Winning with IP

1.

IP STANDARDS FOR

A DIGITAL AGE

Digital transformation makes new demands on IP management. Two recent standards are seeking to bring everyone up to speed. A CEIPI report reviews progress

No industrial company and hardly any high-growth technology business can ignore the terms Industry 4.0, the Fourth Industrial Revolution or the internet of things (IoT) anymore. Just as software-based solutions are constantly being updated and improved, businesses have been reinventing themselves again and again for hundreds of years. We can already look back on three industrial revolutions. Industry 4.0 joins the ranks, forcing companies to adapt to a fast-changing business environment¹.

Those who want to gain competitive advantages are developing new business models, use cases and applications with significant digital components. Intelligent platforms are changing the way we interact with customers. In production, the use of new communication standards (eg, 5G), cloud computing, artificial intelligence and digital twins is closing the gap between software and hardware, leading to greater agility and higher efficiency in the industrial internet of things (IIoT)².

Digitalization and the resulting changes in business ecosystems³ are leading to a radical rethink of the way intellectual property is handled, especially patents. Companies have always tried not only to secure their own range of services legally by patenting their technical developments, but also to gain exclusive market positions by designing patent portfolios that are specifically geared towards customer benefits. Such IP strategies allow for the expansion of your own market share and many other advantages. New business partners, markets and competitors, including those from other industries, bring opportunities and risks whose complexity even larger companies cannot master comprehensively.

Typical digital interaction patterns for creating customer benefits, such as condition monitoring, pre-emptive maintenance or updating mobile devices over the air from the cloud, are covered by a large number of patents that are increasing rapidly worldwide. For those making innovations in physical products or in transaction-based business models, adaptations to how they organize the development of their patents may be smaller.

To sum up, the new developments in the technological and economic area, related to Industry 4.0 and IoT, lead to a stress test of operational IP management.

In addition, digital patents are different. They do not come from physical reality or technical functionality, but from the application, the solution or the use case. These characteristics also affect analysis of the competitive situation, including taking third-party patents into account. A classic freedom-to-operate search, which has the purpose of identifying all relevant third-party patents largely to rule out infringement, is becoming so much more extensive and time-consuming that it sometimes looks as if it would be impossible. There are considerable dangers and liabilities lurking in the large patent portfolios of third parties, for example, when using mobile phone technologies for your own campus networks or IT technologies for new products.

Dealing with IP risks is not only one of the special challenges for entrepreneurs because of their possible impact on business operations, but also because of the personal consequences for managing directors and board members resulting from a violation of due diligence. These personal consequences can go as far as personal liability of the managing director. Such personal liability can occur, for example, if the management fails to take steps to prevent damage. Since failure to observe third-party IP rights can result in severe sanctions, such as sales bans or claims for damages, the identification and consideration of third-party patents is an essential element of damage prevention. Risk management not only raises the bar for internal IP management systems, but also when dealing with suppliers and partners.

Development of IP management standards

It is quite common for organizations to implement the ISO 9001:2015 quality management standard to improve their overall operational performance, establishing practices of continuous improvement and risk-based thinking. But as companies experience increasing IP challenges in the field of digital innovation, they need to adopt a more specific set-up to respond to the various threats they face. This leads to a new understanding of the use of standards in IP management as well.

IP management standards like ISO 56005⁴ or DIN 77006⁵ have been created to support companies and IP service providers in developing their abilities to handle the challenges of a modern and compliant IP management. They provide guidance to the design of an up-to-date IP management system⁶, ie, the introduction of effective processes and an allocation of tasks that are aligned with the company’s strategy and business objectives. They focus on leadership and strategy, as well as tools and methods, such as the implementation of the concept ‘plan-do-check-act’⁷, as introduced in DIN 77006, which leads to improved productivity and error prevention⁸.

Externally, expectations are rising as well. Before a larger organization partners with an SME or a high-tech growth business, it will often want to see an IP management standard in place, so offsetting any potential risks to itself.

ISO 56005: guidance to tools and methods for IP management

In 2014, the International Organization for Standardization (ISO) set up the ISO/Technical Commission 279, aiming to provide tools and methods using the holistic approach to innovation management, its implementation and its interaction with stakeholders. The commission’s main objective was to standardize tools and methods dedicated to the field of innovation and in interaction with all actors in its management for industrial, environmental and social benefits.

The ISO 5600X family is designed as a framework in a standardized format to support innovation management procedures starting from the idea, via research and development, up to the creation of the IP and verified products or services.

ISO 56005 as a part of the 5600X family is designed as a guideline to systematically manage IP within the innovation environment. It supports the innovation process and provides an IP strategy that is aligned with the business strategy, and includes five major activities and outcomes to help organizations protect and maximize their best ideas:

IP landscaping

IP creation and acquisition

IP portfolio

IP commercialization

IP risk management

The ISO 56005 standard can be used for any type of innovation activities and initiatives and is based on certain principles derived from the innovation management system, such as:

realization of value for all relevant stakeholders;

leadership that inspires and engages employees, and other interested parties, to generate, protect and leverage IP;

alignment of the overall strategic direction for managing IP with an organization’s business and innovation strategies;

access to a diverse range of internal and external IP knowledge sources for the systematic development of its IP expertise;

management of innovation uncertainty and risks from an IP perspective;

generation, protection and leveraging of IP for long-term value creation based on shared values, beliefs and behaviours across the organization.

