Corporate Intellectual Property Department Governance

By Donal O’Connell

Governance

Governance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of decision-making or leadership processes. In modern nation-states, these processes and systems are typically administered by a government.

When discussing governance in particular organisations, the quality of governance within the organisation is often compared to a standard of good governance.

In the case of a business, governance relates to consistent management, cohesive policies, proper guidance, well defined processes and decision-rights for a given area of responsibility. For example, managing at a corporate level might involve evolving policies on privacy, on internal investment, and on the use of data.

To distinguish the term governance from government: “governance” is what a “governing body” does. Governance may be defined as the way in which rules are set and implemented.

Corporate governance consists of the set of processes, customs, policies, laws and institutions affecting the way people direct, administer or control a company. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the corporate goals. The principal players include the shareholders, management, and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.

Intangible assets

The importance of intangible assets is growing, often equaling or surpassing the value of physical assets for a company.  The state of the intangible assets of a company can determine their share and corresponding influence on the market.  The size and quality of a company’s intangible asset portfolio can have a direct impact on several factors, such as the reputation of the company, the level of returns on investments and their access to the market, amongst others.

The way a company is valued has also changed considerably.  In the mid 70s, approximately 80% of the value of a company was made up of tangible assets, with the remaining 20% being made up of intangible assets.  Today this is completely reversed, with intangible assets making up 80% of the value of the company and only 20% being made up of tangible assets.

The exact percentage split will vary from one industry sector and from one company to another. Regardless, the relative value of a company’s intangible assets will be significant.

Business & intangible assets

Intangible assets, created, managed and exploited intelligently, have the potential to provide strategic flexibility, decrease corporate costs, build bottom-line return and increase shareholder value. At this time of great economic and financial uncertainty, it has never been more important for companies to focus on the proper growth and development of their intangible assets and maximizing its value. Companies must have an intangible assets strategy in place on how to build a control position around the key intellectual building blocks of their innovations, markets, and business ventures in order to creation and communicate business value.

Perhaps the most important class of intangible assets is technological know-how. Know-how and other intangibles are increasingly the “bottleneck assets” that allow innovating firms to differentiate and establish some degree of competitive advantage. Value can flow to the company from the astute creation, combination, transfer, accumulation, and protection of intangible assets. Such assets are the new “natural resources” of the global economy.

It is most important to realise that there are multiple legal and IP regimes for the protection and promotion of intangible assets.  It is also important to take a holistic view of intangible asset rights, and to realise that the premeditated use of multiple legal and IP regimes can help achieve sustainable differentiation.

The Corporate IP Department

Within many companies, especially larger sized companies. there typically exists a corporate function responsible for intangible assets. This function is basically tasked to ensure that the company appreciates its intellectual capital, assets and property, and to manage these intangibles in an efficient and effective manner.

There is no ‘one size fits all’ when it comes to such a function. Corporate IP Departments vary in terms of their size, their budget, their focus, their remit from management, their level of maturity and sophistication, their people’s skills and competencies, their knowledge and experience, the position of the Department within the overalll cororganizationalational structure, their internal structure and mode of operation, their process, what tasks are done in-house versus what tasks are outsourced, their network of external IP Firms and IP Service Providers, the KPIs which they have been taken into use, their systems and tools, the level of IT usage within the Department, how data is utilised within the Department, plus much much more.

Perhaps the key manner in which one Corporate IP Department differs from another is with respect to their IP strategy and associated action plans, and the manner in which the Department and its various activitiesy adds value to the business. However, they may  also vary in terms of how much time and attention they have given to IP Governance issues.

IP Governance

IP Governance is simply about defining the rules for this particular Corporate function. It is the process of decision-making and the process by which decisions are implemented (or not implemented) within the Corporate IP Department. Ideally the process should distinguish between strategic and tactical decisions.

Since governance is the process of decision-making and the process by which decisions are implemented, an analysis of the governance of any Corporate IP Department should focus on the formal and informal actors involved in decision-making and implementing the decisions made and the formal and informal structures that have been set in place to arrive at and implement the decision.

Good governance cultures are marked by consistency, responsibility, accountability, fairness, transparency, and effectiveness.  And these same characteristics should apply to good governance within a Corporate IP Department. Leadership of the Corporate IP Department should focus on both performance and how that performance was achieved.

Final thoughts

IP Governance may not be a hot issue, but if the value of intangible assets is now equaling or surpassing the value of tangible assets within a company, then that function with responsibility for managing those intangible assets needs to behave well and adopt good governance practices.

 

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