Welcome to the Spotlight archives. 

Each month, we find a member of the IP Community to ask our Spotlight questions:

1. Describe your corporate structure/organization to extract value from intangibles.
2. What, if any, IP reform would you most like to see?
3. What is the most useful intangibles reference book, article, or website for you?
4. What is the biggest challenge facing the IP/intangibles community in 2007? 
5. What is the biggest intangibles challenge facing your company in the next year?

Use the list on the right side of the page to see all of our past spotlight answers.

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1) Describe your company’s structure/organization to extract value from intangibles:

• One global IP organization, with several local offices, including US and China. More than 120 professionals that deal with all aspects of IP, including trademarks.
• A multi year corporate strategic IP (business) plan, approved by the Board.
• IP Strategies for all units.
• Intellectual Asset Management roles implemented.
• IP reports to the Chief Innovation Officer, who directly reports to the CEO.
• Corporate IP requirements.
• IP training (not so much on the legal aspects, but from a business point of view).

2) How did you become interested in intangibles?

• Head quarters surprised me at the end of 2002 with a request to start as interim manager for the patents and trademarks department, that seemed to be struggling. While I worked in the pharma field I had already figured out that the people with IP positions made the 'big bucks' and the rest was struggling. I did the interim job too well and got  hooked up. Actually I realized this was just another facet of my life long interest and career in innovation. 'Why would you innovate if you can't protect it?'
• In the outside world I saw the fascinating shift from tangible to intangible assets as the main driver for many companies/industries. I saw it as a challenge to lead my company through this change in positioning of IP.

3) How does your company manage innovation and the associated intangibles?

• A Managing Board that shows strong interest in Innovation and IP
• Separate Innovaton Center, that includes many crucial functions, e.g. the CTO office, Venturing and IP/Licensing. Innovation is primarily done in the business units, but we stimulate, measure and facilitate it in many ways.  We see innovation as a fascinating, but very complicated game, where you have to do many things right at the same time. Any (fatal) flaw can make you fail, just as in major sports.
• All intangibles are in a separate corporate unit (DSM IP Assets B.V.). I am also responsible for this unit.
• See also my comments under point 1.

4) What issue or opportunity would you like to see addressed by the Community in 2008?

• IP Metrics: tough subject, but has to be dealt with, in term of efficiency (use your scarce IP money and resources wisely) and efficacy (how good is your value extraction in IP?).  

1. Describe your corporate structure/organization to extract value from intangibles.

Most of our nearly 80 business units have their own individual intellectual capital review teams.  These teams are populated by an intellectual asset manager who is part of the business, a lead technical person, the IP lawyer responsible for that particular business unit and a lead business person responsible for that business.  In addition, we have a corporate Intellectual Capital Review Team (ICRT) comprised of myself, as VP and Chief Intellectual Property Counsel, the head of our Intellectual Asset Management Corporate Center of Expertise (IAM COE), a technical director pertinent to the technology transfer issue being considered, and a business representative from our Corporate Leadership Team.  Input is also provided from our Tax Group.  This ICRT considers high level transactions involving our intellectual assets, especially those having cross-corporate or cross-business unit implications.  One of our larger business units also has set up a holding company which holds all of the intellectual assets of that particular business and licenses it out to its individual business segments, both internal and external.  We are currently looking at this model on a larger corporate scale as well.  In addition, our intellectual property lawyers are assigned to individual businesses and work as a team with the individual intellectual asset managers who are present in a large number of our individual business units.  Mentioned above, we have also established a corporate Intellectual Asset Management Center of Expertise which coordinates the management of our intellectual assets among the individual business units, and from a corporate perspective as well.  The Cargill Technology Committee (of which I am also a member), which is a board committee, has also specifically made a pronouncement that they “own” intellectual asset management within Cargill and oversee the programs and set policies related thereto.  For example, they have recently authorized expenditures for a corporate-wide intellectual management software system, and have also sponsored the establishment of the IAM COE.
 
