TYGlobe

Strategic Design of Enterprise Intellectual Property Rights

Shanghai TYGlobe Law Firm Liu Qinglin

I. Relationship Between Enterprise Intellectual Property Strategy and Other Strategies

An enterprise's intellectual property strategy generally consists of the following components: intellectual property research and analysis, intellectual property output, intellectual property acquisition, intellectual property maintenance, intellectual property development and utilization, and intellectual property risk management.

Corporate intellectual property strategy is closely related to corporate business strategy and innovation strategy, and the three complement each other. The formulation and implementation of a corporate intellectual property strategy must be based on its business strategy and innovation strategy, while the intellectual property strategy plays an important role in ensuring the smooth progress of the business strategy and innovation strategy. In the process of market development and business expansion, enterprises will continuously carry out innovation and development in accordance with market demand and their own development prospects. Various trademarks, new works, new products, new technologies, trade secrets and other intangible assets constitute the core competitiveness on which enterprises depend for survival. The purpose of a corporate intellectual property strategy is to administer, develop, utilize and protect these important intellectual properties, so as to support enterprises in realizing better survival and development.

II. Design Concept

Intellectual property rights shall serve the commercial operations of enterprises and promote their commercial development, as the commercialization value of enterprises' intellectual property rights holds a pivotal position in the modern commercial environment. Such commercial value is mainly reflected in two aspects. On the one hand, intellectual property rights can increase the revenue of enterprises, and enterprises with high-value intellectual property rights have the capability to convert innovation achievements into economic benefits. On the other hand, intellectual property rights can also help enterprises restrict the conduct of competitors, expand their market share, and ensure their more sound and long-term development.

Therefore, when designing an enterprise's intellectual property (IP) strategy, first, such strategy shall be aligned with the enterprise's business strategy and innovation strategy, focus shall be placed on assessing the internal and external IP environment, and judgments shall be made based on specific circumstances; second, the formulated IP strategy shall be able to guide and assess IP plans and programs, and promote the continuous optimization and improvement of its IP management system; finally, requirements including risk appetite, compliance, performance and audit shall be explicitly specified during the strategy design process, and continuous assessment and supervision over the strategy design shall be conducted.

III. Specific Procedures

When formulating intellectual property strategies, enterprises may start with the following steps:

Intellectual Property Rights Audit and Assessment

Conduct a comprehensive audit of the existing intellectual property rights (patents, trademarks, copyrights, etc.) held by enterprises, and assess their commercial value and legal risks.

2. Formulation of Strategic Plans

The objectives of the corporate intellectual property strategy shall be determined in accordance with the overall corporate strategy, including but not limited to increasing corporate revenue, protecting market share, and enhancing brand image. After the objectives are confirmed, specific implementation routes and timelines shall be formulated targeting the aforesaid objectives.

3. Strengthen the capacity for intellectual property rights creation and innovation

Enterprises shall increase capital and resource input for their intellectual property R&D departments to encourage technological innovation. They shall also provide intellectual property-related training for internal employees, establish incentive mechanisms to encourage employee innovation, and foster a sound internal competition mechanism.

4. Improve the protection mechanism

For new inventions, new creations and new artistic works, applications for intellectual property rights shall be filed proactively and in a timely manner, and regular maintenance and updates shall be conducted. An intellectual property infringement monitoring system may be established to detect and handle infringing acts committed by other organizations and individuals in a timely manner.

5. Commercial Operation

First, enterprises may convert their existing intellectual property rights into economic value through such means as technology transfer and licensing; Second, they may integrate intellectual property rights into product development and realize commercial operation through marketing promotion.

6. Establish the Intellectual Property Management System

In light of the specific circumstances of an enterprise's business operations and intellectual property rights, a sound intellectual property right management system and working procedures shall be established. In addition, a dedicated intellectual property right management department shall be set up to take charge of the application, management, maintenance and commercial operation of intellectual property rights.

7. Cooperation and Alliance

Establish cooperative relationships with external institutions such as universities and scientific research institutes, unclog channels for the circulation of technical talents, and set up internal and external talent cooperation mechanisms, so as to promote the improvement of the efficiency and quality of technological research and development. In addition, it may join industrial alliances to jointly address intellectual property rights challenges and drive the development of the industry.

