The Rockwell Collins IP best practices journey

The aerospace and defence industry presents some unique challenges for rights holders. Rockwell Collins has been adapting to this ever-changing sector by taking a dynamic approach to IP management, transactions and cross-sector cooperation

Looking at the history of technology development in the aerospace and defence (A&D) industry, one soon realises that it is characterised by far-reaching collaboration. Collaboration has flowed readily between original equipment manufacturers (OEMs) and their suppliers, between suppliers and other suppliers, and between competitors and partner companies. Often company A will have multiple relationships with company B simultaneously: the two might be partners on one project, competitors on another and suppliers to each other on a third. Additionally, the US government relies heavily on the A&D industry to collaborate with the various military branches and research institutions in order to fulfil its interests and needs in various Department of Defence contracts. Even on the international front, there is a push for technical collaboration between different governments sitting in the same technical coalitions – some military, some not.

Collaboration has been essential to bring bold new ideas and technology to fruition in the A&D market. This means that experts from different parts of the industry often share intellectual property in an open arena format. They gather together to kick around new ideas and discuss how solutions might mix and match with one another, working to build on each other’s strengths to solve new problems and formulate ideas on how to build faster, cheaper, lighter-weight, more technologically advanced products. This is all very exciting technically. However, what is less exciting is that much of this collaboration – especially in the early years – went untethered by things such as licences or IP ownership agreements or, in many cases, even adequate non-disclosure agreements. The common position has been not to worry about the legal details because there are technical problems to solve.

Because of this early lack of attention to the legal details, the A&D industry has developed some fantastic technical solutions with myriad IP arrangements. These range from crisp, clean commercial licensing to complex US government regulations (Federal Acquisition Regulation Supplement (FARS)/ Defence Federal Acquisition Regulation Supplement (DFARS)) driven into Department of Defence contracts, to just plain confusion. An untold number of A&D contracts have been written without so much as a list of the intellectual property being bought for use by the parties or clauses governing who owns the developed intellectual property and who gets what rights of use. Parties have intentionally been as ambiguous as possible at the time of signature in order to leave the problem for someone else to deal with in the future.

One day, someone finally did start trying to figure it out. Exactly where the chain reaction actually began is impossible to know, although it is easy to speculate that the one word that started it all was: ‘mine’. Once one party decided to claim ownership to the intellectual property in its deals, the IP reality check began to kick in. People had to start thinking about the consequences of taking a position in an IP transaction. They had to respond to claims of ownership and what these might mean for their own company’s freedom to operate. They had to start thinking about all those legal details and recognise their significance. With the heightened chatter about licensing, IP-educated lawyers and professionals started to enjoy a wider reach and influence in A&D business. As a result, many of the larger companies and OEMs have even begun to leverage IP licensing as a means of bringing in additional revenue.

Most A&D companies now acknowledge that this collaborative environment needs to be tethered to the legal and business management disciplines of intellectual property. However, this does not mean that collaboration will end. Whether it be a commercial aircraft flying across the sky, a rocket shooting into outer space or a communications system coordinating soldiers, aircraft and ground vehicles, this is possible only by a host of companies and experts working together. And this is true even if only one company is named on the outside of the final product. Collaboration is the lifeblood of this industry. The task it now faces is how to embrace and use IP best practices to leverage that collaboration and ensure that the market remains innovative, competitive and profitable by being fair and reasonable in how all matters around intellectual property are handled.

Technical environment

The avionics market is a critical subset of the A&D industry. ‘Avionics’ can be broadly described as aircraft electronics, such as the equipment that a pilot uses in the cockpit to communicate, navigate or carry out surveillance (eg, radios, smart display units, weather radars and flight management systems). Over 30 years ago, the function of any given avionics box depended almost entirely on the physical mechanisms (analogue) and hardware design of the equipment. Little or no software was involved. Since then, the technical solutions used in the avionics market have slowly but steadily been driving the functionality out of hardware and into software. This means that the software has become the brains of the box, carrying out the core intended function of the equipment.

This technical evolution has been significant in that avionics companies are no longer just building boxes; they are working with vast amounts of complex software and, in some cases, creating far more software than hardware. As one would expect, the market has evolved along with these technical advancements. Customers are now suggesting that avionics manufacturers provide the software separate from the hardware. These customers would even like eventually to procure software as an application which can be installed in any manufacturer’s hardware equipment. This would be comparable to licensing a fitness or gaming application to use on either an iOS or Android phone. The users of the software want the application to have the same functionality, performance and quality irrespective of the platform on which it is used. While this sounds straightforward enough, it is actually riddled with challenges when applied in the complex world of aerospace. Some of those complicating factors include cybersecurity, safety-critical requirements and real-time performance. While it is no surprise to see this kind of technical solution push its way into the aerospace market, the ripple effects into that market go deep and wide.

