The Musings of Metis

Some Say....

There are rumblings around the racetrack. Some say its protection of identity. Others, that it is the right of licence payers. We only knew he was called the Stig!

No longer.

The BBC had taken legal action to block publication by HarperCollins of the book which would unmask the faceless mystery driver and well established merchandising image.

The BBC claimed he had been bound by a confidentiality agreement and that revealing who he is would spoil viewers' enjoyment of the popular Top Gear programme.

However, after more than a day of private legal submissions, lawyers for HarperCollins emerged to say the case had concluded in their favour and the identity of the Stig was revealed.

So this case may raise questions in your business: is your brand and identity secure? Have you fully protected some of your core intangible assets by trade mark copyright or design right? How important is the identity to your company? Can you live without it?

I’m sure that the mystique of the Stig will continue, just look at the merchandising collateral and after all he had African, American and other nationality cousins. Didn’t he?

Coffee to Go?

In an interesting article in a recent Financial Times, two opposite perspectives on licensing were demonstrated.

The article related to Oracle’s patent and copyright infringement claim against Google for the inclusion of elements of the Java software (now owned by Oracle after its purchase of Sun Microsystems earlier this year) within the Google Android smartphone operating system.

It appears Java has become the victim of a sea change in licensing strategy surrounding its use. When owned by Sun, Java was “promoted” as the enabler for internet applications, a tool set where developers could rapidly build solutions for an ever widening, cross platform user base. As a consequence, it is unlikely for you not to have Java somewhere on your systems if you use a PC, mobile phone or netbook. “Freely” licensed use of Java established its position as the tool of preference and core to internet business and in return Sun gained kudos.

Now, under the ownership of Oracle, Java has become embroiled in the battle for smart phone supremacy. With sales of Android-based smartphones overtaking Apple’s iPhone in the last quarter, and the inclusion of Java code in the operating system. The FT article suggests Oracle see a threat to their existing Java licence revenues whereby it would lose the power to “charge a royalty on new handsets”. As a consequence, the Java strategy has moved from collaborative to protective, with multiple copyright and patent infringement claims being raised in San Francisco.

While the outcome is yet unknown, there remains a risk that Google, if forced to pay for the use of Java, could start to charge for Android, challenging Google’s Android business model and new handset providers may look for cheaper alternatives or open up the opportunity for Apple to regain the initiative or another player (Microsoft?) to enter the arena.

As the article states: “at the time it bought Sun, Oracle executives said they would tread carefully in how they exercised their Java rights, since a heavy-handed approach could undermine the software’s standing as a de facto industry standard”, but has the temptation of new revenues as a result of the growth of mobile apps been too great?

The bottom line is this: when you establish a patent portfolio, you must seriously consider how you intend to utilise it. Do you intend to actively pursue each infringement or do you view a collaborative approach to be more attractive, sharing profit through a well thought out licencing strategy?

Is Java now both a headache as well as an opportunity?

If Apple do it, why can't you?

With all the press that Apple has received recently with the iPad and last week the new iPhone 4, it was interesting to read the review of the new iPhone's features by Kyle Baxter of Tightwind.net.

In it, Baxter highlights the new hi-res screen, the camera and – as ever – the overall design. But technology aside, his most significant comment is not the adding of more features but:

“they [Apple] aren’t attempting to compete with Android phones feature-by-feature. Instead, they are trying to continually redefine exactly what a smartphone is, and thus force their competitors to compete on Apple’s terms. They’re trying to make everyone else respond to them, rather than the other way around.”

Metis Partners always stress the importance of “competing on your own terms” as a key strategic objective and by identifying and exploiting your companies intangible assets - brand and reputation, market intelligence, know-how, IP and culture being among the ten areas Metis consider - you can immediately take the upper hand and make competitors respond to you, rather than you to them.

So if Apple with its wealth and position of strength does it, why aren’t you? What hidden assets do you have that can be used as a “weapon” to compete? Where do you have the pistol to beat your competitors bow and arrow?

Think fruity you little monkey!

Metis Partners has been successfully partnering with insolvency practitioners in order to maximise the return for creditors in insolvency situations for a number of years. You may have seen we recently completed the sale of the Kshocolat and Hot Choc brands to Bon Bon Buddies Ltd. http://www.kshocolat.co.uk/.

Metis Partners are currently involved in the sale of a number of other brands and we have had the bright idea (if we don’t say so ourselves) to supplement our normal marketing process by offering opportunities for businesses to purchase and exploit otherwise under-utilised intangible assets via our website.

