Turning the IP threat into opportunity

It surprised me a little to learn that many small firms figure out their intellectual property issues themselves. The majority of companies, keen to save money, time and anguish, just get busy themselves.

It surprised me a little to learn that many small firms figure out their intellectual property issues themselves.

While larger companies can usually afford lawyers, accountants and specialist valuers to work on intellectual property plans and problems, or at least justify the expense, the majority of companies here seem keen to save money, time and anguish and so just get busy themselves.

My surprise comes from the fact that identifying, valuing and protecting intellectual property (IP, to those in the business) appears a complex and difficult business. A small band of professionals are paid lots of money to get it right. Or as right as they can get it. Inevitably those involved in the business disagree with professional valuations, 80% of the time according to one industry specialist, but those who hold the cheque hold the key. It might seem like guesswork to outsiders, and I suppose it still is an educated guess: IP valuers, like their colleagues in other fields, rely on years of financial training and time-tested analysis methods, solid experience and a good dash of common sense.

What's not surprising is the interest in IP. The Carter Holt Harveys of the world sensibly see money in ideas. Only last week one fair-sized IT services firm mentioned that one of the top 20 companies in the country regarded some IP (it was software) that it had developed as a competitive asset. The very term implies something whose value can add to the bottom line in a very real way rather than perpetually irritating the CEO by sitting on the cost side of the balance sheet.

Developing IP is logical; protecting it even more so. The key lessons the legal people are keen to impart are that you can protect your IP with the usual tools -- patents, copyrights, trademarks -- but nailing down employment, distribution and other business contracts early on will help a great deal in keeping your revenue streams watertight and avoiding messy legal problems later. (If you're looking at exporting, you could do worse than have a run through migrant US lawyer Robert Auerbach's checklists on the Trade NZ site)

So if the majority of small firms -- a majority of firms in this start-your-own country -- will do it themselves, what help is available? Well, there are kilobytes of information put out by the government's trade and industry arms, but I couldn't help thinking about a one-stop-shop for all small-biz IP needs. It could be governmental, given the cash being already put into the area, or a combination of public and private. Seems logical for a nation that wants to be a knowledge leader and a net exporter of IP. Thinking aloud further, it could even include a legal sorting division along the lines of the small-claims tribunal.

But maybe we need more than just advice. Maybe we need export tax breaks, like the $US4 billion ones the US has been ticked off by the WTO for giving to companies like Microsoft and Boeing. Maybe not. But if the country doesn't become a seller of evolved, polished ideas, and continues to export people and raw products, the intellectual equivalent of wood chips, we'll have no one to blame but, well, the government. IP lawyers usually argue that to become a stronger exporter of IP we need stronger protection for existing ideas and less onerous ways of defending them. (The MED is busy working on possible changes to our copyright law, giving every intention of taking a more measured approach. Hopefully we will avoid idiocies like the possibility being touted in the US of IP owners being allowed to hack into firms they suspect of breaching their copyright.)

But to really keep an eye on whether we were moving toward being a net exporter of intellectual property, we need to know the numbers. IT, of course, is just one of the "creative" industries that produce IP, including media, biotech and pharmaceuticals, but it's probably a good indication of trends. In 2001 we imported $2621 million worth of hardware, the vast majority from Asia and North America. But we only exported $261 million, fairly evenly around the world. Oops, almost exactly a spooky tenth. These figures rely on Customs data, whereas IT firms told Statistics NZ that they exported $404 million worth of gear, most of it communications hardware. Software and services exports total about $600 million, if the unavailable 2001 services revenue held up from 2000. Check it for yourself here.

Finding how much software comes into the country is harder to track. I'm not surprised MED, Stats NZ or Customs couldn't give me a number off the top of their heads, given that it can come in electronically or loaded on hardware.

But we will only be able to track our progress toward becoming an IP exporting heavy-hitter if we can break down the country's balance of payments figure to intellectual property. Call it balance of IP, or BOIP (TM), if you like. Perhaps I'll copyright the idea, just to be smart.

Broatch is Computerworld's deputy editor. Send letters for publication to Computerworld Letters.

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