Whitepaper: Patent strategies in the 2012 economic environment


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Difficulties and changes in the macro-economic climate have forced companies to alter the way they carry out their research and development. This, in turn, has had an effect on the approach of many organisations to intellectual property.

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Whitepaper: Patent strategies in the 2012 economic environment

  1. 1. Patent strategies in the 2012 economic environment Mark Cohen, Matthew Loftus June 2012
  2. 2. 1 © Sagentia 2012 1. Introduction Difficulties and changes in the macro-economic climate have forced companies to alter the way they carry out their research and development. This, in turn, has had an effect on the approach of many organisations to intellectual property. The most significant changes that we have noticed from our work include: - R&D budgets targeted at developed countries have been subject to significant ‘belt tightening’. Budget holders have to do more with less while remaining innovative and at the top of the market. New market trends and new stakeholder demands, resulting from changing consumer demographics, challenge the healthcare and consumer industries in particular. Adapting and responding to these challenges in developed countries before the competition is key to achieving revenue and margin targets. - There is increased focus on how to appropriately and successfully address the continued growth of ‘emerging markets’. Many organisations are rethinking how they enter and operate in these markets. From an IP perspective this means building and executing a strategy for protecting market-specific products, including accounting for the current states of IP enforcement and likely evolutions as they become more “developed”. - Emerging and non-traditional markets are not all the same. Some markets (for example, Russia and Brazil) are driven by new found material wealth. Much of South Korea and Taiwan’s new wealth stems from technological innovation. China has benefited from its low cost labour and flexibility around large scale manufacture. In addition, the individual wealth and sheer number of consumers in these markets vary widely. Companies need tailored IP strategies for operating within each of these markets, whether for sourcing suppliers, manufacturers or selling to new customers. - Although the introduction of regulatory initiatives in recent years have improved the quality of patents granted and restricted actions that could lead to uncertain patent expiration dates, these initiatives have not provided enough certainty to overcome the appeal of patent infringement litigation, which is at an all-time high. The growth of the ‘non practicing entity’ is an obvious culprit and of particular concern. To better understand how industries perceive these changes, Sagentia conducted a survey investigating the varying perspectives and comparing the different approaches being taken. Our survey ran between December 2011 and February 2012. We received contributions from 73 professionals across the fields of corporate IP and product management, representing a variety of sectors. This report summarises our survey findings and provides our interpretation of what they mean for the industry. Methodology Sagentia’s survey consisted of 32 questions that were accessible through a web-interface. This was supplemented by additional telephone research. The survey participants were segmented by business sector as set out in Figure 1.
  3. 3. 2 © Sagentia 2012 Figure 1 - Respondent breakdown by sector For general analysis, all responses were used. For more detailed analysis, selected subsets of data from the three largest sectors were used:  Financial, Legal and Business Services  Manufacturing  Medical Devices and Pharma 21% 18% 14% 12% 10% 25% Financial, Legal and Business Services Manufacturing Medical Devices and Pharma Communications, Media and Internet Energy and Utilities Not Stated
  4. 4. 3 © Sagentia 2012 2. R&D and patenting focus The macro-economic environment over the last few years has challenged R&D departments with some difficult decisions. Traditional or ‘developed’ markets are experiencing significantly slower growth rates than emerging markets, but it is the developed markets that most organisations understand best. While the emerging markets present the greatest volume growth opportunity, traditional markets still offer higher margins and, for now, the largest revenues. There are also a number of demographic, regulatory and market changes that are challenging the way products are used, the features and efficiency they deliver and, perhaps most important to this report, the level of IP protection that is considered for them. In the last twelve months we have noted many corporate restructures taking place as senior executives try to better position their companies to respond to the changes of traditional markets and to navigate the growing demands of new markets. Recognising the impact that many of these changes would have on R&D and therefore on intellectual property, Sagentia’s survey included a number of questions focused on R&D and patenting. What were companies expecting in terms of R&D