More on Exploitation Strategies
| Author | Russell L. Parr |
| Profession | President of Intellectual Property Research Associates |
| Pages | 187-212 |
CHAPTER 14
MORE ON EXPLOITATION
STRATEGIES
The corporate do-it-yourself approach to everything has changed. Previous corporate
xenophobia dictated that ideas were to be kept “in the family,” hoarded, and nurtured
privately.Even ideas not pursued were kept in the vault to gather dust. In fact, the mentality
went so far as to consider anything not invented internally as not any good. Enterprises in
touch with innovation and/or the marketplace have come to the realization that they cannot
go it alone. The long cutting edge of technology development has created a veritable ood
of opportunities. If an enterprise depends for exploitation on its own resources alone, so
few of these opportunities can be dealt with that it inevitably drops behind in the race.
In the previous chapter, the defensive and cost-savings levels of intellectual property
management were discussed. Once a company has its defensive strategy established and its
costs optimized, the next strategy is to capture value from intellectual properties, and that
is the focus of this chapter.
As with any business strategy, there must be a clear understanding of what is needed to
accomplish goals. A process called “gap analysis” can be a valuable tool.1There are four
primary steps in this analysis:
Step 1. Describe the industry and economic conditions that will exist far into the future.
Step 2. Describe the business characteristics of a hypothetical company that will domi-
nate this future industry and economic scenario (the future winner).
Step 3. Assess the current competencies and business characteristics of your company.
Step 4. Compare your company to the future winner to nd areas where important future
competencies are lacking.
Many companies have carried this “gap analysis” technique even further, using it to
identify potential gaps in their technology base that may appear years in the future. The key
to the process is to identify and describe a product or business environment that will exist in
the future. This is often done by observing what has occurred in the past. The rst task is to
describe, in as much detail as possible, the market that is expected to develop; the products
or services that are expected to serve the market; the surrounding economic conditions;
the facilities, funding, and people that will be required; and the intellectual property that
1Russell L. Parr and Patrick H. Sullivan,eds., Technology Licensing— Corporate Strategies for Maximizing Value
(Hoboken, NJ: John Wiley & Sons, Inc., 1996), p. 137.
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188 Ch. 14 More on Exploitation Strategies
will underpin the participation. The second task is to describe the characteristics of the
company or product that will be successful in the anticipated market. The third task is to
identify which of the required ingredients for success one already has, which are under
development, and which are missing. The missing ingredients are, of course, the “gap.”
One gap-lling strategy is to identify other companies that already may have the missing
ingredients or have the ingredients under development. If those other companies have not
done the same gap analysis, they may not realize what they have. In any case, a portfolio
license transaction could be the means by which the gap is lled, or the means to provide
the technology base for further development to accomplish the task. A portfolio license
may also be a good competitive strategy to avoid tipping off the source of the technology
to the direction of one’s interest.
A portfolio license typically involves no knowhow or showhow. If that is a required
ingredient of the transaction—either because of the nature of the technology or because
the licensee has not got the skillset to exploit it—then another strategy must be employed.
Probably the most common of these is a joint venture or other form of strategic alliance.
The two parties license their portfolios to the joint venture and provide the knowhow to
it. This provides both licensor and licensee with the economic incentive to provide what
may be relatively costly follow-on consultation and to share proprietary technology, which
would not occur with a simple portfolio license.
The gap analysis is basically having you look at where you want to be, determining what
you need to get there, and assessing what you already have for the journey.The last step is
to ll in the gap of missing pieces.
Implementation of gap analysis requires an assessment of the current technological posi-
tion of a company. The key points for assessment are:
• Generate cash from core technology.
• Generate cash from noncore technology.
• Gain access to complementary assets needed to exploit technology. This may
include technology, trademarks, and distribution networks.
• Obtain, through invention,licensing, or acquisition, technology that will ll in blank
spots in a company’s portfolio.
• Acquire technology to keep it out of the hands of competitors.
• Acquire complementary technology that will provide synergistic value.
• Make technology available to competitors in order to harvest cash from their
markets.
• Use technology as the basis for establishing alliances or joint ventures.
• Obtain a larger technology portfolio to provide design freedom and avoid infringe-
ment litigation.
• Acquire technology in order to avoid the time and cost of self-development.
Once a corporate strategy is established and gaps have been identied, there are different
ways to ll the gaps discovered in the assessment:
• Internal development
• Licensing-in
• Acquisition
• Cross-licensing
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