Intellectual Property and the Business Model

By Fred Logue

Intellectual Property can be used in three ways in a business. Each of the dimensions gives the business leader more degrees of freedom when constructing his or her strategy when compared to the case where there is little valuable intellectual property.

The degrees of freedom are well illustrated in the diagram below

In essence owners of intellectual property have the right to exclude others from infringing those rights and the state through its laws guarantees those rights and provides remedies and enforcement. However these rights are dynamic and may be sold, licensed and traded. It is this dynamic which opens up several degrees of freedom for intellectual property use as described below:

Exclude: Using or threatening to use intellectual property to prevent a competitor or other third party from making or selling a product or service is the most readily understood use of intellectual property in a business. In many ways this is also the most limited way of using intellectual particularly today where there is a high degree of outsourcing and collaboration in many industries and indeed where often the control of all the necessary technologies for a given product rarely rests with a single entity.

Interact: Companies are learning that intellectual property is a real tool for interaction and collaboration. For open innovators a strong IP position facilitates open collaboration when talking with partners about the technologies that need to be developed. In other sectors manufacturing technology can be shared with contract manufacturers, others may cross licence to access broader portfolios and indeed many companies may pool and share their IP in order to develop interoperability standards.

Monetize: Companies with valuable IP may additionally derive financial benefits from their intellectual property other than from enhanced profits on their own products and services. The may licence rights to others, raise finance or indeed sell elements of their portfolio.

A manager of a sophisticated global business needs to understand the contribution of IP to his or her company’s business model and needs to create and manage a portfolio of IP that blends enforcement, interaction and monetization in a way that is appropriate for the business now and in the future.

[This post originally appeared at New Morning Intellectual Property.]