Foundations of IP Strategy

What are the Most Common Types of IP Strategies to Consider in Light of Business Objectives?

Different IP strategies can be used to help achieve different business objectives. In addition, different forms of IP will drive different strategies as well as the form(s) of IP protection a business may seek. 

As a first step, think of all the forms of IP that a business might want in its portfolio based on some of the considerations identified below. Most successful businesses will use a combination of different types of IP protection to achieve their objectives.

EXAMPLE

Apple’s tremendous market success is attributable to an integrated and well-thought-out IP strategy that includes the sophisticated use of patents, trademarks, copyright and industrial designs. We will discuss Apple’s strategic use of IP in subsequent modules.

BUSINESS STRATEGIES

Here are some considerations that might suggest the use of one possible form of IP protection over another, even though a business will always want to weigh all of its IP options in light of both its current and long-term business goals.

1. Preserve market share and exclude competitors (when product or process is not easy to discover through reverse-engineering or other means)

   Possible IP Strategy

   If the business’s strategy is to preserve market share and exclude competitors in cases in which the product or process would not be easily discoverable by means such as reverse-engineering, then confidential information/trade secrecy protection might be an appropriate form of protection.

   Example

   A good example of a business strategy premised on confidential information/trade secrets is the case of Coca-Cola, which has maintained its market position for more than a century by treating its recipe for its soft drink as a trade secret.

2. Preserve market share and exclude competitors (where product or process is easily discoverable by competitors and the desire is to exclude competitors)

   Possible IP Strategy

   If the business strategy is to preserve market share and exclude competitors in cases where it is important to have strong monopoly control over the product or process, such as, for example, where the product or process can be easily discovered, then patents can be effectively used to achieve this objective, even though protection is limited in time and requires disclosure.

   Example

   The smartphone industry is an example where this sort of patenting strategy is employed to exclude competitors from adopting specific features that are often used to distinguish products.

3. Create brand loyalty

   Possible IP Strategy

   If the business strategy is to create brand loyalty, then trademark protection will usually be used to achieve this objective.

   The more well known or famous a trademark becomes, the stronger the scope of legal protection. This becomes especially important for businesses that are multinational and want to adopt and use their trademark in countries around the world.

   Example

   Luxury goods producers such as Gucci and Prada are common examples of how brand loyalty is the premise for a company’s marketing strategy.

4. Generate revenue from the IP itself, independently from the product or services sold

   Possible IP Strategy

   If the business strategy is to generate revenue from the IP itself, then the acquisition of patents and other forms of IP rights developed by others and/or resulting from in-house research and development (R&D) will be at the core of the business.

   Such a business will then typically seek licensing revenue or revenue generated through damage awards from successful IP litigation.

   Example

   Non-practising entities, patent trolls and patent aggregators are examples of entities whose business model is premised entirely on the acquisition of the patents of others.

   However, this is a strategy that has also been used by successful market players such as Ericsson (discussed below), which combines strong in-house R&D spending with acquisition of third-party patents as part of its overall business strategy.

5. Standard setting, encouraging complementary products and services, or generating goodwill and positive reputation

   Possible IP Strategy

   If the business strategy is to set a standard or to get others to develop offerings that are complementary to the business’s products and services, then strategies whereby IP is “shared” can be adopted. Either full or partial free access to IP can be used to achieve a variety of commercial advantages, including generating goodwill and a positive reputation among consumers.

   Example

   Some musicians have chosen to offer entire albums or individual songs online for free downloads. In doing so, not only do they generate strong customer goodwill but they are also able to draw considerable financial returns through concert ticket sales and sales of online merchandise instead of exclusively through copyright royalties.