project volumes, patent filing volumes and the nature of the R&D projects themselves? And would expansion of filings in emerging markets be at the expense of filings in traditional markets? In response to these questions, we found that 45% of respondents expect their overall number of R&D projects to increase, while 24% expect this number to fall (Figure 2). This suggests respondents anticipate recovery rather than long-term decline, although the geographical drivers of the recovery are less clear. The most optimistic sector was Manufacturing from which 55% of respondents expect R&D project volume growth. The most pessimistic sector was Medical Devices and Pharma, which does not expect an increase in the number of R&D projects. Seventy one percent of respondents in this sector expect no growth and the remainder expect a decrease. Figure 2 - Expected change in R&D project volumes (all responses) These changes in R&D project volumes correlate strongly with expected patent filing volumes - more than 75% of respondents expect their filings to increase or remain the same (Figure 3). This reflects a continuation of 2010 and 2011’s rebound in PCT filings following the negative growth in filings in 2009.1,2 12% 33% 31% 18% 6% Increase significantly Increase somewhat Stay about the same Decrease somewhat Decrease significantly
  5. 5. 4 © Sagentia 2012 Figure 3 - Comparative change in R&D project volumes versus filing volumes (all responses) When considering R&D projects, respondents broadly expect to focus on new product development as well as incremental developments (Figure 4). Although a push into emerging markets is expected (see below), new product pipelines, rather than repurposing existing products and technologies, will be the likely driver. We believe that this may reflect the growing trend of multi-national companies establishing R&D capabilities in emerging markets for developing market-tailored products. Figure 4 - Expected focus of new R&D projects (all responses) Responses largely were not surprising and match Sagentia’s recent experience: our clients are still heavily focused on new product development but are aware that such new products now have to address a wider range of geographical markets and demographics than before. Of note is that medical device and pharmaceutical leaders are the most pessimistic about R&D; when constructing our detailed analysis, these respondees showed the lowest focus on new product and technology development and a higher than average focus on repurposing their technologies for new markets. Many of the larger medical device companies in particular seem to be very focused on how to deliver successful tailored products to the emerging markets, particularly China and India, without compromising on profit, developing overly complicated operations or being impacted by IP infringement. These challenges are real but we think surmountable. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% R&D projects New filings Increase significantly Increase somewhat Stay about the same Decrease somewhat Decrease significantly 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% New product and technology development Incremental developments Repurposing for new markets Agree strongly Agree Neutral Disagree Disagree strongly
  6. 6. 5 © Sagentia 2012 3. Patenting strategies This section of our questionnaire looked at where companies are expecting to focus their IP filings, how they will manage their IP and what approaches are being considered for licensing and enforcement. From the previous section we can see that R&D projects in emerging markets are expected to grow but are companies planning to protect this investment with formal intellectual property rights or through other mechanisms, for example brand protection? This might indicate the level of faith that western companies have in the IP frameworks of emerging markets. Our survey also questioned companies’ expectations in terms of licensing and enforcement. Should we expect increased activity in either outbound or inbound licensing and how are companies planning to address the increasing costs of litigation? Changes in filing geographies Figure 5 illustrates how respondents see their filing volumes changing across different geographies. Figure 5 - Expected change in geographical filing volumes (all responses) Overall, the majority of companies expect to maintain their level of filing in the Western and Asia Pacific geographies. However, there is a significant proportion - roughly 35% of respondents - who expect to increase their filings in these regions. Nearly all respondents expect to see an increase in filings for emerging markets in Brazil, Russia, India, and China (“BRIC”). While many companies have traditionally been wary of the patent system in such markets, continued education about their operation, business necessity and expectations for continued reform may be driving the expected increase in filing. Based on Sagentia’s recent work, we believe that the trend for additional filing in emerging markets will continue. This will, most likely, be coupled with greater scrutiny on the number of geographies prosecuted during the PCT phase and the number of states maintained after EP grant. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Western Asia Pacific Emerging markets Increase significantly Increase somewhat Stay about the same Decrease somewhat Decrease significantly
