Food for thought on intellectual property: 7 courses from IPBC Australasia 2016

Right now, intellectual property (IP) management presents a banquet of opportunities, judging by presentations at the IP Business Congress Australasia, held this month in Melbourne.

1. Appetiser

In her keynote address, Patricia Kelly, Director General of IP Australia, proposed that Australians are embracing entrepreneurship, invention and innovation, as evidenced by 10% growth in patent applications (28,000 total) last year. In 2015, the numbers of applications for trademarks and design protections were the highest ever recorded in a single year. Ms Kelly also outlined the new and improved, public, online tools IP Australia has developed to aid searching, visualisation and comprehension of IP data, as well as promoting collaboration between researchers, inventors and industry: IPGOD, IPNova, IP Toolkit and Source IP.

2. Palette cleanser

As soon as their knees were under the table, the first panel of experts pushed back at Ms Kelly’s optimism. Moderator Brett Lunn reported that Australia ranked 19th in the INSEAD and Cornell University Global Innovation Index, prompting Adam Liberman to comment that Australia ‘wouldn’t accept this ranking in the Olympic Games medal tally’ and that it contrasts with our high global ranking for research publications. Mr Liberman also stated that Australians submitted 1.8 patent applications per $1b of GDP in 2015, down from 3.7 in 2010, and pointed out that the Australian Government’s Innovation and Science Agenda Report mentions IP only once.

3. Soup du jour

Asked to define a world-class IP strategy, the panel served up the following:

  • Brendan Cheong: ‘Just patent everything’ is not a strategy. Each patent must have a purpose  – to achieve exclusion, or as a bargaining chip, for example. IP strategy must live and evolve, so IP managers need to stay in touch with project teams to assess and prioritise the portfolio, also conducting third-party patent watches and forming contingency plans to protect the company’s freedom to operate.
  • Joo Sup Kim, Vice President, IP Centre, LG Electronics: Cost cutting tends to target IP protection, but without an IP strategy, your company has no future. In a crisis, preserve your long-term assets if you want to still be in business when the crisis is over.
  • Gildas Bossard: IP strategy must align with business goals and strategy. Philips’ IP department runs as a business, reporting profit and loss, not as a cost centre. A world-class IP strategy will generate value for the company, which can be monetised, but also includes significant non-cash benefits.
  • Jane Perrier: IP strategy should be holistic and nuanced, as alignment depends on company culture, governance and process. The strategy must be communicated to all staff and stakeholders because education builds appreciation and compliance.
  • Mr Liberman: IP strategy should align with business strategy at both enterprise and product levels. The IP leader should report directly to the Board and engage in all operations and projects. The CSIRO ran an effective internal education program by asking researchers to share their IP experiences with other researchers, who wouldn’t listen to the same messages if delivered by an IP attorney.

4. Fish course

The next panel offered a taste of the IP landscape in Asia, Europe and North America:

  • Sakura Holloway: Partnering is critical for Australians seeking to commercialise innovations internationally. Potential partners will want to know about your: scope of patent claims, protection in key markets, time to market versus term of patents, strategy to address prosecution challenges, and any relevant third-party patents. Litigation in the US is extremely expensive. Meanwhile in China, IP Australia has installed a new attaché, seeking feedback on IP experiences from Australian businesses, for Chinese authorities.
  • Joon-Pil Hwang, IP Business Partner, ResMed: The Chinese IP system is improving. If you don’t have a patent in place when the system starts working properly, you won’t be able to defend it.
  • Andrew O’Brien: There are 38 countries in the European Patent Organisation and to patent in each costs approximately 30k Euros. Design or trademark protections are cheaper options, with streamlined processes. Language translations account for 50% of costs. Unfortunately, Brexit threatens the proposed move to a single European IP jurisdiction. If European unification occurs, it may make some patents vulnerable to being ruled invalid.
  • Philip Parker: In 2015, 2.7million patents were filed in China, compared to 1.8m total in next top nine countries. The US ranks second, then Japan and Korea. The latter two receive a low number of non-resident patent applications, which is not proportionate to the size of their markets. Few Chinese file in other countries.  In China, Japan, Korea and Taiwan, liquidated damages for patent infringement are low. It is still extremely difficult to use patent value as leverage in China.

