Ideas: Mind the Gap. #18 #cong18

How States, businesses and Individuals manage and realize value from intellectual property is emerging as a key challenge of the Information Age. 19th and 20th century governance structures are not fit for purpose in managing the Information economy. However, mechanisms and technologies are maturing to the point where individual ideas and their associated Intellectual Property can contribute equitably to the life long benefit of the Individual, Businesses and State.

1. Existing Governance structures are not fit for purpose in the Information Economy
2. Most Innovators get no returns from their Intellectual Property
3. Intellectual property value will be the key component of national wealth
4. Mechanisms exist to realize life long earnings from Intellectual Property

Firm believer that a good idea needs 5 years of patience for the rest of the world to catch up with you. Moved back to Connemara because I got tired of being a stranger in strange lands and it provides  head space to think without the clutter and mutter of urban life and bureaucracy.

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You can connect with Colum on LinkedIn or via email.

By Colum Joyce

“Actions exist and their consequences, but the person who acts does not” The Buddha

The technological resources of the information age provide an unparalleled capacity for ideas to be realised and create value. Such value is rarely recognised to the innovator.

This is because there is a value recognition gap created by the systemic failure of out dated governance structures and business models. Antiquated governance structures effectively alienate individuals and broader society from the commercial returns generated by most actioned ideas, Intellectual property or personal information.

These governance failings are related to the ownership of ideas, intellectual property, innovation, personal data and allocation of usage rewards.

A key reason for this are the contracts used in education and business. These effectively alienate innovators from the returns generated by their intellectual property.

To understand the level of control formalised in such contracts one simply has to ask “In a contract who is designated as owning the Idea, resulting Intellectual Property and the value it generates in the future.?”

In third level institutions ownership of Intellectual Property and rights of exploitation of thesis and research related ideas are most often uniquely vested in the institution to the total exclusion of the individual.

In business, employment and termination contracts usually stipulate that all Intellectual Property and value generated from it, during and after employment, is vested solely in the business. Some even require transfer of prior Intellectual Property rights to the business.

On termination of employment many businesses also impose severe time, occupation or subject related restrictions and stipulations on the future intellectual and commercial endeavours of the now ex-employee.

This has serious consequences for both the individual and society. Rapidly aging populations, rising dependency rates and an ever increasing burden on the employed threatens the financial and social stability of states whilst also undermining the future wellbeing of individuals.

As we move value creation from a muscle to a mind based economy there is the need to create, implement and govern equitable mechanisms to recognise the lifelong value from the private or corporate use of ideas, intellectual property and personally identifiable information. This capability will be critical to managing and mitigating future risks of state insolvency and personal deprivation in old age.

The question then has to be: “Do mechanisms exist to equitably attribute, account for and reward Intellectual Property contributions?”

Potential mechanisms exist but few have ever been successfully used for this purpose.

• Go it Alone: This mechanism is currently used by innovators to attempt to establish market ready products or services to exploit their Intellectual Property and realise its value. It is a high risk, low success rate strategy at a personal and financial level. (Innovators often prove to be poor business people).
• Litigation: This is a mechanism that is costly and risky for the individual. One notable (and successful case) was when Shuji Nakamura invented the Blue Laser and sued his former employer. However, his final, one off, $9 million settlement was consumed in legal fees.
• Patents: Patents are a way to register intellectual property to a business or go it alone individual inventor (s). This provides the rights to control and license the use of the subject of the patent thus rewarding the registered inventor. However, patents are costly in time (months or years) and money (€5000 -15,000 per country plus lawyer fees) and generally beyond the resources of an individual and many small businesses.
• One off Payments: A business may, exceptionally, make a one off payment for the Intellectual Property to the inventor. However, this mechanism usually vests all future value gained from the invention in the business not the inventor.
• Company Shares:This mechanism provides a way for the inventor to indirectly benefit, to a degree, from the contribution of their intellectual Property to the success of a business. Share allocations usually conditional on continued employment and require the transfer of the ownership of the Intellectual Property and its exploitation to the business.
• Activity Based IP Contribution (ABIPC) Activity based costing (ABC) is used to allocate a cost to every physical activity and input to a process or product in order to arrive at a true cost and then market price. Each cost is also allocated to a cost centre within the business for accounting purposes. This mechanism could be adapted to calculate and account for the value contribution and returns of an inventor’s Intellectual property to a product or service.
• Block chain and micropayments:These technologies offer a promising mechanism for recognising and paying inventors for the value defined by ABIPC and realised from the use of Intellectual Property in a product or service. Block chain provides a verifiable contractual link to the product or service and can be used to trigger a micro payment (s) which is then apportioned equitably to the inventor, business, state or other recipients. This mechanism is equally useful in providing a return to individuals when their personal information is used by suppliers and third party processes for commercial gain.
• State Level IP register and Ledger: Modern states invest heavily in education to increase the quality of human capital in order to remain competitive.
  However, the state receives a poor long term return on its investment in human capital. This is because the mechanisms for capturing a proportion of the future value generated are gross (taxation on personal income and spending), vulnerable to flight (emigration, Intellectual property transfers out of state) and time limited by retirement, incapacity or death.

The truly modern state will increasingly have to identify, account and benefit from the value of the Intellectual Property generated in its jurisdiction.
Key to this is knowing and codifying the Who, what, Why, When and Where in relation to Intellectual Property.
This is done for physical property and the mechanisms exist (see above) to link the recognition of and value from Intellectual property at an individual level through to its exploitation and then allocate its value contribution to the National Intellectual Property stock or ledger. Such a granular process is fully achievable using block chain and micropayments (see above).
It opens up the possibility of life long earnings for innovative individuals because as long as the Intellectual Property remains active, anywhere in the world, in a block chained product or service they (and the State) will continue to benefit. Such ongoing contributions of micro payments to the state can be transfer recognised to the individual for Taxation (or relief), pensions and social support purposes. This provides a non-invasive cradle to grave mechanism of value recognition, at any age and from any form of engagement with education or business contracts, from Intellectual Property and even the use of personal information for commercial purposes.
There are also the benefits of being able to dynamically identify areas of national competitive excellence or weakness and fund appropriately to reinforce strengths and shore up weaknesses.

In addition, the ability to geographically identify where Intellectual Property is generated / exploited provides an opportunity to encourage / incentivise rural and semi-rural centres of creative excellence and move rural spatial and investment planning from a population based to a more value contribution based footing.

What is increasingly clear is that the governance structures and rights that have evolved to manage physical economies are increasingly failing to adequately or equitably service individuals or states in the information economy. Bridging the emerging gap will be a key societal and commercial challenge in the coming decades.