  7. 7. 6 © Sagentia 2012 Changes in licensing Respondents answered questions about how they expect their levels of in-, out- and cross- licensing to change over the next two years. Figure 6 - Expected change in licensing activities (all responses) Only a small minority of respondents expect any decline in licensing activity. This may be explained by an increasing number of patents and cross-fertilisation between companies and industries3 . Of interest is the expected increase in out-licensing (55% of respondents expect this to increase, versus 38% for in-licensing and 40% for cross-licensing); this finding is consistent with the expected changes in portfolio management in terms of securing extra value through licensing (see below). It is also evidence that more companies are embracing all aspects of open innovation rather than just the technology sourcing elements. Specific highlights from the detailed sectors include:  The three largest business sectors all showed similar responses to the expected growth (or otherwise) for in-licensing, suggesting that this aspect of open innovation is well established. Conversely, levels of cross-licensing and out-licensing had large variations across these sectors.  Medical Devices and Pharma is the only sector that expects a significant decrease in licensing activities, specifically in-licensing.  Nearly 80% of Financial, Legal and Business Services respondents expect to increase their out-licensing activities in the next two years. Interestingly, only 20% of this sector’s respondents expect to increase cross-licensing activities. As the various players seek to license their IP to others, it is likely that the balance will shift towards cross-licensing. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Level of in- licensing patents and technologies Level of cross- licensing Level of out- licensing patents and technologies Increase significantly Increase somewhat Stay about the same Decrease somewhat Decrease significantly
  8. 8. 7 © Sagentia 2012 Enforcement Enforcement is an area of particular interest for any technology business. With litigation costs spiralling due to both increased infringement cases and growth of non-practicing entities, we wanted to understand where companies felt this was headed. Is the perception that this will continue to get worse or will it start to be addressed? Parts of the America Invents Act of 2011 (“AIA”) were directed squarely at this issue but what else is being done? At Sagentia we have noticed greater investment in front-end research and consortia prior-art review arrangements but we were curious to see if this was a trend that others were experiencing as well. Respondents answered questions about whether they expect to increase or decrease the number of litigation cases they file over the next two years (Figure 7). Figure 7 - Expected involvement in litigation as plaintiff (all responses) Whilst 50% of respondents expect to see no change, 36% expect to increase their level of litigation to enforce their intellectual property rights. When looking at the business sectors, a disparate view is observed:  Medical Devices and Pharma expects the largest decrease in litigation at approximately 28%. Litigation can be a hugely expensive activity and this figure may be the result of a loss of appetite in pursuing such cases, with patent owners seeking to resolve disputes by other means.  Financial, Legal and Business Services expects the largest increase in litigation at approximately 43%. The inclusion of non-practicing entities (a.k.a., “patent trolls”) in this sector may be driving much of this growth.  Manufacturing has about 83% of respondents expecting no change, the largest such response. 4% 10% 50% 31% 5% Decrease significantly Decrease somewhat Stay about the same Increase somewhat Increase significantly
  9. 9. 8 © Sagentia 2012 Figure 8 shows the trends in US litigation over the last 12 years.4 Figure 8 - US patent litigation cases commenced, 2000-2011 The fall back in litigation volume after the 2008 financial crisis can be clearly observed as can the upswing in 2010 and more so in 2011. We would expect the volume of infringement litigation cases to be significantly higher in the US in 2012 partly due to the upswing (as evidenced by Figure 8 and our survey findings) but also due to the restriction on multi- defendant suits introduced in the AIA. What can we expect for the future? Although 50% of our respondents don’t expect any change in the number of litigation cases they will be involved with, we think that the expected increase in out-licensing and in-licensing will have a positive impact. There has been growing evidence that more is being invested in front-end analysis but still no signs that litigation is slowing down. This may be a big ship to turn and so we will continue to monitor for signs of a slowdown. 1500 2000 2500 3000 3500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (est)
