As companies continue to face pressures to maintain (or revitalize) growth rates, a common tactic is to reassess their market focus and seek entry into new markets.
Whether this growth is organic R&D (build), open innovation (build and buy), or acquisition, including the business perspective of patents and IP rights provides an important strategic lens. The value of this lens is greatest when incorporated early into the process to help guide understandings of a market's dynamics.
First, let's outline the traditional role of IP in the acquisition process of many multi-billion dollar companies: (we will discuss other processes separately)
- We are looking at buying firm X to help establish our next high growth market
- They are a market leader with key customers and strong cash flow
- Does the firm have IP? (Yes, great, let's verify that the fees were paid -- maybe we can get our attorneys to help us review the patents at the last minute too)
Questions unasked:
- Are there other patent risks that we should be concerned about?
- What other companies may be developing technologies that compliment / leapfrog our acquisition candidate?
- Are there past efforts / trends that we can learn from / adopt given our present or unique capabilities?
- Are there pre-revenue companies that we should monitor or evaluate?
- What is the quality of the target firm's intellectual property and patent positions?
- Are the target's IP rights such that we might modify the control premium?
- Can we 'change the game' in this market by building / buying a foundational IP position?
A better process exists. Here are a few key steps to incorporate this view:
- Develop a dual patent view to support your corporate strategy process
- Understand your "internal patent position" (what we own today)
- "Assess the "external patent landscape" (how are we positioned)
- Become comfortable with direct and indirect competitors, including both "market competitors" and "IP competitors"
- Remove blinders (ignoring patent risk is not managing patent risk)
- Shift from reactive actions to proactive planning and management -- incorporate IP perspectives into your organization's critical business processes, particularly including R&D, corporate strategy, and risk management
- Ask the right questions and incorporate IP awareness into your broader business culture
At the end of the day, too often, effective IP strategy is confused with the tactic of developing and obtaining patents.
Patents and other IP rights are levers that management can use to fulfill their corporate objectives. Leaders seeking to fulfill growth imperatives through market entry (by whatever means) are well-advised to insist upon obtaining the value of these insights early and often.
