Intellectual property portfolio management

Large corporations often evaluate their intellectual property portfolio and enforcement policies at every stage of their business development process.

This is an era where intellectual property rights (IPRs) simply cannot be ignored. Such intangible assets – including trademarks, patents and industrial design – are becoming an even more prominent axis around which business strategy revolves.

As an example, multinational technology and consulting corporation International Business Machines (IBM) has acquired the most United States patents (over 6,500 to date) since 1993, making its name synonymous with patents. Although IBM’s businesses span across countless products and services, it is their patent licensing fees that supports the company’s profit structure, bringing in around US$1 billion annually.

In the beginning, IBM researched and developed technology for in-house use and had little concern with technology transfer. However, after the appointment of Louis Gerstner as CEO in 1993, the company started to adopt a new game plan. IBM retained core technology for in-house use and development but, by transferring other technology, the corporation not only began to earn huge fees for licensing but also created partners and allies at the same time.

Well-run corporations often think of patents at every stage of their business development; they often merge their patent and business policies together into a single company strategy.

Leading companies tend to investigate their own patent networks to find and eliminate weakness one by one. Jeong Seong-Chang, an executive officer at the Korean Intellectual Property Office (KIPO), explains that Gillette, an American blue chip company, inspects patents as old as one hundred years to determine the direction of technological development.

Hitachi, a Japanese conglomerate with annual sales of over US$90 billion and over 320,000 employees, has an office that is dedicated to IPRs. The office develops the corporation’s overall intellectual property strategy by overseeing the selection of the most important IPRs to protect. The IPR office is known for encouraging patent acquisition at the initial development stage and gathering large portfolios to create a strong patent network.

Hitachi completely reformed its patent strategy in 1978, when the company announced that its quantitative patent strategy was insufficient and that it needed patents that were internationally competitive.

Although patent submissions amounted to around 20,000 annually in the 1980s, the balance sheet for licensing fees was not as favourable. However, this situation was reversed several years later in 1985 after a qualitative patent strategy was adopted. In 2001, the legal and patent departments were reorganized and an IPR office was formed.

A ‘big hit’ patent consists of a patent group with three layers: primary patents, secondary patents and basic patents. A single patent group can comprise 300 to 400 patents. This clinical, calculated approach is known as ‘patent portfolio management’.

Keeping to its founding motto of 1910, ‘invention is the life of engineers’, Hitachi carefully develops individuals with IPR-related skills and talents. Currently, the IPR office has over 300 employees, most of whom are patent engineers.

“It takes ten years to become a fully eligible patent engineer”, says Yasuo Sakura, a director of the IPR office. “After entering the company, you spend two years on IPR-related works, ten months of preparation for the patent attorney exam, years of IPR work after passing the exam, and six to twelve months of training in U.S. law firms or patent offices. Then you become a regular patent engineer”.

For that reason, patent engineers are core workers who determine a company’s technological competency. As another example, Alps Electric is a mid-sized enterprise headquartered in Tokyo, Japan. The company manufactures electric parts in several business areas, focusing on communication, nanoprocessing and human-machine interfaces. Being a manufacturer, using patents as defensive measures against litigation is as important for Alps as utilizing it is as an offensive tool. As a way of keeping the market competitive, the company also submits strategic patents at the initial development phase.

Hirotoshi Okamura, a former director in charge of legal affairs and IPRs, says that the company analyzes patents belonging to competitors over a period of time and looks for changes to predict trends in technology. In an area of intense competition, the company’s strategy is to beat the competitors in the acquisition of patents. However, if the benefit of secrecy is greater than the benefit of letting others know about the technology, then the company will not attempt to patent the technology or process. Those technologies or processes will be managed within the company in ways similar to a patent statement, using a system called ‘in-house registration’.

These patents are so precious that, in order to manage confidentiality, any tours of the company, even for routine inspections, are carefully planned. Mr. Okamura added that because the company is a parts provider it focuses on cross-licensing rather than exclusive patenting. The company appears to maintain this policy in order to avoid huge costs associated with patent litigation, as many companies will go to huge lengths to defend their IPRs.