Making Room for IP Strategy in the Boardroom

While IP and innovation strategy is a topic worth a periodic look by a board in any corporate context, the degree and nature of IP issues faced by a company and the importance of IP as a strategy topic can vary based on a large number of factors, including [to name just a few]:

  1. Industry – companies in some industries will rely more heavily on IP plans and strategy than others and companies in IP-intensive industries will most appropriately see IP strategy and issues visit the boardroom more often;
  2. Competitive landscape – if the corporation is involved in a business vertical where intense competition relies upon IP protection and IP-based product or service differentiation, occasional review of the execution by management of the development of the corporation’s own IP portfolio, and knowledge and anticipation or avoidance of competitive IP hurdles, is appropriate;
  3. Innovative positioning of the corporation in relation to peers; and
  4. Importance of IP assets of the corporation to the profitability of product or service lines.

The approach taken to IP issues, and the importance of the IP assets of the company, fits within the larger context of enterprise strategic planning and management and the board should work together to ensure that the risk profile of IP strategy is in line with the remainder of the corporate structure and plans.  The sufficiency of IP clearance and avoidance measures and protective considerations in the new product development workflow of the corporation is also a strategic area in which the Board should gain reasonable assurance of management’s plans and operations.

Related to product development and other business development plans of the corporation is the general position which the corporation elects to undertake with respect to their IP portfolio and the IP assets of competitors. One analogy to consider is the placement of the corporation, in terms of the type of IP position taken, along a spectrum anchored at one end by a purely defensive strategy, centred around freedom to operate and avoidance of third party IP rights, to the opposite end of the spectrum in which a corporation elects to take a more offensive strategy centered around intensive capture, development and exploitation of IP assets to either provide more aggressive exclusionary or competitive options or to add value to the company through increasing the size and depth of the IP portfolio.  This analogy of “pinning” the corporation to a point along a strategy scale oversimplifies the issues but is demonstrative of one thinking approach which might be taken both by management in development of an IP strategy as well as by the board in providing oversight and critique of same.

Insofar as the directors bear responsibility to assist management in crisis management and have a responsibility as custodians of the brand of the corporation, the board should be advised when brand-threatening IP issues such as large scale IP litigation or the like arise. Using IP litigation as an example, given the costs as well as the materiality of the potential economic outcome either in terms of damages awarded against a defendant or as a potential revenue item for a plaintiff corporation, management should work with the board to ascertain and provide appropriate ad hoc or periodic reporting in this area.

Even in terms of product development and similar issues, if certain new product pipeline items have potential IP clearance hurdles associated with them such as proximity or threat of action from third parties based on pre-existing IP, if those threats approach or exceed the predefined risk appetite or parameters desired by the board, there should be opportunity for the board to consider these items and provide guidance.  These types of issues might occur more often in an “innovation intensive” enterprise, and this is not to suggest that the board should insert their decision making in place of management, but both the board and the executive of the corporation should condition themselves to have a constructive look at these types of items should they arise, and as important as the discussions themselves to identify the existence of the issues to trigger appropriate followup.

The list of IP and innovation capture issues outlined above is only indicative of some of the areas in which directors might consider seeking feedback and assurance from management in the corporation – there are many ways in which boards can satisfy themselves that they are applying appropriate stewardship and risk management principles to the IP portfolio, assets and position of the company, including for example through assigning various IP issues into the ongoing enterprise risk management and monitoring matrix.

Every corporation has and creates IP assets – occasional strategic review and oversight of IP initiatives by the board of directors is appropriate and important.  The best likelihood of success for IP initiatives which require wide cultural adoption begins with tone at the top, and it will be important throughout a corporation to see and feel that the cultural requirements for an IP capture plan, tech transfer strategy or the like is adopted by and driven down from the highest levels of the corporate hierarchy into the operational corners below.  This begins with and includes initiative, direction and buyin at the board table.

Directors should provide their varied insight and perspective to the development of IP plans at a strategic level, and insofar as the board will ultimately bear responsibility for the value which is or is not generated in the corporation from IP decisions it is also important to gain a level of assurance on management’s development and execution of intellectual property strategy and plans.

Furman IP can help you to develop and implement strategic management of the IP elements of your corporate strategy.  Let’s chat if you have questions!