Book Review - The Invisible Edge

I thought that it would be nice to provide some variation to Intangitopia by recommending a book that I read recently. The recently published book is called The Invisible Edge- taking your strategy to the next level using intellectual property.

Background
Intellectual assets and IP are traditionally not discussed in the boardroom as the core to business strategies in the way it really ought to be discussed. This is true both for many industries/companies as well as for many of the US top business schools. Too often, business managers think of IP as a problem for the patent lawyer to deal with, or that it only applies to particular industries such as entertainment, software and pharmaceuticals. The authors argue that IP instead should become your number one priority and be the core of your strategy (which may be compared to one of the older posts here at Intangitopia).

Zooming as a Concept
The book introduces the concept of “zooming” where the analogy of using different “lenses” allows you to see different dimensions of your strategy. Using this concept allows you to look at specific cases from several perspectives, and is also something that we recently utilized at Intangitopia in a post to visualize value extraction in Agribusiness. The IBM PC is used as one of the examples in the book. IBM’s strategy is argued to be perceived as an innovation success on a high-level (“architecture level”), whereas it is obvious that a zoomed-in picture (“component level”) reveals details that show a platform where control (and market share) is gradually lost to become cloned and flooded by competitors making implementation on a detailed level less successful.
The book provides some really interesting examples of “zooming” where one starts at the level of competition between nations only to gradually zoom in to company competition, networks of inventions/developers, technology inter-dependency, patent rights and claims thereof.

Control - Collaborate - Simplify
Another simple, but yet elegant, concept that the book presents is: control-collaborate-simplify. This is more of a holistic framework of the dimensions of IP rather than a readily applicable tool. The model describes the exclusionary role (control) of IP that still is the focus of many firms versus the newer phenomena of openness and co-creation (collaborate), and how these concepts can be packaged and shaped (simplify) using ingenious designs, setting standards and architectural thinking into logical/intuitive models that will be the factor that “wins over the market”.

Case Studies
The book presents a wealth of studies ranging from the steam engine to golfballs, razors, computers, patent trolls, as well as IP strategies for Lenovo, Qualcomm, Xerox, Toyota and Boeing among others.

About the Authors
Mark Blaxill and Ralph Eckhardt are managing partners of 3LP Advisors. Blaxill is a former senior vice president of The Boston Consulting Group (BCG) and was head of its Strategy Practice Initiative. Eckhardt is the former head of BCG’s intellectual property strategy practice. More about the authors here.

Conclusions
The book is very inspiring and is an exceptional read for anyone who is new to the IP world and would like to understand its importance in relation to business strategy and the new economy. Personally, I enjoy case studies and therefore find the book to be really useful to see what strategies that have worked or failed in the past. One of the best things about the book is that it is written in a way that is easy to communicate to non-lawyers, meaning that it provides a good tool when looking for examples to describe why a client should worry about their IP strategy or why patenting should be a boardroom decision. The only negative aspect that I found about the book is that I would like to have seen more detailed frameworks, models and checklists for successful implementation of IP strategy, and I really hope that there will be a more advanced second book in the future where more hands-on advice is provided. I do realize however that the contextual nature of IP makes drafting of general widely applicable frameworks extremely difficult. Nonetheless, I enoyed the book and I recommend reading it.

Tobias Thornblad
(Follow me on Twitter)

Get the book here

More information:
Forbes: IP Is Now Job One For Every Senior Executive
IP Think Tank Podcast: interview with the authors here
IP Finance: Anther book review here

The Pirate Bay Verdict: Bad marketing for Intellectual Property

“Sometimes, I am ashamed to say I am an IP professional. I rather say I work with Innovation or just general business development.”

Massive attention is directed to the trail and verdict for the founders of The Pirate Bay, a.k.a. the spectrial. Today at 11:00 CET the verdict was released and 15 minutes later the Chairman of the Court, Tomas Norström, held a press conference. The press conference can be heard in Swedish here.

