November 27, 2019

Does your business have sufficient Intellectual Property ‘Resilience’?

In the first instalment of our 'IP- Resilience' series, Clyde & Co Partner Elliot Papageorgiou looks at the potential IP-related risks faced by businesses as a result of climate change and the measures to manage its risk.

What does Intellectual Property 'Resilience' (IP-Resilience) mean?

The awareness of climate change and its potential environmental impact, and connected business risk, is something that many businesses are now becoming well aware of – even if many still remain exposed. What is often overlooked is that the sea-change in technology designed to manage the impact of climate change, carries its own business risks. These risks have the potential to 'make' businesses that are driving these changes, but also to 'break' businesses that fail to prepare for change.

Viewed in this context, IP-Resilience means ensuring from an intellectual property perspective that business is sufficiently prepared, adapted and aware of the paradigm shifts in technology arising from climate change, digital transformation, changing trade-routes and conditions, and a move to high-tech/low-impact manufacturing.

Part 1 - Climate change & Intellectual Property

While businesses will experience and indeed expect many changes both as a result of climate change, and the need to respond to it, there are specific IP-centric changes businesses should expect. Responses to climate change will take effect in fields such as (i) renewable energy development including solar and wind; (ii) next generation natural gas and nuclear; (iii) smart grids, storage and interconnection infrastructure; (iv) carbon capture and storage; (v) alternative modes of travel and transport; (vi) alternative fuels; (vii) alternative/autonomous drive and battery technologies; and (viii) use of big-data and software to optimization off all types of business functions thereby reducing environmental impact.

1.1 Move towards new fields of Intellectual Property…

As a result of the aforementioned changes, businesses need to be aware of and avoid risks in wider intellectual property fields than their traditional business scope would envisage. An example in point is alternative drive technologies. Whereas in the past, traditional automotive manufacturers generally knew who their competitors were, which technologies to watch, and which patents to search, as a result of climate change and responses thereto, new competitors have emerged in the form of electric-vehicle companies, manufacturers of alternative modes of transport (for example, makers of e-bikes), and indeed companies from the software/data/ITC field such as Google, Apple etc. From an IP risk perspective, this expanded field means greater risks of infringing others' intellectual property rights, and a need to adjust business strategies to adapt to such risks.

1.2 Move towards / focus on new types of Intellectual Property…

Facing new, often disruptive technologies and new intellectual property fields, businesses also need to grapple with intellectual property types, and concepts beyond their expectations. Increasingly intellectual property value is flowing from intellectual property embodied in tangible products (for example, patents for mechanical / engineering inventions), to intellectual property that protects intangible assets. Experts speak of a "commoditization of manufacturing hardware" and transformation from a manufacturing model where "advanced machines are using standard software" to a future one "where advanced software is using standard machines". Adapting and responding to climate change will thus lead to greater levels of patenting not just in the general field of "environmental science", but also specifically and significantly in the ICT field, in the form of a greater number of software patents, process patents, and even business method patents. Businesses not only need to be aware of these changes, but also prepare for entirely new intellectual property rights such as those protecting data-bases and other, so-called sui generis rights protecting investments in compiling 'big data', including data-gathering, data-processing and data-mining. Again, businesses must prepare for risks from unexpected directions, and take appropriate safe-guards.

1.3 Move towards new competitors from an Intellectual Property perspective …

Briefly touched on earlier, the technology and business challenges arising from climate change and ways of dealing with it, will result in new alliances being formed, between traditional technology companies, and those potentially facilitating (or accelerating) digital transformation). We'll also see new partnerships being established, such as the recent merger discussions between behemoths of the automotive sector, all contributing towards a much disrupted competitor landscape.

Taking traditional automotive manufacturers again as a case example, when developing or updating a vehicle, they will now have to expect competition (and patents, and thus licensing demands) from new and existing players in the field of ICT, digital consumer electronics, on-line and off-line information/mapping/sensing technologies, autonomous battery technologies, GUI systems etc., in addition to the fields of electronics, auto-mechanical engineering, chemical, physics, optics etc.

As a result traditional industries will have to both expand the scope of their intellectual property due-diligence, and 'freedom to operate' inquiries, and will have to seek to defray risk by engaging expert advisors in the intellectual property / digital transformation field. To deal with "worst case scenarios" (for example, wandering into a multi-party IP litigation law suit in a significant market such as China), businesses will need to supplement "best in class" intellectual property advice, with specialty insurance covering intellectual property risks arising from this rapidly changing business environment.

On 22 April 2016, almost 200 countries became signatories to the Paris Climate Change Agreement, within the UN Framework Convention on Climate Change. Over the next decades, climate change, and ways of adapting to it and/or combating it, will result in countless inventions and innovations, all with a potential intellectual property effect. To ensure businesses are well prepared, in addition to securing expert counsel on the potential commercial impact of these changes, they should consider the intellectual property aspects and adapt their business practises to maximise opportunities these changes will bring, while minimising the risks.

In the next instalment of our IP-Resilience series, Elliot Papageorgiou will consider the business risks arising from intellectual property rights, caused by changing trade-routes and trading/political conditions.