The key to establishing and achieving your business goal is to know your intellectual property strategy. However, many business leaders don’t understand concepts of intellectual property, trademarks, and patents. Victoria Meyer’s guest in this episode is James Drake, a patent attorney and the Managing Counsel of Drake & Associates. James discusses what intellectual property is and how you can use it to achieve your business goal. Tune in and listen to this conversion to learn more about what you, as a business leader, need to know about intellectual property.
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Aligning Your Intellectual Property Strategy With Your Business Goal With James Drake
In this episode, I have James Drake, a patent attorney with many years of experience at Fortune 50 and global companies in the chemical industry. James has guided firms and diverse markets from telecommunications, petrochemicals, retail, identifying, protecting, and monetizing their innovations and inventions. He is now the Managing Counsel of Drake & Associates, where he provides a full suite of intellectual property services to companies in chemicals and out of chemicals. James, welcome to the show.
Thank you for having me, Victoria. I appreciate it.
I’m delighted to have you here. I've sat across the negotiating table with you on intellectual property-related items. How did you get started working in IP?
It was a long time ago. When I was doing undergrad, I looked toward possibly a career in the medical field and my undergraduate degrees in biology. Through a series of circumstances, I decided that it wasn't for me. Mostly it was physiology lab determined that, I didn’t care for that. I decided and looked around at what other options were available. I said, “Maybe I'll look at law school.” I started in law school. There was a posting on a job board, which dates me. They were looking for somebody with an undergrad science degree, which I had.
They were looking for somebody in bp America's Patent and Licensing Department at the time. It was absolutely the worst first interview you could have. To this day, I do not know how I got the job. I walked in and the first gentleman I spoke to said, “Have you ever seen a patent before?” I said, “No.” He pulled one out and, on the spot, went through all the parts of it with me and explained what it all was. By the time that ten minutes was over, I said, “This is something I can do for a career.” That's what got me into it. It was one of those chance things.
When we talk IP or Intellectual Property, it's not always well understood by business leaders. Patent attorneys like you throw these words around and we don't understand it. I do think people are familiar with the concept of patents and trademarks, but it's broader than that. Explain more about what this is and what business leaders need to know about IP.
All of those things in intellectual property fall into a category that we like to call intangible property. You can't touch it, feel it, and that always makes it hard to grasp what it is necessarily. Intellectual property is things that you've generated with your ideas, internally in your mind, and then used to gain some advantage in the marketplace, whether it's with an innovation that nobody else has. You can prevent your competitors from using it, it could be a slogan or a new name, and that would fall into a trademark area, or you could publish a paper that everybody else refers to and then you've got copyright protections.
There are also intellectual property segments. The key here is to figure out ahead of time what your business goal is because intellectual property strategy should track very closely to your business strategy. Once you know what you're trying to do from a business standpoint, you can adjust your intellectual property strategy accordingly. Let's say that you've just broken into a new market. You want to be fairly aggressive about gaining market share. You might want to invest a lot in your R&D and might want to build up a portfolio of patents based on that and those new innovations. What happens then is over time, that portfolio matures, either you stop making new innovations, or you've gotten to a point where you're happy with your market share and everything.
Now, your strategy shifts a little bit. You're not looking so much to gain but to maintain and defend your position. You may look at using different types of patents in a different way to create a competitive barrier. As you mature even further, there are ongoing costs with your patent portfolio. You need to be constantly looking at that and saying, “What's my business strategy right now? Do the patents, trademarks, and all the intellectual property that you have. Do they support that strategy?” If they don't, push them aside or do something else with them, but if they do, maintain them.
Do companies do this? Are there examples that you could share of companies that do this well, actively manages their IP portfolio in alignment with their business strategy?
