This document proposes a quantitative framework for investors to assess a company's intellectual property (IP) strategy and management. It involves grading companies on their IP processes in key areas like IP strategy, risk management, generation and enforcement. Questions are provided for each area linked to potential investment risks. Companies are given scores in each area for comparison. The framework aims to provide a simple, standardized way for investors to understand a company's IP management early in the investment process and identify risks. It could guide further IP due diligence and show the likelihood of a company successfully generating and exploiting IP to support its business goals.

1. DEVELOPING A QUANTITATIVE FRAMEWORK FOR
MEASURING IP STRATEGY AND MANAGEMENT OF
POTENTIAL INVESTMENT COMPANIES AND THE
ASSOCIATED RISK FOR INVESTORS
Jacob Watfa
MIPLM 2023 - Thesis Defence
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2. BACKGROUND
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What does an investor
want?
•Supranormal returns
How can a company
achieve supranormal
returns?
•Sustainable competitive
advantages
How can a company
provide a sustainable
competitive advantage?
•Intellectual Property
But – not all IP is the same! How can we be sure that a company has the
right assets to provide that advantage?

3. HOW CAN INVESTORS ASSESS IP?
Methods
• IP audits
• IP due diligence
• “Condensed notes”(?)
• … this is software so it cannot
be patented!
• Not at all?
• Financials and projections look
good!
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Problems
• Time consuming + expensive
• Lack of understanding on the
behalf of the investor
• Certain risks such as FTO are
hard to quantify starting from
the end point
• Not comparable between
companies
• IP assets don’t tell the full story
What would be better?
• Something that is
• Simple to understand
• Linked back to investment
risks
• Simple to apply
• Comparable between
companies
• Also about how IP assets are
generated and managed
• Industry agnostic

4. IP MANAGEMENT STANDARDS
ISO 56005
• Guideline to support the role of
IP within innovation
management
• Establishing systematic IP
management
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DIN 77006
• Requirements throughout an
entire organisation as to how IP
should be managed
• Integration of IP management
into company management
Frameworks for dealing with IP risks and opportunities
For companies that want to proactively develop their IP portfolio [to protect
customer benefits with innovative solutions], secure freedom to operate, and
manage it in a legally compliant, goal-oriented, and consistent manner, the
norms DIN 77006 and ISO56005 show ways to manage these processes.
A. J. Wurzer et al. “Standards For The Quality Of IP Management,” Les Nouvelles, pp. 237-245, September 2022

5. Formulate "key
questions" for
each IP service in
DIN 77006
Associate with
business risks
Framework for
grading a
company’s IP
management
system
METHODOLOGY
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If we understand the processes for generating/exploiting IP, then we can
get an idea about the IP itself

6. IP STRATEGY
H O W W I L L W E U S E I P TO A C H I E V E O U R B U S I N E S S G OA L S ?
Is the IP strategy documented
and available to all relevant
parties?
Risk: failing to apply consistent IP
management – missed opportunities
Does the firm have knowledge of
its own IP position in the market
(and by proxy, the IP position of
its competitors), and how that
position affects the fulfilment of
business objectives?
Risk: failing to recognize valuable IP –
inefficient allocation of resources
Does the IP strategy identify what
IP is needed by the firm?
Risk: generating irrelevant IP – inefficient.
Increased FTO risk
Is that identified IP linked to the
business model such that it
would allow the firm to occupy
an IP position to allow them to
sustainably achieve their business
objectives?
Risk: generated IP does not achieve exclusivity
Does the IP strategy set out how
IP should be utilised so as to
continuously develop the market
position?
Risk: losing exclusivity
Does the IP strategy set out
means to achieve its goals, in
terms of the organisational
framework as well as required
financial and human resources?
Risk: unable to apply the IP strategy
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7. IP RISK MANAGEMENT
W H AT C O U L D G O W R O N G A N D H O W D O W E P L A N F O R T H AT ?
Has the company identified the IP
risks and opportunities to which
they are exposed to?
Is there a risk mitigation plan
setting out actions needed that
bring those identified risks down
to an acceptable level, and those
actions implemented into IP
processes of the company?
Do the identified IP risks and
their mitigation actions evolve
over the life cycle of the
company’s offering?
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Risks: lost opportunities, increased liability, infringement

8. IP AWARENESS
D O E S E V E RYO N E K N O W W H AT T H E Y N E E D TO K N O W ?
Has the firm identified all persons
performing activities in the IP
management system throughout
the firm?
Are all those persons aware of
the IP strategy and their role
within the IP management
system, how it affects business
performance and the
consequences for not performing
their roles?
Does the company provide
suitable training for those
persons to equip them with the
technical competency for
providing their role?
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Risks: inadequate application of IP processes, specific risks with roles being unaware of their duties

