IP Strategy: What management can learn from the disruptors

23 July 2019

Intellectual Property (IP) strategies that appreciate licensing, connectivity patents and the behaviour of start-ups can give companies the edge in disrupted markets.



When Mark Zuckerberg made "move fast and break things" his company's motto, he coined a mantra for those seeking to tear up old markets.

The Facebook founder's provocative statement summed up much about the attitude and drive behind disruptive companies.

On the one hand, the speed: create, refine, pivot, repeat... On the other, rule-breaking, professional transgression coded into the culture.

This behaviour has been at the core of the start-up scene, helping hundreds of companies force their way into sectors that for decades had looked and acted largely the same - before turning them upside down. It even helped a handful of them change the world.

We are currently in a period of extraordinary innovation that promises similar chaos. AI, connectivity, blockchain, autonomous vehicles, drones, 3D printing, augmented and virtual reality… An unprecedented amount of new technologies is changing the way we work, the products we buy, and how we buy them.

For businesses, it's also changing who their competitors are.

But there is a way that companies in mature markets can take part in this frantic innovation and defend themselves against these non-conformist competitors - intellectual property (IP).

As Gowling WLG's Co-head of Intellectual Property, Gordon Harris, says: "IP is very important across all the major likely growth technologies of the next few years.

"Whether it's general tech, in terms of AI or robotics, or the increasing correlation between tech and healthcare, wearables, diagnostic equipment, energy… IP is involved in all of these things on all levels.

"It's not going to go away and it's getting much more significant."

But 'speed' is not something that IP is known for, certainly not when applied to litigation or changes in the law. And 'rule-breaking', while definitely an IP strategy, is more the result of, not a mantra for, a rules-based system.

When a business is faced with an onslaught of disruptive technology and the competitors who use it, how can it adapt its IP strategy?

This is the theme of Gowling WLG's Multiplicity: Smart choices in disruptive times report.

Surveying hundreds of C-suite executives at large multinational companies, heads of IP, and general counsel, the report examines where innovations like AI, connectivity (IoT) and blockchain meet IP strategy.

What it discovers is 92% of all respondents think IP is either very important or important to their business.

Yet it also finds IP strategies that could leave some sectors unconcerned about start-ups with a 'bet the company' patent and aspects of disruptive culture that can benefit progressive legal teams.

1. Explore licensing

IP will be an integral element in consumer-product relationships of the future.

Licensing is increasingly becoming essential for companies wanting to use new technologies in their products and services.

While all companies have specific IP needs, so may not want to engage with licensing, it is regardless set to permeate into new sectors as industry-changing innovations appear.

"There is a move towards more of a licensing model rather than selling a product. This is pervasive: whereas people used to buy CDs, now they are sold the right to stream music.

"And in terms of IP, logistics, customer recruitment and retention, revenue, etc., that's a very different business model," explains Matt Hervey, Director at Gowling WLG, who works with leading-edge tech companies.

2. Give more weight to branding

Many of the disruptors are backed by software. From an IP perspective, that is a problem because AI and machine learning is still seen by the major patent offices as a 'computer-implemented invention', making it harder to protect.

Take autonomous vehicles, for example. Cars already contain millions of lines of code to help them operate, so whereas one might own a car, "the ability to use one can be controlled via a licensing relationship" says Matt.

"The theory is that, if cars drive themselves, it's unlikely you'll ever own one because if it will come to your door the moment you want it... you might as well get 'mobility as a service'. So the IP is probably going to focus on brand values," Matt says.

Consumers will pick 'mobility providers' like they currently pick a smartphone package. The tech being largely a bundle of licensed patents on wheels, it will be the brand and its registered trademark that holds the value.

3. Understand connectivity patents

The predicted ubiquity of the Internet of Things (IoT) will be built on connectivity patents.

The interoperability and sensitivity around data privacy and protection, mean objects that are connected to each other and the internet will be subject to standards.

This will inevitably include standard-essential patents familiar to the smartphone and, in future, autonomous vehicle markets. Want to take part in IoT? Then you need to understand how these patents are licensed.

Says Matt: "And, with regulators taking a balanced position between patent holders and implementers, it is likely to fall to the market to develop the business model and pricing when there may be billions of connected things."

What's more, "companies producing connected products (which may increasingly be all companies) will need licences. Enforcement of connectivity patents for mobile phones has been battling in the courts for 20 years," he adds.

4. Know the enemy (they could be your friend)

What can an established business do against a new competitor that does not play by the rules?

It helps to understand what you are up against, says Bruce Sales, a Partner at Lerner David in the US, who has worked in IP since the 1980s.

"The last 20 years have certainly shown that no matter what size a company may be, you need to be vigilant about how you are going to adapt your companies position in the market to disruptive business practices," Bruce warns.

It is 'inevitable' that start-ups act in a more agile way, but they sometimes use IP as a shield against older leverage, like market share.

"Smaller, start-up disruptive companies may have some proof of concept... but they're not going to have significant market share in a short period of time."

To defend themselves against existing players, some construct a sophisticated IP programme.

Adds Bruce, "IP might give a larger competitor, or a broader marketplace pause to consider the start-up's technology… to license it, or to buy you."

Download Multiplicity - Smart choices in disruptive times today to learn more about the big disruptors and why you can no longer rely on traditional methods to protect and enforce your IP.


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.
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Multiplicity: Smart choices in disruptive times

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