Up to now, intellectual property has been taught only in law schools. But over the last 50 years, IP has grown from a narrowly specialized legal field into a major force in American social and economic life. With IP-protected innovation now the principal driver of corporate value as well as driving economic growth nationally, intellectual property has become vitally important to all Americans, not just those in the legal profession. Indeed, the University of Southern California just recently was the first school to launch a course in intellectual property for undergraduates.
With so many players involved in facilitating the market success of an innovation, the effective use of IP plays an important role in reducing risk for those involved, who may be able to reap returns for their participation in the process. These days, IP plays a very key role in facilitating the process of taking innovative technology to the market place. At the same time, it also plays a major role in enhancing competitiveness of technology-based enterprises, whether such enterprises are commercializing new or improved products or providing service based on a new or improved technology. For most tech-based companies, a successful invention results in a more efficient way of doing things or in a new commercially viable product – the improved profitability of the company is the outcome of added value that supports a bigger stream of revenue or higher productivity.
Fabio Marino, vice chair of the IP department at Polsinelli and Peter Thurlow, shareholder at Polsinelli, recently sat down with IPWatchdog for an exclusive interview to discuss the critical importance of IP-protected innovation today in the United States.
Intellectual property has traditionally only been taught in law schools because it is based on laws passed by Congress, signed by the President, and interpreted by the courts including the U.S. Supreme Court, according to Thurlow. Thus, there is a legal foundation associated with IP, including Section 35 of U.S. Code for patents and patent regulations found in Section 37 of the Code of Federal Regulations.
“However, this is changing as healthcare innovation programs and engineering associations are incorporating IP into their educational programs because IP is so critical to the success of their innovation programs,” he said.
Technology companies have been educating inventors about IP informally for many, many years. Marino says this takes the form of seminars and other informal interactions where IP attorneys talk to engineers and other technologists about how to protect IP, reduce inventions to writing, submit invention disclosures, etc.
“Large technology companies have formal processes to collect and review this information and make educated decision about how to invest resource in protecting their IP,” Marino added. “While lawyers, both in-house and outside, often drive this process, many non-lawyers play an important role, for example, as members of a patent committee. And it is this entire ecosystem of lawyers and technologists working together that generates most of the IP in this country.”
Over the past 50 years, IP has grown from a narrowly specialized legal field into a major force in American social and economic life mainly because of the increased importance and appreciation for the value of IP by companies and their investors, according to Marino. Silicon Valley, for example, is all about the expertise of its tech workforce, which is why most leading tech companies in the world have major operations in Silicon Valley. A large portion of the market cap of those companies can be directly attributed to intangible – or in other words intellectual property – assets. IP law is the primary tool used to protect the value of that innovation, and as we see from countries without meaningful IP laws there is simply no way to protect innovation absent a strong intellectual property system.
Today, the tech industry in particular, as well as other industries, are increasingly based on innovation as their primary value driver. Indeed, well over 50% of all patents issued by the United States Patent and Trademark Office relate to software innovations, many others relate to pharmaceutical and biotechnology innovations. IP, predominantly patents and trade secrets, provides the legal mechanism used to protect the value created by innovation.
Developing an IP portfolio is now a basic requirement even for tech startups that hope to raise early stage financing. In addition, M&A transactions between more developed companies depend heavily on IP due diligence, and are frequently driven by a desire to acquire intellectual property assets, particularly patents and the trade secret know how that exists in the acquired company.
“The IP field has grown exponentially over the past 50 years because virtually every industry either produces IP or uses it,” added Thurlow. “For example, a USPTO report from 2012 showed that IP-intensive industries contributed $5 trillion and 40 million jobs to the U.S. economy.”
So, how has IP become vitally important to all Americans, not just those in the legal profession?
“As a country, because of our comparatively high standard of living with respect to less technologically advanced countries, we have become more and more dependent on innovation as the primary driver of value in the products we make,” explained Marino. “And because of that phenomenon, we depend more and more on IP to protect the value of those innovations. And that is why nowadays developing and protecting IP is not just the job of IP lawyers, but an important part of the job of those who develop innovations in all industries.”
According to Thurlow, although there are concerns with the status of IP laws in the U.S., IP still remains an important “cog in the innovation wheel.” The reality is that investors want IP production before they invest capital in a startup, manufacturers need IP to try to prevent competitors from simply copying their products, and companies use IP to increase their brand and overall company valuation.