Intellectual property (IP) refers to creations of the mind, such as inventions, literary and artistic works, designs and symbols, and names and images used in commerce.

Below, we discuss three main tools that companies can use to deal with their IP: formal standards, patents and secrecy.

Standards and patents

Companies can choose to become a member of a standards committee to actively or passively participate in standardization. There are two forms:

• formal standardization (formal standards and standard products) that is developed under the guidance of recognized standardization institutions such as NEN, CEN and ISO
• non-official standardization, such as standardization in (research) consortia.

Patents grant an exclusive right to an invention (product or process) that is inventive, distinctive and industrially applicable.

IPR must be taken into account in standardization. Companies that participate in standardization, at least in formal organizations, are required to disclose all existing patents related to the standard. Patents must be licensed under FRAND terms (fair, reasonable and non-discriminatory) as standards are a form of common ownership.

Secrecy

A trade secret denotes any type of confidential knowledge or business information that gives the owner of a secret an opportunity to obtain an advantage over competitors who do not know or use the secret.

In particular, technologies that can be easily imitated can benefit from secrecy.

It is certainly not the case that patenting, secrecy and standardization are mutually exclusive.

Advantages and disadvantages

Formal standards, patents and trade secrets have benefits and risks.

For example, standards enable companies to gain inside information and early access to information, while increasing the diffusion of their technologies and proactively influencing future technologies. Moreover, participation in standardization helps companies to develop new markets. But standardization can take a long time.

Patents are also beneficial to businesses as they generate license fees, grant temporary monopoly / exclusive rights for a period of time and serve as a way to attract potential customers and investors.

A patent also incoporates risks for the company, as the content of the patent must be disclosed, even if the patent has not yet been granted. In many cases, imitation of patents can be very well hidden and difficult to detect. In addition, the process of registering a patent can be lengthy and costly. The patent infringement defense process can also be time-consuming and costly for the company.

A trade secret is beneficial when the IP in question is related to an internal process that is not visible from the outside. However, secrecy in itself cannot grant the company any rights if a technology is simulated.

The purpose of the decision tree below is to help decide when to standardize and when to patent. After research results are created, the first question that managers or researchers ask is whether or not the results are patentable.

If so, the benefits of patenting should be compared to the costs and benefits incurred in applying for a patent. If the benefits outweigh the costs, patenting is an option, and then the company or research institution must go for patent registration and wait for the patent to be granted.

If it works, the patent will be granted to the inventors.

If something does not work during the patent process, standardization can remain an interesting and serious option.

Even if the patent is granted, companies can still move to standardization by integrating their patents into standards as Standard Essential Patent (SEP).

The following steps will help you to make an informed and systematic decision to patent, standardize, combine both, or keep a technology secret.
The four levels of the decision tree refer to relevant questions that entrepreneurs must answer in order to be guided towards the correct tool to implement. These questions concern four aspects:

• patentability of technologies
• importance of protecting own know-how
• need for additional networks of users, customers and other stakeholders
• the pace of innovation in the market.

Dit is eigenlijk geen gemakkelijke vraag. De octrooieerbaarheid van een uitvinding wordt beoordeeld op basis van drie noodzakelijke vereisten:

• First, the invention has to be a novelty, in other words no prior use of anything similar in the market.
• Second, it should also involve an inventive step that is not readily discovered.
• Third, the invention should be suitable for industrial application.

Answering the question about patentability is not easy and requires extensive research, often requiring the support of a professional patent attorney. Strategic considerations also play a role. Even if patenting is possible, this is not necessarily the best option (EPO 2013).

Source: EPO (2013), Patents for software? European law and practice.

The importance of protecting own know-how depends on the specific objectives of a company, in particular its business model.

A company that does not intend to implement its technology itself, but to sell or license it for a fee, assesses the relevance of internal know-how differently than a company seeking to implement its technology.

The effectiveness of a specific instrument (secrecy, patenting or standardization) also depends on the (geographic) context. A company may decide to keep its technology secret in a region where a company's ability to create value with its innovation is low, rather than applying for a patent.

The competitive environment also plays an important role. For example, knowledge protection is very important when there are many competitors on the market who can imitate the technology.

Other aspects, such as the type and characteristics of a technology, determine the importance of knowledge protection. For example, a company that produces measuring instruments can standardize the procedure by which measurements take place, while patenting the core technology of the device that performs the measurement.

This requires that the technology is divided into several parts, some of which are suitable for patenting and others for standardization. When the technology in question is not visible to competitors, for example a new internal production process, the importance of internal protection can be assessed as high.

