Intellectual Property
Prerequisite Competence and Competitive Capabilities for the
Next Millennium: A View from the Business Unit
John W. Peterson
Senior Manager, Technology Strategy
Switching and Access Solutions
jwpeterson@lucent.com
Working Paper
November 1999
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IP In The News
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CREATING AND MAINTAINING IC ASSETS
Patents
Copyrights
Trademarks
Trade Secrets and Know-how
Non Disclosure Agreements
Questions and Answers
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Copyrights
 Protection afforded literary, artistic, and other
works, such as software, to prevent
unauthorized copying.
 Copyrights come into being upon creation
of a work and fixation in a tangible form.
 Duration of rights, after which the work is in
the public domain:
individual - life of creator + 70 years
corporation - 95 years from publication or
120 years from creation,
whichever is shorter.
 Works to be published should carry a proper
notice (i.e.):
© 1999 LUCENT TECHNOLOGIES INC.
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Trademarks
 Anything (word, phrase, design, sound,
smell, etc.) used to identify source of origin
of goods or services
 Federal Registration
– Symbol: ®
– Nationwide coverage
– Apply to U.S. Patent & Trademark Office
 Common Law:
– Symbol: ™
– Regional coverage
– No application - just mark (e.g., Apollo™)
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Trade Secret
Any information which is used in one’s
business and which gives one a competitive
advantage over those who do not know it or
use it.
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Non-Disclosure Agreements
PRIMARY FEATURES
 Obligates receiving party to not disclose confidential information
for certain period of time.
 Confidential information can be used only for particular purposes
for limited period of time.
 Can cover incoming and/or outgoing information.
ADVANTAGES
 Preserves trade secret value of confidential information.
 Preserves eligibility for foreign patents.
WHEN NEEDED
 Prior to negotiations where it is likely that confidential information
will be disclosed.
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Requirements for Patentability
Test for Each Requirement
 Useful
 New
-
Can it be used? (It does not
have to be better)
Was it ever done before in
its entirety elsewhere?
 Non-obvious - Is it an obvious variation of
prior art?
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Time Requirements for filing a patent:
 Within 1 year of publication
 Within 1 year of public use
 Within 1 year from an “offer to sell”
IF “ready for patenting;” i.e.,
1. Reduced to practice , OR
2. Described sufficiently to allow
a person skilled in the art to
practice the invention
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Factors Affecting Novelty
Global
 Public Disclosure
 No Grace Period
U.S. Specific
 Publication, Sales, Offers for
Sale and Uses
 Grace Period for Inventor
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Protect, Project and Leverage Intellectual Capital
Drivers: IP Strategy and Innovation
Assessment
Strategy
Execution
Understand
Current Position
Protect Future
Desired Position
Design Program &
Set Goals
Analyze Situation
“Leverage IP”
Execute Program
Identify Achievable
Alternatives
License, Litigate
or Lose
Monitor & Control,
Fix and Follow-Up
Technology
Office, BLGs & Strategy
Organization
EC - Senior
Management Team
Strategy Organization,
Functional (BLGs) &
Core Organizations
Value: Alignment, Leverage, and Returns
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Intellectual Capital Strategies In Context
• Provide a means to “manage the present from the future,” not from
the past
–
–
–
Snapshot of current expectations (Executive Vision)
Multiyear view (Platform and Core Product Family Product Technology Roadmaps)
Updated continuously via Product Technology Roadmaps, formalized at least annually
• Align strategy and technology based on business priorities and
investment levels (Technology Value Chain)
–
–
–
Reflect the pull of strategy
Reflect the push of technology
Reflect current investment plans
• Integrate intellectual capital strategies based on served market
relationships and targeted rates of return
–
–
–
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Business Leadership Needs first (may require business case)
Targeted rates of return and appropriateness of revealing technology (interface with IP Law)
Competitors and Assertion (Support IPD as appropriate within scope above)
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The Corporate “Battlespace”
Within the Context of the Corporate
Strategy:
Generic Objectives and Major Players
Impact on Corporate Strategy
High
High Impact - Low Internal Influence
Monitor, Anticipate,
Precipitate, and Respond
• Regulators
• Competitors
Low Impact - Low Internal Influence
Monitor, Advise,
Counsel, and Defend
• Lobbyists
• Attorneys
• Economist
High Impact - High Internal Influence
Manage for Growth
and Share
• Customers
Low Impact - High Internal Influence
Manage for Efficiency
and Profit
• Bureaucracy
• Functional Support
Low
High
Internal Control/Influence
Intellectual Capital Issues
Enterprise Positions
• High Impact - Low Internal Influence:
Cumulative influence of governments,
regulators and competitors far exceeds
that of the business. It is here that the
LONGER TERM FUTURE is determined.
