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Wednesday, 6 April 2011

IP and IC-- Best mates or ships in the night?

One of my favourite images (strictly of the armchair variety, since I am likely to become sea-sick just watching my grandchild's toy boat float in the bath tub) is the notion of "ships passing in the night." This image of mutual oblivion, so near and yet so far, carries with it both the promise and failure of potentially compatible subjects that seem largely unaware of the existence of one another.

Roughly seen, one can view the terms "intellectual property" and "intellectual/intangible capital" nominally, if not conceptually, as ships in the night. In the one corner we have IP, the purview of lawyers, with a pedigree reaching back seven centuries. Defined as consisting of a bundle of legal rights, most prominently patents, copyright, trade marks and trade secrets, I imagine that IP is the professional mother's milk for many readers of the IPKat.

In the other corner is the upstart notion of "intangible capital" or "intellectual capital" (either way, IC for short). Developed within the context of MBA and management education, IC is variously described in terms of a broad set of intangible knowledge assets that have increasingly become the prime driver of value creation in the 21st century. Colleagues of this Kat--Mary Adams and Michael Oleksak--in their elegant book, Intangible Capital, have defined the term as "the combination of all the intangible in an organization."

I can already hear my IP colleagues groan about the broad swathe and lack of precision of this definition and, from the IP perspective, such a complaint may have merit. But in another sense this criticism is a bit unfair. IC comes to reorient managers (and their accountants), from focusing on the notion of assets as being primarily tangible objects that one can count, manufacture and sell, to the concept of enterprise knowledge as the value proposition driver of the 21st century. Under this view, the ultimate question is "how can I extract value from my IC?"  While it may seem trivial to us IP practitioners, the reorientation from physical assets to knowledge-based intangible assets is still work in progress for the management profession and the professional schools that train them.

If you don't believe this, check the course offerings of most of the leading MBA programs and search for how many courses are devoted to IC. As a friend who teaches in one such MBA faculty (and who offers one of the few dedicated courses in the area) noted, if such courses are to be found, they are likely to be the domain of adjunct lecturers rather than full-time staff. For full-time faculty, research in IC is only for the fool-hardy and it is hardly the route to tenure at the schools that adorn the top 10 (or 20 or 30) list of MBA programs.

All of this is a backdrop to this Kat's ongoing paedagogical dilemma. For several years he has been teaching a course (required, to boot) that has sought to consider IP, in its broadest sense, within the context of managerial strategy. Whether he has done so more or less successfully is for the students to decide. Students, at first beset with fear and trembling, expecting perhaps "IP law lite", have joined me in my efforts to navigate between IP and IC.

And here lies the challenge: just how much IP should be presented as part of any IC course? Over-emphasize IP and your encounter grumblings that the course threatens to become "IP lite" for non-lawyers. Devote only slight attention to IP in favour of the notion of IC, and you face the fundamental question of whether one can manage IP (as a subset of knowledge-based asssets) without personally having much more than a cursory understanding of the IP subject-matter. Stated otherwise, are IP and IC meant to be "ships in the MBA night", or is a meaningful mutual encounter possible? For one, this Kat is still searching for the most effective answer to this question.


Mary Adams said...

Thank you Neil for bringing up this topic. I have skated along this boundary for several years and welcome the opportunity to try to clarify this issue.

IC as a field tries to understand the full scope of knowledge assets available to organizations. We know that the intangible potion of corporate value exceeds 80% in the U.S. and similar economies. We believe these knowledge assets fall into the broad categories of human, structural, relationship and strategic capital. Structural capital includes all internal knowledge from data to processes, documentation and knowledge.

What’s the role of IP in this? It depends on how you define IP. I think you know that I once tried to define all structural capital as intellectual property. If you look at it this way, lawyers (and perhaps your course) have a role in helping their clients to think strategically about all the ways that the law protects IC/IP including contracts, policies, procedures, and (yes) traditional IP.

Of course, most business thinkers still associate IP only with the specific pieces of knowledge that are explicitly recognized/managed as patents, trademarks, copyrights and trade secrets. Each of these designations has specific bodies of law associated with them and are, deservedly, a specialty for lawyers and other professionals supporting these systems.

(As a quick aside, maybe the increasing use of trade secrets as a protection strategy is the market's way of dealing with a more holistic view of knowledge.)

Every MBA student should know enough about traditional IP to know when to call in the experts. Does this need a whole course devoted to it? Maybe not, which is why you struggle with the IP lite problem.

So I guess it depends on the goal of your course. IP is an integral part of IC. But it’s not the only part. And even though the field of IP is much more mature and established, ignoring the IC perspective will not make it go away.

I applaud you for even asking this question. And I look forward to continuing to explore the answer with you and others willing to step out of their silos and re-discover our areas of expertise.

Anonymous said...

Ships in the night? No. Best mates? No. Much more than that. They are siamese twins. Different but connected and dependent.

I can't imagine a worthwhile MBA that would not cover both in combination.

Most don't. I rest my case.

Debra M. Amidon said...

Maybe all IP is Intellectual Capital; but not all IC is IP…

When I first wrote about 'intellectual capital' in 1987, I was referencing the intellectual wealth of a nation. The Roundtable was 'Managing Knowledge Assets into the 21st Century'. