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Managing Confidential and Proprietary Information Agreements

As a guideline to processing proprietary information agreements, the following generalized process for large corporations is recommended as a guide. There is ideation management software available that integrates such processes with email systems to reduce the time taken for execution. The steps are:

1. The Originator determines if there is confidential information that needs to be protected.
2. The Originator gathers pertinent data to complete the agreement (i.e., formal company name, common company name, state of incorporation, address, contact person, phone numbers, email addresses, details on the type of information to be protected, and the name and title of the signatory for the other company).
3. The Originator discusses the agreement with his line Manager and agrees on the intellectual property to be covered.
4. The Originator and the Manager together create a Word or other standardized document agreement by accessing the Standardized Agreement Document Database.
5. (a) If the agreement is to be generated by the Originator’s organization, the Manager completely fills out the Standardized Agreement Document template. (b) If the agreement is not to be generated by the Originator’s company, the Manager fills in the basic company data in the Standardized Agreement Document template and links the original document proposed by the other company to the information for it in the Standardized Agreement Document database.
6. The Manager informs the appropriate Legal Department Representative and the Originator that the agreement is ready for legal review.
7. The appropriate Legal Department Representative will make the review, make changes as necessary and approve.
8. After review the appropriate Legal Department Representative will notify the Originator and the Manager that the agreement has been approved.
9. (a) If the agreement was generated by the Originator’s company, the Originator will print two original copies of the agreement and forward hardcopies to the R&D director or appropriate governing person for signature. (b) If the agreement was not generated by the Corporation and the Legal Department Representative approves the agreement as written, the Originator will forward the original to the R&D director or appropriate governing person for signature. (c) If the agreement was not generated by the Corporation and the Legal Department Representative did not approve the agreement as written, the Originator will forward the original and Legal Department Representative modified agreements to the R&D director or appropriate governing person for signature of the Legal modified agreement.
10. The R&D Director or appropriate governing person of the Corporation will sign the hardcopies and return them to the Originator.
11. The Originator will mail copies for appropriate signature to the other company requesting one signed original be retained by the other company, and one signed original be sent back to the Originator.
12. The Originator receives back one signed document and forwards that document to the Standardized Agreement Document Database administrator.
13. The Standardized Agreement Document Database administrator electronically closes out the document file noting the date when it is been signed by the other party as well as ensuring the date of expiration is correctly entered.
14. The Standardized Agreement Document Database administrator forwards the original hardcopy to the appropriate Legal Department Representative for file retention.

Although this seems like an overly detailed process it is been observed that many corporations failed to adequately process their confidential information and proprietary agreements. In so doing they leave themselves open to disputes with other organizations thus jeopardizing their business relationships and potential ability to obtain patents and other intellectual property.

Managing IP from Fuzzy Front End of New Product Development Projects

300 companies in US based electronic manufacturing firms they found the criteria listed in the “Key FFE IP Decision Criteria”
Key Fuzzy Front End IP Decision Criteria

In their work on Fuzzy Front End processes, Yonghee Cho and his colleagues were able to identify techniques which can help with IP evaluation and selection in the fuzzy front end (FFE) of new product development (NPD) process. Based upon 300 companies in US based electronic manufacturing firms they found the criteria listed in the “Key FFE IP Decision Criteria” figure the most important for evaluation of whether or not to patent early stage technologies.


a multi-criteria weighted scoring model was employed to help with the patent decision process. The weights and scoring are shown in the “FFE IP Scoring Model” figure.
Fuzzy Front End IP Scoring Model

Further, a multi-criteria weighted scoring model was employed to help with the patent decision process. The weights and scoring are shown in the “FFE IP Scoring Model” figure. The weights are from a US-based electronics manufacturing firm. Note that because this is for use during the Fuzzy Front End of innovation factors that related to intrinsic patent value over-ride those that deal with business use.

In using this method it is important to use both internal and external experts in the scoring process. Also important is to adjust the scoring weights to account for the business processes of the company. For example, if a company has a licensing department the degree of fit to the company would be weighted less than if no out-licensing of art is supported by the organization. Likewise, if individual patents serve as a key barrier to competitive business pressure, business fit is important, vs. if defensive positions are maintained by simply patent portfolio size.