• High Impact - High Internal Influence :
Day to day commitment of resources
to new and emerging opportunities.
GROWTH and CURRENT PROFITABILITY
are determined here
• Low Impact - Low Internal Influence:
Domain of economists, external affairs
and attorneys. Economic planning
assumptions and DEFENSE of the
enterprise from litigation and adverse
regulatory intervention.
• Low Impact - High Internal Influence:
Domain of legacy products. CORE
PROFIT generation. Bureaucracy’s infrastructure. Training ground for next
generation of managers.
External Pressures
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Why Is IC Important?
 Wall Street measures patent performance
 Market Capitalization Value to being in the Top 10
IBM: 1
Canon: 2
NEC: 3
Motorola: 4
Sony: 5
Samsung: 6
Fujitsu: 7
Toshiba: 8
Kodak: 9
Mitsubishi: 10
Hitachi: 11
Matsushita: 12
Lucent: 13
U.S. Philips: 14
HP: 15
Xerox: 16
GE: 17
Intel: 18
Siemens: 19
TI: 20
Sharp: 21
Micron Tech: 22
Nikon: 22
AMD: 24
3M: 24
2682
1934
1632
1428
1321
1306
1205
1194
1125
1120
1107
1058
0
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927
845
811
769
729
705
631
618
611
580
580
557
557
500
1000
Top Recipients of
U.S. Utility Patents
1/1/98 - 12/31/98
1500
2000
2500
3000
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Strategic Issues
• Must Align Strategy and Technology
–
–
–
Align technologies with specific strategic thrust
Time thrusts to create specific market opportunities by inserting technologies
Balance timing and technology for competitive advantage
• Technology is intellectual capital, it must be leveraged:
–
–
–
–
Limit access to and leverage “strategic” technologies
Enhance the served market relationships with strategic customers including accelerated
access to new customer identified technologies and to new partners, markets and
customers
It must generate cost-offsets through royalties and technology use fees
Increase strategic competitors costs to stay in the game (require comparable investment in
R&D to keep pace with the market leader(s) -- Lucent Technologies
• Intellectual capital must generate returns comparable to those of
other assets
–
–
–
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Minimum: Average weighted cost of capital
Target: Average weighted cost of capital + 20%
Maximum: Whatever the market will support
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The Strategic Business Development Spectru
Suppliers
OEM
Joint
Development
Strategic
Alliances
Mergers/
Acquisitions
Expand
Internal
Units
Simple
Tactical/
Operational
Complex
Strategic
Licensing
Control
Style
Sales
Agents
Legalistic &
Contractual
Cross
Joint
Licenses Marketing
Collaborative
& Flexible
Joint
Ventures
Establish
Subsidiary
Commanding
& Directive
Adapted from Zielinski 1998
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Product Technology Roadmaps
• Technologists interpretation of a platform, product, platform life
cycle plan
–
–
–
–
Direct link to strategy and business objectives
Direct link to financial metrics
Align customer needs with price points, architecture, and enabling technologies
NIH? (Sourcing Internally or externally)
• Require virtual teaming to complete
–
–
–
–
–
–
–
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Multiyear planning horizons
Market and cost projections
Strategy alternatives and metric sensitivity
Technology attack strategies
Common Technologies Roadmaps
Assembly Process Roadmaps
Technologies to protect (see Intellectual Capital Continuum)
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PTR (Roadmapping) is a Core Process
COMPETITIVE STRATEGY
A dvantage
C om petancy
G oals
V alue P rop.