2. What if any IP reform would you most like to see?

I’ll answer this question in terms of the Patent Reform Legislation currently pending in Congress.  My biggest concern is the damages provision of this legislation.  As currently written, it severely weakens the amount of damages one could get for patent infringement.  As written, this has the potential of being extremely harmful to the US patent system.  I sympathize with the IT and Telecom sector over the tremendous costs being added to their operations based on patent litigation, but I do not believe the proposals contained in the current Bill mandating the use of a prior art subtraction test will be to the benefit of any industry in the long run.  Several people are taking a line from the physician’s oath with regard to the Patent Reform Legislation, “First, do no harm”.  We have a tremendous opportunity to make our system a better system with the Patent Reform Legislation.  This change would not do that.  The other two areas that absolutely require fixing in my opinion are the inequitable conduct mess we have right now in the Court system and passing the First to File procedure to get us more in line with the rest of the world.  In that regard, anything we can do by way of harmonization would be extremely helpful from a cost perspective. 

3. What is the most useful intangibles reference book, article or website for you?

Clearly, Edison in the Boardroom by Julie Davis and Suzanne Harrison is my “bible”.  I have been using this book since it came out to primarily help business people understand the importance of managing intellectual assets in the same way they manage their other assets.  It has been invaluable in that regard.  I put together a presentation based around the pyramid graphic from that book and it really has been helpful in getting technical, business and even legal people to understand the concepts of intellectual asset management and to help devise a strategy to get there. 

4. What is the biggest challenge facing the IP community in 2008?

Not necessarily in the order of importance, but there are three areas of very serious concern to me in the patent acquisition and patent enforcement area.  The increasing time it takes to get a patent application through the US Patent and Trademark Office is an area of serious concern.  On the investment side, it is becoming more difficult to make significant capital investments based on our intellectual property not knowing exactly what our limitations or exclusivity will be in any particular area.  Similarly on the enforcement side, if you have a new invention and others begin to copy it, it cannot only be emotionally frustrating but it can be economically harmful not being able to exclude others from copying your innovation based on the delay in getting a patent through the US Patent Office.  This is also starting to show itself globally in other patent offices as well.  The second area of concern is on the enforcement side.  It is becoming more and more difficult to predict the outcome in the US Court system on patent infringement issues.  You can clearly have an improvement over the prior art, i.e., clears all prior art, and still have a patent held unenforceable by the US Courts on a technicality.  Probably the most onerous example of this is our current situation based on myriad holdings of “inequitable conduct”.  For example, something which does not even represent patent defeating prior art can render a patent unenforceable because it was not disclosed to the Patent Office.  This makes outcomes totally unpredictable and makes it very difficult to advise clients of exactly how strong the patent actually is.  One of business people recently said to me, “Ok, go ahead and enforce this patent, just make sure there are no skeletons in the closet.”  Between the extensive and expensive discovery which is a part of our enforcement system, the myriad land mines available to defendant in the inequitable conduct area, even with solid due diligence, there is simply no way one can make this type of a representation any more.  The best we can do is say “Nothing we are aware of”.  Not a very satisfying answer when you’re getting ready to spend millions of dollars.  Which leads to the third area of concern, the huge cost associated with both patent enforcement and patent defense.  Again it is becoming more difficult to make a decision to enforce a patent.  We have got to find ways to enforce our patents which is less expensive, or this in itself could become a consideration as to whether or not we even want to get patents in the future. 

5. What is the biggest intangibles challenge facing your company in the next year?

We have made great strides in the last ten years in integrating intellectual asset management into the business strategy of the individual businesses. We are now at a point where we need to coordinate this corporate-wide.  With operations in over 70 countries and close to 80 business units, this is no small task.  We are currently putting in place corporate intellectual asset management software to help in this regard.  The hope is that the software will be ready for use worldwide and populated with all of our intellectual asset data by the end of this year.  The adoption of this software throughout our geographies and by all 70+ business units will be our biggest challenge in 2008. 

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1.  Describe your work with the business community to educate them about the importance of IP protection.

In the year ahead we are expanding our outreach to large companies, which submit 75 percent of the patent applications we receive at the USPTO.  Our goal is to communicate with these companies to identify and promote best practices in IP management, which will ultimately improve our IP system, promote innovation and strengthen our economy.

