Managing A Triangle Relationship

In a Marcus Evans conference in Singapore entitled Managing R&D Outsourcing and Partnering held in August 2007, Ho Cheng Huat, executive vice president of the Intellectual Property Management Division of Expliot Technologies PL, the marketing and commercialization arm of the Agency for Science, Technology and Research (A*STAR), addressed pressing issues on these two key working relationships.

“The IP owner has two different external partners, namely vendors and licensees. The IP owner needs to ascertain its IP assets, evaluate its management of the IP assets, and get an IP budget to affirm management’s commitment to IP protection and exploitation,” said Ho.

Examples of IP assets that a typical IP owner has are:
• Confidential information such as know-how and trade secrets in processes or process recipes,
• Copyright for subject matter expressed onto a medium,
• Trademarks or service marks for products, services, or company name and logo, and
• Patents for inventions filed in one or more countries/system.

Ho said managing IP assets means managing both internal and external resources. “Internal resources include database and software systems developed and/or supported by trained or qualified personnel who have relevant IP background or expertise. On the other hand, external resources include patent firms and/or IP system consultants that interact with or support the internal resources,” he said.

Relationship with vendor
In the IP owner-vendor relationship, costs, quality control and professional work ethics is key to growing the relationship. “While both parties are working within a fixed budget, both will set expectations and work towards sustaining and monitoring the entire engagement period,” said Ho.

“Both parties need to be professional in their respective operations to develop a long term business relationship to manage costs and quality. Feedback and sharing between both parties are essential.” For example, he said that while a vendor wishes to meet a customer’s expectations in terms of costs and quality, an IP owner should correspondingly reciprocate by setting clear deliverables and settling its bills promptly.

“Word gets around on work quality and business professionalism. Hence, IP owners should know exactly what they need and set clear boundaries when working with external parties and avoid making changes too frequently. Furthermore, they should be thinking of what they are likely to need in the future from current vendors while working on what is needed now.”

Relationship with licensee
In the case of the IP owner-licensee relationship, the IP owner needs to understand the licensee’s business objectives, the difference between ownership and commercialization rights, valuation of its IP, and have, as far as possible, terms and conditions in a license agreement that leave little room for doubt.

“Both parties need to align their business objectives while having trust moderated with practical reality. This will help establish a long term, mutually beneficial business relations through contracts and actions.” said Ho.

“It is unlikely that business relationships allow for three-strikes-and-you-are-out conditions. All it takes is just one strike to damage a working relationship that then requires substantial efforts and time to mend.”

Ownership and rights
Depending on the type of IP working relationship – solely developed-solely owned, jointly developed-jointly owned or joint ownership-independent and joint actions – Ho said the party who is funding for the project may not necessarily be the owner of created IP.

“Research groups engaged by sponsoring corporations are increasingly putting in IP value that is worth more than the funding. They want some form of returns in order for them to release the IP rights to the sponsoring corporations. Returns may be in the form of rights, shares and profits,” said Ho.

Increasingly, exclusive IP rights that restrict parties in transferring IPs and know-how to other parties IP contracts are more prevalent. Consequently, these other parties in the same industry are not able to share and use IPs licensed between two parties. One way around this and thereby allow an IP owner to work with different parties is to look at limited exclusivity of IP rights based geography, time, or field of use, said Ho.

Details of limited exclusivity of IP rights and ownership are usually stated in contract terms and conditions in agreements.

When working with external partners, Ho advised companies to make assessments of risks versus benefits constantly, while managing both internal and external expectations.

“Review relationships on a regular basis and terminate an agreement or start afresh if an existing one does not make business sense,” said Ho.

Ho further suggested that parties “be aware of current issues and anticipate future issues where possible. This helps to streamline your business processes and goals with your external partners.”