ENSURING SECURE STRATEGIES
Law firm Baker Botts specialises in IP protection and corporate finance and it emphasises the importance of IP strategy marching in step with wider strategy
No business with serious ambitions can afford to neglect the importance of Intellectual Property and of protecting that IP.
Neil Coulson, IP partner with law firm Baker Botts explains why.
“For any business which deals in any shape or form with a technical offering or a product, intellectual property is going to be vital to that technical offering or that product,’’ he says.
“Intellectual Property is not just technology, your branding is your intellectual property too and no business in the world can get by without having effective branding and aligning its branding with its marketing strategy. So IP does permeate every aspect of every business which is why you have to align your IP strategy to the particular type of business that you are.’’
Baker Botts is an international law firm which specialises in advising high growth companies on their corporate and IP issues and Coulson finds that its clients in the UK are increasingly alive to the importance of IP.
He says: “Younger and growing businesses are switched onto IP, but they don’t necessarily know what the best IP protection for them is. Our role is to make sure that their IP strategy for the business and the business strategy are aligned. But what we also find with some of the high-growth start-up businesses is that they need to ensure that their spend on their IP protections is commensurate with their funding.’’
Baker Botts is a full service firm, operating across all disciplines. From an IP perspective, it handles the transactional aspects of IP, such as licensing agreements, technology transfer agreements, research and development agreements, and joint technology development agreements. Further, it represents clients in their disputes across patents, trademarks, copyright and, increasingly, the misappropriation of trade secrets.
From a corporate perspective, the firm advises both investors and fund managers, as well as high growth entities from formation through rounds of venture capital or other private equity financing, exit, whether by sale or initial public offering, and beyond. The aim of both practices is to establish long-term strategic partnerships with all clients to help them navigate difficult corporate and intellectual property issues.
Coulson adds: “The other aspect is what we would call counselling: the advisory aspect of intellectual property, where we work with companies at whatever stage of development, but principally early stage companies going through a growth phase. This is to look at their existing intellectual property portfolio and work with them to advise on how they can best strategically develop that portfolio in order to meet the demands of investors who are going to be poring over the business to see what they have done and what they have got.
“This is to ensure two things: first, that what they say is protected actually is protected and second, in terms of budget, that they are not over committing a budget to certain forms of intellectual property protection when that budget could be better spent on other things like, for example, branding or development of the technology, marketing, or sales. This is because some IP rights – principally patents – are more expensive to obtain and eat up a budget very quickly, both with prosecution costs and ongoing maintenance fees to keep the patent in force over the course of its life.’’
Patent protection, therefore, is not necessarily the most appropriate form of protection and more digitally oriented businesses might be better focusing their IP strategy around their branding and investing money in their branding and protection of trade secrets such as the algorithms that actually run the software on their digital platform.
This can have two benefits: investors can see that the IP strategy is aligned with the business’s activities and, second, the spend on intellectual property protection can be managed and often significantly reduced.
However, Coulson emphasises, every business has its own requirements. “There is no one set roadmap which fits all companies. They are all slightly different and it may well be that in some areas, particularly the life science area, spending money on patents is vital because they are important and your key form of protection. There will be others, such as more digital, database businesses, where what you want to make sure is that there are appropriate technical controls in place to ensure that your algorithms remain confidential.
“So it really is a business-by-business analysis and it‘s impossible to have one size fits all in terms of strategy which is why, when we work with these companies from an investment portfolio perspective, it’s so fundamentally important for them, because it allows an investor to see that they are not doing standard things, that they have taken strategic advice and that they are moulding and shaping their protections to fit with their business and the direction that their business is taking.’’ Baker Botts will examine a company’s IP portfolio and advise it in the form of a report which the client can then show to its investors and potential investors. It reviews what that company already has and it makes recommendations as to how that company can develop its portfolio strategically.
“If that company is going into an investment round it has two things,’’ says Coulson. “It has a document which reviews its IP protection as a snapshot in time, but it also provides a roadmap for that company, so that investors can look at the piece of paper as a starting point and also see, as part of its diligence process, that the company has followed a recommended roadmap. Again, the whole aim is that the investor sees an IP strategy that is allied to the business.
Baker Botts corporate senior associate Sarah Melaney explains: “The broad principle here is that investors want to ensure, when they’re subscribing for shares in a business, that the value that’s attributed to the business is protected and therefore there will be future economic growth.
“But with a lot of technology businesses, a great deal of that value is tied up in their IP. The value of the report which we can provide is that investors can clearly see what protection is in place today and what needs to be done in order to get full protection. They can then make a decision: whether those protections need to be a condition for investment being made or, if things are going to take slightly longer, clear steps set out in the investment documentation that the company will take post investment to ensure that that the IP strategy is implemented within a proposed time frame.’’
She emphasises that regular reviews have to be undertaken to ensure that the IP strategy is developed as the business develops and changes. This is particularly important when a business enters into agreements with other companies, perhaps on a joint research and development project, or by looking at a proof of concept model with a larger player in the industry.
“What’s really important with those agreements is to make sure that they are protecting their own technology and that they are not giving away their crown jewels without realising it,’’ says Melaney. “That can be as easy as reviewing a company’s standard form of nondisclosure agreement to make sure that there is nothing inadvertent in that which is going to cause leakage of their technology. Also that they are safeguarding the ownership of the fruits of that project.’’
Much of Baker Botts’ work in helping clients protect their IP has an HR aspect. Coulson explains: “A lot of these companies have a relatively small staff where the technology may well be in the heads of one or two people. You have to make sure you have effective controls around those employees potentially leaving and either setting up on their own or joining a competitor.
“It’s also important that, if those employees do leave, you have a process that allows you to download everything that they know, so that your business is not going to suffer as a result of the fact that those who know how the technology works are going to walk out of the front door and there is nothing you can do without them.’’
At the other end of the spectrum, it’s important to look at the markets that a business is targeting and then how IP protection should be tailored for that.
“Intellectual property rights are national rights and they are enforced and protected on a national basis, so you have to be picky about which jurisdictions you are going to register in, because no company, not even the biggest company in the world, can afford to register everything everywhere,’’ says Coulson.
“Again, this is part of the company’s business strategy and we work with them to ascertain the key jurisdictions for them and again make sure that their strategy is aligned to their exploitation plans for those particular markets.
One of the first questions we ask is, where do you sell now and where you plan to sell in the future? A lot of IP strategy is crystal ball gazing and you try to project where the business is going to be in one, two, three or four years’ time.’’
Need to know:
- Baker Botts opened its London office in 1998 and has 725 lawyers in 14 cities around the world.
- The London office specialises in corporate, intellectual property, energy and disputes resolution work.
- Specifically, on the corporate and IP side, the London office represents technology and other emerging growth companies from formation through rounds of venture capital or other private equity financing, initial public offering, sale or merger and beyond.
- With the corporate and intellectual property practices working side by side, its lawyers help to deliver creative and specialised solutions for their clients’ needs, working with them every stage from idea to exit.
“As a lawyer, unless you can understand the technology you cannot properly advise on the strategy,’’ says Coulson. “Because there is no one size fits all, you need to have a beyond-basic knowledge of the technology behind a product or a service offering, because it’s that knowledge that enables you to craft the appropriate strategy for that business.’’
Melaney agrees: “I think that’s what differentiates our firm from other firms within the UK legal market. We really focus on two sectors: energy and technology and there is a nice intersection between them. That kind of sector focus allows us to have that depth of knowledge that means our clients are getting the right advice”.