  10. 10. 9 © Sagentia 2012 4. Management of pipeline IP With budget cuts and cost pressures affecting all departments, organisations today need to concentrate on improving the cost/benefit ratio of their IP portfolios. In this section, Sagentia’s survey focused on how companies were planning to manage their pre-publication “pipeline” IP. What were the most important aspects of their IP activities? What is the prevailing perception of value linkage between IP and potential products? And what approaches are being taken to prepare for out-licensing? Respondents first were asked to answer questions about how their management of pipeline IP is likely to change in terms of the following aspects:  Value linkage between pipeline IP and potential products. Ensuring that the patents being progressed cover specific products or technologies for attributable revenue, as opposed to just blocking utility.  Licensing opportunities for new IP. Prioritizing patent applications that may offer opportunities for license revenues.  Prosecuting only the most promising disclosures. Companies are no longer chasing opportunities that counsel has advised may be problematic.  Alternatives to patent protection. Utilizing other forms of protection such as trade secrets and commercial agreements.  Use of offshoring in the authoring and prosecution process. Shifting all or part of the drafting and prosecution processes to lower-cost geographies, such as India. Figure 9 sets out how respondents see the importance of the above aspects changing in response to market realities. Figure 9 - Change in focus of patent pipeline processes (all responses) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Value linkage between pipeline IP and potential products Potential license opportunities for new IP Prosecuting only most promising disclosures Use of alternatives to patent protection Use of offshoring Much less important Less important Stay the same More important Much more important
  11. 11. 10 © Sagentia 2012 Overall, respondents expect that the recent economic crises may cause companies to re- think some aspects of their IP pipeline management (e.g., value linkage), while expecting other aspects to remain largely unchanged (e.g., offshoring). Value Linkage The link between intellectual property and R&D strategy/future product portfolios is key. At Sagentia, we believe that one area of undue risk is when R&D and IP processes are disconnected. We have seen this lead to delays, increased costs, incorrect filings and unnecessary exposure. Equally however, if the IP department gets involved too early then you can end up with patent filings for concepts that don’t ever make it to market. Many of our clients have put additional review steps (stage gates) in their pipeline management processes to ensure that value linkage is established at the earliest possible stage. Is this a general trend occurring and what is the general perception of value linkage between IP and R&D? The majority of our respondents expect an increasing focus on linkage between IP and value-generating products or technologies. Sixty-eight percent of respondents expected that, given the current climate, the focus on value linkage between IP and potential products will become more important. Twenty-three percent of respondents expect the level of focus to remain the same. The rising importance of linking owned IP to valuable product opportunities was particularly noted in the Financial, Legal and Business Services sector, with 90% of respondents expecting that value linkage will become more important and the remaining 10% expecting the focus would remain the same. Only the Medical Devices and Pharma sector reported a decrease in value linkage, with about 28% stating that it would become less important, though this is somewhat offset by 57% who stated it would become more important. Given the long development timescales and regulatory hurdles in this sector, it is likely that value linkage is more complex to establish early on in the development and patenting process than for other sectors, leading to this response. Potential out-license opportunities for pipeline patent applications A majority (61%) of respondents expect that prioritising pipeline IP that may offer licensing opportunities will become a more important part of their pipeline management processes. Thirty percent of respondents expect this factor would remain the same. Within the detailed sectors, only Medical Devices and Pharma diverged from this picture in a similar manner to its responses for value linkage. Not surprisingly, when Sagentia asked respondents how they expect their efforts to generate value from their existing patent portfolio through licensing to change, similar results were seen (60% expect their efforts to increase, 38% remain the same and 2% expect a decrease). While respondents state that out-licensing will become more important, only a small minority of Sagentia’s clients appear to have active, non-legal, out-licensing programs. The majority of out-licensing appears to be driven by specific external requests or by enforcement from counsel after ad-hoc R&D intervention. We identify that a key factor in successful out- licencing is that the business needs to establish a dedicated role for this to be pursued as it falls between the technical, legal and business development domains.