Patents are unlikely to help in this latter case, as patents are published, giving competitors the opportunity to imitate the process. Also, it is not easy to detect patent infringement, because it is an internal process.

In order to choose between standardization or patenting, a company must also consider the need to integrate additional networks of relevant stakeholders. Many technologies and systems are often too complex to develop in isolation, which requires collaboration. However, developing a business network can prove challenging for young, small and medium-sized enterprises, and the standardization process can be particularly helpful for them.

Standardization supports networking. In technical committees, competitors, suppliers, users and other key stakeholders work together to develop standards. During development, the participants gain insight and knowledge about the standard. In addition, the standardization process facilitates the exchange of knowledge between all participants, promoting R&D through targeted development of technologies, for example by obtaining feedback from other stakeholders.

Because standards support the compatibility and diffusion of a technology, they can be seen as a special form of R&D collaboration. In addition, the adoption of a technology in a standardization process is seen as proof of quality, enhancing a company's reputation associated with building the standard. Others are more willing to communicate and cooperate with the company.

Standardization thus clearly supports companies in expanding their networks. Compared to standardization, the benefit of patents in this regard is quite low. Patents are a way of showing the public that the company is innovative. Investors mainly see patents as an important indicator of how well a company can derive value from its innovation. Patents often play a key role in helping companies access investor networks.

The following questions can help companies to decide whether their need for additional networks is high or low:

• Is external communication / presentation important to the company (in the sense of (innovation) reputation and visibility)?
• Is it difficult to connect with "big players" in a particular technology area?
• Is compatibility with other systems or technologies important?
• Does the technology benefit greatly from positive network effects?
• Is additional knowledge required?
• Are there any standardization activities in the company's technology?
• How likely is it that potential business partners and / or competitors will participate in a specific standardization process?

The pace of innovation of a technology can influence the decision to patent or to standardize. The development of patents as well as formal standards is tedious, time consuming and can take many years. Consequently, the technology life cycle is an important factor in the decision process.

Formal standardization is not suitable if the technology changes—perhaps many times—before the standard is released. In a fast-changing innovation environment, standardization could prove inefficient, as the standard
would already be out of date when it is published. The same also applies for patenting. Patenting is also not only a time-consuming, but also a costly process, especially if the patent is filed in many regions worldwide.

If the technology life cycle is short, market uncertainties are high, and therefore the development of a NEN Spec or another fast track standard product are more favourable, as these standards can be
generated much faster (in approximately three to six months). A wide consensus is not required.

In general, short product life cycles and a high number of competitors indicate a high pace of innovation in the market.

Companies may use the following questions to evaluate the pace of innovation in their industries:

• How high is the market uncertainty concerning future developments?
• How long is the life cycle of own products or products in the market?
• How many competitors exist in the market?

In the figure, the left part (L) describes solutions where patenting is possible, whereas the right part (R) focuses only on standardization.

Even when patenting is possible, a company can still choose from several options. For example, the company can decide to maintain confidentiality instead of patenting it, if, for example, it appears that patent infringement is difficult to prove if used unlawfully by a competitor.

When the protection of own know-how is less important, patenting and secrecy also become less important and standardization can increase in importance. Especially when the company can benefit from network effects resulting from the standardization process.

When both the innovation pace and the market uncertainties are high, it seems advisable to draw up a NEN Spec or another standard product that can be quickly realized. If there is more time and less dynamism, the choice can be made to develop a formal standard that is established by consensus.

There are also various options for using patenting and standardization in combination. This can be useful if the company wants to show its innovative strength to the outside, for example when looking for money for external investments.

As discussed earlier, there are several possible combinations of standardization and patenting:

• Technologies can be integrated into standards in the form of SEPs, with licensing fees charged under FRAND terms.
• Include patents in the standard without charging a license fee. In this way, companies place their IP in the public domain to achieve a broad level of dissemination. This can be interesting if their revenue model is related to related products or services.
• Companies could patent their technologies and participate independently in standardization (patents related to a standard generate more license revenue).
• If a company cannot fight patent infringement, it may be advisable to keep the relevant IP secret.

The decision tree shows that standardization is an important tool that can be just as valuable as patents and, when used properly, can help companies reap benefits.

NEN can also provide support in this regard and map out the various options, but the company itself is responsible for the ultimate strategic decision-making.

The decision tree method is further illustrated by the following case studies:

Case study: Secure data GMBH

Case study: Locator GMBH