5. Main course

Expert panel number three discussed the key ingredients for cashing in on IP development:

  • Tim Heberden: Gauging the strength of IP involves measurement of: marketability, incremental utility (cost saving or creation of new demand), legal protection, exploitation period, development risk and market risk. These measures can determine triggers to warn of degradation of IP value. Don’t make licence deals too broad, or you’re giving away value.
  • Wayne Attrill: Litigation is the price of market disruption. The potential for litigation should shape your patent claims. If you litigate, you run the risk of having your patent invalidated. Litigation funders are only paid – usually 33% of settlement – if you win the case.
  • Alastair Hick: IP protection has non-monetary value in terms of profile and credibility. Monash University does much more licensing than spin outs.
  • Jarrod Ward: After initial IP protection, inventors often forget to protect add-ons or other developments in technology. Communication is key to ensuring your patent protects your ultimate product. Option deals between researchers and industry are common during product development, i.e. an annual payment to prevent researchers from talking to competition and for first option to license when technology is ready.

6. Dessert

The final panel held the audience’s attention with tasty examples of taking innovation to market:

  • Christine Emmanuel: CSIRO’s accelerator ON brings small teams of researchers, business and IP people together for a 12-week semi-residential program to identify an appropriate path to market. The program is now open to universities to collaborate in teams with CSIRO staff. CSIRO has 30 active spin offs. The culture has changed recently: now, the CSIRO stays involved and supports spin offs with management and direction.
  • Christina Hardy, Director, Corporate Legal and Partnerships, Garvan Institute of Medical Research: Genome One is a spin off producing pathology reports from genome data in an intense and chaotic market. Genome One has multiple IP domains: software, analytical tools, data, patented tests and trademarks.
  • Brett Kensett-Smith: Xinova maintains a global network of more than 10,000 inventors in 30 countries, to provide ‘structured creativity’ for corporate clients with complex technological problems. Xinova owns 5,000 patents; their clients receive licences. The inventors receive a selection bonus on filing of patent and a share of revenue.
  • Dr Claire McGowan: SODA is a founder-focused NZ incubator. Their 8 week to 6 month program is part-time – so the entrepreneur can keep their day job – and remotely delivered. SODA provides specialist advisor options, considers all capital options and focuses on fundamentals, because ‘if you get the fundamentals right, the money will chase you.’ If a start up is successful, SODA cashes out and rolls the funds back into the program. Unlike 93% of incubators, SODA is designed to be self-sustaining.
  • Derek Minihane: Cochlear spun out of the University of Melbourne during the 1980s, with government funding – because venture capital funding was virtually non-existent then. Cochlea has a huge global network of collaborators, which keeps it in front of competitors. Commercial success requires a natural ‘moat’, i.e. a sustainable competitive advantage based on IP, service differentiation, data or networks.

7. Cheese platter

Other tidbits of particular relevance to researchers, inventors, start ups and SMEs included:

  • The grant application and funding process generally involves long delays. Venture capital funding has dramatically increased in Australia in recent years. (Mr Hick)
  • R&D in universities can lack focus due to too distant horizons. Companies can provide funding and focus, in exchange for access to more talent than they could otherwise employ. (Mr Cheong)
  • There are increasing opportunities for startups and SMEs to collaborate with large companies to bring innovations to market, but small businesses must understand the IP priorities of large ones. (Ms Perrier)
  • Startups filing patents are 35 times more likely to succeed than those without. Research papers cited in patents can point to potential partnerships. (Mr O’Brien)
  • Patent density is lowest for pharmaceuticals and chemical products (usually only 1 patent per product), highest for microprocessors and smart phones (multiple patents per product). With low patent density (high patent value), the best strategy is to exclude (or license to out-of-reach markets) and file in multiple jurisdictions. With high patent density (low patent value), the strategy is to limit risk – e.g. through defensive acquisition of third-party patents, or supplier indemnification – and to file in only a select few countries. Multiply value through win-win deals, e.g. preferential supplier/customer arrangements, access to manufacturing capability, cross-licensing, etc. (Mr Parker)
  • Kurzweil’s Law of Accelerating Returns predicts that the next 100 years will produce as much technological progress as the last 20,000 years, so networking and collaboration will be essential to comprehend and develop complex technologies. (Mr Kensett-Smith)

IPBC Australasia 2016 was a feast of fresh information and deliciously different ideas. If Australia is to thrive as our economy transitions away from resource dependence, then perhaps the dish of the day was a take-away from Jane Perrier during the first panel session, who urged us all to ‘innovate innovatively!’

Article written by Rebecca Colless.