Managing Intellectual Property In A Knowledge Economy

Tuesday, January 21, 2014 - 13:02

Securing protection and commercializing IP are key considerations in a knowledge-driven economy. This characterization of our economy embraces knowledge as the driver of productivity and economic growth and is reinforced by the use of information, technology and learning in economic performance. The growing codification of knowledge and its transmission through information networks requires workers to acquire and adapt their skills to meet the challenges of the modern economy.

We frequently see new products, brands and creative designs that are the result of continuous innovation and creativity. Many of these innovations are driven by small businesses that possess innovative and creative capacity, but may lack awareness of the protection that our intellectual property system can provide.[1]

Left unprotected, an invention or creation may be lost to competitors who are in a better position to commercialize the product or service, leaving the original inventor or creator without financial benefit or reward. Three-fourths of patent applications filed by inventors without representation by patent attorneys or agents were abandoned (e.g., failed to result in the issuance of a patent).[2] In contrast, only one-third of applications filed with representation were abandoned. A substantial portion of applicants who did not have representation unintentionally abandoned their applications, terminated the examination process relatively early and/or failed to take advantage of interview opportunities that may have resolved issues precluding allowance of the patent application. Furthermore, among applications issued as patents, claims filed without representation appeared to be narrower and of less value than the claims in the represented patent set.

Therefore, securing adequate protection of a company’s intellectual property may be a crucial step in deterring potential infringement and in turning ideas into business assets with a real market value. Additional benefits may include access to new markets and the creation of a unique corporate identity.

Effective IP management also requires successful commercialization of IP; securing protection is not enough. One hurdle in IP management for many small businesses is securing adequate funding to commercialize the invention. In response to this challenge, many small businesses have entered joint ventures or other arrangements with third parties, with more than half of those arrangements coming in the electronic and electrical equipment, communications and transportation equipment industries, according to the U.S. government’s Cooperative Research database.

While data on the success of commercialization programs and the amount spent on commercialization are not available, some insight is provided by the Small Business Administration (“SBA”). The SBA awards grants through various government agencies to foster the development and commercialization of intellectual property. For example, every year, the Small Business Innovation Research and Small Business Technology Transfer programs award more than $2 billion for such efforts. These programs may award individual projects up to $850,000, and that does not cover the cost of commercialization.

Nearly half of all small business startups survive five years, and approximately one-third survive at least 10 years. Almost 40 percent liquidate their assets within five years. Funding for such startups generally comes from personal resources, including family and friends. In most cases, such funding sources will not prove to be adequate for the development of a prototype that must be manufactured and sold. This means inventors will have to seek other third-party sources of funding.

In spite of the costs associated with commercialization, inventors are driven to commercialize their IP. Surveys suggest that more than 50 percent of U.S. patents are commercialized. Similar results hold true in Europe, and the rate of commercialization in China approaches 70 percent. To be sure, much of the commercialization relates to innovations that mostly go unnoticed. Generally, we only notice giant steps in an area of innovation, leading many of us to believe that commercialization rates are in the low single digits.

A company that develops its own IP has incentives to protect and exploit it. Effective IP management involves a company’s ability to commercialize its inventions, market its brands, license its know-how and develop other contractual arrangements. Those with expertise in securing protection and funding process can help achieve business success through IP.


[1] The World Intellectual Property Organization estimates that small and medium-sized businesses constitute 90 percent of all businesses in the world and account for more than 70 percent of the production of goods and services.

[2] Gaudry, Kate S. "The Lone Investor: Low Success Rates and Common Errors Associated with Pro Se Patent Applications."  Found at http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0033141.

 

Steven L. Henning, PhD, CPA, is Partner-in-Charge at Marks Paneth LLP.

Please email the author at shenning@markspaneth.com with questions about this article.