Managing IP from Stage/Gate and Agile/Lean Projects

Best practices in patent portfolio management are dependent on a number of factors, including the industry, technology, company, and personal risk tolerance. But by examining historical behavior, it is possible to find some commonalities among them that provide good general rules to go by. For overall portfolio management see the section in Chapter 13 on Patent Portfolio Assessment Processes. For new technology and business development projects several of the tools discussed in that Chapter can be used for a quick assessment of utility and value at early stages of the patent application process.

When ideas are submitted to the Corporation for consideration as patent applications, a couple of quick tests can be run. Two tests apply to all applications submitted, irrespective of whether they are proposed to cover products and services that will be new to the Corporation, or those it will cover improvements to existing product lines. A third test is applied just to those applications which will cover improvements to existing product lines.


evaluate the application using the “Use Map” figure
Use Map

The first test is to evaluate the application using the “Use Map” figure (more completely described in chapter 13). This mapping done is to ensure the new patent application’s relevance to the corporations mission vision objectives. This proposed patent applications that map into the upper left-hand quadrant of the decision matrix should receive the full and complete attention of those intellectual property resources assigned to the project team. These applications are likely to be high value to the Corporation and should be thoughtfully and timely prosecuted. Those applications that map in the lower left quadrant of the decision matrix should be considered as low level “inventor recognition” patents, and prosecuted with lower priority and level of resources. That for most corporations it’s important to make sure that the sales and marketing teams agreed that the key attributes of the proposed patent applications in fact will cover a feature of the product service to be sold that will provide incremental sales or profits because of the exclusive nature of that feature in the corporations offerings. Those patent applications mapping on the right side of the use matrix should be declined and put on the shelf for later prosecution if the company’s direction changes.


IP “Value” Maps from Stage/Gate and Agile/Lean Projects

evaluate the application using the “Value Map” figure
Value Map

The second test is to evaluate the application using the “Value Map” figure (also more completely described in chapter 13). This second mapping is done by comparing the proposed patent application to other similar prior art, and commercial products and services known to the project team. Again new patent applications that map in the upper left quadrant of the decision matrix should be thoughtfully and timely prosecuted. Those that map in the lower right quadrant should not be considered for prosecution. Depending upon the corporation’s vision, mission and objectives, either the upper right or lower left quadrant will be relevant to the Corporation. The other of these two quadrants will not. If the patent application is mapped in the relevant quadrant, the patent application should be prosecuted in a thoughtful manner. If the new application maps in the outlying quadrant, prosecution should not be considered.


IP “Patent/Product/Revenue Table” from Stage/Gate and Agile/Lean Projects

For proposed new patent applications that are going to cover new products that will fit into the existing product lines that the company already sells, the “Patent/Product/Revenue Table” is used to look up the revenue and profits of those very similar items.
Patent/Product/Revenue Table

For proposed new patent applications that are going to cover new products that will fit into the existing product lines that the company already sells, the “Patent/Product/Revenue Table” is used to look up the revenue and profits of those very similar items. If the similar products are generating strong revenues and profits, and the new product is going to build on those strengths or perhaps cannibalize them, then in early stages of prosecution, it can be assumed the new product covered by the proposed new patent application, will likewise be valuable. This assessment is especially important if the new product being brought forward is incremental in nature and maps in the lower right part of the Use Map. Even though from the Use Map the new patent application may not be recommended for prosecution, if it will cannibalize, or be adjacent to, current high revenue and profitable products, the new patent application should be thoughtfully prosecuted instead of put aside.


Obtaining Advantaged Competitive Positions via a Value Chain Approach to IP Management

Tom Hunt summarized how a value chain approach to IP management can guide patent creation and prosecution. The value chain concept is a proactive strategic tool that is used to understand upstream and downstream uses of the technology or product that is been created. The approach is used because it can result in greater market leverage, greater revenue potential, and enhanced innovation.

