IP-this and IP-that … how do you define IP-rich?


There it is again. 

This time it was a year-end interview in the Financial Post.

“Bains called the $250 million a “down payment”, suggesting more money is coming.  The pledge was intended to give him additional flexibility to invest in “IP-rich” companies.”

Bains went on to say “We’re focusing a lot on developing IP”.

OK that all sounds good, but what is an IP-rich company? What does IP-rich mean?

Large pharmaceutical and semiconductor companies often own significant patent portfolios.  Fifty thousand or more “live” patents is quite possible.  These companies are IP-rich.  Within any given portfolio some estimate that less than 5% of the patents present technology that is being used.  Simple math indicates there will be a decent number of valuable patents.

However, Bains is talking about smaller companies that may have, at most, a handful of patents.  They may well not own a single issued patent.  In turn, there are limited patent assets to assess.  One has to turn to the technology and one has to assess its potential.  Is the technology of importance?  Will there be other approaches to the problem?  Are those more efficient?

Then, one has to consider if the technology has room to “fan-out”.  Is there room to grow the technology or is it a limited, specific solution in a competitive market?  It is time to look at some examples.

In 2018, a Globe and Mail article about Waterloo’s Smarter Alloys commented “ … IP will give [the] company a big edge”. One might infer they were IP-rich, or at least on their way, at the time of writing.  In February 2020, after receiving $4.5 million in funding from SDTC, I took a second look at Smarter Alloys’ patents, and thought about what one might want to see for IP to give this big edge.    

“…one might look for patents that are central to the application; patents that will protect any advantage the system might provide.  … any patents will be more valuable if the basic technology i.e. generating electricity using shape memory alloys, is advantageous, such as providing higher efficiency compared to other technologies in the waste heat-to-energy space.”

A few month’s later BDC announced their IP-backed funding envelope.  The term IP-rich was used to describe the type of company of interest for their IP-backed fund.  They also mentioned IP-potential.  These two concepts go hand-in-hand as IP-potential is needed for a company to be IP-rich.

What sort of patents might lead to IP-rich companies? I wrote:

“Patent potential suggests the technology and solutions will lead to a large number of patents.  In such cases one would likely be working at a fundamental level of a technology, such that many levels of development … are possible.  Solving a “small” problem in a peripheral bit of technology does not meet the standard.”

And, where might one turn to identify whether an idea has IP-potential or is IP-rich?

“A combination of deep technical knowledge in the company’s field and patent experience is needed to identify “patent potential”.  The technical knowledge is key, as the analyst has to see the field, the particular technology and where the two might go in the future.”

Any focus on IP is laudable. However, proper execution of these initiatives will take work and will require the right tools be in place. One of these tools is understanding the technology, because the technology must have potential for any patent to have potential. Let’s not miss these opportunities and allow IP initiatives to be relegated to the “trending” category.