The verdict states that the four convicted are going to pay $905K each and are sentenced to one year imprisonment. The appeal will come is a matter of course, so the outcome is far from set yet since this is the lowest out of three instances. The verdict could be found in Swedish here.

Regardless the stage in the process, the reactions is substantial in the digital community and the rumors are that demonstrations are going to be held in Sweden in the near future. This blog post is not about whether or not the verdict is correct, it is about the bad press intellectual property as concept receives in this process.

So what is Intellectual Property?

Still the term is quite ambiguous and used in many ways dependent on context and market. This is just one non-exhaustive description of the perception which is mine and taught at ICM.

Intellectual Property is one of the primary vehicles for wealth creation in the knowledge based economy. Intellectual Property makes intellectual/immaterial assets translatable, and thus economically functional and managerially controllable.

Consequently, the concept facilitates properties needed for entrepreneurial activities such as turning an invention into an innovation to enable creation of so called intellectual capital, where commercial interaction is a subset of intellectual capital. A quite positive and needed mechanism, don’t you agree?

Where things went south

Currently, copyright and patents are the IPRs mostly attacked and connected to the phrase IP in media. The IPR system is accused not to cope with the technical developement and is percieved to represent the rights system pre-internet.

Copyright – Copyright is seen as something holding creativity and creation back. Both due to the quite long life time of the copyright, but also due to the change in how we consume copyrighted materials nowadays. One of the most disruptive pattern in this is file sharing, now enables global dissemination of knowledge and culture practically for free. File sharing is seen as one of the primary democratic vehicles but in the same time as the technology version of Beelzebub destroying copyright holders’ opportunity to preserve the moral and economic rights over their copyrighted material.

Patents – Patents are commonly plainly coined as intellectual property, which naturally is wrong since the concept is much broader. Patents have gained a lot of negative publicity lately in relation to software patents, but also in relation to Big Pharmas use of their patent portfolios.

This is a free translation from one organized entity against intellectual property´s conclusion:

“[...]Thus, the only ones who actually benefits from the use of patents are the paten attorneys or IP lawyers. Without a patent system, they would be unemployed. Unfortunately, these people form the politics and policies in our society despite their lack of objectivity.[...]”

(The reason why I dont state the source is that I dont want to direct more attention to this organisation, for most of you who follows the debate surrounding the Spectrial knows which entity I am citing. However, for transparancy reasons I am happy to provide the source via e-mail)

How to turn the direction of where the perception of IP is heading

I guess the youth of today imagine Intellectual Property professional to be a greedy, filthy rich, old fart making his living on exploiting what they perceive almost as human rights. At least this is the perception I’ve got following the spectrail discussion, my own twitter feed and other media.

To change this, the mindset of Intellectual Property owners must change. IP is not an exclusive right to exclude others from using the captured assets constituting the IP. It is not a tool to keep the third world from the global trade. It is not a tool to hunt poor counterfeiters to increase bottom line results for multi-national conglomerates. However, that is the way IP is presented in media and often used by the IP owners.

We need to see change in how IP is used in the business arena. The positive properties with IP as facilitator for the development of our society must be communicated. It must be brought back as the primary asset for entrepreneurs regardless if they build they utiliza online business models or not. I hardly believe spectrail helps in that. We need more initiatives such as Spotify, TED (CC-licensed content), Hulu, last.fm, etcetera. They leverage the technology development of file sharing and streaming without violating the underlying IPRs. Let’s pray to improve the perception of intellectual property and to get help by a more innovative culture industry, an industry taking the step into the knowledge based economy.

For further reading about perception of IP, please read Roya Ghafele´s Perceptions of Intellectual Property: a review. For further reading about IAM/IPM in the business arena read Tobias Thornblad’s splendid post.

Mathias Hellman (follow me on Twitter)

EDIT: the youth political organization Ung Pirat or Young Pirate in English, is now the largest in Sweden. However, Larry Lessig had somewhat of pin pointed the question already two years ago at TED.

