Corporate Counsel: the Guardians of Innovation
Corporate counsel may not generally see themselves as the guardians of innovation in their businesses. Nonetheless, corporate counsel are the custodians of intellectual property, which can be defined as the legal asset in innovation.
We all see innovation as a critical ingredient in a successful business. However, innovation has no intrinsic value in itself. Innovation only has commercial value if it serves a purpose. There are numerous examples of innovations which prove to have no value. A legion of inventors regularly invent some new device or process, patent it in a number of countries and then wait for the world to beat a path to their door. They usually wait in vain. There are myriad start-ups and technology companies which create advanced and complex technologies, only to go broke in the process.
The main reason that so many talented innovators fail commercially is that they do not do their homework. The initiation of a successful innovation does not begin with the development of the innovation itself but with the thorough research of market needs. A successful innovation should be created to satisfy those market needs in an unique way. When Ray Kroc founded McDonald’s, he did not invent an innovative new hamburger to sell to the public. He first researched the market and found that hamburgers were seen by consumers to be a standardised fast food item. He therefore focused on the key need of consumers which was speed. Kroc then embarked on numerous innovations in ingredient procurement, warehousing, cooking equipment and staff training programs, all aimed at increasing the speed of supply of hamburgers to his customers. As a consequence, McDonald’s became at one time the biggest food distributor in the world.
A successful innovation delivers two critical benefits to a commercial business. The first benefit is increased revenue. If you have a better product, more people will buy it. The second benefit is increased margin. If you have a better product, people will pay more for it. These two benefits are critical to the profitability and growth of a business. Without innovation, a business has nothing to sell but price. There is no profitable future in a business philosophy which excludes innovation.
Innovation lies at the very heart of the business and should be the foundation of future planning and growth. Intellectual property, as the legal asset in innovation, is therefore the jewel in the crown of any business. The primary responsibility for identifying and protecting that IP asset lies with the corporate counsel of the business. This task involves identifying in a systematic program all registered and unregistered IP and determining the true ownership of that IP. Registered trade marks, patents, designs etc should be exhaustively listed and monitored. The ownership of all copyright in all creative works used by the business should be ascertained. Trade secrets should be subject to strict confidentiality procedures.
The role of corporate counsel in the identification and protection of IP inevitably involves liaison with all managerial functions of the business. Financial managers need to be made aware of the legal aspects of IP transactions. Research managers need to introduce secrecy procedures for budding inventions and designs. Marketing managers need to adopt strict rules in the promotion of the brands they have created. Corporate managers need to be kept informed of all the IP assets of the business so that they can be fully exploited.
In a cyber world, the rapid introduction of new technologies places even more importance on the identification and protection of IP. These new technologies may eventually necessitate fundamental changes in IP law itself in order to address the cyber environment. The use of artificial intelligence brings into question the whole concept of the ‘human intellect’ inherent in copyright law. The inventions created by machines rather than individuals challenges the legal concepts of ‘novelty’ and ‘inventive step’ which are fundamental to patent examination. The idea of the ‘Internet of Things’ involves a re-assessment of how new technologies can be linked via the Internet to carry out complex tasks.
Whatever direction innovation might take in the future, the commercial benefits of innovation will remain central to the financial future of any business. Corporate counsel will continue to have a key role in identifying and protecting the IP in that innovative future.
Eric Ziehlke is a Partner at Swaab and offers it’s clients a free IP Health Check as a starting point in developing an effective IP identification and protection program.