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Wizards and trolls: Accelerating technologies, patent reform, and the new era of IP

Technological “wizards” are finding ways to aggressively enter markets and drive out entrenched players.
By John Levis, Deloitte Touche Tohmatsu Limited; Don Fancher, Deloitte Financial Advisory Services LLP; Eziah Syed, Deloitte Touche Tohmatsu Limited; and John Hudson, Deloitte Financial Advisory Services LLP
Published Last updated This article is more than 2 years old.

In a September 2011 special call with analysts, the newly appointed CEO of MasterCard, Ajay Banga, said that MasterCard “is a technology company that’s in the payments space.” The assertion surely raised a few eyebrows. After all, MasterCard was broadly considered a B2B payments company or a financial services company, but it was certainly not a technology company in the traditional sense. Banga wanted to establish his vision for electronic payments and a cashless world—one where technology would play the central and pivotal role in payments and commerce and would form the core of MasterCard’s business.

Technological advancement has changed the face of business today, and drawn almost every industry into intellectual property (IP) activity. This altered landscape makes it imperative for business leaders to reassess their IP strategies.

Many industries are experiencing a pattern of technology encroachment followed by heavy IP activity. A case in point is the credit card industry. Though credit cards have been in use for decades, the platform that drove this sector—a thin plastic device with a static magnetic stripe—resisted innovation for years, and card issuers, processors, and payment networks controlled the industry. Then came the internet.

Alternative payment providers such as Paypal, as well as NFC- and RFID-enabled payments made through chips embedded in dongles, phones, or stickers, have encroached on the territory of traditional players. Many other disruptors, such as biometric payments and innovations on the traditional stripe itself, are in the incubator.

A multitude of “wizards”—new entrants such as Bling Nation, Square, and Roku, as well as established technological giants—are using their technical know-how and patents to compete aggressively. Traditional players face the prospect not only of being driven out, but also of being unable to effectively respond because patents have blocked them out of the game. In addition, non-practicing entities—sometimes known as “trolls”—may hold patents strictly to extract value through licensing or litigation. A similar story is unfolding across several sectors.

In response, the United States has introduced legislative reforms, such as the central provisions of the Leahy-Smith America Invents Act (AIA) and the Innovation Act, to prevent the misuse of patents as a business strategy. A comprehensive IP management strategy will not only help firms deal with this new legislation, but also benefit innovation in several ways:

  • With sound IP management, companies can analyze patent filing activity to gain insights into where wizards are innovating and where tomorrow’s IP battles will be fought.
  • The new innovation landscape—characterized by open and collaborative models—challenges the “protection” mindset and could give rise to new practices in IP.
  • An IP lens can be used when evaluating adjacencies and white spaces for innovation.

IP is no longer just a legal conversation; it is a core business conversation in which IP strategy and corporate strategy reinforce each other.

Companies that do not yet have a robust IP management program can take a few preliminary actions:

  • Give visibility to IP management by hiring an IP leader into the C-suite.
  • Invite subject matter experts to educate the C-suite on trends, laws, and leading practices in IP.
  • Give IP leaders the necessary budget and resources to be effective.

IP management may require a big budget, but the benefits and payback cannot be underestimated.

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This article was produced by Deloitte and not by the Quartz editorial staff.

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