Disruptors are introducing new ideas into the manufacturing business with the ability to change current and uncover unique methods of functioning in the tale of the rising digital economy.

The issue for incumbent manufacturers in many sectors is not only that technology has grown and gotten more sophisticated, but they may also not control the Intellectual property (IP) on which new digital technologies are constructed. In this rapidly changing digital world, they have a fundamental issue: their power base is based on outdated and diminishing traditional business models and concepts. Many companies have invested much in intellectual property portfolios for traditional models that are in danger of being supplanted by disruptive new approaches.

Data analytics, digital platforms, robotics, virtual assistants, blockchain, IoT and wearables:” Companies are emphasising and significantly investing in the implementation of new capabilities and technological priorities. While these capabilities and technologies offer improved business outcomes and the delivery of new value propositions to consumers, each one introduces a new set of intellectual property (IP) serious concerns third-party rights.

Driving Change

The automotive industry is a prime example. Cars will most certainly be powered by electricity and electric engines in a decade, and these vehicles will be more ‘intelligent,’ if not driverless. Such innovations are attracting a variety of enterprises, including established digital giants, creating a whole new threat to traditional automobile manufacturers.

For incumbents, these automotive transitions pose a significant Intellectual Property risk. There are two big risks: First, the corporations that will dominate the automotive sector of the future are likely to be those who possess the intellectual property (IP) for upcoming technologies or critical components of them. Knowing how to utilize them is not enough. Suppose this know-how is owned by digital giants entering the sector. In that case, conventional automakers may be forced to form alliances in order to survive and may wind up paying for access to the technology. Second, the huge automotive companies who have dominated the market for years have constructed their patent portfolios around the technologies that are important to the current (or prior) business model. These portfolios are at risk of being severely devalued.

Five Intellectual Property Challenges in a Digital Economy

Manufacturing firms face several challenges around Intellectual Property in the digital economy, including the following five:

1. Protecting and exploiting the value of data

The value of enormous amounts of data gathered within businesses is expanding. There are commercially sensitive electronic goods such as CAD drawings in addition to product sales data, customer records, component costs, supply chain information, or market statistics. Such data poses an Intellectual Property risk in terms of possible cyber security breaches.

Proprietary cloud-based algorithms and large-scale training data repositories generated overtime via Internet of Things (IoT) devices are particularly valuable. As they acquire and use training data to enhance their accuracy, artificial intelligence (AI) algorithms gain value. In a digital market, such proprietary and thoroughly trained AI algorithms may be extremely valuable, perhaps accounting for a major portion of a company’s worth.

As a result, businesses must pay particular attention to safeguarding and monetizing this value. Previously, Intellectual Property security was centred on maintaining information held by employees, employing measures such as contractual restrictions to prevent employees from leaving the firm and joining rivals. While this is still applicable in many circumstances, the emphasis is moving to cyber security for data protection.

Furthermore, in order to increase the value of data, organisations will find it increasingly appealing to contemplate licensing out their data.

Digital rights management is thus critical. They might adopt a cautious strategy, engaging just with a few partners in their supply chain or ecosystem, or a more expansive one, which could even include licensing data to competitors.

Blockchain and other digital ledger technologies are anticipated to play a key role in not only securing but also commercialising data and intellectual property.

2. Moving to portfolio-based Intellectual Property

Understanding the power of Intellectual Property portfolios is critical. For example, in the automobile industry, electronics-based technologies crucial for future car manufacture might include IoT, AI, battery management, and drone control. Companies that understand how to build large, strategic Intellectual Property portfolios comprising numerous relevant, emerging, and converging technologies will be successful.

They will also need to have (or have access to) complementary information and abilities in order to identify and establish favourable trajectories that keep rivals at bay.

Suppose new entrants, such as digital giants, can do so successfully and early. In that case, they may obtain a competitive edge over large incumbents, who may find it difficult, if not impossible, to catch up and close the gap.

3. ‘In-licensing’ and ‘out-licensing’: needs and opportunities

Given the digital economy’s complex and fragmented patent environment (with IP ownership scattered across numerous enterprises), it will be difficult for corporations to possess all the Intellectual Property required to produce intelligent gadgets. As a result, organizations must examine how to effectively get usage rights from Intellectual Property owners. In-licensing arrangements are frequently required to ensure compliance prior to product launch and avoid infringements.

On the other hand, the proprietary technologies that manufacturers own may be valuable to other companies willing to pay for access to those technologies. However, establishing out-licensing services necessitates the acquisition of unique and scarce skills and competencies, in which enterprises must invest if they intend to explore this potential.

