Canada’s Intellectual Property Firm

Innovation, Intellectual Property and Intellectual Property Management — 10,000 feet level

Nowadays, much is being written about the need for innovation to help kick-start the economy as well as to help institutions, industries, companies, regions or even countries further distinguish themselves from others, i.e., develop a competitive advantage that aims to generate corporate and/or economic growth. To make this happen, participation is required by numerous key stakeholders, and — more importantly — these stakeholders need to realign and coordinate amongst themselves more effectively to deliver this ambitious yet necessary plan for sustained growth and success.

This article provides the author's personal view, at the 10,000 feet level, of where we may currently stand and the challenges that lie ahead in gradually implementing this requisite innovation strategy. It will discuss "Innovation", the relationship between Innovation and "Intellectual Property", and "Intellectual Property Management".

Innovation. Innovation, as defined by the Organisation for Economic Co-operation and Development (OECD), is the key business performance of essentially finding new or better ways of doing things that are valued in the marketplace. Innovation may be radical or incremental, the latter being more common for most innovative companies. The OECD defines business innovation as "the implementation of a new or significantly improved product (good or service), or process, a new marketing method or a new organizational method in business practices, workplace organization or external relations."

There are four types of innovations:

  • Product innovation (more common in manufacturing industries) — significant changes or improvements in the capabilities of goods or services
  • Process innovation (more common in manufacturing industries) — significant changes or improvements in production and delivery methods
  • Organizational innovation (more common in service industries) — new or significant changes or improvements to organizational methods, business practices, workplace organization or external relations (e.g., Dell's direct to customer business model)
  • Marketing innovation (more common in service industries) — new or significant changes or improvements in product design and packaging, product promotion and placement, and methods of pricing goods and services (e.g., Apple iPod)

Put differently, an innovation is not simply inventing or creating; it must be implemented into a new or significantly improved product, good, service, process or even a new marketing or business method that is introduced into the marketplace or business operations. For each type of innovation, "significant" is defined as a significant degree of novelty, whether developed internally (i.e., internal R&D) or externally (i.e., via collaborations, joint ventures, licensing or acquisition, for example). As such, leading companies have Innovation Management as a key competency.

Relationship between Intellectual Property and Innovation. In IP — and, more specifically, in the realm of patents — novelty is a key criterion in determining whether an invention, creation or development may qualify as a patentable subject matter (i.e., is the invention, creation or development substantially novel in light of what is already known?). The concept of novelty, which also defines Innovation, is one key example of the interface between Innovation and IP.

In practice, companies that are constantly making and managing their innovations usually have, as one of their metrics of success or key performance indicators, an objective to protect their key innovations under IP laws and thereby generate IP assets that create or generate corporate value and benefits. As such, Innovation Management has a direct relationship with, and it comprises, IP Management in terms of good practices at innovative companies.

Intellectual Property Management. As a key component of Innovation Management, IP Management — which may fall within the responsibility of the legal, R&D and/or finance functions — should comprise all of the following best practices:

  • Create IP assets resulting from innovative efforts, such as patents, trademarks, trade secrets, copyrights, etc.
  • Develop a management system to capture, own and protect such IP assets.
  • Ensure that commercial exploitation of the results of the innovative efforts — namely products, services, processes, methods of doing business, etc. — do not infringe on the IP rights of third parties, especially in the U.S., where the legal and financial risks of such infringements are high.
  • Leverage the IP assets or rights to create commercial value for the company in a clear and tangible manner, including, for example, licensing, enforcement to maintain market position or control competitive business activities, reducing client costs, enhancing joint ventures or business collaborations, increasing revenues, securitizing loans, etc. This essentially values IP as an investment, not a cost or expense, for an innovative company that is proactively managing its IP, since presumably innovation and IP are viewed as a key competitive business asset that is aligned with the business strategy.

Challenges... or opportunities? It is the author's view that, in Canada, we are only recently focusing on developing an Innovation, as well as an IP, strategy for the country. In the business sector, the situation appears similar, with such development only taking place within the last decade. In general, it would seem that most companies still view IP as an extension of R&D and not yet as a corporate investment with potential for significant return or a value enhancer. Furthermore, sometimes even senior management, investors or board members may not yet have had sufficient experience (good and bad) in managing and growing companies whose key assets include those that are intangible. Moreover, the professionals who advise on such intangible or IP assets, such as lawyers and accountants, have not yet fully coordinated their efforts and services to help their clients better understand and manage this unique asset class.

Accordingly, more focus and genuine efforts are required for a clearer and strategic public policy on Innovation that will be practical and useful for companies of all sizes and technologies. Businesses also need to adjust their management practices and objectives to improve or optimize the latent commercial value of their IP assets. IP Management, as a subset of Innovation Management, needs to be more structured, resourced and rolled out into the various company functions that touch upon innovative activities or efforts within companies. External professional advisors and consultants that deal with IP should coordinate more closely when advising clients on technology, Innovation and IP to help their clients better understand, manage and leverage such assets for corporate value.

Proactively and methodically addressing some of these challenges, which in essence constitute opportunities, should assist to some extent in implementing an innovation strategy that would improve business and economic results in Canada.


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