On the international front, we help businesses by posting IP attaches in countries around the world, including China, India, Switzerland, Egypt, Thailand, Brazil and Russia.   These attaches both work with U.S. rights holders to help them understand their IP rights in these countries, as well as work with local governments to support and improve their IP laws and enforcement.  The USPTO also advocates for the rights of U.S. IP rights holders in international agreements.

The USPTO has been highly engaged in working small to medium businesses to educate them on the importance of IP protection.  In a survey we conducted in 2005, we found that only 20% of small businesses realized that patents or trademarks they have in the United States don’t apply in other countries.  Counterfeiting and piracy are serious threats generally—and to small businesses specifically, as they often lack the resources or experience to appropriately protect their IP.

We hold free conferences in cities across the country where attendees hear from government and industry experts regarding the risks and impacts of counterfeiting and piracy, which cost American businesses $250 billion and 750,000 jobs per year.  We also show how businesses can mitigate those risks by incorporating intellectual property protection into their business plan.  We’ve reached thousands through these conferences and a DVD version of the conference that we’ve made available for free.  These efforts are part of our involvement in the Bush Administration’s STOP (Strategy Targeting Organized Piracy) initiative, an effort that brings together six government agencies to curb IP crime and strengthen IP enforcement-both here at home and overseas.  As part of this effort, we also host a Web site for small to medium businesses (stopfakes.gov/smallbusiness) and a toll-free hotline where folks can speak to USPTO experts regarding counterfeiting and piracy and protecting their IP.

Our Patents unit organizes an outreach program specifically for independent inventors.  This effort includes a dedicated inventors assistance area of the uspto.gov Web site, a toll-free hotline, regular online chats with USPTO experts, and several conferences per year.

2. What, if any, aspect of the proposed patent reform legislation would you most like to see passed? 

I’ll start by saying the Administration supports patent modernization legislation that fairly balances the interests of all innovators, helps ensure patent quality and reduces litigation costs.

To that end, there are four areas that we see as critical:

First, we strongly support applicant quality submissions (AQS), which would require applicants to provide more and better information to examiners in the form of a prior art search and a statement of how their invention differs from prior art they have found.  Through our successful Accelerated Examination program, we’ve seen that getting this information up front leads to a higher quality and more efficient examination.   But AQS cannot stand alone.  The currently uncertain standard for inequitable conduct serves as a deterrent for some applicants to freely and fairly share relevant information with us.

Second, any damage formulation must work for all industries.  In the Statement of Administration Policy in response to H.R. 1908, the Administration opposed the bill’s too-rigid limits on the court’s ability to assess damages adequate to compensate for a determined infringement.  Over time, this could reduce the rewards of innovation.  We will continue to work with Congress to increase certainty--in balance with—making-whole a patentee who has been infringed.

Third, we support legislation that would grant the USPTO fee-setting authority, which would give us the opportunity to set, eliminate or otherwise adjust fees—with the oversight and comment of our Patent Public Advisory Committee (PPAC), Congress and other stakeholders.  Fee balancing is necessary as we currently don’t recover costs at several examination stages.

Finally, we support post-grant review as a less expensive alternative to litigation in review of a patent’s validity.   The Administration supports a first window of opportunity within one year after the patent’s grant, as well as a narrowly drawn second window.  

3. Where do you get your news on what’s happening in the world of IP?

I get my news from a variety of sources.  I read newspapers--the Wall Street Journal, the New York Times, the Washington Post and, often, the Indian Financial Times—as well as IP-specific press like IP Law & Business, The Recorder, National Journal’s Tech Daily and Patently-O.  But I also get a good bit of my news from IP system stakeholders, counterparts at international patent and trademark offices, policy makers and industry associations. I learn a great deal from speaking to our examiners—they are incredibly knowledgeable and have unique insights into to the concerns of applicants.   Supreme Court decisions on IP matters are informative as well!

I’m pleased that mainstream news organizations seem to be dedicating more resources to covering intellectual property issues, which helps the public understand how important IP is to the global economy.  The importance of IP to the U.S. economy was even raised in a recent Republican presidential debate, which I consider a positive sign.

