Key Findings of the State of the IP Industry Survey:
- Budget constraints intensify challenge in establishing/defending intellectual property (IP) assets -- in Asia, Europe, North America.
- More than half of in-house IP professionals and one-third of law-firm IP attorneys call Asia Pacific most challenging for IP Rights, citing rampant piracy', sizeable levels of infringement', and shortfalls in IP legislation and legal rights.
- Survey finds 72% of companies conducting IP portfolio audits annually, 39% at least twice a year, and 10% as often as every month -- assessing core patent and trademark assets.
- Major developments forecast for IP in 2010 include increased IP monetization, decline of patents as tool of business value, trouble enforcing brands in wake of new generic top-level domains, and U.S. patent reform; USPTO director David Kappos named as having greatest impact on IP industry.
Emerging Trends Revealed
CPA Global's annual State of the IP Industry Survey reveals the increasingly important influence of the cross-border environment on IP innovation and on obtaining and protecting IP Rights.
At the same time, the theme of restricted budgets also runs through responses to this year's Survey. Belt-tightening both in-house and at law firms makes establishing and defending IP rights more expensive and challenging in almost all regions of the world, from the intensely litigious culture of North America, to the still-evolving IP landscape of Asia, to the patchwork quilt of the European Union, where differing regulations among member states make broad IP penetration a halting and uncertain process.
More than half of in-house IP departments (55%) and over a third of IP law firms (34%) regard Asia Pacific as the most challenging geographic theater of IP, citing "rampant piracy", "sizeable levels of infringement", and shortfalls in IP legislation and legal rights. Concurrently, 71% of in-house IP professionals and 73% of respondents working in law firms say curtailing legal expenditure is a top priority in 2010 for their or their clients' IP departments.
Carried out in March and April 2010, the State of the IP Industry Survey reflects responses from 242 IP professionals, two thirds of whom work as lawyers and IP managers for companies and one third at law firms. A report on the results of the Survey is available here: www.newlegalreview.com.
The Survey also reports how often companies conduct IP audits: nearly three quarters review their portfolios at least once a year, and 39% conduct IP audits at least twice annually; 10% appraise their portfolios monthly.
Behind the costs and difficulties of establishing and protecting IP Rights in Asia looms another potential dilemma for U.S. and Western companies: most built their portfolios with an eye to defending them in the West, and, with the economic rise of a region where IP Rights are weak, the firewall around companies' core assets suddenly looks more vulnerable.
"It's clear that intellectual property is no longer national or even regional, but that companies with IP portfolios must think about their IP assets in global terms," says James Pohlman, CPA Global Vice President, Patent Monetization. "In this new environment, there are as many challenges as there are opportunities in managing an international portfolio and maximizing value."
Mr. Pohlman continues, "Companies are increasingly proactive in taking a hard look at their IP portfolios through audits -- most do it at least annually, many do even better by reviewing semi-annually or quarterly, and those that are really on top of it evaluate their portfolios monthly. There is a good reason why portfolio reviews are called audits. Just as firms provide regular financial statements to stakeholders, they should also perform regular inventory and assessment of their IP. Companies need to be confident that their intellectual property is aligned to changing business strategy, which is critical to realizing a strong, positive return on these investments."
IP monetization and portfolio auditing will likely assume greater importance as companies contemplate the rise of Asia and evolution of its IP Rights, and consider how best to position and protect their assets. Law firms maintain they are still educating clients on the singular importance of IP assets to business, and pushing clients to undertake audits, protect core assets, and sell or let lapse assets that are no longer needed.
Moreover, the State of the IP Industry Survey shows that the continuing lack of harmonization among nations' laws and court decisions remains a concern.
Some Survey respondents report a drop in IP filings due to cost-cutting, while others are controlling expenses by bringing back in-house work formerly outsourced to external counsel. Four in ten in-house IP practitioners say their restricted budgets make the proper management of IP assets difficult, while 30% of law firms say smaller client budgets are a challenge to IP work.
These difficulties, combined with weakened global economic conditions, might mean a decreased focus on obtaining IP Rights, the Survey revealed, as business struggles through a period of uncertainty. Some respondents report increased infringement on their IP, too, as licensees who stopped making licensing payments continue to use the IP.
Within the United States, reform at the US Patent and Trademark Office (USPTO) figures prominently in many State of the IP Industry Survey responses, both as a prediction for the coming year and as a hoped-for remedy for some of the industry's current problems, including the PTO's lengthy backlog of patent filings. David Kappos, director of the PTO and Undersecretary of Commerce for IP, is not surprisingly seen as one of the individuals having the greatest impact on the IP industry, along with his European counterpart, Benoit Battistelli.
Law firms, meanwhile, are getting creative in the way they attempt to reach new and existing clients: from social media and blogs to new networking methods, firms are using newer technologies and means of communication as never before to both create and fortify client relationships.
Here is a deeper look at some of the key findings from the 2010 State of the IP Industry Survey:
The defense never rests -- Some 40% of in-house IP departments expect increased IP litigation this year; 90% of law firms, meanwhile, expect litigation to remain steady or increase over the next 12 months. Infringement is up too, as 35% of in-house departments report increased patent infringement over 2009 and 27% see greater trademark infringement. About half said infringement was unchanged from last year.
Portfolios under the microscope -- Some in-house departments blame budget cuts for forcing decreases in their IP portfolios, with the attendant risk that valuable assets might have mistakenly been let out the door. More companies are taking a closer look at not only their core IP assets, but the protective assets around them; recognizing this, CPA Global's Patent Renewal Monetization Program was recently created to help companies accurately determine which patents have a core or valuable place in a portfolio and which would produce revenue on sale. Nearly half of in-house IP departments consider portfolio audits important, while 42% see portfolio monetization as having a similar level of importance; 30% say portfolio monetization will climb in 2010. Some 41% of law firms say portfolio audits are significantly important to their clients' ongoing IP strategies. Almost 70% of in-house IP professionals believe lack of knowledge about the role and importance of IP is a problem within their companies.
The more things change -- In-house IP departments agree that managing IP work within existing budgets is a major challenge: 77% say the issue, noted as well by in-house professionals on last year's Survey, has not changed. But there is no relief on the outside: almost three quarters of respondents overall agree that fees for external counsel remain a major challenge. In last year's Survey in-house IP professionals bemoaned the lack of harmonization in IP legislation, registration, and court rulings, and 60% of in-house respondents this year agree that the problem remains acute.
Client strategies going forward -- Law firms see portfolio consolidation (46%) and monetization as significant components of clients' IP strategies going forward. Licensing IP (43%) too is regarded as important, significantly more so than either acquiring IP (22%) or divesting it (16%).
Law firm challenges -- the predominant issue for IP law firms is, unsurprisingly, economic: more than half say acquiring new clients is their premier challenge, while 30% call client budget restrictions a significant challenge. Client pressure to freeze or reduce costs was cited by law firms in last year's Survey, and 91% of firms this year agree it remains a major issue. Further, 79% agree with last year's respondents on the difficulty of adequately managing clients' IP work within current budget constraints.
Respondents forecast the year in IP -- among key changes respondents see in the upcoming year:
- Patent reform, from a first to file to a first to invent system;
- A decline in the importance of patents as a tool of business value, as the PTO backlog puts a crimp in applications and further signals that the pace of business and the patent process are moving in opposite directions;
- Transition from defensive to proactive portfolio management;
- Better patent examination procedures in patent offices worldwide;
- Brand enforcement difficulties in the wake of generic top-level domain reform;
- Ripple effect from passage of the Anti-Counterfeiting Trade Agreement;
- Evolution of China as an IP standard-setter.