Recent predictions from analysis firm Research and Markets estimate that the global market for photonics crystal components and modules will be worth $20.4 billion by 2017, and the global silicon photonics market worth $1.96 billion by 2025. With this surge in innovation the photonics market will become even more crowded, so it is imperative to get an advantage over competitors and generate a return on research and investment. A robust intellectual property (IP) strategy is a tool that can help achieve this.
There are many benefits of having a well-developed IP strategy, from identifying and reducing risk, to building value and protecting investment. Early stage investments can be particularly uncertain, so investors will want to see something of value in a company. IP is often considered to be a valuable asset, as it can be used as collateral if the unthinkable happens and things do not go as planned.
Despite this, it is not uncommon for start-ups to have no, or a poorly thought out, IP strategy in place, which can greatly affect the level of investment they can attract. Indeed, there have been several instances of this in the photonics industry.
In one example, Gill Jennings & Every carried out IP due diligence for an investor on a new company developing a band-gap engineering technology. The company had numerous patent applications and had asserted a high valuation based directly on its IP assets. After careful analysis it was determined that the patent portfolio was not as valuable as claimed, since many of the patent applications did not map to the company’s commercial products. In addition, the company had broken the first rule of patenting: never disclose the technology before the patent application is filed. This meant that some key patent applications that did map to products were actually invalid and therefore unenforceable. In this case the investor still went ahead with the investment, recognising the potential of the technology, but did so at a much lower valuation than the company initially sought. This could have been avoided if the company had put in place a sound IP strategy that supported its business plan, at the outset.
Even when investors are presented with a business plan which includes an IP strategy, the savvy investor is not easily convinced by a brief plan lacking detail. A poor plan may state something like: ‘Intellectual property: our company is a highly innovative business, and much of our value stems from our strong patent portfolio. We have 10 patent families pending in six countries.’
This could lead to a host of questions which the investee company would need to be ready to answer, or face the threat of its IP, and ultimately the company, being devalued. Lack of explanation as to how the patent families are targeted at key markets could imply an unsophisticated filing strategy. No mention of any awareness of third party IP and how that may affect the company’s plans could also set alarm bells ringing. Such omissions could lead to uncertainty for an investor at first glance as to the justification for the value of the IP.
So what is a good IP strategy? Well, this depends partly on the company in question and should be tailored to suit its situation. Generally, it will consist of a framework for dealing with the development, ownership, protection and exploitation of IP arising from the company’s technology and commercial activity. As mentioned above, the strategy should also take into account consideration of IP owned by third parties, which might pose a risk. Such risk can be mitigated by conducting a freedom to operate (FTO) search to identify competitors’ IP rights and take action to neutralise any threats discovered. The strategy can also consider how IP rights might be enforced to maintain exclusivity, or monetised, for example by developing a licensing model. Lastly, and importantly, budgeting for the costs involved in pursuing an effective IP strategy should be factored in.
Of course, a good IP strategy is not only about obtaining registered IP rights such as patents, registered designs, and trademarks. It is also important to consider other types of IP. By way of example, Gill Jennings & Every reviewed the IP position of a company which had developed a unique process for efficiently manufacturing photonic crystals. The firm had not filed any patent applications to protect the new process, but had wisely kept the process of manufacturing secret.
In this case, filing patent applications would not have been the right call since without the benefit of reading a published patent application, there was no way that a competitor could reverse engineer a crystal produced by the process to determine how it was manufactured. Similarly the company would have had no way of knowing, from studying a competitor’s product, whether it infringed any patent rights that might have been obtained. The firm’s IP was thus much better protected by keeping it as a trade secret than by pursuing patent protection, which would have involved publishing the details of the process.
As the above shows, there is no one-size-fits-all approach to IP strategy. A discussion with a patent attorney can help a company consider all options and lead to finding the best approach to support its commercial goals.
It is never too early to develop an IP strategy, particularly with the increasing competition arising from the surge in innovation in the photonics sector. Our advice is to take the time to consider this important component of business planning, to make sure you are not caught out.