The Utilization of Intellectual Property Rights in SMEs Kazuo HATTORI Director for Patent Information Policy Planning and Coordination Patent Information Division Japan Patent Office September 8, 2006

Intellectual Property Strategy for SMEs and Venture Companies

Section 1 Significance of Intellectual Property Activities in SMEs and Venture-funded Start-ups -Various Merits -

What is intellectual property? Antenna storage structure Utility model Antenna storage structure LCD technology Patent 06/27 THU 11:29 Brand name Trademark Smart design Design

Merits of intellectual property activities in business Preventing infringement by other companies and protecting proprietary technology Increasing profits through licensing Increasing customer confidence in proprietary technology and establishing a brand Boosting employee motivation

Advantages of IP in SMEs and Venture Companies Top management making speedy decisions and directly linking intellectual property strategy with management strategy Securing a share in niche markets by using intellectual property

Risks of disregarding intellectual property A company’s technology that had been considered not special technology and therefore left unpatented became patented by a competitor! Ideas and know-how can be leaked through marketing and transactions! A company suddenly received from a competitor a warning or a claim for damages regarding intellectual property infringement!

-Truth and Falsehood Concerning Intellectual Property - Section 2 Common Misunderstandings and Preconceptions among SMEs and Venture Companies -Truth and Falsehood Concerning Intellectual Property -

It would be a waste to junk a razor blade. Misunderstanding 1 Only high-level technology such as “revolutionary inventions” can be patented . It would be a waste to junk a razor blade. Hint

File applications for all inventions . Misunderstanding 2 File applications for all inventions . Unnecessary annual fees would be a severe strain on business operations. Careful selection File applications. Keep as know-how.

License (income from IP) Misunderstanding 3 Acquisition of intellectual property rights and dealing with infringement involves a vast amount of money, time, and labor. Sales of a product License (income from IP) Cost of IP

Section 3 Concept and Patterns of Intellectual Property Strategy -Business Strategy for Increasing Added Value -

Definition of a Company’s Intellectual Property Strategy A company’s intellectual property strategy is a strategy for increasing a company’s added value and for securing profits by creating, protecting, and using intellectual property while considering the company’s management resources and external business environment. It is a strategy that regards intellectual property as a means for building business and not one that regards the mere acquisition of intellectual property rights for research results as the final goal.

Models of the Intellectual Property Strategies of SMEs and Venture Companies

An Overview of Intellectual Property Strategies of SMEs and Venture Companies Creation Protection Utilization Conducting R&D in collaboration with another company or university or independently Acquiring intellectual property or concealing technology as know-how License IPR to other companies or using another company’s IPR Joint development strategy Monopolization strategy License/transfer strategy Independent development strategy Know-how strategy License acquisition strategy

Strategy 1: Joint Development Strategy Conducting R&D in collaboration with another company or university Where a company cannot conduct commercialization independently due to a lack of management resources such as technological capabilities Where a company can provide an attractive and unique core competence (unique technology or skills for providing customers with products or services that cannot be imitated by other companies) to the partner company

Strategy 2: Independent Development Strategy Conducting independent R&D so as to protect proprietary technology and know-how Where a company wants to keep their proprietary technology and know-how secret from other companies or universities

Strategy 3: Monopolization Strategy Gaining a large market share by acquiring intellectual property rights Where the company’s technology is difficult to conceal and there is a risk of it being easily found out and imitated by other companies Where the technical level of the company is the same as that of its competitors in the relevant field Where it is difficult to claim the prior user’s right

Strategy 4: Know-how Strategy Concealing the proprietary technology Where the technique is not easily discoverable by other companies, such as technology related to a manufacturing process Where a strict confidentiality system within the company is in place

Strategy 5: License/transfer Strategy Gaining profits by licensing or transferring the company’s intellectual property rights to other companies Where the company lacks production and sales abilities and finds it difficult to conduct commercialization independently Where the company intends to expand the market for its proprietary technology by having other companies use it as well

Strategy 6: License Acquisition Strategy Using another company’s intellectual property right and conducting commercialization independently Where the company finds it easier to conduct commercialization by obtaining a license from another company Where a problem cannot be solved by the IP right (i.e., technology) held by the company

Intellectual property strategy is not necessarily a choice between two alternatives but can involve multiple decisions. It is necessary to effectively combine strategies across the intellectual creation cycle. A company is required to formulate multiple intellectual property strategies and to carefully determine whether to take a monopolization strategy or a know-how strategy depending on the technical field or business area.

