With a high level of ongoing innovation in the MEMS industry, strategic management of intellectual property can be beneficial for companies and universities for maximizing profits and developing partnerships. We spoke with Meagan Dietz, a consultant at McKinsey & Co., who is an expert in innovation and intellectual property knowledge development. Among other topics, we discussed a recent study that was conducted by McKinsey and the lessons that may be applied to intellectual property management in the MEMS industry.
MEMS Investor Journal: In your recent article (“Getting more from intellectual property”, The McKinsey Quarterly, 2004 Number 4) you speak about the current trends and challenges in IP licensing. What are the main obstacles to a more efficient IP licensing and exchange among companies?
Meagan Dietz: Two areas which proved most daunting to our study participants include having access to sufficient resources as well as managing deal complexity and relationships, e.g., co-development, co-promotion.
Participants described their resource constraints on a number of levels. Those with limited IP management resources were forced to restrict the time spent on portfolio management and organization, and talent development. As a result, several had difficulties in accurately identifying costs versus revenues for their groups. As one respondent noted, "Getting good numbers internally is chaotic". Furthermore, survey participants were specific in citing skill gaps in both in-licensing and out-licensing. In-licensing, for example, requires "state-of-the-art search capability and negotiation skills," said one participant, while out-licensing requires all these skills, plus a legal due diligence component.
As IP deals become a corporate growth engine, they are also becoming more complex. Participants told us that relationships are increasingly important in order to successfully execute deals, and, they cited changes in working relationships as a significant aspect of increasing deal complexity.
MIJ: Are academia’s tech transfer offices (TTOs) similar to corporate IP management organizations or do they face challenges specific only to them?
MD: We did not include universities in our work, and I have limited experience working with university tech transfer groups. From my experience, my understanding is that universities can share similar challenges relating to technology management, deal complexity and partnering but that they face a whole set of independent commercialization challenges that relate to public or corporate funding.
MIJ: How do companies market their IP portfolios? How do companies search for IP to license? Are there specialized brokerages that help in this process?
MD: We found there was no correlation between performance and partner type. Of particular interest is that brokers and internet marketplaces that are designed to help companies find or market their portfolios were among the least leveraged. Most leveraged partners include technology experts and specialists at universities. Many companies use their own industry networks and tradeshows in sourcing licensing opportunities.
MIJ: What advice do you have for smaller companies and start-ups that have some unique technology and want to license it to a large firm?
MD: Although most of our participants were medium to large size companies, there were a few smaller companies in our study; the ones that had successfully (deal volume and licensing contribution to overall corporate revenues) licensed their IP to large firms differentiated themselves by:
1) conducting regular audits of their portfolio to identify valuable IP to license
2) identifying competitive situations where there was possible infringement, which subsequently led to licensing and
3) creating open or proprietary standards.
Successful small company licensors also differentiated themselves in negotiating and structuring IP agreements along the following: valuing potential IP and assessing partner contributions, getting to a "fast no" or a "good yes" during negotiation and applying risk-sharing mechanisms, e.g., contingency payments, to avoid potential stalemates.