8. Risk Management and Legal Rights Protection

Improve the risk prevention mechanism to mitigate intellectual property rights (IPR) risks for enterprises. In the event of an IPR dispute, legal measures and other reasonable means shall be taken promptly to safeguard the interests of enterprises.

9. Continuous Improvement and Optimization

The implementation of an enterprise's intellectual property strategy shall be subject to regular assessment. It shall be optimized and updated in response to existing problems, and supplemented and adjusted in a timely manner in light of the new conditions of the enterprise and the market.

IV. Experience for Reference

To develop a more sound intellectual property rights (IPR) strategy, enterprises may draw on the mature and advanced experience of well-established enterprises in IPR strategy formulation. Various enterprises have already accumulated abundant experience and yielded fruitful results in relevant practices. We may not only seek references from official standard documents, but also learn from the practices of renowned enterprises in formulating IPR strategies.

(1) Normative Documents

For example, process guidelines are specified in the relevant international standard *Innovation Management — Tools and Methods for Strategic Intelligence Management — Guidelines* (ISO 56006), as illustrated in the figure below:

There are also normative documents available for reference in China. Section II of this Part will specially interpret the *Requirements for Enterprise Intellectual Property Compliance Management System* newly issued in 2024, so no redundant elaboration on relevant contents will be made in this Part herein.

(II) Cases of Well-known Enterprises

1. IBM Corporation

IBM, whose full name is International Business Machines Corporation, is the world's largest information technology and business solutions company, with business operations covering more than 160 countries and regions. As a giant corporation that has been established for over 100 years, IBM's market capitalization at its peak was equivalent to one-fourth of the GDP of the United States, with a workforce of as many as 400,000 employees. Even Microsoft and Intel were no match for it, making it a veritable "Big Blue". However, it has gradually declined in recent years and implemented layoffs across the globe. Research on IBM's intellectual property strategy can help us understand the factors contributing to its rise and decline.

IBM has established an Intellectual Property Management Head Office, which is responsible for all intellectual property management affairs of the company and exercises centralized and unified management over intellectual property. The Intellectual Property Management Head Office consists of two major departments: the Legal Affairs Department and the Patent Department. The Legal Affairs Department is responsible for relevant legal affairs, while the Patent Department takes charge of patent-related affairs. The Patent Department is structured into five divisions by technical field, each led by a patent lawyer serving as the patent manager. IBM's IP Head Office exercises supervisory authority over the intellectual property management departments of its subsidiaries around the world. Apart from submitting business reports to their competent supervisors pursuant to the subordinate relationship, the intellectual property management departments of all subsidiaries shall also follow the strong functional guidance of the company's Intellectual Property Management Head Office and operate in accordance with the unified policies of the aforesaid head office.

To incentivize its employees to make inventions and creations, IBM has established a reward mechanism with a cumulative point system, under which points shall be awarded to inventors who file patent applications. Each patent corresponds to 3 points and a reward of US$1,200; when the cumulative points reach 12, an additional reward of US$1,200 shall be granted. Where an inventor is granted a patent for his or her first application, he or she shall be entitled to the First-time Application Award with a bonus of US$1,500. In addition, the company holds a grand Scientific and Technological Invention Award ceremony once a year, where 100 award-winning employees will share a total bonus pool of US$3 million. The President of IBM presents the awards in person to encourage inventors both morally and materially. After the ceremony, the awarded inventors are entitled to a 3 to 4-day vacation, with all expenses borne by the company.

As a former giant in the IT industry, IBM's sensitivity to technology is beyond dispute. However, compared with some young start-ups, the relatively closed internal mindset of IBM makes it difficult for the company to identify appropriate application scenarios and business models for new technologies.

In the era when personal computers (PCs) dominated the market in the last century, IBM rapidly secured a leading position by virtue of the advantages of its closed innovation model. While such corporate intellectual property strategy was adapted to the development and expansion of IBM at that time, with changes in the market environment, IBM's Intellectual Property (IP) Department failed to keep pace with the changes, and failed to duly complete the subsequent update and optimization of the strategy. A number of factors, including errors in strategic decision-making and insufficient adaptation to new technologies, have caused the decline of IBM in recent years.