Figure 1. IP shift in avionics market

Who are we really?

Because of these dynamic changes, many companies in this market have been experiencing something of an IP wake-up call. They are not necessarily redefining who they are as much as evolving the way they see themselves. These companies make solutions that last a long time – for decades, in some cases. In order for a product to survive that long, it has to be maintained regularly and be modifiable or upgradable over its lifespan – what the A&D industry refers to as the ‘aftermarket’. Now weave into that model all the intellectual property that is needed to support such an industry. As in a consumable market, much of the valuable intellectual property resides in upfront processes for design and build. Yet unlike in a consumable market, much of that upfront intellectual property is also then needed to create and support the intellectual property that allows for all the activity in the aftermarket. As A&D companies begin to acknowledge the vast amount of intellectual property flowing in this industry, they are forced to ask themselves what their IP management positions and strategies will be in order to keep playing in this rich world of intellectual property.

And Rockwell Collins has been no exception. We are not simply a manufacturer of radios, as we might have thought of ourselves not so very long ago. Rockwell Collins is actually a prolifically innovative company, heavily focused on and invested in cutting-edge intellectual property. We are also a company that responds to our markets. Because our markets have been changing when it comes to intellectual property, we have changed some of our business models accordingly – shifting from hardware-centric to IP-centric solutions or, in some cases, working both into new hybrid solutions. Rockwell Collins is accomplishing this, and much more, by implementing structures, policies and procedures which are moving the company towards IP best practices. This IP evolution is allowing us to adapt more quickly to the IP-related changes and challenges coming from our markets. What follows are some of the features that Rockwell Collins has incorporated to help move us along this path to success.

Figure 2. Change management

Managing change

Influencing or changing a corporation’s existing culture is no small task. An entire industry of books, seminars and training programmes is devoted to this very point. However, if you boil it all down, no matter how fantastic an idea is or how much data there is to support the need for change, nothing will happen until you get people’s emotions involved. This is why starting with change management is arguably the most critical part of any corporate cultural evolution, regardless of whether intellectual property is involved.

The implementation of change management involves systematically looking at the changes that you want to bring about in an organisation and marrying them up with the emotions and thoughts of the affected individuals or groups. You let them know what you want them to do; then you give them a case for change that makes them want to be willing participants in that change. Understanding why has to be tied to the very things that motivate them, so you have to answer the question: “What’s in it for me?” When it comes to business-related changes, people are motivated by solving existing problems, preventing foreseeable problems or pursuing opportunity and growth (ie, money).

Think of change management as the scaffolding or skeleton. Rockwell Collins has judiciously used that scaffolding to support and implement IP management throughout the enterprise. Using these together, we have experienced a major shift in awareness which in turn is affecting our company culture and behaviour towards intellectual property.

 The most powerful catalyst of the IP evolution at Rockwell Collins was the placement of IP valuation at the heart and soul of its management of IP transactions 

Rolling out corporate-wide IP management

The most powerful catalyst of the IP evolution at Rockwell Collins was the placement of IP valuation at the heart and soul of its management of IP transactions. This was also the first thing that was implemented, being incorporated into the enterprise approval policy. This strategic placement automatically gave Rockwell Collins business-unit leaders ownership and decision authority over IP transactions in their business areas. Simultaneously, all IP valuations were required to be determined by the IP management group. This latter move pushed employees to seek out IP management for help, as well as ensuring that IP valuations would be calculated appropriately by people trained in IP valuation, not randomly guessed at or ignored altogether. Seemingly a small step, this action was critical to everything that has followed in the evolution of IP transaction management at Rockwell Collins.

IP valuation became both a lightning rod for discussion and a lynchpin to hold IP transaction management together. We can now talk more substantively about fair value received for fair value given. People can easily relate to that concept, especially when they understand that an exchange of value need not always include cash. Rockwell Collins leaders have learned that while the IP management team determines the IP value (ie, what an IP transaction should fetch in today’s market, all things being equal), they are still in charge of deciding the IP price (ie, what Rockwell Collins is willing to pay or expects to receive for the intellectual property and associated IP rights, specific to the situation at hand). This allows those leaders to remain in full control of their business. It also allows the IP management team to further educate all employees by pushing out the concepts that surround IP valuation. When teams understand that IP valuation is about getting their leaders the right information at the right time to make the right decisions, and that it opens doors to a different kind of discussion with customers and suppliers, lightbulbs go on and enthusiasm grows.

