Could the rise of data leave IP professionals stranded?
The transformation of data into an asset class is a game changer. Bowman Heiden and Karla Soler Riba argue that failure to keep up could lead to those working in intellectual property becoming irrelevant.
While much of the focus on intellectual property since the turn of the century has been on patents and the potential impact a weakened system could have on innovation, a new intangible asset has emerged from the shadows – data. Nowadays companies need to become not only software businesses but also data ones too. After all, data is the raw material being used to generate today’s most leverageable value propositions – insights and predictions. For IP strategists this means it is important to be comfortable with two new, critical activities in the digital economy: the governance of data as assets and property; and the development of data-driven business models as a key source of competitive advantage.
Governance of data as an asset and property
Data is not a traditional intellectual property but it is certainly an intangible asset, with property-like qualities. The recent passage of data legislation (eg, the EU General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA)) have further elaborated specific rights to personal data protection. While framed in terms of privacy, these also convey governance mechanisms associated with property, such as rights related to ownership, access and usage. For example, the GDPR allows for:
- restrictions on access through informed, affirmative consent;
- restrictions on data transfers and data processing to well-defined purposes; and
- the right to move and erase data from businesess that hold it.
In addition, techniques involving blockchain technologies and smart contracts are progressing towards fungible markets for data that allow for governance and payment systems with low transaction costs – similar, in principle, to digital rights management and the development of markets for digital music.
While there are many types of data, it is not inconceivable that personal data or the inference of personal information will be ubiquitous in data collection in the not-so-distant future. This, as our lives become increasingly inundated with smart sensors, Internet of Things solutions and advanced data-processing algorithms that will quickly be able to unanonymise data sets.
While data can produce new sources of corporate and customer value, it can also facilitate surveillance with results ranging from consensual tradeoffs of data for convenience to subliminal manipulation of the democratic process. This is why property can never be separated from ethics: the creation of valuable, tradeable objects always generates commercial incentives with both intended and unintended ethical consequences, which must be governed as internal, not external, business activities.
Most importantly for IP managers, new privacy laws are a great opportunity to build awareness of the value of all types of data and to solidify data as a new asset class with important IP implications. Certainly, the growing use of data and associated machine-learning/AI algorithms, software implementations and cloud-based services will have a significant impact on the relative importance of traditional forms of IP protection – in particular, patents, copyrights and trade secrets – as the digital transformation of the industry intensifies. For IP strategists to grow in relevance they must embrace a more holistic toolkit, including technical, contractual and business model-based means of control that are more aligned with digitisation and the central role of data.
Data-driven business models as IP strategy
Many of the world’s top firms and emerging unicorns rely less on traditional forms of IP rights to build and sustain their competitive advantage and more on platform-based business models. Through network effects, platform users can be seen as assets that attract more users and build strong control positions by creating switching costs.
Personal interactions (and the data collected from these) are the epicentre of platform business models. It is fair to say that the main function of these platforms is to facilitate interactions, while their technology is a means to enable and curate them. Therefore, both users and the data that is generated through interactions create stronger control positions than those coming from any traditional form of intellectual property.
As opposed to products, which tend to depreciate over time, the value that each customer receives from interacting within a platform tends to increase as more data is collected and more customised experiences can be offered. Further, if insights and predictions are the key economic outputs of digital businesses and these outputs become better as more data is collected and machine-learning algorithms improve, then business models that facilitate access to data can become the most important means by which firms control their market position.
For digital small and medium-sized enterprises, platform growth and survival depend on how quickly they can achieve and retain critical mass. For that, they must think and act fast. Pull strategies and user-centric methodologies consist of rapidly capturing users’ wants and needs and launching new improved solutions to meet these. Due to the iterative nature of such processes and the speed with which changes must be implemented, agile market adaptation becomes another key control mechanism. Pivoting is therefore a common practice among digital platforms. It is understandable that patenting may not be a priority in a business’s early growth phase.
The current digital transformation of business offers the opportunity for IP professionals to either move closer to the business core or further into the periphery. If we opt for the latter, it will be difficult to call ourselves strategists.