Bill Elkington has more than 30 years of intellectual property (IP) management experience. Throughout his career, he has worked in various capacities involving research and development (R&D), operations, and strategic planning for intellectual assets. As the Senior Director of IP Management at Rockwell Collins, he works among senior leaders overseeing IP asset management, IP process and policy, and transaction support with government entities. Elkington also serves in leadership roles for the Licensing Executives Society (USA & Canada) (LES), where he has been leading the charge for IP standards. On behalf of the Stout Journal, Stout Managing Directors David Haas and Scott Weingust recently spoke with Elkington, who detailed the IP practice at Rockwell Collins, the reasons for and the objectives of the LES Standards Initiative, and how businesses should establish IP management departments, similar to human resources.
The Journal: Thank you for joining us, Bill. What are some of Rockwell Collins’ primary IP challenges?
Elkington: Like most companies in the 21st century innovation economy, we have to re-educate people. As [tech innovator] Marc Andreessen pointed out several years ago in a blog, software is eating the modern corporation, and I think we see that in our industry, as well. Software is where the growing focus is in terms of managing IP value and in terms of providing value to customers and other business partners. So helping people manage through this transition into a software and information services world, and helping people think through the IP implications and the value implications around IP, is a big part of what we do.
My team is a business consulting group that advises the company’s business units. The challenge is to keep up with the pace of change and help fill in the IP gaps for our business leaders.
The Journal: Do you agree that in the current environment, it has become more difficult to obtain software patents? And if so, how does that impact your ability to protect and enforce your rights as you are moving more toward a software‑based platform for your technology development?
Elkington: Yes, there have certainly been some changes in the law over the last half-dozen years or so that have significantly affected the efficacy of patents to protect software innovation. But I would point out that in our industry, patents are less important than copyrights and trade secrets.
Aerospace and defense tends to be an industry where there is not much patent litigation, at least up until recently. So patents have not been as prominent a part of our business as you might find in the telecommunications and computing industries.
The Journal: A lot of companies are struggling to figure out how to best organize and bring resources together to manage IP. Are there any best practices as to how to organize IP management programs to increase effectiveness?
Elkington: My theory is that IP management is similar to human resource management, or will be similar to it as we move further into the 21st century. People will come to the conclusion that there are sets of policies, practices, organizational structures, dashboards, education programs, rewards, and a variety of other things to help orient people around the effective and efficient management of the intellectual capital of a company, just as we have around the human resources of the company.
So you have a human resources organization that sets policy that provides: business relationship managers, consulting and assistance on hiring, and advice on how to incentivize employees and how to get high levels of employee engagement.
And so, too, you can come up with similar programs, policies, and processes around intellectual capital management to maximize the value of the existing intellectual assets created by the company.
I see enterprises moving in that direction because intellectual capital is a huge percentage of the equity value of the enterprise today.
The Journal: What is the LES Standards Initiative?
Elkington: This idea evolved out of an LES board dinner three-and-a-half years ago at the LES Annual Meeting in Philadelphia.
There are dozens, if not hundreds, of best practices books and certainly hundreds of articles on what are purported to be best practices in IP management. But when you look at them side by side, you discover that one person’s best practices are not another person’s best practices. So we are not speaking with one voice as a profession. Thus, we discussed what we could do differently or better to help the profession and help the economy.
We came up with the idea of standards. And when we say standards, I think of an example like the ISO 9001 quality standard. It is a business process standard that has been in place in various forms for quite a long time. It was developed by the British Standards Institute initially and then handed off to the International Organization for Standardization (ISO) to manage and take forward. It has become a rather large family of standards around quality management throughout an enterprise. We thought a similar concept would be beneficial in the field of IP management.
We want people to understand that we’re going to do this in an above‑board, open, balanced, process-driven way. And the way to assure people of that is to become accredited by the American National Standards Institute (ANSI), which is the accrediting organization for voluntary consensus standards developers in the United States. LES became accredited in February 2017.
The Journal: What are the objectives of the Standards Initiative?
