Thursday, April 18, 2013

How Much Does the C-Suite or a Board Really Care About IP?

Let me lay out my cards on the proverbial table. My primary involvement in IP is as an IP lawyer, inclined to dealing principally with non-contentious matters. In so doing, I usually engage with middle level managers, engineers and other technology types. On occasion, I have dealt with the CEO, ranging from small start-ups to publicly-traded companies. I have reported to a number of boards on IP-specific questions, but I have never been physically present a board meeting. I am IP-centric, but hardly IP myopic. I know my way around a balance sheet and a board resolution.

Against this backdrop, my question is simple—just how frequently is IP an agenda item for a company board or a policy matter for the CEO? Stated otherwise, how many CEOs have ever actually been fired because they mishandled their company's IP? I am not talking about the small number of mega-patent portfolio transactions of the last year or so, such as the sale of Motorola Mobility or Kodak patent portfolios. I would assume that when hundreds of millions, even billions of dollars, are at stake, senior management and the company board are involved in the relevant decisions. But while such high profile transactions have grabbed outsized media attention, they are extreme aberrations in the patent firmament. Almost 100% of companies will never deal with a patent transaction of this scope.

Nor am I talking about companies, such Intellectual Ventures, whose primary asset is patent-related rights. If patents are not the central focus of the attention of a company such as this, one would imagine that management and board meetings would be the corporate version of a vow of silence. Nor am I talking about a company that is the recipient of a legal claim for IP infringement (or even the decision to initiate such an action). These are one-off events, sometimes proactive, more typically reactive, but seldom part of a company's broader business strategy. No, my question refers to the overwhelming number of companies, from the publicly traded to the privately held and to the start-up minnows hoping to enjoy the next big exit. We are told and read about how IP (or its conceptual cousins, such as "intellectual capital" or "intangible assets") is more and more "a", and perhaps "the", central part of the activities of many companies. Reading business-oriented magazines and the business section of leading newspapers, I encounter discussions of IP issues almost on a daily basis.

But I also know that IP-related topics form only a minor, usually elective part, of most management education programs. When this occurs, the usual orientation is to treat IP as simply another asset of the company (or, with the increasing involvement of the financial community with IP rights, as an "asset class"). And while most management education programs know, in their heart of hearts, that they are principally instructing present and future middle managers, such programs strive to maintain the persona that they are directed to training the next generation of inhabitants of the C-suite. Based on this ideal, and the relative lack of IP content in the curriculum, the reasonable conclusion is that most managers do not receive systematic training regarding IP issues. And when they do receive attention, the treatment focuses on IP as another form of company asset, incorporeal and imperfectly understood at best.

As such, and circling back to the questions above, inquiry is made once again. Just how much has IP entered the boardroom and the corner office on a regular basis? Unless the answer is--"a great deal", then there is a material disconnect between what goes on in a company as a matter of IP at mid-level and the IP policy issues that guide a company at the senior managerial level. If any readers are aware of publications that discuss this question, or themselves have insights, anecdotal or otherwise, that can shed light on this question, we would be grateful.

Katnote: the documents mentioned by Len Ruggiero (LaMarch Capital) in the comment posted below can be accessed here and here.