IAM/IPM system in Agribusiness visualized

In my previous blog post, I conclude with “IAM/IPM capabilities will need to become key to business strategy for every organization that wishes to be a player in a knowledge-based economy”. This will require companies to form, and transform into, elaborate IPM/IAM systems where internal assets are consciously controlled to create maximal value. Teece D.J. states in his 1992 (Competition, Cooperation and Innovation) article “the boundaries of the firm are getting fuzzy”; and it is therefore, in my opinion, even more important to manage all types of assets in the development network of a firm, since value creation will be more and more dependent on collective participation in open technology platforms. However, this is to think in practice but rather complex to implement in practice. I therefore thought it would be interesting to visualize a small case study of a real life example where an intellectual asset strategy has been successfully implemented. The problem, as always, is that there is never enough public information available (for obvious reasons) to do an in-depth study, so bear with me as I briefly try to deconstruct one of the more successful commercialization strategies in Agbio; Monsanto’s commercialization of its INGARD technology in Australia.

Case Background
Cotton containing the Bt gene – known as ‘Bt cotton’ - was among the first genetically modified crops in widespread commercial production. Bt cotton has been commercialised in Australia, by Monsanto, under the trade mark INGARD® and in many other countries under the trade mark BOLLGARD®. INGARD cotton has been modified by the insertion of the Bt gene derived from Bacillus thuringiensis together with a promoter region into the cotton DNA. The genetically modified cotton plant expresses the Bt toxin targeting pests such as the cotton bollworm and the native budworm.
The key players involved in the commercial development of INGARD cotton technology in Australia are;
• Monsanto: the owners of the Bt patent and the INGARD® trade mark
• CSIRO: the public sector research institution which owns variety rights on cotton germplasm
• Cotton Seed Distributors and Delta Pine: two commercial seed firms.
Read more about the case here.

The INGARD Value Chain
A simple overview of the value chain that shows a high-level of a selection of the transactions that enable the commercialization strategy is shown below.

Knowledge Management: At the top of the value chain is the knowledge management level. Here all the basic discoveries and enabling technologies can be found that provide a foundation of information and knowledge that may ultimately lead to societal utilities through bundling, innovation refinement or other usage. In this case we find scientific discoveries that ultimately lead to the identification and characterization of the Bt-gene and promoter. The arrows between Monsanto and these discoveries are dashed as I have not been able to find any information regarding the transactions between these two levels.
Genetic Management: At this level we find Monsanto and its Bt-gene capabilities and assets, in this specific value chain.
Genomic Management: Despite Monsanto’s many years’ of R&D in the Bt-gene and its expression in plant systems it did not (at the time) have access to suitable germplasm necessary for developing new varieties of cotton bearing the gene for production in Australia. CSIRO did both have the germplasm and a commercial partner (Cotton Seed Distributors) with the capabilities to distribute the finished product.
End-user Level: The finished product (commercial Bt-cotton) is delivered to growers at this end-user level. Much of the success of Monsanto’s commercialization strategy was owing to the technology user agreement that enabled additional value extraction and direct royalties from end-user to technology provider.

IA/IP Management Level
It is quite simple to stop the analysis at the “value chain level“ and conclude that licensing is important in a knowledge-based economy. This is too simple, in my opinion, and fails to unveil where the real value is created and captured. To understand this on a more detailed level we need to zoom in to see ”Monsanto as a value generating IAM/IPM system“. Since I was able to find Monsanto’s technology user agreement for INGARD cotton (1999/2000) I was able to map out at least some of the value creating processes on a more detailed level, although there is still a lot left to understand for a full picture;

Since most of the assets shown in the picture are of intangible character, it is simple to conclude that clever governance will allow for value extraction of one assets in simultaneous markets (e.g. Bt-gene in cotton, corn, soybean, etc.). Moreover, some assets will increase in value by feedback-loop mechanisms where the technology and market database is an interesting example. According to the user agreement, growers are obligated to disclose scaled map of their farm units as well as information about what they are growing and how. This valuable information becomes proprietary to Monsanto which is allowed to use it as value propositions towards CSD ”to anticipate INGARD Cotton Seed demand“, according to §6.1 (c) of the technology user agreement, meaning that the value of this database further increases as more customers uses the technology. Then considering that growers are obligated to grant-back improvements and developments in relation to the technology to Monsanto ”to use, license or assign, without charge or restriction” (§4.3) it is quite simple to conclude that this is a valuable strategy for the company.

