An Era of IP transparency
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We were joined by an industry expert and the hosts of Cipher Vision podcast
- David Kappos Partner Cravath and former Director of USPTO
- Francesca Levoir Head of Marketing LexisNexis Cipher and podcast co-host
- Nigel Swycher CEO LexisNexis Cipher
Highlights from An Era of IP transparency
IP transparency has been a theme for my entire career as information has become such a dominant force. The IP system in general, the patent system particularly has become more important and the subject of concern, criticism, but also extreme economic and strategic value.
Other forms of IP, trademarks, trade secrets, designs, copyright, have all escalated in importance. So that’s how transparency has been featured and will continue to be a feature going forward for the IP industry.
When I was in private practice, we used to run into situations not infrequently, where a patent would come up.
Frequently, we couldn’t tell who owned it because the party who owned it had either not recorded their ownership in the USPTo’s registry. Or a record had been made in the name of the fictitious company, or an LLC, (limited liability company).
So we couldn’t gain transparency. But transparency is now very much centre stage with legislation being dropped and viewed as bipartisan.
Frankly, it’s hard to argue against transparency. So I feel like our time has come with regard to having a really robust register for ownership of patent assets. What the new legislation is trying to do, is to let the world know, who owns a patent by making a patent owner record their ownership.
On the margins, it’s not more complicated than that, I felt like it really got resonance with senators at the hearing. The initiative that you champion for years now, called Oropo, which a number of us are involved. A number of great companies from, the UK, as well as the US voluntarily record their interest in patents. I will continue to encourage here in the US this legislation to proceed. And then the USPTO, to find mid lane approaches to implementing, and then hopefully we can take this global. So seeing, this legislation and Oropo on a global level become a catalyst could be really powerful and really positive.
Global trade and Challenges in IP transparency
20 years ago, we probably wouldn’t have even tried to figure out, you know, a set of global assets. So things have improved, you know, putting more records online has certainly been a market improvement, the accessibility of data sources from anywhere in the world has been improved. And governments in many countries have taken more of an interest.
But I think now we’re at a kind of a turning point. With this legislation, and then with work that would really be rightly done next. And in Europe, starting right there in the UK, I think we can make this into a kind of a global wave in a positive way.
Maybe as soon as five years from now a single global database that you can go to, and find out, for a particular patent knowledge family members and who owns every one of them. The move is towards data and using data to go and make evidence based decisions.
It’s not just transparency of ownership, it’s risk and value. So on the value side patents are licensed, and if you think patent ownership is bad. The information around patent licensing is appalling.
Data and intangible assets
Data, location, ownership or data control so that it can become more evident to parties that, there’s a huge amount of data somewhere. And, if I negotiate with them, I might actually be able to get access to it, as opposed to, I need access to data.
In most of the conversations with IP owners, they all complain about not having the information they need to make decisions to communicate to the board. At the other hand, when you ask them to disclose the information to make it better, they say why should I go first?
You can see a government’s role as a collecting point. The SEC here in the US, does a fair amount of that. You could get an enormous amount of information by going on Edgar, the SEC database, and there’s thousands of license agreements there that have to get discussed, mostly redacted, but you can learn a lot of information.
But it also is relatively well trusted to anonymize and aggregate things so that no one’s identity or sensitive information gets discussed. I feel like there’s an important role there in licensing information.
Questions being asked around IP in the boardroom
I think boards have gotten a lot more sophisticated. You get bored at all levels, talking about IP very facile at a business level, they’re not interested in, claim scope analysis.
They’re interested in these things as business control assets, and assets that enable them to, to have good profit margins, basically, and to counter the moves of their competitors.
So the boards have become much more sophisticated. I see much more time at board meetings devoted to intellectual asset based discussions.
Our recent patent risk survey, shows over 50% of respondents suggested that one of the communication challenges that boards don’t understand intellectual property, to what extent do you feel that’s an impediment? How have you solved that communication challenge?
It’s all about preparation. It’s a kind of a business level thumbnail of the quality of the IP portfolio of the company. But more importantly, the next level of breakthroughs about how to actually get the science and the materials to work.
Boardroom and investor understanding of IP
It depends on the company size. If you’re dealing with a large public company, you’re almost always dealing with the board and not individual investors, smaller companies and private ones we’re dealing with the investors. And I would tell you, it’s a bit of a mix, right?
And to bring us back to the IP transparency conversation. Reports and accounts are completely silent in the common case, as to intangible assets. But yet we have a situation where enterprise value is very significantly dependent on intangible assets.
What’s your views about breaking down that wall of lack of transparency?
Maybe that’s our next project, after we, get the ownership transparency done. It’s weird, the last survey I saw in the US, it’s at least 85% of corporate value is in intangibles now. And in many cases, that 85% of the value of the company rides on the balance sheet, on a single line, goodwill.
Something’s gonna cause an awakening there. What I see is, smart companies, they don’t take it up necessarily as an accounting issue, but they definitely take it up as a value driver issue.
And that’s usually the finance wing of the company, to understand the value of the IP, and again, it’s not a matter of putting it on the balance sheet. But it’s a matter of understanding the value and the risks associated with potentially needing to go and get third party IP, that’s the most mature approach. I’ve seen it, not enough companies use it small companies almost never get into that level of detail. There’s a start, but it definitely needs to grow.
Future of transparency in the Intellectual Property world
With the pandemic that we’re still dealing with, I fear that we’ll continue to have a lot of pressure brought to bear on intellectual property in general, and accusations of it, impeding or thwarting innovation.
I hope others take the IP discussion to a different level to a much more understandable consumer on the street kind of level. Get people, consumers in general, scholars and policymakers to have a natural understanding almost a reflective understanding of the importance of assets that protect innovation.
As the incentive engines that cause people to invest their time and effort in innovation and just what you develop if you could get people to develop that reflex.
We need to develop that kind of reflexivity that spiritual, almost knowledge about innovations. That’s what I see coming as the challenge of the next five years and it’s something that I’m putting significant effort into.
Cipher Vision Key Takeaway
Well, I told it’s gotta be IP transparency. And the role of tools like Cipher and the gigantic amount of data that it has access to enabling, curious inquisitive individuals and companies to learn an awful lot about the world of intellectual property. So they can make much better business decisions than they ever could in the past.
Message from the podcast host and CEO, Nigel Swycher
Intellectual property strategy protects trillions of dollars of investments. IP sits at the heart of the global superstructure that’s driving the innovation and digital economy. Yet its development into a functional asset class is hampered by the basics, lack of transparency.
This exists at a micro and macro scale, transparency of ownership at one end and transparency of value at the other. Both worked together to hold back the evolution of intangible assets.
Dave Kappos is one of the great IP polymaths whose journey includes all the significant axes of influence owner, regulator and lawyer.
Listen to the full episode of the podcast on Spotify, to feature as a guest or any feedback please reach out to Neha Sarin: [email protected]