4. Understanding the true cost of ‘free’ software

Manufacturing companies internally create software components for digital goods, but they may also use ‘free‘ and open-source software obtained from top development sites like Github. The entire cost implications of open source software may not be immediately apparent. Typically, use is ‘free‘ only under particular conditions, such as forcing the user to make all software produced on an open-source component freely available to the community. For compliance purposes, manufacturing enterprises will need to grasp and master the complexity, variances, and requirements of the many licence categories. Several big consulting firms have already discovered a profitable business model in offering compliance services to businesses employing open-source software for a price.

5. Managing Trade Secrets

We are already witnessing a tightening of regulations around particularly significant private firm knowledge, commonly known as trade secrets, which might include well-trained AI algorithms. This will necessitate organizations to identify, treat, protect, and enforce their most important know-how/data (trade secrets) distinct from their generic data (such as customer records).

Strategies for Intellectual Property in the Digital Economy

There are three essential pillars for manufacturing organisations to consider for managing IP in order to be well-positioned and equipped to flourish in the digital economy.

The first concerns “People”. Firms must possess or have access to the IP awareness and management capabilities required to flourish in the digital economy.

The second is about business objectives and structures. Any solid and forward-thinking IP strategy must be in sync with Organisational Structures and Commercial Goals”. This may necessitate the consolidation of existing IP management, which is frequently dispersed across multiple departments: for example, technologies may be managed by patent departments, brands by marketing departments, trademarks by legal teams, contracts by purchasing departments, and software and data by IT.

The third is “Strategy. Organisations need to develop their own integrated digital IP strategy. This is likely to be substantially different from a traditional IP strategy: it needs to consider the different types of Intellectual Property, including software and data, as well as the firm’s approach to in and out-licensing, and involve a portfolio approach in which multiple Intellectual Property assets complement one another.

Trademarks: When it comes to trademarks, selecting one requires some thought. It is advisable to clear one’s trademark prior to selection to ensure that it is eligible for usage and registration. Clearance and protection via trademark registration are essential to prevent investing in a brand that cannot be used by one’s firm.

Patents and Trade Secrets: The patentability of the technology is critical: if someone has acquired relevant patent rights, a patent can provide them with substantial protection by preventing competitors from creating or utilising that invention. At the same time, it appropriates rewards for innovation investment.

Trade secret protection and related danger should be on the radar as well. Many trade secret instances emerge in rather typical settings, such as highly sought after staff leaving for a competitor, a failed cooperation or joint venture, or a strained third-party relationship. Patent infringement and trade secret litigation can be complicated and pricey.

Copyrights: Using open-source introduces intellectual property rights and duties, especially when it comes to copyrights. The largest risk of open-source software is noncompliance with its licensing requirements, which are far from simple. When merging open-source software elements into proprietary software, caution must be exercised. Certain licensing restrictions, such as forcing the user to distribute its modifications, including its own source code, to downstream users or customers, may be triggered.

To recognize the complete spectrum of IP risk, it is necessary to understand which aspects of new capabilities and technologies are protectable by Intellectual Property rights, the state of the market, and any existing prior Intellectual Property rights as part of an avoidance plan. As a result, an organisation may practise careful IP risk management while also identifying possibilities to safeguard your competitive edge.

Conclusion: Intellectual Property protection is critical in a technologically disrupted economy because it can mean the difference between risk and return for businesses. Patents, trademarks, copyrights, and designs are all acquiring importance, as are other types of Intellectual Property protection, such as trade secrets and non-disclosure agreements. Effective IP management will secure business ideas while also providing the potential to monetize them.

References:

  1. https://www.ifm.eng.cam.ac.uk/insights/innovation-and-ip-management/intellectual-property-challenges-for-the-digital-economy/
  2. https://www.lexology.com/library/detail.aspx?g=63153604-4f1b-4217-ad88-83d6c8932900
  3. https://www.jdsupra.com/legalnews/managing-ip-risk-in-our-digital-world-65875/
  4. https://nap.nationalacademies.org/read/9601/chapter/7
  5. https://www.ip-research.org/wp-content/uploads/2020/05/Holgersson-2018-Technology-based-coopetition-and-intellectual-property-management-final-manuscript-version.pdf

Disclaimer: The present article intends to provide general guidance on the subject, and you can also consult us in your specific case.

Author

  • Title

    Sukrati Gupta is a law student pursuing BBA LLB (Hons) from SVKM’s NMIMS Kirit P Mehta School of Law, Mumbai. She is exploring various kinds of streams in law with enthusiasm in Intellectual Property law, Corporate law, ADR, etc. Sukrati has published various papers in Corporate law. She has a keen interest and experience in writing blogs and legal research articles.