An intellectual or intangible asset portfolio (also sometimes called an “estate”) may comprise intellectual property (patents, trade marks, copyright, designs, plant breeders rights) but also other codified assets including confidential information, know how, contracts, licences, agreements (material transfer, joint ventures, collaboration, research) and databases. A database of these assets is core to their management and is a starting point for any organization on the path to better intellectual asset management. However, it is only the beginning.
Why manage a portfolio?
Continuous portfolio management (as opposed to a single instance patent audit) is a crucial plank of best practice intellectual asset management. The aims of active portfolio management are to
- ensure alignment between the assets and overall organizational strategy,
- inform the creation of complementary or new assets internally, or their selection from external sources,
- identify key personnel and infrastructure needs, and
- ensure financial dividends are returned from the investment made in creating the assets.
Measuring relevance to the business
The first step of continuous portfolio management requires measuring the relevance of the asset to the business along an appropriate scale. This can be done in both straightforward and complex ways.
At a low level of sophistication, two assets of the same type can be simply compared to each other by several different, but strategically focused assessors. Assets are categorized as relevant, irrelevant or by degrees of relevance by each assessor and the cumulative results compared, discussed and agreed. The process will inevitably give rise to debate, but also to a more common understanding between the assessors of the portfolio and its strategic relevance.
At a higher level of sophistication, complex scorecards can be developed against which each asset is tested to achieve a numerical score of relevance. One system is described by van Wijk[1]. Scores can be used as an absolute measure, or alternatively can be used to map a portfolio. Either way, factors that may be considered include the protection the asset provides to the organization’s products or services, the breadth of exclusivity offered by the asset, the income stream associated with the asset and the geographic extent of the exclusivity.
A measurement of the relevance of assets should be conducted periodically as the competitive environment in which an organization operates will continually change leading to a need to adapt corporate strategy and consequently intellectual asset strategy. How often such reviews are carried out will depend on the innate flexibility of the organization, the speed of change in their market and the internal resources.
Using the relevance measure
Having characterized the assets, strategic and tactical decisions can be made.
At the top most level, the presence or absence of a growing asset base will determine whether resources have been allocated in alignment with strategic objectives.
An absence of asset creation or asset gaps in markets of strategic growth will dictate that efforts in that area be appropriately incentivised or resources dedicated. If carried out in adjunct with another key plank of best practice intellectual asset management practice: competitive analysis, it will be possible to conduct a cost benefit analysis to determine whether assets should be accumulated through internal R & D efforts or externally of the business, by acquisition for example, from other organizations with known assets in the space. Competitive analysis might also identify key hires from competitor organizations to fill an internal skills void. Alternatively, the absence of assets may inform board level decisions about the capability of the organization to operate in that market and may direct the establishment of more realistic corporate objectives.
The existence of assets in areas of strategic growth can validate corporate strategy and can also inform personnel and infrastructure decisions. Analysis of these assets will identify creatively prolific personnel who should be managed accordingly and to whom equipment and assistance can be dedicated.
Getting a return on investment in an IP portfolio
Heavy investment is usually associated with early stage portfolio development. One benefit of continuous portfolio management is the capacity to generate new income streams from less strategically relevant assets, and to closely examine more strategic assets to ensure that maximum return is being achieved.
Where once portfolio management taught the abandonment of the least strategically relevant or non core assets so as to save costs, monetization of all assets, including non-core ones, is now more common. Rivette is a well known proponent of the philosophy of mining an intellectual asset portfolio for orphan assets or for underutilized assets. His philosophy was developed further by Davis and Harrison who described the sophistication of an organization’s intellectual asset management strategy and particularly their portfolio management techniques by reference to The Value Hierarchy. This tool was developed after analysis of the practices of leading US in-house intellectual property practitioners who proposed the following model based on Maslo’s Hierarchy of Needs. A version of this hierarchy also developed by Germeraad is shown below.
‘Low hanging fruit’ or non core assets can be monetized by outright sale and many market tools including intellectual property bulletin boards, brokers and auctions now exist for this purpose. Alternatively, assets which are still considered relevant to current products and services but which more broadly provide exclusivity in fields of no interest may be the subject of licensing programs or extension into new fields of interest.
At worst, continuous portfolio management will enable expenditure to be cut by the withdrawal of support from assets returning no current or likely future dividend.
Once characterized as strategically significant, assets can be forensically analysed to ensure their renewal, extension or evergreening, and that maximum dividends are being achieved.
- For intellectual property, this will commonly entail renewed protection and filing programs for complementary or alternate products, processes and services or to establish defensive positions such as by the filing of defensive trade marks.
- For licences and agreements, a financial audit will often reveal underpaid royalties or fees or discussions lead to new opportunities for their exploitation.
Summary
An accurate summary of continuous portfolio management is perhaps provided by Bader[4] who described strategic continuous portfolio management as follows:
“Portfolios are instruments for analysing and visualizing strategic positioning……In portfolio management, assessed market and technology positions are used to generate an action programme for the implementation of corporate strategy… [T]he vision and mission of the corporate strategy form the basis for assessment of the challenges posed by customers and markets, competitors and substitute technologies. Corporate competences….technology and product fields…then form the basis for the formulation of ….strategies. In a final step, the strategies devised are used to derive the necessary measures for property rights in these fields to build up and secure potential”.