More about IAM/IPM capabilities in upcoming posts.

Tobias Thornblad
(Follow me on Twitter)

IAM/IPM capabilities will be discussed further by prominent IP thought-leaders during CIP FORUM 2009, 6-9 Sep, Gothenburg, Sweden.

For some interesting examples of the norms that create these types of transactions see: http://intangitopia.blogspot.com/2009/05/transactional-norms-in-agricultural.html

The IP marketplace in 5 years?

I recently answered a question at LinkedIn with the same question as the title above. I found it very close at heart and thought I'd incorporate it here for further thoughts and some more elaboration

When I think of the IP marketplace I envision sales and acquisitions of IP and not the roll of IP within the marketplace (i.e. technology). The closest embodyment so far would be Ocean Tomo, which seem to have hit a slump with its last auction being seen as a failure (see here and here). In recent years we have seen a surge of different players entering the market (Ocean Tomo being one) and I am a firm believer that this is a field in its infancy, which I have written about here and here.
Before elaborating more on how I see the IP marketplace in five years, I'll take you throug my reasoning. I have chosen only to look at patents as they are by far the most liquid asset.

The IP Marketplace today

First 4 observations I hope we can all agree on:
*Corporations continue to file enormous sums of patents each year, thus "non-core" patents will likely only increase and so will supply for a market.
*Not least in this recession, bigCo,smallCo and inventors are having an easier time to motivate divestiture of patents and are also in greater need of liquidity.
*Non-us legislations are slowly catching on the US model of heavy patent litigation (examples are EU harmonization attempts).
*Increase in large scale patent acquisitions by e.g. trolls, RPX, IV etc.

Looking at above factors; increase in supply and demand combined with legislative action - the obvious answer would be that the IP marketplace would be booming. However this is not that straightforward.

The main reasons for that being:
* Selling (or out-licensing) naked patents is very hard and time consuming and is very much a tacit skill compared to selling many other asset classes which have no element of negotiation as well as much historical data.
* IP landscapes are often cluttered due to wide X-licenses, encumbrances / deal clauses, standards and what's commonly seen as the "troll threat".
* The marginal value for naked patent acquisitions / in-licensing is situation based and that value is often logarithmic from buyer point of view.

I think that in 5 years the IP marketplace will continue to be built up by three sub-markets:
* BigCo broad licensing - continuing with wide X-licenses to increase FTO.
* Liquidity Divestitures - from BigCo to inventors, patents for sale will go up.
* Patent aggregators - nothing indicates any slowdown of RPX, IV trolls.

The IP market moving forward - more behavior than a unified exchange

However I believe there will be great changes, but within quality and behavior as companies recognize strategic value of patents and also the importance of dealing with acquisition or divestiture properly. E.g.:
* Companies will actively start looking for certain technologies when planning a new venture / spin out / line-extension slightly outside of core.
* Patent sales will require more and dedicated work by the seller if looking for short term ROI. The model with an unspecified Cease & Dsesist, countered by a declaratory judgement and then a long wait in Texas, Cali or Delaware is not scaleable and slow - not to mention unpopular.
* With laws passed that could open up for lawsuits also outside of the US, savvy companies will start to be proactive when considering defensive or offensive IP acquisitions to strenghten portfolio.

One could draw the easy parallel of IP and general business where certain amounts of analysis, preparatory work, appealing sales material etc. are given and anyone not complying with the norm has no chance (e.g. not having a thorough business plan, strong PPT and proof of concept if driving down Sand Hill Road). My meaning being that such a norm has not been set in the IP sphere yet.


