will not be used for invention disclosures or other sensitive information. In short, companies who previously took a highly visible and proactive approach to cybersecurity are continuing to do so, with perhaps even more vigilance.
As Corporate R&D Changes, How Will It Impact IP?
As access to laboratories and engineering centers has been dramatically curtailed, the consensus is that it’s resulting in a significant slowdown in meaningful, milestone-level progress in key areas of research. In its place, a lot of incremental adjustments are developing instead, but they don’t represent the substantial forward motion that is the true bread-and-butter of IP strategy and innovation culture.
As a result, it’s not unreasonable to anticipate a significant drop in patent filings next year as the IP legal process responds to the shift. On the other hand, companies in selected sectors are shifting their R&D focus in cases where such work can directly impact progress relating to the COVID-19 pandemic.
In fact, the problem for COVID-involved companies is the opposite: R&D is moving so quickly that product engineering and preparation for go-to-market is far outpacing the IP process that goes alongside it.
Two potential areas of focus that arise from this temporary setback in access to R&D facilities and talent are worth noting, however. One is the availability of additional time for R&D personnel to ‘catch up’ on IP education, invention disclosures and other administrative steps associated with recognizing and protecting the IP they have previously developed. Another is a renewed focus on the question of how current patent portfolios can be revisited, reprioritized and potentially leveraged for fresh business opportunities.
Specifically, some enterprises are recognizing the unique opportunities that this current economic and policy climate creates for leveraging IP through licensing. In fact, virtual Invention Harvesting Sessions designed to generate new Invention Disclosures (IDRs as some call them) are now a relatively straightforward activity to arrange logistically, although the caveat is that participating researchers may struggle to make the sessions productive if they are not actively engaged in the lab.
Finally, culture plays a huge role in this discussion as the current climate has laid bare some of the inherent conflicts that exist within larger enterprises, especially those who have been involved in large-scale M&A activities. The result in some cases is an enterprise that has some parts of its culture specifically built around creating innovations that can be licensed or otherwise leveraged, while other parts of the same culture (typically in other, quasi-independent divisions) are focused on innovations that are directly applied to marketable products which will impact the firm’s own market position positively.
These two cultures can rapidly come into conflict if the challenges inherent in the two diverging approaches are not effectively addressed. This can be further exacerbated in companies where cost-cutting changes in IP-related bonus compensation or incentive payouts are made without regard to the cultural impact or long-term impact on the enterprise’s intellectual property rights and future market position.
One key point on this is simple: Companies should not worry about people making too many disclosures just to generate ID rewards, as they will be identified over time and can be weeded out. Rather, the key is to reward the majority for their hard work and contributions through appropriate monetary and non-monetary incentives.
What is the Future of Post-Grant Proceedings?
While the USPTO has followed a trend of lower invalidation rates in post-grant proceedings such as Inter Partes Reviews (IPRs) and Post Grant Reviews (PGRs), not everyone agrees this is in the best interests of the IP field. While only 60% or so of all claims in patents going through a post-grant proceeding through final written decision are deemed unpatentable, this ignores the significantly declining institution rates in post-grant proceedings.
While the pharmaceutical industry is intensively focused on repositioning the role of the IPR, broad swaths of the IP industry as a whole are of a different opinion, seeing the IPR as a critical resource to clean up “bad patents” that do get issued (and which, invariably, will continue to be issued in our highly complex environment).
IP Litigation Finance: Not Yet on the Enterprise Radar
The Fed is flooding the economy with new money, and there are ample funds being deployed for litigation finance. In a low-yield environment where treasuries are approaching zero, investors are looking for alpha (to increase portfolio ROI).
While a lot of investment from private equity and other sources is pouring into litigation finance, the feeling is that enterprise companies view the field as highly risky, especially since Non-Practicing Entities (NPEs) and Patent Assertion Entities (PAEs) or ‘patent trolls’ have, in many cases, been the early adopters of this model.
In summary, the consensus is most companies haven’t assessed this at all, as Finance is not necessarily concerned about patents on the balance sheet right now because it’s an R&D cost. Rather, they’re focusing first on “what do we not need right now before we cut employees”, and others are focusing on how to get people into the building and otherwise revisit operational cohesion and continuity in the post-COVID environment.
From cybersecurity to invention disclosures and from inter-party reexaminations to litigation finance — clearly the field of IP practice is undergoing rapid change and many considerations are in play. This is both an exciting and challenging time to be at the forefront of intellectual property guidance, strategy, and direction in the 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.