Episode 29: IP assets

Synopsis

Summit TV speaks to intellectual property specialist Alan Lewis from Adams & Adams about the commercialisation of intellectual property assets.

Transcript

Summit TV speaks to intellectual property specialist Alan Lewis from Adams & Adams about the commercialisation of intellectual property assets.

Stephan Lamprecht: Welcome to the Intellectual Property Show. In an earlier episode we interviewed Alan Lewis from Adams & Adams about the commercialisation of intellectual property, on this show we continue the topic. Alan, last time our conversation was around the fact that intellectual property is an asset - and for an asset to be valuable you need to do something with it - so just remind us again what is the purpose of commercialisation?

Alan Lewis: As you correctly say intellectual property should be an asset, however an asset that’s put in a draw and forgotten about is not worthy of the name - an asset is something that should result in benefits to the owner, whether that owner is a private individual, a corporate or a government. If the asset is just buried or neglected it has no value - so as with any other asset the intention should be to maximise the return.

Stephan Lamprecht: So I’ve gone through a process and developed something - a new brand, or a marketing strategy and some people now take notice of who I am - now I need to go and do something with that brand otherwise it means nothing?

Stephan Lamprecht: Correct. As we discussed in our earlier programme there are various ways of doing it - you can manufacture it, you can utilise it yourself, you can licence others, or you could sell it - there are a number of ways. What I would to do deal with in today’s programme is to approach it at a somewhat higher level, and that is to look at the implications - and look at it from a strategic point of view. I am involved in an organisation called the Licensing Executives Society and it’s the belief of the LES that intellectual assets should be approached strategically - that is the way you have to structure your thinking from a strategic point of view. Strategically the entire portfolio - or the entire implementation and creation of intellectual property in an enterprise should be approached strategically.

Stephan Lamprecht: So it’s not just about registering patents as it’s way more than that - it’s about the whole process from creation right through. Elaborate on that a little bit on that…

Alan Lewis: There are various levels and entities within a business - starting right at the top from the management down through the various levels, and intellectual property should be strategically implemented in all the levels of the business entity. It’s not something that can permeate from the bottom up - it has to be driven from the top down, in other words the chief executive has to buy into it, the chief executive has to understand and must be aware of what can happen. A wonderful example is what happened with IBM - in 1990 IBM received the paltry sum of $30million in royalties…

Stephan Lamprecht: That’s a $1billion organisation…

Alan Lewis: In 1993 they acquired a new chief executive and Louis Gerstner had a much better vision and a much better understanding and he changed the entire thinking within IBM - now IBM’s income from royalties is $1billion. That’s just an indication of what can be achieved with a paradigm shift in thinking as to how IP should be aligned within the strategies of the organisation…

Stephan Lamprecht: Would I be right in saying that the lesson from IBM and the Microsofts and other large companies - and in South Africa as well if you look at Altech and some of their results - then it’s very much about moving away from protecting and securing IP so we can tick the boxes towards saying “how can we actually take these intangible assets and generate benefit beyond just the fact that we have got a paper that says we have got a patent or a similar form of intellectual property”?

Alan Lewis: This has been dealt with a few years ago. There are various levels that have been proposed in regard to intellectual property. Right at the bottom is what’s called the defensive level where IP is approached and considered from a defensive point of view - we are going to be manufacturing something, we want to protect it, and put in barriers to entry against any of our competitors. With respect that’s the bottom level. The level above that is what is called the cost approach - in acquiring intellectual property and primarily patents there is a cost associated with acquiring and maintaining a patent portfolio. So now you have this body of portfolio of intellectual property and it’s costing you money - now you start weeding out and deciding what do you need, what is important to the core competencies or the core values of the entity?

Stephan Lamprecht: That’s got to fall within your budget - so you can’t just blindly go and file patents, you have to say what is the return on investment going to be and can I afford to take this approach?

Alan Lewis: Dead right. The next level is the profitability level where it’s approached not only as a cost centre but now as a profit centre - so you’re now maximising or increasing your return on investment by leveraging your intellectual property. You’re not merely having it there as a barrier to entry - you are now using it to generate income. As I said earlier in the IBM model it can generate substantial value and substantial revenue for the organisation…

Stephan Lamprecht: A South African instance - IBM is a huge organisation, it’s been around for decades - do you see the profitability approach also in South Africa our organisations moving up there?

Alan Lewis: My grey beard demonstrates how the number of years I’ve been involved in this, and unfortunately I don’t believe there is any - the closest that we have I think is Sasol. Sasol I think is approaching it strategically with a view to generate revenues. If we can then move up to the next level that’s the investment level. Then we get right to the top the visionary level - that is where the chief executive or management comes along and says “where would we like to be in five or 10 years, and how do we direct our intellectual property or the creation of intellectual property to put us where we would like to be in five or 10 years?” That is the pinnacle that the visionary or forward thinking organisations overseas - the direction they are trying to go in.

Stephan Lamprecht: A final brief question - do you se increased awareness in terms of taking such an approach in South Africa amongst South African organisations?

Alan Lewis: Definitely. Since 1994 we have joined the world stage and we are starting to learn to play the game according to the international rules.