The string of high-profile licensing successes announced by Nokia, Interdigital, Adeia, and others has many Heads of IP reconsidering the role of monetization in their organization.
I recently sat down with a group of 10 IP leaders from large, established businesses to talk about their top priorities for 2024. They’d all built expansive IP portfolios purely for defensive purposes; licensing plans were opportunistic at best, pursued off the side of desks by overburdened teams. But now, these leaders wanted to know how licensing giants were able to build such valuable portfolios. Interestingly, they didn’t want their own world-class licensing programs. Instead, they operated on the understanding that the principals on which these programs were built create value far beyond licensing.
To me, this reflects a broader shift in the industry. I’ve seen many companies largely ignore Qualcomm, IBM, Nokia, and other large licensors when looking for best practices in portfolio development. Conventional wisdom held that licensors’ success was a factor of massive BD orgs dedicated to licensing — something traditional IP teams just couldn’t replicate.
Lately, though, this thinking has been called into question. BD teams at large licensors have been impacted by the same cuts that have plagued most corporate IP teams. The fact that licensing giants have continued to drive successful deals suggests that their secret sauce is due to something more than pure BD muscle.
IP Decisions ARE Business Decisions
Dolby Labs has built its reputation on successful IP licensing. When I asked a former Dolby IP executive why Dolby was so successful, he gave a simple answer: “Every IP decision is a business decision.”
This strategy starts before a single idea is ever disclosed; IP works with R&D, BD, and leadership to align on strategic focus areas (like IOT, AR/VR, etc.). Since patents usually aren’t commercialized until five to seven years after publication, operating this way also requires significant research on future competitive trends and technologies that could impact these focus areas.
Every IP decision then reflects this framework—business priorities, competition; technology. This includes decisions around where to harvest IP, which inventions to patent, and how to navigate prosecution.As the portfolio matures, IP teams continually re-balance the portfolio through maintenance payment decisions based on evolving market and technology trends.
The result is a patent portfolio with such value and relevance to the companies’ core markets that it essentially markets itself. Sure, a skilled licensing team and a healthy appetite for litigation helps, but they are not the secret sauce. If an IP leader cares about driving ROI for the business, regardless of their licensing appetite, then I believe that they can benefit from the same principles that these giants use to power their massively lucrative portfolios.
Most IP teams face challenges incorporating these best practices
There are, of course, structural differences between licensing giants and the rest of the corporate world. Notably, typical IP teams cannot shape R&D strategy in the same way as their colleagues at Nokia or Dolby. Their teams are probably smaller too. But, as I outline below, some relatively simple solutions to these challenges exist.
Lack of buy-in from other BUs and leadership is the main issue. IP teams face a catch-22: implementing this business-oriented framework to drive IP value requires buy-in from the rest of the business, but getting buy-in requires IP teams to demonstrate the value of their portfolio. As the head of IP at a Fortune 500 fintech company once told me, “My entire job is getting the company to care about IP.” Navigating this catch-22 is even more difficult when the most widely-used IP metric, patent volume, does not provide any insight into the business value created by a portfolio. In a perfect world, IP leaders will develop ways to measure the value of risk reduction or revenue protection. These metrics represent emerging thought for the industry, as evidenced by the Corporate Legal Operations Consortium (CLOC)’s current initiative for establishing KPIs for patent management.
In the meantime, I’d like to see IP leaders take a small step towards mapping their portfolio to the company’s product portfolio, strategic roadmap, and/or R&D priorities. In doing so they can begin implementing the lessons we’ve learned from the big licensors. Even if they can’t directly shape R&D priorities, this mapping exercise can help determine where the portfolio is underweight and inform the technology or product areas with which IP leaders spend time building relationships and evangelizing IP.
IP teams can also apply this mapping exercise to new disclosures. Instead of just evaluating patentability, they can make filing decisions based on alignment with research or product goals. Lastly, this mapping can provide a north star for patent prosecution. Tedious, expensive negotiations with the USPTO too often lead to overly narrow claims that no longer reflect the business goal and should have been abandoned to save time and money.
Not only does this approach enable IP teams to begin implementing smarter IP processes, it can also help secure buy-in from senior leadership. I consistently hear corporate board members and C-Suite executives discuss the importance of an IP strategy, while also complaining that IP reporting is either too high-level (overall patent counts), or too complex. By mapping every disclosure and patent to products and/or R&D priorities, IP leaders can provide three simple, compelling metrics:
1. R&D Productivity: Disclosures per R&D dollar for each R&D priority
2. IP Growth: New filings per product or R&D category
3. Portfolio Health: Issued patents per dollar of revenue for each product area
My colleague Marcia Chang will be discussing nuances of value-based KPIs in the coming months, but for now, I hope IP leaders know that this type of strategic reporting is key to securing senior buy-in. To get here, it’ll mean thinking more like a licensing giant across the entire IP lifecycle.