The brands currently available for sale are as follows:

‘Think Fruity’ – The Think Fruity brand was launched onto the retail market in late 2008 / early 2009. Described as a “vibrant, modern range of personal care and washing up liquid products, uniquely positioned to offer the consumer a product of quality, while addressing some of today’s concerns about environment and health, all at a budget price”, the Think Fruity range consists of 14 products, split across 4 categories. Think Fruity was developed specifically to meet a target recommended retail price of £1, and was primarily sold through ‘bargain’ retailers who have seen an upturn in trade during the recession, including Poundland, Boyes and B&M Bargains, although it also enjoyed particularly strong sales through Tesco.

The Think Fruity brand is protected by a UK trademark registered in class 3, and the brand has acquired goodwill through its year of trading and the market recognition gained during that time. A buyer will have the opportunity to acquire and exploit this goodwill for sales growth in the UK and in international export markets. Further information and product photographs can be found at: http://www.thinkfruity.co.uk/

‘Little Monkeys’ – a UK registered trademark is available for sale in class 3 (relating to soaps, shower / bath products, cosmetics and other toiletries). Purchasing this trademark would provide strong branding potential for a company seeking new market opportunities in the children’s toiletries / body care sector.

‘Stir’ – a UK registered trademark encompassing a series of three stylised word marks for the words ‘Stir’ and ‘Stir Soups and Salads’ and a registered UK trademark representing the stylised image of a stirrer are available for sale. These trademarks, registered in classes 29 and 30, relevant to the sale of food and drinks, provide new market opportunities for entrepreneurial businesses in the takeaway soup /salad bar sector, or indeed to businesses in any sector offering products which can be ‘stirred’, such as takeaway coffees and hot drinks.

If you are interested in purchasing any of these brands and would like to receive a marketing schedule containing full details of the assets available for sale, please contact Lauren@metispartners.co.uk or call us on 0141 353 3011.

Who owns the brand?

Metis Partners is always looking for ways to help its clients get the most out of their intangible assets, whether we are acting for clients wishing to commercially exploit their intangibles through licensing or acting on behalf of the insolvency practitioners seeking to maximise the return for creditors through the sale of a company’s intangibles. One issue which has come up in a number of recent deals relates to the ownership of the intellectual property in marketing and brand materials produced for companies by external companies such as graphic designers, web designers and photographers.

These materials can include things like the website content and layout, the design of the company’s logo, and even the shape and design of packaging of the company’s products - all of which are important assets and integral parts of a company’s brand identity. Such materials are all protected by copyright, which arises automatically in favour of the author (normally the design company, when an employee has prepared the materials), and in the case of packaging, design rights may also apply in favour of the designer. Such right may be registered or unregistered, depending on whether steps have been taken to protect the designs in question. The utilisation of external contractors by design agencies can complicate copyright ownership yet further.

Companies often assume that as they have employed the design agency and paid for the work, that they own the intellectual property (copyright) in all materials. But without taking certain pro-active measures to obtain an assignation of copyright, this is not necessarily the case, a situation which can cause problems when assets such as the brand are being licensed or sold. Unless these rights are expressly assigned by the designer to the client, the company utilising the brand may be unable transfer the copyright or design rights to a licensee or purchaser without the consent of the design company, which remains the legal owner of these rights. Obtaining consent in itself can lead to unwanted delays, involving a buy-out fee for assignment of copyright along with potential legal costs. As design company T&Cs may or may not make clear, agencies may well be able to effectively hold to ransom clients who wish to exploit their own intellectual property.

Another area in which companies may face similar problems is in relation to software produced by external consultants on behalf of the company. Unless there is an explicit assignation of the copyright in the software code, this will be retained by the software development firm. This can cause problems in an insolvency situation where bespoke software can be a potentially-valuable asset, essential to a prospective purchaser who wishes to purchase the business or certain assets of the business.

In light of these issues, Metis Partners recommends that companies engaging external agencies to produce brand or marketing materials, bespoke software and packaging designs, which can often be integral and valuable assets of the business, clarify ownership position of these materials and ensure that ownership is transferred at the time the materials are prepared in the contract for services, or in a separate assignation document following preparation. Ensuring all intellectual property is properly transferred can help ensure that certain copyright pitfalls can be avoided.

Links:

http://www.designdirectory.org/new/bdi/brochure/Appoint_a_Design_Agency.pdf

The Emerging Role of the CIPO

In a recent Webinar sponsored by IAM Magazine, "The Emerging Role of the CIPO (Chief Intellectual Property Officer)", thought leaders in IP, Ron Laurie, of Inflexion Point Strategy and Rob Sterne, of Sterne, Kessler, Goldstein & Fox concluded:

An increasing number of companies are managing IP as a strategic business asset and CIPOs will be the key executives for companies wishing to change from the perspective of IP as a cost centre to an IP as a profit centre model.

