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Intellectual Property risks in times of crisis

Alexander Gangnus / May 26, 2020
Intellectual Property risks in times of crisis

Business management during crises calls for thorough risk management. Besides health, safety, environmental and operational risks, IP-related ones are highly relevant and pose a direct threat to business continuation and financial situation if not discovered in time or adequately mitigated. Find out how to assess and manage internal and external IP risks. 

Internal IP risks originate from within the company, for example, losing the novelty of an invention by prior public disclosure. External IP risks are caused by the company's environment, such as being sued for infringement of a competitor's Intellectual Property right (IPR). Not identifying and mitigating internal IP risks has one significant consequence: The non-exclusivity for own products, services or technologies. In turn, this limits the competitive advantage, reduces market share and results in a potential loss of revenue, for example, through increased sales of counterfeits. Does your company need an IP risk assessment? 

Contact our IP consultants!

Neglecting external IP risks often results in high costs for avoiding the infringement of third parties' IPRs, be it through litigation, (forced) licensing or the cost-intensive late development of circumvention solutions. Under certain circumstances, a company can even be held liable for IP problems of its contractual partners, such as suppliers.

 

Selective IP risks

 

  Internal IP risks External IP risks
Core risk Lack of exclusivity /
loss of revenues
Infringement of 3rd party IPRs / costs for defense or licensing
Selective
sub-risks
  • Lack of proper IPR protection of core products resulting in increased counterfeiting
  • Missed deadlines (renewal, payments, oppositions)
  • Insufficient freedom-to-operate (FTO) analyses
  • Early disclosure of inventions by employees
  • Flaws in drafting or application limiting IPRs' enforceability
  • Becoming a defendant in IP litigation
  • Forced licensing under unfavorable conditions
  • Liability for IP risks and problems of contractual partners, such as suppliers
  • IPR invalidation attempts by competitors or Non-Practicing Entities (NPEs) such as "patent trolls"
  • Own invalidation attempts against third party IPRs


In times of crisis, the majority of companies face revenue losses or even business discontinuation, and it is crucial to be able to rely on "cash cows" to keep business going and customers satisfied. Having the core business protected by the right IPRs is a critical factor for preventing others from free-riding on one's innovations. IPRs that are not enforceable due to an insufficient protection scope or an accidental early disclosure of invention are typical internal IP risks that often lead to the loss of exclusivity and revenues.

A systematic IP portfolio assessment can help to identify IPR protection gaps or enforceability problems and safeguard the core business in the primary markets while managing the cost side carefully.

How to mitigate external IP risks

When it comes to external IP risks, one also has to consider that the current crisis did not hit all regions and industries across the globe at the same time and with the same force. While some countries and industries have not been heavily affected or are already on the upswing again, others are still profoundly impacted and probably have to face a more extended period of economic depression. And for some, the worst is yet to come. What companies from such countries surely do not need in the current situation are aggressive competitors, NPEs or patent trolls from "post-crisis-economies" suing them for IPR infringement or trying to invalidate crucial IPRs. Such attackers could benefit from reduced resistance, as many defendants currently have limited financial resources to fight off infringement charges or invalidation attempts.

High litigation costs and potential damages would even further diminish the already limited liquidity. A comprehensive portfolio assessment by Dennemeyer Consulting, for example, uncovers potential exposures to external IP risks and provides suggestions on how to minimize costs and monetary losses caused by the infringement of third party IPRs.

On a higher level, especially in times of crisis, the IP department is often one of the first within an organization that has to hold back to save costs. Many IP managers currently suffer from decreased or frozen budgets and see their departments and activities being perceived as "not important enough" or "too cost-intensive."

IP is a valuable intangible asset that becomes even more relevant in times of crisis and beyond. IP managers can make themselves heard at C-level by pointing out how important it is to identify and wisely mitigate internal and external IP risks and by demonstrating how their work impacts and secures future business success. That way, they will be perceived as a key figure that ensures the company's cash flows during the crisis, and a leading light in future-proofing the company set-up for the post-crisis "new normal."