9. IP ADMINISTRATION
C A N W E C O M P LY W I T H A L L F O R M A L R E Q U I R E M E N TS ?
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Has the firm identified all
administrative needs in order to
provide its IP services, and the
processes for meeting those
requirements?
Has the firm assigned adequate
and qualified resources to
provide those administrative
needs?
Does the firm determine,
maintain and retain documented
information to ensure that the
processes have been undertaken,
as well as regarding the
organisation’s own IP inventory
and their administrative
requirements?
Risks: lapse of IP rights, loss of exclusivity

10. IP GENERATION
H O W D O W E C O M E U P W I T H O U R I P ?
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Does the firm have in place
processes to stimulate IP
generation to ensure that the IP
demand is met to achieve an
exclusivity position for new
products and processes?
Does the firm have an effective
process to identify potential
innovations, and take quick
action to decide what protection
(if any) should be sought to
secure?
Are adequate records of the IP
generation process maintained
and retained?
Risks: IP not aligned with business plan, no exclusivity, increased FTO risk

11. IP ENFORCEMENT
H O W D O W E A S S E RT O U R E X C LU S I V E R I G H T S ?
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Does the firm actively monitor for
potential infringements of their
IPRs?
Do all relevant people within the
firm have knowledge of key IPRs
held by the firm such that they
are able to identify potential
infringements in their day to day
working?
Are there adequate processes for
determining appropriate
responses to discovered
infringements and resources to
take those responses?
Risks: loss of IPRs, dilution of exclusivity, inappropriate responses causing damage

12. IP DEFENCE
H O W D O W E D E F E N D O U R S E L F A G A I N S T I P C H A L L E N G E S ?
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Does the firm have processes for
analysing attacks on their IPRs,
and has it considered fallback
positions and their associated
costs/risks?
Are there processes in place to
review IP claims made by third
parties, consider all possibilities
for response and determine an
appropriate plan of action?
Is the firm able to provide
adequate and appropriate human
and financial resources to timely
respond to a challenge on its
IPRs, or to a claim from a third
party?
Risks: loss of IPRs, loss of exclusivity, high liability

13. IP TRANSACTIONS
A R E W E E Q U I P P E D TO D E A L I N I P ?
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Does the firm have processes for
analysing potential transaction
situations and valuing IPRs that
might be subject to those
transactions?
Does the firm have the expertise
and processes available to
determine relevant provisions in
a transaction agreement, and to
draft suitable agreements based
on those?
Does the firm have adequate
capability for monitoring existing
agreements and ensuring that all
requirements of the agreement
are being met?
Risks: lack of understanding of own asset value, unable to achieve goals of IP transaction

14. IP REPORTING
H O W D O W E E N S U R E G O O D P E R F O R M A N C E O F T H E S YS T E M
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Have there been developed
effective metrics by which the
company’s IP performance is
linked to the strategic direction
of the firm?
Does top management review the
IP management system and its
effectiveness based on the results
of those metrics?
Does the firm observe and report
on the market and competitive
impact of the organization’s IP,
and provide an analysis of
reasons for a deviation from the
objectives?
Risks: ineffective judgement of IP management system, mismangement of investments in IPRs

15. OUTPUTS
0
1
2
3
4
5
6
IP strategy
IP risk management
IP awareness
IP administration
IP generation
IP enforcement
IP defence
IP transactions
IP reporting
Company 1
Company 2
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Company 1 Company 2
IP strategy 3 5
IP risk management 2 2
IP awareness 2 2
IP administration 1 1
IP generation 2 2
IP enforcement 2 3
IP defence 2 3
IP transactions 1 2
IP reporting 3 2
TOTAL 18 22
Easily understood, comparable

16. USES
• Early stage
• Simple questions can be filled out by way of a questionnaire
• Early indication of likelihood of quality of IP in supporting the business model
• Minimised risk, improved IP perfomance
• Late stage
• Guide full due dilligence process
• E.g. low score in IP administration – look at validity of IP rights
• Indicate likelihood certain investment risks
• E.g. FTO risks
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17. LIMITATIONS AND SCOPE FOR FUTURE
DEVELOPMENTS
• No guarantee that a highly scoring IP management system will
necessarily result in a successful business
• Adding in a temporal element?
• Further categories?
• IP culture?
• Integrating a company’s current assets into the framework?
• Empirical analysis between “good” IP management systems and success
of investment?
• Specific weighting of criteria?
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18. CONCLUSION
• There is provided
• A simple framework for a quantitative measure of IP management systems
• Applicable at early stage
• Common reference between graded companies
• Indication of continuing IP performance
• Guidance for detailed IP due diligence
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