A key responsibility of CIPO’s is their relationship with the heads of strategic business units and their joint responsibility to assimilate the financial impact of IP on the unit’s value (including revenue) forecasts.

In posting comments on the Webinar on how to address these challenges on the IP Finance Blog, Neil Wilkof of Herzog, Fox and Neeman raised some critical challenges:

(i) The approach seems to have a patent-centric orientation, but what about trademarks, copyright and trade secrets?

(ii) The approach is focused on a large company environment but what about small and medium enterprises – can the structure be generalised?

(iii) IP could exist as both cost and profit centre – how do we account for both possibilities?

(iv) Where can we identify good practice that is operationally relevant and not phrased in headline terms?

In answer to these questions, Metis Partners suggest, in the first instance, all IP (extending to and including intellectual, relationship and structural capital) should be categorised, recorded and protected. This gives a solid foundation on which to identify the IP impact and engage those immediately responsible for its management in the strategic alignment process.

We agree, when big companies talk about IP assets they often really do mean patents, but patent poor SME’s can focus more on know-how, technical innovation or their investment in R&D as their “IP”. In both cases, and in answer also to question (iii) it’s crucial that companies align their IP with their business strategy – market intelligence is an asset in its own right – IP management offers competitive differentiation and agility in the market, protecting both market share and margins. There’s the common approach, and a strategy to use IP as a profit centre through exploitation in non-competing markets.

Finally, we humbly refer to our own approach, applied successfully across multiple sectors and companies, large and small whereby we break down IP from the business perspective into ten interlinked classes covering areas including IPR, Customer Relationships, Key Business Processes and Brand and Reputation. Defining the assets within in these business perspectives, makes it easier for business unit managers to a) accept, b) manage and c) develop the assets leading to increased revenue opportunities.

To innovate or not to innovate, that is the dilemma

In an article on FT.com by Brian Groom, Business and Employment Editor, previewing a forthcoming report by the EEF manufacturers organisation, it suggests that companies with an inclination to innovate their way out of the recession are being constrained by a lack of appreciation of innovation by finance providers.

The article suggests “a poor understanding in the financial sector of how and why manufacturers invested in innovation, which left better performing companies struggling to access credit.”

Justification for this risk averse strategy appears to be that “many innovations made during the recession were intangible – in areas such as processes, organisation and marketing” and that underwritten personal guarantees or collateral were needed to mitigate the risk.

This is not an unexpected statement to Metis Partners who, earlier in the year completed an exercise within the Financial Sector on behalf of the Intellectual Assets Centre, where a key finding of an analysis of the impact of intangibles was a requirement for the assets to link to an identifiable revenue opportunity.

Metis Partners also found that, whilst many finance providers appreciated the value-add of intangible assets such as critical processes, market intelligence and know-how, the value-add was secondary to a financial assessment. It appears that finance providers are using an entrenchment strategy, digging in to live through the downturn. Only one participant, took the bullish approach and was willing to consider intangibles as critical assets in a risk assessment, even taking account of the potential recovery from the sale of intangibles as part of their security.

Metis Partners believe the solution to this dilemma is to ensure all of the relevant support organisations: the enterprise support companies, business incubator companies, academic /business collaboration organisations and grant funding providers work together to create an innovation infrastructure founded on an appreciation of intangible assets and IP, which takes away the need for finance providers to “do the diligence” and demonstrates that all risks have been addressed or minimised.

Metis Partners, believe there are both innovative companies who, as above, struggle to have their innovation underwritten, and more significantly, companies who innovate as part of the sales process and do not exploit their intangible opportunities to the full, including taking up R&D tax credits, and the innovation infrastructure is ideally suited to aid both.

As we emerge from the downturn, we cannot guarantee that the business market place will return to status quo as before and those who take the risk and create a new market place will reap the rewards. Intangible assets are the building block to business model innovation and why such innovation needs to be supported. Those who do, we are confident, will emerge stronger and wealthier.

Online Protection of your Brand Must Extend to Social Media

In the not too distant past, protecting your brand was (relatively) easy. Once you had your company name registered and you had your product names chosen, having registered trade marks, patents, design rights and copyright gave you protection from most kinds of infringement.

Then came the internet and a whole new mine-field to negotiate – do you get a domain just for your company name or for your products too? Do you stick with a (dot)com or do you want a (dot)co(dot)uk and a (dot)us too - seemingly endless possibilities but by being proactive, problems remained largely avoidable.

The danger for those who are slow on the up-take is that someone can buy up your perfect web domain and then try to sell the website to you at a profit or simply use it to direct traffic to their website – traffic that should really be yours.