Strategies for Types of Rights

Possibility of commercialization Period of use of the design Design Strategy: Protection of Design Rights Developing and protecting original designs Possibility of commercialization Period of use of the design Predicted sales of the product Future trends and the influence on future product line-up

Brand Strategy: Protection of Trademark Rights Supplementing name recognition through branding Does the name precisely express the functions and characteristics of the product? Does the name indicate superiority over other companies’ competitive products? Is the name pleasant sounding, easy to pronounce, and appealing? Is the name easy to understand and easy for consumers to remember? Can the name stand long years of use? Is the name free of any bad meanings or impressions? Can a trademark right be acquired for the name (i.e., Does the name have a distinctive feature)? Does the name violate the Unfair Competition Prevention Act?

Intellectual Property Strategy Coordination between Intellectual Property Strategy and Management Strategy Business Strategy R&D Strategy Intellectual Property Strategy Marketing Strategy Personnel Strategy

Creating Intellectual Property

-Clarifying and Using Core Technology - Section 1 Promoting R&D together with the Awareness of Creating Intellectual Property -Clarifying and Using Core Technology -

Challenge: Human resources and budgets for R&D are lacking. Possible Solution: Educating engineers as well as collaborating with or acquiring former staff of business acquaintances who have good knowledge of technology and intellectual property

Challenge: R&D is not conducted with an awareness of the company’s intellectual property. Possible Solution: Identifying the company’s core technology and selecting and concentrating the areas of R&D Discovering inventions through meetings of engineers and intellectual property staff and through daily information gathering

Section 2 Development of Internal System - Developing System within SMEs and Venture Companies for Supporting their Intellectual Property Activities -

Challenge: The company cannot create a corporate structure conducive to managing intellectual property affairs. Possible Solution: Placing staff and organizations in charge of intellectual property affairs, even if the staff hold additional posts

Challenge: Staff lack intellectual property-related knowledge and know-how. Possible Solution: In addition to intellectual property education through on-the-job training, also conducting off-site training, including dispatching staff to various seminars attended by experts and so on

Challenge: There are no incentives for R&D staff to create inventions. Possible Solutions: Improving the rules regarding employees’ inventions and increasing the motivation of R&D staff to invent Motivating inventors by commending notable inventions

Utilization of Intellectual Property

Section 1 Formulation of Licensing Strategy Techniques for Generating Revenue from Intellectual Property

What strategy should be taken when a company wants other companies to use its patents or when a company wants to use other companies’ patents? Knowing types of licensing strategies (i) Exclusive license (ii) Non-exclusive license (iii) Cross-license (iv) Partial license (v) Licensing-in (vi) Know-how license

What are the merits and risks of a licensing strategy? When granting or transferring (sub-licensing) a license, there is the risk of increasing competition in the market, and there is the benefit of being able to generate stable profits. When receiving a license from another company, there are risks including the payment of royalties and the restrictions on the use of the IP right in business operations.

Where can a company find technology seeds that it lacks? Searching for technology seeds through a university’s consultation service Using various databases and patent licensing-related events

How should licensing negotiation be conducted? Conducting preliminary investigations of a prospective licensing partner Considering the licensing fee before engaging in negotiation Conducting a licensing agreement that meets the needs of both parties Carefully concluding a licensing agreement Consulting a licensing expert

Ten Intellectual Property Rules for SMEs and Venture Companies

1. The company manager should have be 　　intellectual property minded and lead the creation and implementation of intellectual property strategy. 2. All staff should be intellectual property minded. 3. Reasonable investment in intellectual property activities should be a part of management strategy.

4. Measures should be taken to reduce IP-related costs to the greatest extent possible. 5. SMEs and venture companies should optimize their flexibility and speed in their intellectual property strategies. 6. A company should find a competent IP consultant.

7. If a company cannot work on intellectual property independently, it should collaborate with other institutions and individuals. 8. Agreements should be concluded carefully. 9. A company should use the Regional Intellectual Property Strategic Program Promotion Network. 10. A company should make autonomous efforts to gather IP-related information.

Thank you!