Organisational structure – centralised versus decentralised

In order to deal with all the work surrounding IP transactions in a systematic way, some kind of organisational system had to be developed at Rockwell Collins. Along with that, a conscious decision had to be taken either to create a centralised organisation responsible for everything relating to intellectual property or to adopt a decentralised system. Benchmarking with other IP-savvy companies helped us to gain insight into this, along with many other issues that needed to be considered. Rockwell Collins concluded that a decentralised approach was best for the company, for several reasons. The number of IP transactions and how integrated these are within the normal course of business were two major considerations. Pulling all the work relating to IP transactions into just one group would have meant that this group would have needed to be quite large in order to tackle the estimated thousands of IP transactions that flow through the company annually. It would have also meant duplicating some functions which already existed elsewhere in the company, leading to redundancies, which is counter to our Lean-based corporate business structure. It would also have created an approach to customers and suppliers that was disjointed from the non-IP based business processes. While our markets may be pushing us to separate software from hardware, allowing this to divide Rockwell Collins’ business structure into two made no sense.

At Rockwell Collins, the division of responsibilities and authority around intellectual property takes place at the corporate level, split between IP management under corporate development and the IP attorneys under the office of general counsel. Both groups work closely together to support IP transactions, with the legal interpretation, legal guidance and risk falling under the purview of general counsel and the business/financial side of the deal falling under the responsibility of the IP management team. As mentioned earlier, all IP valuations are completed under the team’s authority of IP management. In order to support the development of a decentralised structure for IP transactions, there had to be a way to delegate the IP valuation authority out into the existing organisations. This was handled through the design of a new IP transaction process, along with supporting tools and updated governing policies.

One advantage of a decentralised structure is that it supports the effort to change corporate culture. Company-wide assimilation and increased knowledge around intellectual property are the goal, so leveraging and fortifying existing company infrastructure, business processes and approval processes was the best approach for Rockwell Collins. When job roles were assigned new IP-related responsibilities, individuals did not have the luxury of tossing the problem over the wall and were instead empowered by responsibility. This gave the IP management team the ability to reach out to more people in the organisations and business units through extensive training and coaching. Training happens for all those individuals both formally in the classroom and informally on a deal-by-deal basis. In this manner, people are being prepared for their new IP job responsibilities and at the same time are being sold on the benefits of an IP-focused culture. By pushing responsibility and training out into the company, the overall IP intelligence of the entire company is ticking upwards.

Figure 3. Lynchpin of

IP transaction management

Unique solutions

While there was a sense of trying to stuff a cloud into a small room when translating the art form of intellectual property into logical process, this challenge has forced us to generate many creative solutions and tools. The first of these was the IP valuation filter, which is a collection of cases that do not require IP valuation. It was developed because there are clearly situations where spending time to determine IP valuation would be a waste of resources. For example, calculating the IP value for an off-the-shelf software tool which is sold at a local electronics store would be a poor use of resources. The filter is thus designed to be referenced as early as possible in the IP transaction process to avoid that kind of waste. So while an IP licence is always required when carrying out an IP transaction at Rockwell Collins, IP valuation is not.

Another unique tool developed in this challenging environment was an approved valuation scenario matrix. Like the IP valuation filter, this is also a set of scenarios – although this time they do require IP valuation. These scenarios are common throughout Rockwell Collins, so the tool has allowed us to standardise our approaches to reoccurring situations throughout the company. It is a matrix where each scenario has a brief description of the kind of request to or from Rockwell Collins, the usage of the technology, the possible kinds of intellectual property involved, a prioritised list of IP valuation methods which could apply to that specific case and then several live examples which have been carried out in the past. The business unit financial and pricing organisations in our company have been trained to handle IP valuations which fall within the boundaries of the matrix. Because they have been trained, they have also been delegated the authority to do the valuations on behalf of IP management for these specific cases. Thus, the matrix allows the business units to handle most IP valuations in their areas without being required to come directly to IP management. IP valuations that fall outside the scope of the matrix or meet a certain size or strategic definition still require IP management’s direct involvement. Establishing and maintaining the matrix was a critical step towards allowing for an 80/20 split in the high workload of IP valuations across the company – with 80% staying with the business units and 20% coming to IP management. It has become a fundamental tool which enables us to support the decentralised organisational structure.

The next group that was targeted for training was the contracts and subcontracts teams throughout the company. When the office of general counsel and IP management were working together to develop that training, another particularly creative solution evolved – the Rockwell Collins default terms and conditions. This document was developed to help our contracts and subcontracts organisations to identify more readily the types of licence that they encounter and what the general corporate starting positions should be for each kind of licence. The users of this tool can quickly identify when they need to bring in the office of general counsel or IP management because the contemplated terms of the agreement trigger that need.

