Interview: What matters in IP Management

Intellectual property (IP) can make up the lion’s share of a venture, especially if the IP can be categorized as high tech, research and development or science. However, intellectual property is not that easy to grasp: there is a good reason they also call it “intangible assets” in English-speaking countries. Not only the markets, but also the competition is increasingly expanding as a result of globalization. And in some areas, there are also further accelerating, fundamental innovations. One example for this is the European solar industry: having driven many developments, it has since been superseded by other, sometimes imitating, companies established on the market later on. One of the essential reasons for this was that the competition had been underestimated: an effective strategy for protecting intellectual property was lacking. Future developments are hard to predict. Strategies for protecting one’s own intellectual property are all the more important.

Mr. Stellbrink, what is intellectual property actually?

Axel Stellbrink: Anything and everything originating from one’s brain, going beyond what is conventional. So, in the broader sense, any result of a creative process. Some results, such as works of art, are protected upon the creative act, for example by copyright. The protection is narrow, however, and the body of evidence with regard to the creation date is the responsibility of the creator. Other results require documentation and the confirmation of a public authority, such as designs, patents and trademark rights. In return, the body of evidence regarding seniority is then indisputable, thanks to the corresponding certification.

What role do patents play in effectively protecting intellectual property?

Patents only protect technical innovations that go beyond the usual advances in technology. But the term is used to mean more than is commonly assumed. So, for example, software with a technical effect is also eligible for protection. One example is vehicle positioning using an estimation algorithm; it has to be snazzy – we would say “new and inventive”. The great advantage of patents is also that they protect principles and not concrete designs. In practice, this is easy to achieve with a few considerations.

Are companies aware of the economic and strategic importance of the intangible values they possess – of their technical expertise and patents?

Generally not sufficiently so, in our latitudes. On the one hand, this is due to the still deep-rooted understanding that objects, especially those that exist physically, can develop in value, like real estate. On the other hand, non-tangible assets are also difficult to valuate, as we are now observing in the case of bitcoins and their volatility. However, there are proven calculation and estimation methods that at least indicate a range of value. One strong determining factor, but one that is even more difficult to measure, is the strategic value. Anyway, in Silicon Valley for example, and in the start-up scene, patents are sometimes given great strategic significance and respect. And since these are trendsetters, this perception will continue to rise in other sectors as well. Our own start-up, Quant IP, is attempting to turn the innovative strength of a company into an investment criterion. If we are successful, as I expect we will be, this will continue to drive innovations in companies.

Are there any industry-specific peculiarities?

Definitely: in chemistry, particularly in the pharmaceutical industry, patents have always been decisive for the success of the business. In that sector, patents are relatively straightforward, meaning it is easy to determine the scope of the protection they offer. In the electronics and software industry, which globally generates about half of all applications, patents are quite abstract and are broadly interpretable. In very trendy areas, such as the smartphone sector, there are even thickets of broadly interpretable patents; these are exploited by some parties, called “trolls”, similar to robber barons of times past.

What strategies are commonly used for protecting intellectual property? Do you see any vulnerabilities in these strategies?

Yes, there certainly are vulnerabilities. Especially on the academic side, sometimes truly innovative research results are not protected at all or are only protected insufficiently. For industry, however, “innovation” means product innovation for the next production run. Moreover, people rarely think to apply for a patent. Ideally, there would be a combination of academic, more basic research-oriented strategy and implementation on the part of the industry. However, this would require long-term planning horizons and risks, which stock exchange analysts tend to penalize as costs. One example of this is Amazon, which – until its most recent success – was always being criticized for its high R&D expenditures. So, in summary: too little is being invested in real innovation in the industry, but that’s exactly where science could help. There has largely been a lack of an effective knowledge transfer so far, however.

What do research-related companies need to consider?

They need to consistently protect the results they are theoretically likely to achieve in the next decade, and they need to market those results in the industry. It’s that simple. The most valid and valuable patents are usually registered at the beginning of a certain innovation cycle. These could and ought to come from research-oriented companies.

Is this sort of protection also relevant for start-ups? And most importantly: is it even possible to get this protection at a reasonable cost?

Protection is very relevant for start-ups and is also quite expensive, if it is done seriously. However, this is also the point separating the wheat from the chaff. Young entrepreneurs who invest time and money in wisely protecting their developments, thus showing management qualities and a certain level of commitment, are consistently successful. This is one thing I’ve observed in my decades of experience.

What mistakes do you see the most often?

“Quick and dirty” IP protection – in other words, trying to save money in the wrong places. This would be at the expense of diligence. The iron principle applies: “do it right or don’t do it at all” – especially at the beginning. Later on, if necessary, one can also start adding less substantial inventions to the portfolio. But this is also only if the entrepreneur feels it makes sense to showcase his own company – to collect money, for example, or to create bargaining chips prior to an acquisition. So the latter also requires careful consideration and should not make false economy a principle.

In the patent procedure, a great deal of information is made public. This also involves risks. Can it be an appropriate strategy to purposefully refrain from protecting intellectual property, but rather just to work with it?

That, too, is correct. Especially those exact procedure parameters that are based on many years of experience should not be revealed without consideration. New principles, on the other hand, should be patented. In any case the decision not to patent should be the result of careful consideration and not be a default position.

Here at PARK INNOVAARE, there are also companies whose competitive advantage is in processes. Is it possible to protect those as well?

Yes, of course. However, it is not possible to prove the infringement of processes as fast. In Europe, however, for several years there has been a way to obtain a surprise inspection at a suspected infringer’s premises to check on an internal infringement of a process patent before formal infringement proceedings are initiated.

What should be taken into account in the international context?

The other international developments. Patents run for 20 years, and even if an important innovation is currently not easy to protect everywhere in China, this is getting better and better over time. So it may make sense to go ahead and purposefully register in China, even if the enforcement there does not yet comply with general Western standards. There are also international peculiarities that need to be taken into consideration, despite all the harmonization, to make sure you don’t run into any traps that might be relevant even in terms of criminal law. One example is the “Information Disclosure Statement” (IDS) in the U.S., which forces the patent applicant to disclose to the U.S. Patent Office – without being asked – any possibly relevant state of the art, such as statements made by the applicant before filing the patent application. On the other hand, in the U.S. there is also what they call the “grace period” of one year, where statements made by the respective applicant before filing the patent application, such as in a scientific paper, are deemed harmless within one year prior to that applicant’s patent application. There are similar constructs also in other countries, such as in Germany under the Utility Model Act. For academic inventors, who naturally publish a great deal, that is important information – in the end, it means that even previously published innovations can nevertheless be protected in several important countries.

Axel Stellbrink is the founder and Co-Managing Director of the patent law firm Stellbrink & Partner (www.stellbrink-partner.com) as well as the founder and advisor of Quant IP GmbH (www.quant-ip.com), both in Munich. For more than 25 years, he has been advising companies, universities and institutions on the topics of intellectual property in Europe, the U.S., Israel, China, Japan and Korea.