Even sneakier still is the practice of cybersquatters (the name given to registrants of domain names who attempt to profit from buying up domain names that include another party’s trade mark or name) buying up common mis-spellings of popular websites and redirecting the traffic to their site.

Unless you’re Google, however, buying up every option probably isn’t feasible. Fortunately, there are bodies out there such as the Internet Corporation for Assigned Names and Numbers (ICANN) who oversee domain names and try to ensure fair play in the expansion of the internet and how new domain names are taken.

The unprecedented expansion of social media through Facebook and Twitter has brought with it new complications. These new goliaths of the internet have such power, that registering facebook(dot)com/yourcompany and twitter(dot)com/yourcompany is nearly as vital as the humble (dot)com you once thought covered all your internet needs.

Many companies have been slow to move into these new worlds though, not realising the potential marketing capabilities or perhaps assuming that it would not be their market. The same problems are present here though as in the wider web – failure to register quickly can leave the page open to anyone to buy it and unlike the www – there is nobody policing. Sure Twitter has a policy against it – but this has not managed to stop Tweexchange from springing up and acting as an Ebay for Twitter addresses.

Quite simply – your trade mark, that you have paid to keep for years, is next to worthless on these sites and there is little you can do once its gone other than pay up for it. Once someone has a page name incorporating your name or trademark, they can write what they want and it will appear to the world at large that these comments are those of your company.

Since the introduction of these social media addresses, blogs have been buzzing with how these problems can be solved. The best solution is really for the site owners to realise the damage that cybersquatters can do to established brands and look to help. If Twitter spent some time and money on developing a (dot)twitter/yourcompany address, the umbrella policies of ICANN would kick in and brand owners would be afforded some protection.

For the time being and for the foreseeable future however, the onus on protecting your brand and your company sits with you. In this age of constant technological developments it is important to embrace each new medium for promotion and marketing. These sites might be free to join – but miss out and it might cost you a fortune…

Tips

• Get involved - Its quick and its free so don’t hesitate to take a page on a social media site. Even if you don’t use them, it means nobody else will get in there and take advantage of your goodwill or worse.
• Be proactive – it may not be possible to keep up with all the latest trends on the internet, but every company should know of Facebook and Twitter – they are all pervasive and provide opportunities far beyond keeping up with your mates.
• Cover all the possibilities – if you have a well known product, take the name of that too, you never know how useful it might be.
• Embrace the technology – spend a bit of time getting to grips with the sites. Twitter might not be the most intuitive site, but download programmes such as Tweetdeck and you’ll quickly see how easy it is to spread the word of your company and products to a wide audience.
• If, despite all the measures discussed a third party has already taken your name, it is important to consider the best course of action to remedy the problem – this may be simply negotiating with the cybersquatter to pass the name to you, initiating arbitration under the Uniform Domain Name Dispute Resolution Policy or even going to court for trade mark infringement. Though some of these remedies may cost in the short term, weighed up against the longer term benefit they may prove valuable.

Intellectual Assets for Innovation

In an interview with Jackie Hutter, Chief IP Strategist and Founder of The Hutter Group, Braden Kelley, editor of Blogging Innovation has set out an interesting perspective on the role of IP lawyers and their influence on Innovation. The full article can be read here, Intellectual Assets for Innovation, but here is our summary of the blog and our thoughts.

1: Jackie Hutter, who calls herself “a recovering patent attorney”, suggests an organisation’s legal team can be a major impediment to successful implementation of open innovation and “traditional” IP lawyers often see their primary roles in minimising risk to their clients, a perspective that can result in nascent open innovation programmes being shut down at an early stage.

To a certain level we can align to this perspective but to give IP lawyers their due, they will only act on the information presented and are not necessarily informed of the fuller business objectives. That is where a greater understanding of the company’s IP portfolio, including intangible assets beyond IPR, needs to be established and where these assets are to be exploited to meet new market opportunities, create competitive barriers to entry and support innovation, need to be fully documented and understood. We accept that, when considering Innovation, risk should be assessed – but in context : all innovative opportunities are inherently risky and hence when evaluating these in comparison to other business ventures, the “risk threshold” should be raised accordingly.

2: Hutter comments, “many business professionals believe that IP exists as a corporate asset to be harvested without any groundwork” and for IP to exist in measurable form, the organisation must identify, capture and protect those aspects of the business that serve as its competitive advantage.