IBM keeps a firm grip on a number of cutting-edge technologies and rarely grants licenses to external parties. Against the backdrop of that era, the development of new technologies required high capital outlay and heavy investment, which led investors to prefer giant enterprises. Such enterprises, in turn, monopolized the market by virtue of their proprietary technologies and secured key clients. At that time, clients' tolerance for the speed of technology transformation was far higher than it is at present. However, as competitors continue to launch new businesses, clients have increasingly stringent requirements for technology commercialization. For an enterprise as large in scale as IBM, it is unable to make timely responses to each business, and the problems of "excessively slow response" and "over-bureaucratization" have gradually come to light.

IBM also rolled out drastic reforms after Louis V. Gerstner Jr. took the helm. After a series of layoffs and business integrations, IBM turned around from losses to profitability. It also innovated its business model, gradually transformed into a service-oriented enterprise, strengthened the functions of IT services, spun off its global service business and established the Global Services Division. While this move did re-establish IBM's leading position in the IT industry, business restructuring and layoffs alone did not change IBM's closed mindset. Possession of technologies does not guarantee commercial success. The coexistence of innovation and conservatism has led to the situation where IBM gains an early head start but eventually falls behind in many respects.

IBM was once a hidden semiconductor giant, and the world's first 2nm chip was developed by IBM's team. Prior to that, IBM was capable of in-house manufacturing of memory chips and photoresist, and rolled out its proprietary 3D chip stacking technology. In addition, IBM has made achievements in the fields of semiconductor materials and chip architecture. Its 2nm manufacturing process launched in 2021 also came earlier than those of TSMC and Samsung. However, due to its lack of commercialization capability, IBM has sold its chip division to GlobalFoundries and withdrawn from the chip foundry business. Ultimately, IBM's 2nm chip manufacturing technology has never been put into commercial use.

Therefore, IBM, once known as the "Big Blue", has witnessed a steady decline in its influence and found it increasingly difficult to seize the development opportunities of the times and the industry, and has thus been gradually overtaken by other enterprises.

2. Siemens AG

Founded in 1847, SIEMENS AG of Germany is a leading enterprise in the global electronic and electrical engineering sector. Since its entry into China in 1872, SIEMENS has, for more than 140 years, consistently provided comprehensive support to China's development with its innovative technologies, premium solutions and high-quality products. It has established its leading position in the Chinese market by virtue of its exceptional quality, trusted reliability, leading technological achievements and unremitting pursuit of innovation.

Siemens specializes in the sectors of industry, infrastructure, transportation and healthcare. Its business covers a wide spectrum ranging from more efficient and energy-conserving factories, more resilient supply chains, smarter buildings and power grids, to cleaner and more comfortable transportation systems as well as cutting-edge medical systems. It leverages technology to its full potential and creates value for its customers.

Regarding the enterprise intellectual property strategy, Siemens has established an Intellectual Property Rights Headquarters, which is responsible for the unified management of intellectual property affairs of all its subsidiaries and branches worldwide. This centralized management organizational system is conducive to the unified implementation of the transnational enterprise's intellectual property strategy across the world, the rational utilization of various resources, as well as the avoidance of redundant research and development and repeated trademark registration.

Furthermore, Siemens attaches great importance to fulfilling the responsibilities of its intellectual property rights (IPR) management department. It has realized data communication and information sharing by establishing an IPR literature database. Frequent communication and exchanges are conducted among the IPR management, research and development (R&D), production, sales and legal departments, which avoids redundant research and has formed efficient internal communication channels.

To promote the application, industrialization and marketization of intellectual property achievements, Siemens actively carries out industry-university-research cooperation. In respect of patented technological achievements obtained by scientific research institutions, where such achievements have potential market value, the enterprise shall resolutely purchase the relevant patented technologies or patent licenses from the aforesaid scientific research institutions, so as to convert the patent achievements into actual productive forces as soon as possible.

Formulating a sound corporate intellectual property strategy and continuously optimizing and updating the same serve as a critical guarantee for Siemens to consistently maintain customer trust and market stability.