When boards of directors gather to discuss the top risks of an organisation, it may entail matters such as structurally high unemployment, labour unrest, exchange rate volatility, political uncertainty, unmanageable fraud and corruption, threats of new market entrants or even product stagnation.
Whilst there are indeed many more topical risks that may be relevant to the nature of the organisation’s business and immediate environment, it is not common for a board to include the threat of their innovation and intellectual property (IP) being marginalised or lost. Bearing in mind the critical importance of protecting the organisation’s IP, which is the organisation’s raison d’etre, it’s quite likely this vital business component has fallen within the board’s blind spot.
Recognising types of IP
There are several types of IP found within an organisation, including the organisation’s trademarks, slogans and brands, works eligible for copyright protection, patentable inventions, registerable designs, trade secrets and confidential information.
Expectedly, if an organisation is careless about the registering and protection of its IP, the exclusive right to the IP is often lost or donated to the public, free of charge. The organisation may well find itself facing off its competition, where their own original ideas are used against them by competitors. Indeed, this indefensible situation even extends to an individual level, where for example an individual has a novel idea, which has the potential of earning vast sums of money, and someone else claims the idea for themselves or takes credit for it.
Once a patentable invention has been disclosed to the public prior to the filing of a provisional patent application, the invention becomes public property. It is not often realised that, even though a company pays for the development of software, it will not necessarily own the copyright therein and that the copyright will have to be assigned in writing before the copyright will vest in the commissioning party.
Duty of legal protection
In respect of the board’s duties to protect the organisation, clearly this involves the protection of the organisation’s IP and it is crucial that the organisation – and indeed the board itself – familiarise themselves with the relevant legislation that protects IP.
In doing so, the moral and economic rights of the creators of such IP is legally recognised and protected, including to ensure that a standard of fairness prevails where creators are encouraged to meaningfully contribute toward the organisation’s, and indeed the country’s economic and social development.
The need of protecting an organisation’s (or individual’s) IP has been established across the world over many decades. To this end, the World Intellectual Property Organisation (WIPO) was formed in 1967 at Stockholm and entered into force in 1970, to regulate various matters concerning intellectual property on a worldwide basis.
WIPO’s origins however backdate to 1883 and 1886 with the adoption of the Paris and Berne Convention respectively, where the establishment of international secretariats were formed under the Swiss Federal government. South Africa is a member of WIPO, which comprises approximately 191 member states, and similar to all members, South Africa is bound by its international cooperation provisions which among other functions promote the creation, dissemination, use and protection of IP.
Since there is great strategic value that underpins the use and protection of IP, it is essential that organisations conduct a regular IP audit in order to understand what intellectual property or IP assets they own.
When making reference to IP ‘assets’, it’s important to understand that these are often intangible – including a person’s knowledge and know-how – and therefore it often becomes very difficult to accurately quantify these assets, including their true value.
Conversely, quantifying intellectual property that can physically located or measured in a tangible way, for example a new software application or patented product, is clearly far easier to audit. With the advent of the Fourth Industrial Revolution, trying to measure and audit an organisation’s IP is becoming a lot trickier and more complex in a highly competitive and electronically connected business environment. Since IP of an intangible nature is on a massive growth curve, it is clear that organisations will need to rapidly apply their attention to this growing problem which poses massive risk to the sustainability of organisations.
Importantly, as one of the foremost runners of governance codes, the King IVTM Report on Corporate Governance for South Africa for 2016 (King IVTM) makes…
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Read this article by Terrance M. Booysen, Chief Executive Officer, CGF Research Institute, as well as a host of other topical management articles written by professionals, consultants and academics in the April/May 2019 edition of BusinessBrief.
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