These tools are incorporated into the backbone of the Rockwell Collins IP transaction process and policy, which in turn is laid out as an interactive visual diagram on the Rockwell Collins IP management internal website. While these are three of the more innovative solutions that have been implemented, an additional 20-plus tools (eg, decision trees, roles and responsibility tables, matrixes of questions and/or examples) support the entire process on the website. The IP transaction policy and procedures reference the website directly, allowing everything to be kept in one location and making it easily accessible to any employee. An additional advantage of keeping everything on the website is that some of the IP training is taught directly from the website to help increase visibility to the process and tools and make it easier to keep everything current. This adds to our model of decentralisation, allows people to choose a self-help approach to their learning and enhances the direct support and coaching they received from the IP management team.

Figure 4. Centralised IP management

A very large corporate IP management organisation, which handles everything with little input from other company functions

Figure 5. Decentralised IP management

A very small corporate IP management organisation, which pushes IP information, policy, processes, training and guidance into existing company functions and processes

Pulling it all together

During the roll-out phase, there was a planned sequence to all the work discussed above, such that order and timing became critical. We knew that once we systematically addressed the groups responsible on the front end of the process, the floodgates would open automatically, whether we wanted them to or not. Thus, we needed to prepare everyone downstream first so that they would not be overwhelmed. By working backwards, we could prepare one group for its responsibilities and teach it what to expect from the group upstream from it. This created a sense of anticipation, as opposed to one of surprise. We started with the creation of the supporting tools and training on IP valuation for our finance people. This group needed to understand how to translate deal terms and conditions into appropriate IP valuation approach and method, how to execute the IP valuation calculations and how to use the approved valuation scenario matrix. Next, we moved upstream from IP valuation calculation to the terms and conditions that would be fed to the finance team. This meant focusing on IP agreements training for our contracts and subcontracts teams, which are in charge of the terms and conditions of all Rockwell Collins agreement types. Because the terms and conditions of IP agreements are dictated by the structure of the intended relationship, and due diligence is needed to determine that deal structure, the tools and processes had to be set up for our programme management, engineering and business development teams to know what to do in the due diligence phase. The climax of the roll-out was the coordinated and simultaneous release of updated policies, a new procedure and the website containing all tools and process flows. This was followed by awareness training for leadership and management throughout the company, which opened the floodgates for usage of the IP transaction process.

A few more elements of change management were also a critical part of putting something this big in motion. To start with, clear executive-level support had to be established. The audience will always want to know that the leadership is clearly behind the changes that are being implemented. Employees want to go where their leaders are going, so building the case for change and sharing the sense of urgency with the top levels of the organisation has to come first.

Building that case for change starts by collecting potent, real examples of problems that have occurred and places where the need for change is obvious. Yet this information must be assembled, sterilised and presented in a way that does not leave anyone feeling that they are being hung out to dry. If this unfortunately occurs, the change effort will swiftly shift to being fear based. People at all levels of an organisation will work quickly to sabotage fear-based change, so it is very important to avoid creating any negative effects along those lines. In contrast, a positive environment is optimal for learning and cultivating an emotional desire for change. This means looking for and acknowledging any signs of improvement and not expecting perfection in the early stages.

Finally, the biggest element required for corporate-wide IP management evolution is patience. Rockwell Collins’ journey towards improved IP management has been an ongoing process for several years. In the early days, when dealing with IP transactions, changes were carefully timed and the order controlled intentionally. Yet consciously knowing the need for this discipline did little to ease the frustration in the beginning. The short-term results still felt like a tiny trickle of progress on the best day. Since the floodgates opened just a couple of years ago, everything now feels more like a fast-moving river. Two new layers are being added to our IP management: one that deals with intellectual property in joint ventures and another that focuses on intellectual property in the supply chain. Rockwell Collins’ IP management group is now also actively pulled into larger strategic IP discussions, both inside and outside the company, on a regular basis. All of these are additional indicators of the great progress that Rockwell Collins has made in its journey towards IP best practices. 

Action plan

Operating companies evolving their IP management organisation beyond patent monetisation should consider the following before implementation:

  • Create a clear case for change to command executive-level support upfront.
  • Choose organisational and process structures that complement and leverage your current corporate structure.
  • Utilise change management concepts and frameworks to influence and change existing corporate culture and behaviours.
  • Design process tools and training that are easily understood and readily accessible via internal websites.
  • Prepare and educate supporting organisations, starting with responsible parties downstream and moving upstream succinctly, allowing for anticipation of a roll-out instead of surprise.
  • Avoid a punitive system that creates fear-based change.
  • Have patience.

Carolyn Krull Tomberlin is IP manager at Rockwell Collins, Petaluma, California, United States

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