  12. 12. 11 © Sagentia 2012 Prosecution of the most promising disclosures A majority of respondents (53%) expect to become more conservative in prosecuting patents by only pursuing the most promising disclosures. This suggests less focus on the more speculative applications or narrowing the scope for those in which the prior art is more complex. Within the detailed sector view, there were only minor discrepancies from this figure. Unless companies purposefully set up a structure for legal and business to make these decisions, they will usually have the problem of having patented too much. If a technology is of strategic importance, we expect companies still to pursue these patents despite difficulties in the examination process. Companies may end up with a narrower but still viable patent as a result. Use of alternatives to patent protection Due to the economic climate and high price of patents, we were curious as to whether companies were increasingly considering alternatives to patent protection. The use of alternatives to patent protection (e.g. trade secrets, commercial agreements, public disclosure) was seen as increasingly important by 46% of respondents. This is a notably smaller proportion than the factors discussed previously in this section and is the first area for which the majority is not increasing. Despite the costs and complexities of the patenting process, the alternatives may not offer sufficient levels of protection for the majority of respondents. In addition to the smaller proportion of respondents that expect to increase their use of alternatives, we noted a high proportion that expect to defocus on the use of alternatives (24%). Within our client base, Sagentia has not detected any noticeable shift in the use of alternatives to patenting. Given the strength of patents when compared with other forms of intellectual property rights, we do not find this surprising. The economic environment has however seemed to have at least raised some interest in exploring alternatives. Offshoring Companies have traditionally used offshoring for filing and prosecution in foreign markets. We asked if offshoring might also be used for native market authoring and prosecution as well due to the economic constraints. As with the use of alternatives to patent prosecution, respondents did not seem to expect a large move towards offshoring in the authoring and prosecution process with only 34% stating that offshoring would become more important versus 28% that expect it to become less important. Within the detailed sector view, Financial, Legal and Business Services presented a dual-face with 50% of respondents expecting to increase their use of offshoring and 37% expecting to decrease it – somewhat at odds with the remaining sectors and the overall position.
  13. 13. 12 © Sagentia 2012 5. Management of existing patent portfolio With the economic climate putting pressure on budgets and many companies having a significant proportion of patents producing relatively little value, management of the existing patent portfolio should be a key area of focus. Over recent years, Sagentia has assisted several clients in the build of strategic Intellectual Property management functions which provide portfolio management activities over and beyond those typically provided by legal counsel. We have found that companies with large patent portfolios increasingly benefit from these services, which include maintaining patent portfolio business alignment in light of shifting technology and market landscapes, looking for license opportunities for non-core IPRs (both by technology and by geography) and identifying cost saving opportunities through selective abandonment. Patent portfolios are traditionally very wasteful and we have noticed a growing trend towards pruning of IP ’dead-wood’. This requires careful assessment to ensure that the patents that have the best potential commercial value are retained. We were specifically curious to understand how much investment and effort companies are expecting to put into this area. We asked our survey respondents for their perspectives on how they would be managing their portfolio of existing patents and patent applications . How active are companies planning to be in generating value from existing patents in coming years? Are cost pressures going to impact existing approaches? We asked our survey respondents whether they thought their efforts to generate value from their patent portfolio through licensing over the next 2 years would increase or decrease. Figure 10 - Expected change in level of financial scrutiny on patent portfolio (all responses) Of note is that 55% of respondents expect increased financial scrutiny on the cost-benefit ratio of their patent portfolios. This is likely to be a driver for many of the findings herein. 7% 38% 38% 17% Decrease significantly Decrease somewhat Stay about the same Increase somewhat Increase significantly
