By Andrew J. Sherman, author and Partner at Jones Day
“Confiding a secret to an untrustworthy person is like carrying a bag of grain to the market with a hole in the bottom.” – African proverb
Farmers and ranchers build fences around their property to delineate what property belongs to them, to prevent intruders from stealing their crops, and to prevent cattle from wondering off their property. Fences protect what is theirs and tell the outside world where the lines of trespass are. In the intangible asset-, knowledge- and information-driven society, intellectual property laws can serve as virtual fences. We use these laws to declare to the world which intangible properties belong to us and where the lines of infringement have been drawn.
We choose, as a matter of strategy, policy and ethics, where to build tall concrete walls, rather than barbed-wire fences or wooden split-rail-style posts, which can be seen through and are relatively easy to penetrate. Our budget constraints, our attitudes toward intangibles, our degree of expertise and experience in harvesting intellectual assets, and the size and scope of our inventory of properties are all relevant variables in dictating which types of fences should be deployed for which of our properties.
The intellectual capital agrarian must make the same choices that his or her agricultural brothers made 200 years ago. Do I share my proprietary farming best practices, know-how, systems, protocols, tools, networks, relationships, methodologies, channels and strategies with my fellow farmers, or do I keep these assets hidden and protected behind guarded walls? If I do share them with others, then at what price and pursuant to which business model do I do so? As a consultant? As a trainer? As a vendor? As a licensor? As a franchisor? As a joint venture or alliance partner? As an acquirer?
To what extent does this knowledge truly provide a competitive advantage over other farmers? If it does in fact do so, does it apply to all types of farmers? Or only to my direct competitors? To what extent could this knowledge or these best practices be useful to non-farmers in other businesses? Can I build business models to sell or license this knowledge outside the agricultural community? In other domestic markets? Abroad? The key questions have never changed, but the crops have evolved over time.
Decisions regarding potatoes and tomatoes still exist, but the commodity under the biggest global strategic microscope today is the crop of knowledge, which can manifest itself in many different ways. Companies of all sizes and in all industries (from early-stage entrepreneurs to mid-market gazelles to established global conglomerates) are all challenged with the exact same question: How can we be effective and efficient farmers as we plant and harvest our intellectual capital, and which are the best fences to protect our turf?
There are various types of fences available to your company, each with strategic advantages and disadvantages. Understand that there is no one best or right choice. Each company must decide for itself which types of fences it wants to build and which will best serve its stakeholders, from the open architecture platform of Linux to the closely guarded code at Microsoft, from the high concrete walls around the trade-secreted formula for Coca-Cola to the community-driven and transparent Wikipedia®. It is up to the leaders of the company to draw the lines in the sand and to work with in-house lawyers and external law firms to choose the legal strategies that will drive shareholder value and help ensure future harvests that are timely and bountiful. The level of proprietary intellectual property protection for which you are eligible (and that you choose to enforce) will have a direct effect on your business models, your pricing, strategies, your channel loyalty, and your ability to license the technology on brands and on profit margins.
Andrew J. Sherman is a Partner in the Washington, D.C., USA, office of Jones Day, with more than 2,500 attorneys worldwide. He is a recognized international authority on the legal and strategic issues affecting small and growing companies, as well as an Adjunct Professor in the Masters of Business Administration (MBA) program at the University of Maryland and Georgetown University. Andrew is the author of 23 books on the legal and strategic aspects of business growth and capital formation. His latest book, Harvesting Intangible Assets, Uncover Hidden Revenue in Your Company’s Intellectual Property, is now out.