In the “Value Chain” figure an example company working in the systems part of the value chain purchases upstream components that are made from raw materials.
Value Chain

In the “Value Chain” figure an example company working in the systems part of the value chain purchases upstream components that are made from raw materials. The example company distributes its systems into markets and after markets downstream. Typical for a company in the component or system’s area is to patent only new components or systems that they have developed. Companies that are downstream of the systems company are most likely to be customers of the company. These companies are buying product from the company, adding their own value either via the development of new applications for systems, or through new methods of distributing and selling those systems to the market. By researching and thoroughly understanding the IP of downstream companies the systems company in our example stands to gain insights into the most important issues facing its customers. This is because patents can be thought of as publicly available documentation of a company’s key technical problems and solutions to those problems. By collectively understanding its customers, the example systems company may more effectively solve downstream problems by incorporating solutions into the systems the company supplies to its customers. This potentially saves time, energy and money. With this knowledge it is also possible for the systems company to predict the new problems that will be facing its customers in the near future, and to work on solving those problems in its product set. By paying attention to the downstream IP and potential solutions to customers problems, the company can develop a stronger patent portfolio by ensuring that the patent portfolio it develops covers not only novel technical aspects of its system, but also novel uses and business methods of its downstream customers. This way its portfolio becomes broader more difficult to invent around.

Conversely the company may look upstream for leverage is well. For example companies in the raw materials and components stages of the value chain are typically vendors to the systems company. Often systems companies enter into joint development efforts with upstream companies during the course of product development. Alternatively the systems company may spend part of its internal development resources to utilize new raw materials and components in its systems. When it does so the inventions that result from novel raw materials and components may become key market differentiators for the products it produces. As there are times when upstream companies supply samples to the systems company that come from adjacent uses in other industries, the systems company may find novel ways to use the sampled materials and components, thus creating new intellectual property opportunities. When this happens, the systems company can obtain IP ownership of the uses of upstream companies materials and components. This provides a barrier to upstream companies, preventing them from selling their raw materials and components to potential competitors of the systems company.

Is an example, of how this has worked in the past, an airframe wiring company was able to obtain samples of a new polymer insulating materials from several polymer-producing chemical companies. When it was found that one of these new polymers possessed unique insulating characteristics when used in specific electrical wiring designs, the airframe wiring company patented use of the new polymer material in not just wiring, but also in other market areas were the unique design constructions would be beneficial. In so doing, when the new airframe wiring product when commercial, and pricing discussions took place between the airframe wiring company and the chemical company, the wiring company was able to get a lower price by licensing, as part of the purchase package, its upstream and downstream intellectual property which covered non-wiring applications using the new polymer, as well upstream blends and formulations of the same polymer material. In so doing so doing the airframe wiring company created an advantaged cost position for its own wiring products.


Project Considerations for Out-Licensing IP in Operating Companies

When large corporations take a look at their intellectual property assets many find that those assets are underutilized. This is particularly true in organizations that derive their profits and revenues from sales of tangible products and services to customers. In these organizations intellectual property is predominately used to give those offered products and services a sustained advantaged competitive position. Out-licensing for such organizations is typically viewed as an opportunity to leverage those assets for slightly improved corporate profitability by letting someone else use the intellectual property, and making money on them using it. This is pertinent because in most for-profit corporations selling tangible goods and services, less than 10% of commercialized products and services are covered by the patent portfolio the Corporation holds.

The benefit of global out-licensing to corporations selling tangible products and services is typically twofold.

First there is a tactical benefit to extract value from licensing the intellectual property. The goal is to increase the return on existing IP via licensing technology, know-how, trademarks, patents or copyrights. This tactical value comes in multiple forms. It is not just up-front money to the bottom line. Other value sources are royalties, merchandising, brand impressions, new distribution channels, improved retailer relationships, capital avoidance, full capacity utilization, penalty avoidance, litigation minimization, and lower pricing for raw materials.

There’s also a second value to out-licensing technology. That is to strategically build value for the Corporation. This is done primarily by accessing technology and know-how from external sources to fuel internal innovation, speedup commercialization, and to reduce costs. Example of such sources of value are the ability to source, clear market and technology focus, better decisions on where to play, and better decisions on mergers and acquisitions. The goal here is to find the intersection between the needs that the company’s marketing department has uncovered, and various solutions available internally and externally to the Corporation to create value by delivering products and services that meet these needs. Predominate activities include securing the rights to technology for the company’s innovation efforts. These include acquisitions, joint ventures, cross-licensing of technology, know-how, and business methods.

The key challenges in licensing-out technology are obtaining corporate permission to do so. For corporations that have had successful licensing programs the following principles tend to apply: (1) all technologies and know-how are candidates for external commercialization, (2) all technologies are available for out licensing three years after market introduction, or five years after the patent is been granted. (3) all packaging concepts are immediately available for licensing, (4) licensing is available to competitors, and (5) the company retains a right to practice all art that it licenses out.