  14. 14. 13 © Sagentia 2012 Value generation Figure 11 - Expected change in efforts to generate value from patent portfolio Figure 11 shows that a majority of respondents (about 55%) stated that efforts to generate value from their patent portfolios would increase either moderately or significantly over the next two years. This response was more prominent in the Financial, Legal, and Business sector, but it was in the minority for Medical Devices and Pharma (about 30%). About 14% of the Medical Device and Pharma respondents expect a significant decrease in efforts to generate value from their IP portfolios. This sector also reported the lowest expectation of value-generation effort increase. There is a variety of possible reasons for this, including the diversion of funds for litigation, the higher likelihood that technologies will be proprietary rather than transferrable and the expiration of key pharmaceutical patents over the next few years (e.g., Plavix, Seroquel). This tallies with Sagentia’s experience, with our clients in telecoms and consumer more likely to have active out-licensing programs than those in the medical sectors. Cost savings As can be seen in Figure 12, a significant majority of respondents (about 70%) expect to pursue cost savings opportunities through the disposal or non-renewal of non-essential patent families. Sagentia has seen evidence of this recently with one client in the telecommunications industry saving over €5m on patent renewal costs through the identification of patents related to redundant technologies. Around 48% of respondents expect to reduce the number of geographies automatically renewed. This aligns with other surveys5 that report up to 50% of respondents expecting to file in fewer countries going forward. While this may save costs in the short-to-medium term, additional emerging geographies such as the BRIC nations may eventually become part of the standard country set for patent renewals, thereby negating these savings. Only about 25% of respondents expect to abandon complex prosecution cases. Given that 70% of respondents stated that value linkage will be of increasing importance, this suggests that speculative patent applications are less likely to be filed in the first place. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Total Financial, Legal and Business Services Manufacturing Medical devices and Pharma Increase significantly Increase somewhat Stay about the same Decrease somewhat Decrease significantly
  15. 15. 14 © Sagentia 2012 Figure 12 - Cost saving opportunities to be pursued in next 2 years 0% 20% 40% 60% 80% Disposal / non-renewal of non-core patent families Reduction in number of geographies automatically renewed Abandonment of complex prosecution cases Affirmative Responses
  16. 16. 15 © Sagentia 2012 6. Spending and staffing related to patenting activities Sagentia’s survey also posed some questions on internal IP spending trends and whether, due to economic pressures and entry into new geographic markets, companies were expecting to see an increase in their use of external counsel and other external resources. Respondents answered questions about staffing and spending changes in their IP departments over the next two years. Our focus was on internal staff (legal and non-legal), external spend (counsel, consulting) and the involvement of non-IP functions in the patenting process. Internal and external counsel Figure 13 - Spending on counsel (all responses) Despite a growing number of patent filings (WIPO reported a 10.7% increase in 2011 PCT filings over 20101,2 ), respondents did not expect their spending on IP counsel – whether internal or external – to increase. Respondents largely expect spending on external counsel to remain the same over the next two years. Approximately half expect spending on external counsel, for prosecution and enforcement, to be maintained at current levels, while the other half were split between expecting either a marginal increase or a marginal decrease in spending. Respondents did not expect spending on internal legal counsel to change significantly either, with only 24% expecting to increase and 74% expecting spending to remain the same. Given the expected overall static nature of spending on legal staff, the expected growing volumes of patent applications and the increased complexity of managing pipelines and portfolios which support open innovation, it is clear that companies are expecting to extract far greater value from their current internal and external legal staff over the forthcoming years. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% External counsel - prosecution External counsel - enforcement Internal legal staff Increase significantly Increase somewhat Stay about the same Decrease somewhat Decrease Significantly
  17. 17. 16 © Sagentia 2012 Paralegal and consulting spend Figure 14 - Paralegal and consulting spending (all responses) A majority (59%) of respondents expect spending on internal non-legal staff related to IP to remain the same, while 29% expect it to increase and 12% expect a decrease – all roughly similar figures to those for counsel. Two industry sectors (Manufacturing and Financial, Legal and Business Services) expect spending on internal non-legal staff related to IP to grow more significantly over the next two years. One area where spending is expected to increase is internal research on competitors and external patenting activities. Fifty six percent of respondents expect spend to increase, while only 7% expect a decrease. Despite the current economic woes, companies are continuing to spend money on external IP consulting services. Fifty nine percent of respondents expect such spending to remain the same, while 32% expect it to increase, and only 9% expect a decrease. The two biggest discrepancies to these figures appear in the Manufacturing sector (86% same, remainder