4. What is the biggest challenge facing your agency in the next year?

We just finished our 2007 fiscal year, in which we saw great results with respect to patent quality measures.  Though we examined a record number of applications—more than 362,000—we had a Board affirmance rate of 69 percent, up from 51 percent in 2005 (meaning the USPTO Board of Patent Appeals and Interferences affirmed patent examiner decisions 69 percent of the time).  We also saw the percent of patent applications granted drop to 51 percent in 2007 from a high of 72 percent in 2000.  This number is a function of many inputs, including the quality of patent applications—but we think our focus on internal quality controls is primarily responsible for this lowered grant rate.

Having said that, we know we must manage our growing patent application backlog and reduce pendency.  In keeping with our strategic plan, we are in our third year of hiring more than 1,200 patent examiners each year.  But we know hiring alone won’t solve this issue.  We do believe our quality initiatives that provide better information to examiners--such as our accelerated examination program, our peer-to-patent pilot, and the claims and continuations rules--will lead to a more efficient examination process.  We are also conducting process mapping of patent examination to address any inefficiencies.  We have and will continue to look at other initiatives that we believe will provide quality and timely patent examinations.

Naturally, we have more than one challenge.  As an organization we must continue to attract and retain talented employees, engaging them to contribute to a mission of global importance.   Ours is a highly-skilled workforce—made up of many folks who have advanced degrees in engineering, chemistry or other sciences. We are competing for these employees with companies and organizations which are much better funded than we are, necessitating that we review and update our hiring and retention practices to  attract and keep top candidates.  We offer a range of incentives, including special pay scales for patent examiners, recruitment and performance bonuses and an award-winning telework program, all of which help us compete on a more level playing field for these sought-after employees.  And we manage this all while obeying government accountability regulations!

5. What is the biggest challenge facing the IP community in 2008?

The biggest challenge for the IP community - as I see it - is ensuring that IP owners don't become victims of their own success. To the degree the public and the international community begins to view IP owners as anti-competitive or overly self-interested in a manner that impedes innovation, popular support for strong intellectual property rights will erode. The USPTO, for example, has expressed concern with a trend toward applicants valuing simply the number of patents they can obtain, potentially at the expense of the quality of applications they submit. We need to be concerned whether such trends can devalue patents as a whole in the eyes of the public, since public support for the patent system is crucial to the strength of patent rights. The increased threat/use of compulsory licensing, especially in the developing world, is just one symptom of an undercurrent that must be tracked, and reversed if possible.

Apart from the battle over perceptions, a critical challenge, in this era of global trade and business, is to bridge gaps in IP law and practice around the world. The divergences and redundancies that currently exist in the international patent system, for instance, impose substantial costs and burdens on applicants and patent offices alike. The IP system must adapt to meet the changing needs of the knowledge economy, and this means, among other things, a more streamlined, predictable and reliable international patent system. The USPTO has been at the forefront of meeting this challenge. To cite one recent example, the USPTO and its Trilateral Office partners, the Japan Patent Office and the European Patent Office, developed a common patent application format that would allow applicants to prepare a single application that would be acceptable in each office without the need for further changes to satisfy national or regional law requirements. The USPTO has also played a leading role in international discussions aimed at substantive patent law harmonization. Greater convergence in law and practice will improve the stability and certainty of the IP system for all stakeholders as technology and business increasingly transcend national borders.

Then there are recent Supreme Court decisions such as KSR International v. Teleflex and MedImmune v. Gennentech. Arguably more than any other entity, courts influence the development of patent law, examination and practice. These recent decisions have changed the patent landscape—making it harder to get a patent and easier to challenge existing ones. Of course, rights holders may have to adjust their IP practices and strategies in light of these court decisions. But my view is these cases have also raised the stakes enormously for the USPTO to ensure certainty and deliver quality patents. With respect to KSR, we believe the ruling will help the patent system as a whole in that it gives our examiners more flexibility to use their considerable technical skills to reject obvious changes to existing technology, which will ultimately contribute to patent quality and offer greater certainty to patent holders that their patent can withstand potential challenges.