We also agree that a company needs a defined IP strategy which must be aligned to “supporting and enhancing its forward-facing business strategy”. IP is one of a number of classifications of intellectual assets that can be assessed and aligned to a company’s business model (we analyse and rate the value in twelve areas: Brand and Reputation, Strategy and Market Intelligence, Unique Business Structures, Customer Management, Organisational Knowledge, Management and Key People, Key Business Processes, Partners and Suppliers, Staff, culture and CSR, Know-how and of course IPR, and R&D and Innovation itself).

Aligned to #1 above, these classifications are best considered in a business context under the ownership of the business unit Director/VP. By pulling these assessments together into a holistic business focus, they can be presented to the IP Lawyer to formalise any contractual or legislative requirements thereby having all of the team playing to their strengths.

3: Hutter concludes by stating (from her US perspective), “IP lawyers are scientists with and law degree and probably only 25% or so have real business experience. This means that the business reasons for IP lawyers’ efforts is of the lost in view of the technical and legal focus most place on the patenting process.”

We cannot comment on the validity of this statement nor would want to but it does suggest an underlying fact that multiple perspectives must be taken when assessing the impact of IA and IP in an organisation and that its value is wholly contextual. This means IP management must be at the core of an organisations existence and not left to the lawyer, the engineer or the developer to decide its value and application. There is an argument for the “external eye” to guide exploitation, without prejudice, ensuring all avenues are considered.

Monetising the intangible Part 1: what is the value of a relationship?

When asked recently by an insolvency practitioner to give a view on the potential goodwill value linked of the name of a city club, the initial response was: ‘Oh, that’s an interesting one, we’ll have a think and get back to you.’ So think we did.

Now the reality is that getting some sort of payment for intangibles on a club or bar is quite unusual, unless it’s a well-known and established brand in a busy city centre area. Some sort of leasehold premium is the approach most commonly applied by insolvency practitioners.

But never let it be said that at Metis we don’t explore the ever-thorny subject of making the intangible tangible. So our thought was – how could you measure the potential goodwill in a club? Would it be:

• Years of trading

• Customer database (not common to most pubs)

• Marketing / advertising spend?

All valid to some extent, but in the age of the internet could there be another way to assess goodwill, the strength or value of a brand, as well as recognition and loyalty? How about Facebook®, MySpace® or Bebo® friends? Yes, even pubs have pages on popular social networking websites. Sites that have a defined number of people happy to be classed as ‘friends’ of the pub (hopefully a repeat customer) can potentially receive tens of thousands of views from those friends or other visitors, constituting an online community for them.

Could these sites provide some sort of metric of popularity? If a few Glasgow pubs/ clubs popular with young people had between 1000 and 10,000 friends, could this be something to take into account when assessing goodwill and brand reputation?

The concept of valuing intangible assets such as relationships by substitution, was neatly presented in Chris Anderson’s latest book “Free: The Future of a Radical Price”. Anderson offered an interesting take on monetising the non-monetary.

Earlier in 2009, Burger King®’s ‘Whopper® Sacrifice Campaign’ gave Facebook® users the opportunity to “de-friend” (remove their name from a person’s page) ten Facebook® friends in return for a voucher for a Whopper®. After a week or so, the social networking site asked Burger King® to close the applet as it breached their privacy agreement (the applet notified those “de-friended” of the action as opposed to Facebook®’s normal non-disclosure procedure) but by then nearly 250,000 relationships had been traded.

So what was the transactional value of this and where does this lead? One keen blogger, Jason Kottke (www.kottle.org) took up the challenge and did the calculation.

Facebook® has approximately 150 million users with on average 100 friends. When you de-friend in Facebook®, two relationships are lost, so each user has effectively 50 unique relationship units. Burger King® asked participants to give up 10 friends for a Whopper® priced at $2.40 therefore the “friendship” cost per user is $12 (or five Whopper®’s). Scale this up with 150m users and you reach a valuation of approximately $1.8bn.

So is Facebook®’s value $1.8bn? In terms of relationship capital it might be, but as Anderson writes in his book, if we compare this value to the estimated $10 - $15bn placed on it by investors (Microsoft paid $240 million for a 1.6% stake in late 2007) where does the other $8bn or so value come from? Not at this point from revenue generated, so most likely goodwill – of the future monetisation of these online relationships. Interestingly, an alleged leaked internal document highlighted a revised internal valuation of $3.7bn in July 2008.

This all raises an interesting question: Has the economic downturn proven that the Whopper® substitution model to be more accurate?

Back with our city club, the question of measuring customer goodwill in an insolvency situation remains. However, there is no doubt that customer relationships have long been monetised (for example, paying for databases in trading or insolvent transactions) so it does not seem too far-fetched to think that virtual customers – from Facebook® friends to Twitter® followers – could well be factored into a valuation equation to help make the intangible a little more tangible.