AT&T
PRODUCT ATTRIBUTES AND
VALUE
1995 1996 1997 1998 1999
M otorola
MARKET ANALYSIS
Market
4
12
Revenue
Product
Evolution
Plan
Market Share
60%
10
Manufacturing
Engineering
50%
3
8
Business
Drivers
40%
2
6
30%
4
20%
1
2
10%
0
1996
97
98
Offer Portfolio
99
2000
0
1996
97
98
99
2000
0%
1996 97
Customer
PROJECTED
Value COSTS
$500
$400
98
99 2000
$300
A T & T PR O PR IE T A R Y -- U se p u rsu an t to com p an y in stru ction s
PRICE
MANUFACTURING ROADMAP
$200
Growth
Market Basket
1995-1996
COST
$100
$0
1995
1996
1997
1998
1999
2000
1997-1998
1999-2000
ALGORITHM ROADMAP
AT&T PROPRIETARY -- Use pursuant to company instructions
2001
1995-1996
Position
1997-1998
1999-2000
COMPONENT ROADMAP
Requirements
Investments
Availability
Strategy Alternatives
Value
Bus.
ProSegment
Channel
Prop
Practice
duct
PRODUCT TECHNOLOGY ROADMAP
Customer drivers
Core technology
Area
Ease of use
Display
1995
1996
1995-1996
1997
1998
1999
VISION
Import.
Compet.
Position
Needs,
Supply
Techn.
M/B
1997-1998
1999-2000
ASICs
Memory
Interconnect
RF Devices
Passives
User interface
Keypad
Software
Talk time
Power management
Baseband processing
Microcontroller
Mixed signal
Memory devices
TECHNOLOGY ATTACK STRATEGY
Batteries
Low cost
Radio
Antenna
1995 1996 1997 1998 1999 2000
Attack
Technologies
Power amp
Housing
Shielding
PWB technology
System design
Standards
Accessories
Audio quality
Voice recognition
Voice coders
IP
Strategy
DSP algorithms
Transducers/microph.
Business-driven technology
plans
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AT&T PROPRIETARY -- Use pursuant to company instructions
Microelectronics
Supply Line Management
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Intellectual Capital Continuum
Retain Ownership
Limit Protection to 2 Years on
almost everything
• Develop Product/Services
• Obtain Marketplace Advantage
• Protect, Police, Enforce
• Impact Future Competition
Selective Licensing
(The enemy of my enemy is my friend)
• Technology based partnerships
• Technology Transfer (More than Patents)
• Barter Technology for Equity
• Market Entry/Advantage
After 2 years, unless product differentiator
license almost anything...
“We aren’t cheap but we can be bought!”
• Negotiate
• Royalties = $$
• Protect, Police, Enforce
• Selective Denial for Market Positioning
• Grantbacks
Industry Licensing
(Result of Enforcement)
• Negotiate
• Royalties = $$
• Added Value to Incremental Development
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• Recovery on Sunk Costs
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Business Unit View of Intellectual Capital
1. Use
2. Type of
Innovation
3. Business
Strategy
4. IP Strategy
In Product
No Licensing
In Selective
Licensing
In Broad
Licensing
All
Architectural
and Selected
Revolutionary
Revolutionary,
Incremental, and
Niche
Incremental
and Niche
Grow Share, Then
Manage Life Cycle for
Contribution
First to Market
Early to Market
Time based:
Share Risk, Transfer
Technology,
Maximize Sales,
Generate Royalties
5. Timing
Product Life Cycle
6. Difficulty
Timing and Predicting
Value of Patents
7. Cost
Moderate
8. Benefits
Modest Protection
9. Market
Players’
Perceptions
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Business as Usual
Vigorously
Defend through
Litigation
Development,
Introduction and
Growth
Single Source,
Non “Standard”
Solutions
High
(Identifying Use
and Litigation)
Time: Market
and Product
Protection
Design around
or fight it out in
Court
Share
Development
Risks/Costs,
Position for
Market Entry
Development
and Introduction
Influence Not
“Control”
Low to
Moderate
Sharing Market
and Product
Risks/Rewards
Pay for
Technology
Access
Maximize
Technology
Use and
Royalties
License for
Profit and
Cash Flow
Mid to Late
Growth
Technology
as a
Commodity
Moderate to
High
(Multipliers)
Incremental
Profits
Nothing
unique, low
value/rates
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Conclusion
Intellectual Capital is a Valuable Asset
 Protect It
– Use Appropriate Markings
– NDAs
 Grow It
– Document Ideas
– Generate Patents
 Use It
– Enhance Marketing Position
– Generate Royalty Revenue
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