The emerging new actor

In light of an increase in "homework" (i.e. analysis) needed I see the emergance of a new actor. Such an emerging actor would be similar to an m&a department within an investment bank. An actor dealing with sellers and buyers, possibly being a strategic partner to BigCo when divesting/acquiring patents. Cases are built around business, technical and legal strenghts. Key metrics are profitability, portfolio strength, ROI and regional / technological FTO. This actor will also, like the banks, rely heavily on trust and look for long term partners rather than short term assertion raid. Which is also the reason why such an actor in the long term could develop a scaleable model of naked patent sales - which I see as the true key of a functioning patent marketplace.

// Marcus Malek
(follow me on twitter)

Information capture and repackaging as core business

Some time ago, I blogged about the company 23andMe that specializes in personal genetics by offering DNA testing kits and web-based interactive tools that allows individuals to understand their personal genetic information. The company was founded by Linda Avey and Anne Wojcicki, in 2006, and its investors include Genentech Inc., Google Inc., and New Enterprise Associates. The company recently announced that they have launched a Parkinson’s Disease (PD) initiative in collaboration with the Parkinson’s Institute and Clinical Center and the Michael J. Fox Foundation.

Community-based research
The PD initiative is planning to use an open platform approach where the two clinical institutions above will reach out to their networks and encourage PD patients to enroll. The press release states that “the first-of-its-kind program will focus on enrolling 10,000 individuals with Parkinson's disease” meaning that a valuable database is likely to be built from the genetic information. One of the major advantages for participating PD patients, at the same time, is that they will have access to an online community where they may meet others in the same situation as themselves. Commercial tests are usually $399 each, but Google co-founder Sergey Brin has made a personal contribution to lower the price to $25 each for participants for the benefit of PD research. The value of the contribution is not explicitly disclosed but simple mathematics of a cost decrease of $374 per test for a total of 10,000 participants adds up to an indicating value. Current customers of 23andMe, who are not PD patients, that already have their genotypes uploaded into the 23andMe databases, can also contribute to the initiative by participating as “healthy controls”.

Intangibles as value-drivers in knowledge-based business
Knowledge-based industries, such as biotechnology, enable interesting novel structures due to the nature of intangibles. The PD initiative provides an optimal example of a structure where information is the most important underlying object of transfer. Although it is repackaged into many forms: First the genetic information is inaccessible (physically present in the nucleus of cells) and hence without direct value to the PD patient. By enrolling in the initiative, that very same patient transfers (by physical means: DNA kit + post office as distribution channel) his genetic information (physically present as saliva) to a cost of $25 to the company’s database where the information is presented back (by virtual means: analyzed data and predictions in a web-browser) to the PD patient. The patient may now choose whether he would like to share or compare his data or parts of it to peers (by virtual means: presented as personal data) within a community of others in the same situation. At the same time, data supplied by the PD patient contributes to a database that will increase in value for the company (by virtual means: analyzed data becomes building blocks for bioinformatic/computational tools to make discoveries) and participating institutions* (by virtual means: genomic associations that may lead to clinical studies - which may in turn provide further data that can build the database even more).

Maybe even more interesting, at least from an IAM/IPM perspective, is that due to the scalability of the current model: 23andMe is planning to launch several new communities for other diseases - extracting tremendous value from their current assets and capabilities by segmenting parts of their existing business model (TBMDB).
* I have assumed that the institutions have access to the data for the sake of argument.

Intangible assets and property
The scalability of the model makes it very attractive, but what are the underlying assets, capabilities and activities that are needed to create it? The list of assets can be made long, but on a high-level some key assets include a proprietary database of both understood and non-understood data, tools to sequence and analyze genetic information, (probably) cost-efficient out-sourced distribution channels for sending out and collecting information, an external relational capital of information-suppliers / high-end investors / renowned advisors, internal human capital, customer user base, trademarks claimed through (™), and software to manage, analyze and ”present data back“ to the customer. Not to mention policies, agreements, strategies, competitor intelligence, technical know-how etc that would require a more in-depth investigating to be identified and described.

