Tuesday, December 2, 2008

Reacting to the Recession

For most companies, the official recognition of the U.S. recession by the National Bureau of Economic Research on December 1st was merely validation for what all understood was a definite, significant downturn in the economy. While certain industries bore the brunt of the initial slow down and have been impacted to a greater extent, by now all companies are taking measures to help them navigate this cycle. For those of us focused on Intellectual Property, we have seen active discussion about how companies might leverage their IP and adjust their IP practices. Challenging times always provide corollary opportunity, and we see many IP professionals emphasizing patents, brands and other intellectual assets as untapped sources of value. We can expect that IP-rich companies will increasingly turn to their intellectual assets as both sources of capital (sale, securitization, in kind contribution), and income (sale, licensing, damage awards.) With the increased recognition of intellectual assets in the last decade, we can expect that failing or failed companies (their creditors and shareholders), will have a newfound appreciation for the value that can be recaptured from the IP portfolio. Also, as we have seen in past slowdowns, the volume of legal disputes increases during difficult economic times and it can be expected that IP litigation will be one important value channel pursued by IP owners.

Another area where we have seen increased attention is in IP operations and administration. With the IP area often considered a cost center – or even if it is net income generating—expenses are particularly scrutinized for potential areas of savings. With already lean operations, many IP practices are challenged to further tighten their belts, while maintaining their level of service and protecting their companies “most valuable assets.” One area ripe for cost review is the use of outside counsel. Over the years we have seen the pendulum swing between the use of outside counsel and in-house legal work. In the last few months we have received increased interest in how technology – such as ANAQUA – can be used to actively manage work load between outside counsel and in-house staff. Assignment workflow, task automation and detailed workload reports are examples of the capabilities needed to precisely manage the outside counsel / in-house balance. Also with significant innovation in IP services over the last few years – such as “global” IP law firms and offshore outsourced services—companies are looking to more finely disaggregate the prep and prosecution process to optimize service costs.

Portfolio administration – patent maintenance fees and trademark renewals – are also key opportunities for savings. While most companies are using outside services, the high service fees and currency rates are causing many companies to consider bringing some or all of this work back in-house, or to actively evaluate and negotiate better rates from their service providers.

With increasingly “computerized” operations, systems are clearly seen as a required enabler of these efficiency improvements and cost savings. Unfortunately many IP groups are living with older systems and tools which are not well equipped to support needed process changes. In working with our clients, we have been fortunate to help companies achieve a positive ROI, generally within the first year of implementation. And whether good times or bad, these improvements will provide welcomed value for the long term.

If you are interested in this subject feel free to view the Anaqua webinar on "Managing IP in an Economic Downturn" featuring Bruce Story.