Friday, April 1, 2016

Reducing intellectual property flight risk

Intellectual property (IP) flight risk is the risk of losing valuable IP from a company, thereby reducing the value of the company. Organizations are vulnerable to losing IP if: 
  • IP is not properly identified; and/or
  • IP is not properly secured.
Since innovative companies such as high technology or biotechnology startups are heavily dependent on IP as a driver of value, IP flight risk poses a major threat to value for these companies. If these companies have invested heavily in, for example, branding, marketing and product development, losing IP results in reduced return on these investments.

A first step in reducing IP flight risk in a company is instituting an “IP-aware” mindset within the company. Company stakeholders should be aware of the importance of IP to company value, and the need to protect IP. Fostering such a mindset requires the formulation, implementation and dissemination of an effective IP policy. A well-formulated IP policy will contain 3Ps:
  1. Proactivity – the policy should prompt the employee to proactively consider whether valuable IP is being created. This is achieved by explaining the importance of IP to the company, and providing examples of how IP could be created.
  2. Processes – The policy should explain the processes necessary to identify and secure the ownership of the IP.
  3. People – the policy should identify the key people and their responsibilities in carrying out the processes.
Once the policy has been formulated, it needs to be implemented and disseminated. Proper implementation leads to employees “buying into” the IP policy. Dissemination serves to make employees throughout the company aware of the processes and people for the protection of IP. Dissemination could include emphasizing the importance of IP during formal onboarding or orientation sessions; and holding periodic seminars within the company to remind employees of the importance of IP to the company and the processes and people contained within the IP policy.

A second step to reduce IP flight risk is securing the company’s IP ownership within employee, contractor and partnership agreements by using appropriate IP ownership clauses. The IP policy should explain the importance of including these  IP ownership clauses in such agreements. 

A third step is running periodic IP mining sessions to identify the IP created within the company. These sessions should involve personnel responsible for the creation and protection of IP, such as technical, marketing and legal personnel. All IP identified during the session should be documented, preferably in forms. The identified IP should then be evaluated and the appropriate processes to protect the identified IP should be carried out. The IP policy should explain the importance of running these periodic IP mining sessions; and the processes/people to document, evaluate and protect the identified IP. The second and third steps are interlinked with each other. Once IP has been identified in a mining session, the agreements serve to secure the company's ownership of the identified IP.

In conclusion, while IP flight risk is a threat to value, proactive measures to identify and secure IP can be put in place to mitigate this risk.

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