IP as an Asset for Business Development

In January 2018, Apple, the technology giant agreed to pay $38 billion to the American IRS, the Internal Revenue Service for the foreign cash of over $350 billion, which it has stashed outside the US. Still, it is considered to be a good deal for Apple as it has faced criticism for stashing all this money abroad and avoiding payment of fair tax in the US. How did Apple earn so much money? Only because of intellectual property (IP) – the numerous patents including the design patents, highly valuable tradename, and trademark, and any other IP, even if remotely connected!

Asset simply means a useful or valuable thing or person. More specifically, in financial terms, an asset is an economic resource. It can be something tangible or intangible. It can be owned by a legal person, including a company. The owner controls it to produce value, and, its value can be commercially exploited to make a profit or meet debts or commitments. Intellectual property truly fits within the ambit of this definition. An asset is valuable only if it can be legally protected and if there is a challenge about its ownership or usage, the legal environment should be effective enough to get a realistic and efficacious remedy for the owner. Otherwise, an asset simply has no inherent value, even if on paper it may be worth
millions of dollars. The way the business world is queuing up before the patent offices, it is quite evident that patents are being accorded the highest importance as an asset for business development by businesses. Of late, it has been reported in the media that the Bank of America has applied for or received 43 patents – the maximum number of patents for blockchain. Virtual currencies like Bitcoin primarily work using the ledger technology, known as blockchain, for verifying and recording transactions.

Not very close to the Bank of America, but with a sizeable number, are International Business Machines Corp. (IBM) and Mastercard Inc. with 27 patents each involving applications leveraging blockchain and artificial intelligence for giving the push for future growth. These are the big companies which typically are the leaders in their chosen field of business and quite often successfully anticipate the upcoming moonshots along with the method to be followed to realize maximum benefit from these developments. Amazon has recently patented a robot which can tailor clothes with glow-in-the-dark guidance. This is a system which uses fluorescent inks as a guide for cutting fabric. This ink can be used on fabric, rubber, leather, paper, plastic, etc. the ink remains invisible under normal lighting. However, the ink can be seen under ultraviolet light and can be detected
with sensors. The applications can be enormous for customized products like clothes, footwear, scarves, gloves, hats, bags, curtains, towels, etc. Imagine a future when products are made in the delivery truck which is driverless.

From technology companies to luxury brands making fashion statements, and from biotechnology innovations to financial engineering, intellectual property is emerging as the foremost requirement for the success of a business enterprise. Businesses are protecting their turf even in some of the jurisdictions which were erstwhile considered to be extremely weak intellectual property regimes like China. Recently, on January 11, 2018, China’s Shenzhen Intermediate Court decided in favor of Huawei, the Chinese smartphone maker, against the South Korean giant Samsung. The court ordered Samsung to stop manufacturing and sale of the infringing products and observed that Samsung had maliciously delayed negotiations between the two companies since 2011. Though this is a Chinese court’s decision in favor of a Chinese company against a foreign company, it should not be perceived as being nationalist or protectionist because patent holders are being given considerable importance and recognition.

In the cloud technology, IBM got more than 1900 cloud technology patents in 2017. According to IBM, its patents include 1400 artificial intelligence patents, 1200 cybersecurity patents and several others in related areas. IBM has received more patents per year for 25 years than any other American company. It has often been said by observers of patent law that the story of America’s economic progress and development is the story of patent development in the country. No wonder grand old tales of patent litigation regarding the electric bulb, Ford’s car, telephone, even a wooden pavement have become part of folklore for law students and intellectual property fraternity. Several of these cases were decided by the US Supreme Court in the 19th century taking the intellectual property protection to glorious heights. Interestingly, with the opening of floodgates of business method patents in 1998 in the State Street Bank case, the judiciary in the United States gave a new twist to patent protection and business development.

In the last decade or so, the explosive growth of business method patents has been criticised on several occasions. However, the courts have not yet ruled against the business method patents as evidenced by the Bilski versus Kappos case in 2010, and later in Alice Corp. versus CLS Bank case in 2014. This has compelled several writers to comment on the consequences of a liberal patent regime, which at times leads to patent trolls resulting in, debatably, impeding the development of business and technology.

The way the technology related to robotics, artificial intelligence, cloud technology, biotechnology, smart phone usage, telecommunications, pharmaceuticals and several areas concerned with making the lives of human beings better is developing and evolving, patents will no doubt remain as the most important asset for businesses.

Written by Anurag K. Agarwal

Prof. Anurag K. Agarwal is a faculty with the Business Policy area at IIM Ahmedabad. This article is an extension to the 21 Jan 2018 article by the author that appeared in DNA titled, ‘Patents becoming assets for business development.’

Leave a Reply

Your email address will not be published. Required fields are marked *