One I can tell you that I've participated in was when I was with the Dow Chemical Company. They have what they call Intellectual Asset Management Teams. They review their portfolios on a regular basis and their patents, trademarks and agreements. Oftentimes, they'll look at those on a quarterly basis, have a meeting and determine what we want to do going forward? Is this aligned with what we're still doing from a business standpoint? What do we want to keep and want to get rid of? Getting rid of doesn't necessarily mean abandoning something.
This is where you can start to look at using your portfolio for alternative revenue streams. Perhaps you're not going to be as active in a certain area as you had been previously. You may want to sell or license your portfolio to a different company, smaller company, or somebody else who wants to focus in that area. You can get a revenue stream that way or they may have intellectual property. They may have patents that you are concerned that you might infringe. You can cross-license between the two. In that way, you gain access to intellectual property, but your competitors don't.
Your intellectual property strategy should align with your business goal.
It doesn't surprise me that Dow has a very robust approach to this. It seems to me that a lot of companies probably don't. What's the bare minimum that companies need? If they're not sure about what that is, where do you start even on this journey?
The bare minimum is to know what it is you have. That sounds axiomatic, but a lot of people don't know what they have. Patents have a twenty-year term. Oftentimes, these things can get lost over time. Doing a good census of what your intellectual property is and understanding what exactly you have is probably the thing that you want to start with. A lot of companies get very serious about this when they start to have to pay maintenance fees and annuities on older patents. The story doesn't end when you get the patent issued. There are ongoing costs. I was with a company that's been bought out, but in the early 1990s, they went from $400,000 a year in maintenance fees to slightly over $1 million in just a year. They had created a lot of innovation and patented a lot of it, but nobody was paying attention to when they were coming due.
It's a good thing, but you also have to maintain it. There's a lot of innovation in the chemical industry. It seems that IP activity would be high. When we think about patenting of innovations, if we were to look at IP activity, a lot of it is probably around sustainability, green and circularity. Yet sometimes, there's also a little bit of mystique and concern about when you patent, you have to disclose, and you're letting your secrets out?
That's the deal. Patent law is enshrined in the Constitution. We start right off by saying, “We want to advance the progress of the useful arts.” The Patent and Trademark Office is one of the ways that we do that. The reason that people get a little bit hesitant when they start developing new innovations is they don't want to reveal everything. The deal is the patent trademark office gives you a twenty-year limited monopoly, and in exchange, you tell everybody how to do it so that you can continue to build as a society.
One of the things that touch on too is what I call patent urban myths. One of the things that I see a lot of from C-Suite on down is this idea that, “I need to get a patent because I want to do X.” What a lot of people don't understand is not intuitive. A patent doesn't give you the right to do anything. A patent gives you a right to exclude others from doing something. It's a distinction, but it means a lot. There may be other things that are patented out there that even if you've got a patent on what you're doing, you would infringe somebody else's patent if you do what you're doing. Having that understanding of just going out and getting a patent is not enough. You need to understand what the landscape is, what your competitors are doing, and then determine how you want to approach it.
Is keeping trade secrets a viable approach?
Keeping trade secrets is a viable approach. The problem is most people don't do it very well. This is across the industry because there are some basic requirements to maintain a trade secret. Trade secrets are great. It never expires. You don't have to register a trade secret, but what you have to do is you have to keep it secret from everybody else. It's the old maxim that “If you tell somebody, it's no longer a secret.” You have to have strong controls on how you store information related to your trade secrets. If it's a process, a product, whatever it may be, you probably want to have your dedicated server that has all that information. You want to make sure that access to that information is limited. It starts to tie into other functions in the company too. You want to be able to have HR understand, if they're leaving the company, what trade secrets they've had access to, and explain to them what their ongoing obligations are with those.
It then opens up more exposure to that trade secret. That's a good point because know-how falls into some of this intellectual property. Yet we see maybe even accelerating movement of people between companies. It's hard to lobotomize your new employee so that they can't use the old company's information. It seems like a great area at times.