increasing) and Financial, Legal and Business Services sector (60% expect increase). The fact that few respondents report reducing external spend may be indicative of improving economic conditions or a realisation that, regardless of cost, keeping abreast of IP developments that may impact future business is vital. This increased focus on competitive intelligence, both internal and via external IP consultancy, may be tied to the rise in litigation costs and companies’ desire to shy away from patent litigation. By front loading their efforts into understanding the competitive IP landscape and innovating into white spaces, companies may be able to successfully avoid litigious circumstances. This is the basis for many of Sagentia’s IP landscaping assignments. Involvement of non-legal business functions Respondents answered questions about whether involvement of non-legal business functions in the patenting process is likely to change over the next two years. Two specific functions, R&D and marketing, were considered: 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Internal non-legal IP staff Internal competitive IP research External IP consultancy Increase significantly Increase somewhat Stay about the same Decrease somewhat Decrease Significantly
  18. 18. 17 © Sagentia 2012 Figure 15 - Involvement of non-IP functions in the patenting process Within the patenting process, R&D’s involvement may include the generation and reviewing of patent drafts and assisting in the generation of responses to examiner arguments. Fifty two percent of respondents expect R&D to become more involved in the patenting process. A smaller, but still high, proportion (38%) expects R&D’s involvement to remain the same. Only around 10% of respondents expect R&D’s involvement to fall. When considering the detailed picture, Medical Devices and Pharma expect the smallest growth in the involvement of R&D (approx. 30%) coupled with the largest expected decrease (also approx. 30%), possibly due to the complexity in prosecution in the pharma area. The largest expected growth in R&D involvement is from the Financial, Legal and Business Services sector – this may be due to higher than average levels of software patenting in this sector. Marketing’s involvement in the patenting process is expected to fall outside the technical and focus more on the commercial importance of pipeline IP to specific product developments; therefore marketing is expected to provide inputs to patenting decisions rather than being intimately involved in the patenting process. The level of involvement of marketing is expected to grow by a smaller proportion of respondents (35%), with 55% expecting it to stay the same. As with R&D, only 10% of respondents expect the involvement of marketing to fall. Highlights within this include 33% of respondents from the Medical Devices and Pharma sector expecting the role of marketing to decrease. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Involvement of R&D in the patenting process Involvement of marketing in the patenting process Increase significantly Increase somewhat Stay about the same Decrease somewhat Decrease significantly
  19. 19. 18 © Sagentia 2012 7. Conclusions Sagentia surveyed key opinion leaders in the fields of corporate IP and R&D management to understand how emerging markets and continued economic concerns about US and Europe will impact IP management across a range of industries and geographies. Our key findings based on 73 responses are:  Despite the current woes, the general position is one of expected growth with only a minority (about 20%) of respondents expecting to decrease R&D efforts and volumes of patent filings over the next two years.  More than 80% of respondents expect to increase their level of patent filing in emerging markets. This is not at the expense of more traditional markets, however, with less than 10% of respondents planning to reduce filing activities in traditional geographies.  A majority of respondents expect greater scrutiny on the cost-benefit ratio of their patent portfolios. This is likely to lead to cost-saving measures including disposal of redundant patent families and revenue generating activities such as selling licenses. In addition, many respondents expect an increased focus on assuring patents in their portfolio link to value-generating products.  Overall, respondents did not expect significant changes in staff-related expenditures, whether internal staff, external counsel, or third-party services, but did expect spending on competitive research to increase. Given the above, the wider economic issues and the ongoing rise in patent litigation, we conclude:  Historically, there was little agreement on the necessity of filing in the emerging “BRIC” economies, as many companies were wary of the effectiveness of the patent systems in these markets. Continuing reform and business necessity appears to be driving the expected increase in filing.  The increased spending on competitive research may be tied to the rise in litigation and companies’ desire to shy away from patent litigation. By front loading efforts into understanding the competitive IP landscape and innovating around white spaces, companies may better avoid litigious circumstances.  