IP management responsibilities related to innovation should include, for example:

defining innovation outputs that need to be protected as the organization’s IP assets and the appropriate resources to manage this IP;

monitoring IP in the public domain that is relevant as an input to innovation activities to avoid potential infringement of third-party rights, to identify potential infringements of the organization’s IP, and to report risk and opportunities to interested parties;

establishing awareness and providing training within the organization.

The annex of ISO 56005 gives an overview regarding tools and methods for:

Invention record and disclosure

IP generation, acquisition and maintenance

IP search

IP evaluation

IP risk management

It is a best-practice collection of directions and strategies of how to manage IP systematically within the innovation environment that is especially helpful for SMEs.

DIN 77006: requirements for IP management systems

In 2016, the German Institute for Standardization (DIN) constituted a working committee to deal with the creation of standards and specifications in the area of ‘quality in IP management’.

The German DIN standard can generally be seen as a more specific, stricter version of the ISO 56005. It takes a comprehensive approach to the organizational landscape of the company with a strong focus on processes and quality and provides a set of rules to implement an IP management system (see Figure 1). DIN 77006 is a systematic tool to establish, implement, and maintain an IP management system in almost every organization and for almost all types of business models.

Figure 1: Development of standards for IP management

If an organization already operates a single management system (eg, only quality) or an integrated management system (eg, quality and environment), it may additionally map the IP requirements of DIN 77006 without having to introduce a completely new system.

If no management system exists yet, DIN 77006 contains all the essential requirements to establish an IP management system that is based on internationally accepted standards.

An important aspect of the compatibility of management systems is the uniform standard structure, HLS or High Level Structure⁹. According to this structure, the organization can combine different requirements and create an integrated management system (IMS)¹⁰, for example, ISO 9001 plus DIN 77006 or ISO 9001 and ISO 14001¹¹ plus DIN 77006.

According to this common structure, any organization can integrate its identified and documented IP processes into an existing, known and established management system structure. DIN 77006 is fully compatible with the general HLS standard requirements, eg, context and interested parties, leadership, risk and opportunity management, planning of goals and many more requirements like internal audits, management reviews and improvement¹².

Process model

What the standards of the ISO 9001 family have in common is a process model that establishes a cycle of plan-do-check-act (PDCA)¹³ within the company. This cycle receives impetus from customer demands and feedback from expressions of customer satisfaction or dissatisfaction. It serves to make constant improvements to the quality management system¹⁴.

The process model assumes that the phases of the improvement cycle consist of processes that are interconnected¹⁵. The processes for creating products and providing services are triggered by customer requirements and end with a service to the customer. They are designed and enabled by management and resource processes. Supporting processes (eg, development, procurement, accounting) provide services to the core processes or to external interested parties who are not customers.

The purpose of an IP management system from a business perspective is to provide an organizational framework to deal with IP risks and opportunities among other things. The IP management system is established as an iterative process:

IP strategy and policy are generated, published and communicated.

IP risks and IP opportunities are to be determined and appropriate IP objectives and processes are to be defined (plan).

The corresponding processes are then to be carried out as part of operation or support (do). They concern the topics of IP awareness, administration, generation, enforcement, defence and transactions (do).

The performance and effectiveness of the IP management system must be checked regularly and recorded using IP reporting (check), the IP management system must be evaluated by internal or external audits systematically. The results are documented as a management system review.

Improvements to the IP management system are subsequently initiated (act), if necessary.

The standard explicitly points out that IP management must be aligned with the overall strategy of the company, but that the above processes can be carried out both within the company and externally, ie, by third parties. Accordingly, suitable agreements must be made with these service providers to ensure compliance with standards.

DIN 77006 helps an organization establish an efficient and legally secure IP management system. The systematic approach of DIN 77006 (PDCA principle) with the documentation requirements across all hierarchical levels and processes ensures that all relevant legal and regulatory requirements can be met and that processes are optimally integrated in terms of achieving corporate goals.

The introduction of DIN 77006 provides benefits for industrial companies and service providers in the IP sector:

by providing a comprehensive and practical set of rules;

through the integration of IP (partial) processes into the core processes of the company;

by creating the necessary conditions to increase opportunities in the development of patentable (digital) business models and use cases;

through the introduction of risk management for IP and thus the reduction of possible liability risks;

and last, but not least, by communicating IP’s contemporary role to internal and external employees responsible both for IP and for the future of the company.

By establishing, implementing and maintaining an IP management system compliant with DIN 77006, a company will be able to meet the diverse challenges of the upcoming digital transformation more securely and efficiently.

• The full version of this article first appeared in the September 2022 edition of les Nouvelles, the journal of the Licensing Executives Society under the title ‘Standards for the quality of IP management’ and is available at: www.epo.org/learning/materials/sme/high-growth-technology-businesses/ip-professionals.html

CEIPI is the Centre of Intellectual Property Studies at the University