Elkington: There are four principal objectives for the initiative. The first is to raise the standards of business conduct in IP-oriented transactions. The second is to improve the practice of IP management and, by doing so, to mitigate its risks. The third is to reduce the cost and time required to execute IP-oriented transactions and to manage IP generally. And the fourth is to protect and preserve the value of IP.
The general goal of all of these is to encourage investment in innovation and enhance the economic well‑being of society.
There are currently five active committees: IP valuation; IP licensing; IP brokerage; intellectual assets in the board room, which has to do with what boards should do in order to perform their oversight function with respect to intellectual asset management; and IP protection in the supply chain.
There are three additional committees that we’re considering: IP hygiene for startups – to help startups figure out the checklist of things that they need to be doing in order to responsibly manage their IP assets; reasonable and nondiscriminatory/fair, reasonable, and nondiscriminatory (RAND/FRAND) licensing standards; and patent quality.
The Journal: We understand that you are a member of a government-industry panel called the Section 813 Panel. This panel meets at the Pentagon every few weeks and studies the IP laws and regulations pertaining to IP rights in relation to DoD acquisitions. Can you tell us about the panel, including why it was developed and what its purpose is?
Elkington: Every year Congress passes what is called the National Defense Authorization Act (NDAA). It is basically the DoD budget for the year with any additional guidance from Congress to the department. In the 2016 NDAA, there was a requirement for the development of this panel to study law and regulation around IP rights in defense acquisitions.
There is a perception that the edge the DoD has had globally has historically been associated with innovation and advanced technology. And what policy makers within the government have been saying for a while is that, for some reason, they are not seeing the level of investment in innovation these days that they have seen in the past by traditional suppliers to the DoD. And they are not seeing as much interest as they would like to see on the part of many commercial and consumer-oriented high-technology companies in doing business with the DoD.
Part of the hypothesis has been that this lack of investment, or lack of interest in doing business with the DoD by advanced-technology companies, is that the laws and regulations around IP rights when the department attempts to buy goods and services from private companies may deter those companies. So the idea was: Let us figure out what we need to change about the law and the regulation to persuade people to invest at the rates that they used to and to persuade both commercial companies and traditional DoD suppliers to make the fruits of their R&D available to the DoD for its purposes.
The Journal: Is there any way to bring together the work that is being done at LES relating to standards and the issues that are being addressed by the Section 813 Panel?
Elkington: Yes. In fact, some of the companies that I work with on the Section 813 Panel are also involved in LES Standards. And they are involved because we think that standards can be an effective way of helping both the DoD and the companies that sell products and services to the department, to develop a common language about how to do these IP transactions. The idea is to find a way to balance the needs of the parties.
One of the characteristics of the DoD is that it has significant market power. You might say the same thing about a number of the high‑technology firms that it wants to work with. So this is an attempt to break through that dynamic in the context of IP transactions and try to establish a foundation for executing those transactions without a lot of perceived risk and concern over the possibility of disputes.
The Journal: What are your opinions of the current state of IP in the U.S. and the world, and how do you see things changing in the future?
Elkington: The prior Premier of China, Wen Jiabao, famously said, “The future competition in the world is about intellectual property.” And this was back in 2004. Like him, I really believe that competitive advantage and value is being driven by innovation and the intellectual assets that are the fruits of innovation.
I see us becoming more and more cognizant of that globally, more attuned as to how to manage these assets well, and more motivated by our constituencies to do this well.
We are basically a global economy now. Most companies like Rockwell Collins have global customers. A good percentage of our business is in selling products and services across borders. And our supply chains are global. So it makes sense that we ought to be sorting this out globally and working toward a way to get IP management out of the courtroom and into business processes.
Several major constituencies – Congress, judges, juries, and regulators – are really removed from intellectual asset management. They don’t know very well what works and what’s best. We ought to be actually turning to the people who do this for a living to help us get this right.
I think that is the direction that we need to go globally. The LES Standards are meant to be globally applicable standards, and we welcome participation from enterprises all over the world.