A number of factors come together to suggest that companies expect to extract far greater value from their patent departments over the forthcoming years. Such factors include the static nature of staff spending, growing volumes of patent applications, and the increased complexity of managing patent portfolios which support open innovation. Our research has only scratched the surface in illustrating the effects of the macroeconomic climate and globalization on intellectual property management. Traditional markets are showing lower growth potential and the emerging markets have ever-increasing economic power. This shift presents businesses with new challenges in managing IP for less wealthy customers and building products for emerging markets where margins may be lower but volumes greater. In the longer term, we expect to see companies to have multiple parallel product lines serving the differing needs of the geographical markets they serve. Innovation will continue in Western markets and traditional patent strategies will be required. More ‘frugal’ innovation, generating new low cost products or using older and cheaper technologies, may
  20. 20. 19 © Sagentia 2012 serve consumers in emerging markets. Such developments may be protected using traditional patent strategies but the use of older technologies presents more challenges, especially when such technologies may not have been protected in the emerging geography in the first place. In the absence of formal means to protect such developments, it may be that transferable brand values offer the best opportunities for differentiation. Sagentia’s focus is however more centred on the technical aspects of IP. With increased emphasis on avoiding future conflicts and getting greater value from patent portfolios, we expect to continue to work with organisations to help them evolve the way they work with patented intellectual property through additional landscape analysis in the early stages of product and technology definition; audits on patent portfolios to ensure ongoing business alignment and maximum value extraction; and the creation of ‘IP robust’ products, where IP analysis forms a critical part of the development process. About the authors: Mark Cohen is Head of Intellectual Property Services at Sagentia. Mark leads a team whose main activities include: advising Sagentia's clients on the impact of external IP landscapes on their technology developments and R&D plans; how to manage their patent portfolios to minimize wastage and maximize return; and advising them on how to strategically protect new product and technology developments. Mark and his team are also active in Sagentia’s product development assignments, ensuring that new developments are isolated from existing IP and building robust IP positions to protect revenue streams for the long term. Mark's clients range from small start-ups through to large multinationals, typically in the medical, food, personal care, automotive and telecommunications sectors. Matthew Loftus is Business Development Manager at Sagentia. He previously spent eight years practicing as an IP attorney, prosecuting patents before the United States Patent & Trademark Office on a wide range of technologies, including medical, mechanical, and electromechanical devices, semiconductor manufacturing, and software. He also worked on patent litigations before United States District Courts. Before becoming a lawyer, Matt worked in the custom plastics molding industry. He received his J.D., cum laude, from Boston College Law School and his BSME from Worcester Polytechnic Institute.
  21. 21. 20 © Sagentia 2012 8. References Cited references 1. 2011 World Intellectual Property Indicators, World Intellectual Property Organisation (http://www.wipo.int/export/sites/www/freepublications/en/intproperty/941/wipo_pub_941 _2011.pdf) 2. “International Patent Filings Set New Record in 2011”, WIPO press release (http://www.wipo.int/pressroom/en/articles/2012/article_0001.html) 3. Open Innovation in Global Networks, OECD (http://www.oecd.org/dataoecd/48/35/41721342.pdf) 4. Patent Litigation Statistics: 1980 – 2010, IPWatchDog (http://www.ipwatchdog.com/2011/08/02/patent-litigation-statistics-1980-2010/id=17995/) 5. The US 2011 Global Patent and IP Trends Indicator, Inovia (http://info.inovia.com/2011/02/us-2011-global-patent-ip-trends-indicator-is-now- available/) Background material 1. World Economic Situation and Prospects 2010, United Nations Department of Economic and Social Affairs (http://www.un.org/en/development/desa/policy/wesp/wesp_archive/2010wesp.pdf) 2. 2011 State of Innovation, Derwent World Patents Index (http://img.en25.com/Web/ThomsonReutersScience/StateofInnovation2011.pdf)
  22. 22. Sagentia Ltd Harston Mill Harston Cambridge CB22 7GG UK Sagentia Inc One Broadway 14th Floor Cambridge, MA 02142 USA T. +44 1223 875200 T. +1 617 401 3170 Sagentia Sagentia is a global innovation, technology and product development company. We provide outsourced R&D consultancy services to start ups through to global market leaders in the medical, industrial and consumer sectors. With global headquarters in Cambridge, UK, and US headquarters in Cambridge, Massachusetts, Sagentia works with clients from front end market needs analysis through to transfer to manufacture. We deliver innovation around new technologies and new generation products and services that provide commercial value and market advantage. The company also assists business leaders to create strategies for technology, innovation and growth. www.sagentia.com info@sagentia.com