Since 2000, members of corporate Boards of Directors are increasingly being sued in shareholder derivative suits for claims related to mismanagement of patent and other intellectual property assets. There is a new class of shareholder activists who police neglect of patent portfolio management. They call out management that fails to aggressively exploit a company’s technology assets to monetize them through licensing revenue opportunities. Since patents are a time limited property right, and life cycle limited in a rapidly evolving technology marketplace, these opportunities must be sought out in a timely and aggressive manner to reap maximum benefit from the asset.
About half of the cases alledge misinformation given to the shareholders, and the other half alledge of misappropriation, mismanagement and undervaluation of the patent assets. Allowing technology assets to go unrecognized and underutilized is now actionable as a form of mismanagement. Interestingly, a study by Ocean Tomo shows that shareholder case filings have an upswing every other year (perhaps an 18 month cycle). With this 12 year trend, we would predict that 2013 will be a big year for new shareholder suits to be filed.
What can management do to avoid patent mismanagement liability?
- Perform an IP audit of the company’s technology to identify potentially patentable inventions.
- Undertake a competitive landscape analysis to position your products in the marketplace and potential licensing opportunities.
- Implement an invention disclosure policy.
- Implement invention assignment and confidentiality agreements with employees, contractors and joint venture partners.
- Implement a technology commercialization and evaluation team to review the company’s technology advancements on a monthly or quarterly basis to identify which are candidates for trade secret protection, patent protection, and which pending patent applications and patents should still receive furth investment in in light of current commercial directions of the company.