IAM/IPM capabilities to control and extract
Some quick searches in Google Patents and Patentlens for 23andMe as assignee did not yield any results. So how does the company maintain in control over their value creation and extraction? A number of capabilities, and IA/IP strategies probably exist for each of the assets. But if we look at the proprietary database as an example, some strategies possibly include;
• property-based copyright protection associated with the totality of organized data
• technical control by providing proprietary softwares which (only?) displays data from 23andMe
• market power through a large user-base where the network effects of online communities create higher barriers to entry for other players
• contractual control to ensure that rights to use the information within are maintained (see example below)

Example of contractual control between the customer and the company: (17.) 23andMe’s Proprietary Rights: ”[...] Your saliva, once submitted to and analyzed by us, becomes our property. Any genetic information derived from your saliva remains your information. We retain the rights set forth in the consent form and any additional terms of service.“.
”You retain copyright and any other rights you already hold in information and content you create and which you submit, post, or display on or through, the Services. By submitting, posting, or displaying the information and/or content, you give 23andMe a perpetual, irrevocable, worldwide, royalty-free, and non-exclusive license to reproduce, adapt, modify, translate, publish, publicly perform, publicly display, and distribute any content which you submit, post, or display on or through the Services.“
”You agree that this license includes a right for 23andMe to make such content available to other companies, organizations, or individuals with whom 23andMe has relationships, and to use such content in connection with the provision of those services. [...]“

At the same time, it is interesting to think that a number of IA/IP strategies probably exist to extract even more value from the database, including;
• value capturing strategies to repackage data in the database into new value propositions (e.g. genetic associations to be used in studies, new genetic tools, new communities, database access for external parties, publication opportunities, intellectual objects for transactions or to form new ventures/entities, and so on)
• strategic alliance strategies to both evaluate existing data, and to collect new data for other diseases

Final thoughts
In my previous blog post, I discuss the changing role of patents in a knowledge economy and how companies must incorporate IP strategy to their cores. I think that 23andMe provides an interesting example for how both control and value can be maintained efficiently, while managing several simultaneous value recipient, by detailed IA/IP strategies (although, I have in this case interpreted the strategies as a case study based on their public information). I think that many organizations can learn from this model. IAM/IPM capabilities will need to become key to business strategy for every organization that wishes to be a player in a knowledge-based economy.

Tobias Thornblad
(Follow me on Twitter)

IAM/IPM capability and open innovation will be discussed further by prominent IP thought-leaders during CIP FORUM 2009, 6-9 Sep, Gothenburg, Sweden.

(Link to 23andMe’s blog: the Spitoon)

Onlive: Technichal and Business model innovation

Some time ago we posted a some thoughts about Quake Live's business model and way of delivering the value experience to the users in a new and inventive way. Well it seems like that business model have been extended and altered.

Onlive is a new service enabeling a high-octane gaming experiance on your low-end notebook, laptop or even TV. Unlike Quake Live you need a micro console and a handcontrol to play with it. So in that sense it is actually a clear competitor to the existing gaming consols currently available.

So, by scrutinizing Onlive's business model according to tbmdb.com's business model components you clearly see that Onlive innovates upon several components. But essentially, the end-user have the same or an enhanced value experience for less money and in a more flexible manner. However, Onlive needs diffrent skills to manage external relations, create the propert control mechanisms and expecially create the capability and assets needed to have virtually zero downtime on the service since that have a huge impact on the value reciver - the customer - .

One thing is for sure, this is a clear and awaited model for how to treat piracy issues without deminishing the value experiance by the customer. That clearly talks in favour for the adoption of this model of delivering consol gaming. But whether it is Nintendo, Microsoft or Playstation who will do it in the long run, or if perhaps Onlive can claim a sustainable market position, is still to see.

Have a look at the promotion video and see what you think. I'm quite sure that I will never go back from having only a laptop. Further it is always nice to enable gaming without installation on a system managed by a grumpy ICT staff.




However, its getting increasingly clearer that in the future we will see a consolidation of IP-TV, gaming in the cloud and other similar services. They will probably utilize the same hardware and will be provided by the one service provider.

Via Wikonomics, for more great frameworks for understanding business models: tbmdb.com