Absent somebody coming in with a thumb drive and downloading your entire database oftentimes it's information that they bring with them. It's hard to segregate general information that they've learned versus specific information from the company where they've been. Again, this gets back to my point about companies not necessarily doing it correctly. You need to track what your trade secrets are, and it can't be everything. This is another one of those things where oftentimes I'll get emails from clients and they'll say, “Attorney-client privilege.” They'll put it on everything. If you put it on everything, they're not going to honor that. You need to understand what trade secrets are very important and give you a competitive advantage and then protect them accordingly, keep track of them, let your employees know what a trade secret is and what is not. Once you've been able to put that process together, it gets much easier.
A lot of this sounds like managing this whole IP portfolio is about having systems and processes in place.
If you end up in a situation where you're going to court and suing your competitor and/or your former employee for taking your trade secrets, you're going to have to show that you took the necessary steps for protecting those trade secrets in line with what you thought the value of those was. That's a moving target. It's always hard to say if you're going to meet that standard, but if it's the most important thing in your company, you look at the formula for Coca-Cola. There are only three individuals within Coca-Cola who can access the safe deposit box that they have. It moves from branch to branch in this one bank in Atlanta. They can't fly at the same time. There are all sorts of rules.
That is not an urban myth. That is truly a trade secret?
I know you've said that you've started focusing quite a bit on data privacy and its compliance. What led you to that space? What's critical in this area?
It ties in with intellectual property probably more than I expected it to. I was practicing in the intellectual property space and licensing. I started to get more and more inquiries about GDPR, which is the European data privacy law and CCPA, which is California privacy law. I started to understand that information that companies keep about their customers or have brought in from their customers is an asset in and of itself. You could argue that data privacy might be a new form of intellectual property that's coming online. I started seeing more posts about data privacy law. I also saw that nobody was quite sure what data privacy laws applied and what they needed to do about it. As you read through the laws, you can understand, because they're not written with the final user in mind, they threw some things at the wall.
What we're finding is that a lot of companies are doing one of two things. Either they're saying, “I've got this service that I use and I figured they're taking care of it,” or they're saying, “They'll go after Facebook, they'll go after Google, but they won't go after me.” I could tell them, this is like the IRS. They'll work their way down to you eventually. Given that the penalties for violating various data privacy laws can be quite severe, you're talking anywhere from 2% to 4% of global revenue if you violate the GDPR in Europe. People go, “I'm not in Europe.” It doesn't matter. If you're processing data from European residents, you may be subject to GDPR. It’s a similar thing to California, where if you've got a certain number of your customers in California, then CCPA will apply to you. It's happening all across the country. Virginia and Massachusetts passed a law. New York is working on one. They keep trying to put one through at the federal level, but so far, nothing's happened, so you have to keep track of this patchwork.
One of the things you talked about is when you collect your customer's information that's an asset, it makes me immediately think about mailing lists. We've all ended up on mailing lists or phone lists and they seem to get sold and transferred. Is it still a viable thing for that? I still get spam. Some of which is more or less valuable than others. How do companies manage the patchwork of it because there is value there?
The key here is transparency. That's what all these laws are directed toward doing. You want to make sure you're informing your customers when you take in information and you're getting their consent for what exactly it is you want to do with that information. You'll see this oftentimes on websites, especially probably in 2020. You see things pop up all the time, “We use the information to do this and this, and please click accept.”
When it comes to cookies, many times, I looked to see what cookies they're tracking and will only let them track the minimum because they don't need to be doing all the rest of them. I know I'm the exception. To me, this is the challenging space in data privacy. You're often forced to check accept. I can't redline a document. I have to check it because I want to purchase something or get access to a certain piece of information. Maybe they're informing me and it's buried in there. Can I do anything about it?
That's an issue that a lot of these laws looked at when they were being written. It's like the click-through licenses that you used to have when you'd have physical software. It's the same kind of idea. What they've done is that a lot of these laws have a means by which you can file a Data Subject Access Request. There's a requirement that each business has some method for you to contact them and say, “First of all, I need to know what information do you have about me?” There are prescribed time limits in which they have to provide that information.