Finally, we must identify the role and rate that IP has in business development--by industry. We must establish common metrics and meanings for patent quality and find common purposes for IP protection. We need regular, meaningful discourse on the goals and the future of the IP system. We need to settle upon more strategic, value-driven approaches to IP management, leading to more responsible applicant behavior in pursuing patent protection thereby contributing to the health of our IP system.

1.  What would be an ideal corporate organization or structure for extracting value from intangibles?

From my experience in working for companies I feel that the biggest dilemma for many companies is how to create a spirit of innovation and entrepreneurship and at the same time respond to the growing pressure from various stakeholders to be accountable. Many companies translate this pressure into creating more and more planning and control mechanisms, which often hinder innovation. The most successful companies I have seen have been able to withstand this pressure and create flat, team based organizations with highly professional and empowered knowledge professionals. But that takes trust and courage to do.

2. What, if any, IP reform would I like to see?

A lot of work needs to be done on the reporting of intellectual capital by the business community. As most of the value of companies is hidden in intangibles, stakeholders are at the moment completely in the dark where value creation comes from. This is not a matter of new accounting regulations. In my opinion the accounting systems cannot be 'repaired' as it is based on totally different (transaction-based) principles. Instead I think two things need to be done. First thing is the raising of awareness of the importance of intangibles and long term 'nurturing' of these assets in companies. This will be difficult as the pressure to create short-term shareholder value is so strong. Second is the further development and especially testing of complementary reporting systems for intellectual capital. Although a lot of methods for the measurement and reporting of intellectual capital have been proposed, very few have been thoroughly tested in practice. As I don't believe in one-size-fits-all, it is very important that we find out what models work and under which circumstances. 

3. What are the most useful intangibles reference books or websites for me?

I think Harrison and Sullivan's 'Einstein in the Boardroom' is a very good book that I also recommend to my students, as well as Roos, Pike and Fernstrom's Managing Intellectual Capital in Practice. For resources on Intellectual Capital check out www.intellectualcapital.nl  

4. What are the biggest challenges facing the IP/intangibles community in 2008? 

I think that the management of intangibles is not about making money but about managing companies to create long-term and sustainable value for our society at large. The intangibles community in my view has to adopt a critical view on how modern companies are managed and help to promote new ways of management that will benefit all of mankind and create a better future for our children. The biggest challenge in the short run will be to counter the tendency in today's business world to make quick money at the expense of people and the environment. Unfortunately the business world is run on greed and that has to stop if mankind wants to survive. And to be honest, I don't know whether the concept of monopolizing knowledge through intellectual property rights will help us to achieve that goal. There is a certain element of greed in the idea of protecting knowledge to make money. I know all the arguments in favour of this system but I do feel it is getting a bit out of control… 

5. What is the biggest intangibles challenge facing your company in the next year? 

In the Netherlands many companies will need to counter the growing competition from Asia, especially India and China. They only can do this by becoming more knowledge intensive. They need to invest in social and technical innovation and develop new products and services. These companies need to create their own unique niche in the market place because competing on cost or quality will no longer do the trick.

About Daan Andriessen:

Dr. Daniel Andriessen is Professor of intellectual capital at INHOLLAND University of professional education, The Netherlands, and director of the INHOLLAND Centre for Research in Intellectual Capital, a research group set up to study the impact of the intangible economy on people and organizations (www.inholland.com). Before joining INHOLLAND, Dr. Andriessen worked as a management consultant for KPMG for more than 12 years. He was founder of KPMG’s Knowledge Advisory Services Group in 1997, together with Prof. Dr. René Tissen. Daniel received his Ph.D. degree at Nyenrode University in The Netherlands and he holds a masters degree in political and administrative science at the Free University, Amsterdam.

He suggests you check out his website (www.weightlesswealth.com), download some of his papers and mail him your feedback.

1.  What would be an ideal corporate organization or structure for extracting value from intangibles?

My work, as well as the work of the Gathering and Forum is focused on helping operating companies find new and creative ways to create