Companies that engage in these out licensing efforts often find that most value is generated via nonfinancial measures. When out licensing organizations are set up within a large company they typically have a good first year or two, but then once the low hanging fruit is licensed, the real benefit of such organizations is acting as liaison groups for accessing new technology and providing nonfinancial assets in support of venture and merger activities.

Typically out licensing groups are resourced with a few senior technical and marketing executives supported by intellectual property and contract specialists.


Project Considerations for Out-Licensing IP in R&D and Non-Operating Companies

Some companies are built to conduct research and product development and new technologies that will be incorporated into components manufactured by other organizations. Qualcomm and Fallbrook technologies are but two examples of US companies who use R&D organizations create intellectual property and other forms of IT to meet the challenges in their respective marketplace. Typically because they understand they can’t compete with the low cost of manufacturing products globally, they instead choose to focus all their efforts on innovation. Once the technologies are protected by patents, they can license their ideas to other companies that operate a lower cost. In effect they are selling to industry communities that share the same technologies.

The challenge for these entities is to accurately forecast the future needs of different industries and then create technologies, products, and business models that will enable those industries to increase their sales and profits. This often requires that such companies develop best practice market forecasting and technology roadmaps in specific niche areas. When successful, the licensing company licenses its technology to manufacturers in their target industry group. The manufacturer then pays licensing fees back to the patent holding company. From a technology management standpoint the best strategy is to engage in next-generation technology developments, and to avoid incremental and breakthrough innovation efforts.

Universities, government labs, and research institutes can also be placed in this generic class of entities. The distinction here is that their research is typically not consumer oriented, but rather focused on the pursuit of basic science and engineering principles. The patents these entities produce often need further market specific development and intellectual property protection to be of high value.

There are other entities that are considered as non-operating entities. These organizations specialize in finding, developing, and commercializing technologies that will shape the markets of tomorrow. This typically entails a high-level systematic assessment of technology gaps in commercial markets of high potential. Examples of such entities are BTG in the pharmaceutical area, Acacia in the area of internet pornography, and Rovi in the area of TV Guides. In the case of BTG, it identified interesting technologies (with approximately half coming from university and research institutes and half coming from businesses), acquired the rights of them, developed and/or aggregated them, and then licensed them to others. Traditionally BTG focused on biotech products with a smaller number of high-tech products in the semiconductor and telecommunications area. The business model was formulated on the time-honored 80/20 business equation were 20% of the licensed technologies can be expected to make real money and 80% do not. However this flies in the face of the lognormal value distribution and the experience of many venture capital firms that less than 10% of the art generates 90% of the value.

Clearly the real challenge for these organizations is to find industry segments that are to be highly profitable and second, locate chokepoint patents that will be necessary for almost all industry participants in that segment to license. These entities also need to have deep litigation pockets, as until threatened with a patent lawsuit, many of perspective licensees resist paying.


Sources, References and Selected Bibliographic Information

1. “The value chain approach to IP management” by Tom Hunt, Intellectual Asset Management, December-January 2004
2. “Managing strategic intellectual property assets in the fuzzy front end of new product development process” by Yonghee Cho, Sema Kirkewoog and Tugrul Daim, R&D Management, Jan. 2018
3. “Creating an Intellectual Property Business at Boeing” by Joe Cherneski, presentation at LES Annual Meeting, Sept. 2002
4. “An Integrated Value Extraction Capability” by Stephen Baggott, presentation at LES Annual Meeting, Sept. 2002.
5. “BellSouth Intellectual Property Marketing Management Corporations” by Carol Beckham, presentation at LES Annual Meeting, Sept. 2002.
6. “BTG”, Intellectual Asset Management, Dec-Jan 2004.
7. “Portfolio Management, Benchmarking the Industry”, by Thom Kobayashi, Innography white paper, 2016.
8. “IP Handbook”, by WIPO, http://www.iphandbook.org/
9. “Managing strategic intellectual property assets in the fuzzy front end of new product development process”, by Yonghee Cho, Sema Kirkewoog and Tugrul Daim, R&D Management, January 2018.
10. “Prior Art will be easier to find due to creation of a new prior art archive by Google, Cisco, MIT, and USPTO” by Eagle IP, Eagle IP blog, Oct. 10, 2018.