You also have a right of correction and a right of removal. In Europe, they call this the Right to be Forgotten. After a certain amount of time, your information should be removed anyway. It is a mechanism that exists. The problem is that a lot of companies, when they're talking about data privacy, focus on breaches. You see this all the time. There's a breach and hundreds of thousands of info, which is good. They should focus on breaches. However, they also have an obligation under a lot of these laws for their customers to be able to contact them and say, “You have my information. I got the services or goods that I needed. I don't want you to have my information anymore.”
It seems like this is something that big companies are doing, but maybe small companies are less equipped to do. It is something that I think about across the chemical space particularly. We've got a lot of very big companies, mid-sized companies. There's a wealth of smaller, perhaps more entrepreneurial companies that are operating on a much leaner basis that maybe think that this doesn't apply, or they don't even know how to apply it.
A patent doesn't give you the right to do anything. It gives you the right to exclude others from doing something.
I'm working on a venture with a colleague who has his own IP security business in Colorado. We're just about to launch Drake on Consulting. Watch this space. The idea behind that is those small companies don't have the resources to have a dedicated function for that. Even medium-sized companies oftentimes will have a legal and an IT function, but don't have an overall direction that they need to follow to be able to comply with these data privacy laws.
My partner, Jason, and I have concluded that legal and IT people don't tend to talk to one another very much. To the extent, they sometimes speak different languages. We're trying to offer something that will be a data privacy compliance service that is not within the company itself, but can handle everything soup to nuts for that company, small, medium-sized businesses. That's what we're looking to do. To your point, a lot of these companies don't want to think about this because it requires adding on a lot of personnel.
Maybe don't know how to think about it.
They understand that there's this thing called data privacy out there. They're trying super hard to make sure that they don't have any breaches, but that's about it. They don't know what the requirements are.
The leaders I talked to at companies, big and small, their goal is to run a business, make money to generate profits, and do it in a compliant way. They have no idea what that whole area of compliance means, whether it's intellectual property or data or any of the other multitudes of compliance requirements. That’s always a challenge.
It’s bribery and corruption laws. It'll even tie in sometimes with respect to some of our boycott, things like you can't send certain things to certain countries. That's even parsed out by what kind of a product it is. Rarely is it an entire country. People get this wrong all the time. It's usually individuals within the country who are the right people that ineffectively bars the whole country. Even then, there are exceptions. I've done filings of patent applications in Iran. You're allowed to pay Iranian associates to continue prosecution of your patent applications. It’s one of the exceptions.
Even on something like LinkedIn, I've gotten a couple of requests from countries that are on the no-fly list. I'm like, “I don’t think I should even accept this.” I don't know who this person is, or what the connection is. I think they're in a country I shouldn't be doing business with anyway. Let me bypass it and move on.
I've seen things that despite the fact that there was that exception in place, I've had interactions with associates, for example, who will say, “Whatever you do, I'm going to send you this invoice, but do not send it to this other bank in this other country, and whatever you do, don't put the word Tehran on it.” That immediately raises red flags.
How about I don't do business that way, and then we don't have to worry about it?
That’s probably the easier way. It's a similar thing when you're talking about anti-bribery laws where a lot of times people will hire agents in the country and then say, “See no evil, hear no evil.” I don't know what those agents do. That’s not a dance. If they go out there and start bribing people, you're going to be liable for that.
In addition to doing all this work on IP, data privacy, and finding a new entrepreneurial venture to start up, what else are you doing in your free time? If you have free time, or what are you looking to do now that it appears, at least, the US is loosening up restrictions?
I'm looking to travel more, especially with this burgeoning data privacy compliance business. It's one of those things where you have to be at the customer location and understanding how data is being used within that location, where it goes and comes back. I'm looking forward to doing more traveling and getting to see people face to face. Zoom is a great option, but there's nothing like having that body language and everything right in front of you.