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Book Review: Intellectual Property for Managers and Investors
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Book Review: Intellectual Property for Managers and Investors by Steven J. Frank

Intellectual Property for Managers and Investors: A Guide to Evaluating, Protecting and Exploiting IP

Written by: Steven J. Frank. Cambridge, UK: Cambridge University Press, 2006. 170+xii pages.
Reviewed by: Reardon Smith

A year or so before her untimely death in 1997, Diana, Princess of Wales, used her celebrity status to draw the world's attention to the horrors being inflicted on innocent people by landmines. After reading Intellectual Property for Managers and Investors, you will have some small idea of what she was talking about: One false step, and it is all over. The victims here are not small innocent children but rather big, ignorant senior executives and project managers. The minefield constituting intellectual property (IP) evaluation, protection, and exploitation is waiting for the unwary at every company that owes its existence to proprietary information and processes—which is most companies. Steven Frank is an excellent guide through this minefield.

Being aware is what this book is all about. These mines are too numerous and too difficult to disarm for the average IP amateur to attempt it—especially the engineers in your firm. Leave the dangerous work to your company's IP legal advisory team. At several points in the book, in full disclosure, Frank points out that he is a practicing IP lawyer himself. But to be forewarned is to be forearmed, and this book does an excellent job of pointing out many of the pitfalls that management and development teams should watch for and also some opportunities for them to exploit.

The first chapter discusses what kind of IP you might have and the need for timely filing for protection. The United States may allow you one year after public disclosure of a new invention, but the rest of the world allows you no time at all. You need to file before you tell anyone anything about your invention. And “telling anyone anything” can include (watch out for the mine) casual conversations between your development engineers and a competitor at an industry conference, a presentation to potential investors, or a badly executed Beta test agreement. Public disclosure could mean you cannot file for foreign patents, period.

Chapter 2 is a helpful discussion of the different benefits—and disadvantages—of patents, copyright, and trade secrets. This is often a difficult choice, especially when software and hardware are combined with services. A wrong step here can commit you to an expensive defense later—or dilute the value of your company should a buyer take an interest. Frank uses a well-constructed case study to work through an example analysis while pointing out a couple of new explosive devices along the way. Do not try, for example, holding back some key best-practice information from your patent application: “A patent must teach the entire invention—all of it, not just the parts …. US law demands disclosure of the best way …. The penalty for holding back is Draconian: in the United States a patent that fails to disclose the best mode is invalid in its entirety; every claim—not just the ones directly related to what has been withheld” (p. 31, italics in original).

Building an IP strategy is the subject of Chapter 3, for “a technology company must have a patent strategy, to paraphrase H. L. Menken, as a dog must have his fleas …. The truth, however, is that few companies develop IP strategies that are business driven and responsive to changing circumstances; most, instead, indulge in guesswork and fall victim to inertia” (p. 43). Frank states that “IP protection must fully and constantly align with the company's business objectives” (p. 45, italics in original). This surely sounds familiar to us as product development professionals. The IP should be as much a part of the development process as is the technical development. IP is a part of the product at least, and it may be a product all by itself, as explored in Berman (2006). Frank again uses a case story to illustrate the importance of building such an IP strategy, with particular emphasis on international protection. They do things differently the world over, and without care, you will find yourself unprotected in some of your most promising markets. In the United States there is some extraterritorial patent reach, but as Frank says, “Be forewarned: the analysis is a bit involved, and the faint-hearted may wish to skip ahead. But not if you plan to rely on these provisions. They are one ensemble you will want to try on carefully before buying; getting it wrong means going naked abroad” (p. 60).

Chapter 4 is more of a how-to chapter, as Frank describes some implementation issues. It is important to have all employees who contribute to inventions sign properly executed assignments of rights—not just the typical umbrella form that all employees get when they come to work at the company but specific assignments for specific inventions. Another little-known mine waiting to get you is in establishing who was the first to gain protection for an invention: In the United States—almost uniquely—the protection is afforded to whoever was the first to invent it, not who was the first to file for a patent. But how do you determine who was the first to invent it? With those lab notebooks, which are signed dated and witnessed on a daily basis.

If you have a fairly large IP portfolio, at some point disputes are inevitable, and Frank devotes Chapter 5 to that topic. His intent mainly is in stopping the layperson (e.g., CEO, VP of engineering) from making a bad situation worse. Five common behavior patterns he strongly advises against are (1) Place head in sand (no, it will not go away); (2) express yourself (you will give the opposition all kinds of information to their advantage); (3) be your own lawyer (do not start doing internal assessments and investigations—the opposition will have access to them later in discovery); (4) tell your friends (“the temptation to talk—to run some exculpations up the flagpole and hope for approving salutes—can be terrific, surprising even the talker”) (p. 101); and (5) eat the evidence (do not shred). Frank's advice is, “Self-serving as this may seem coming from a lawyer, the only right way to react to a letter accusing you of infringement is to call your patent attorney and formulate a plan” (p. 102).

If you are thinking of investing in a technology company or of moving into a senior executive position, you need to do a fair amount of IP due diligence. This is the topic of Chapter 6. The message here is to dig down and then to dig down some more. Be particularly cautious of contracts the company has with customers and vendors and what IP liabilities or warranties are included. It could cost you crippling penalties in the future: “IP indemnification provisions should strike fear into the heart of any potential investor” (p. 124). Likewise, carefully look for signs of open-source software use: “Adopt even a thimbleful of open source code, so goes the fear, and invite a flood of disclosure obligations that will wash away proprietary rights in your entire system. While overstated, this fear is far from irrational” (p. 126).

The final chapter is an interesting review of licenses, especially software licenses. This subject is worthy of a book of its own, and the coverage in this book is too short. It is almost as if the topic were added as an afterthought to make a small book a bit bigger. Frank does, however, cover some useful basics such as explaining in clear language various licensing terms such as exclusive, non-exclusive, sole, paid-up, irrevocable, and perpetual. He also touches on the business aspects of licensing, such as royalties and valuation of licenses as an asset. This can be a major issue, of course, particularly in the pharmaceutical and semiconductor businesses.

This book will be a welcome addition to any development lab's library and should be required reading for senior managers who work in business development. It would also make an excellent reference text for an in-house IP seminar, repeated at regular intervals. In Frank's words; “Part classroom and part revival meeting, such a seminar communicates a shared sense of mission in which IP plays a critical role. Sinners are forgiven their past transgressions and shown the righteous path” (p. 76).

That is, the path through the IP minefield. Watch your step.

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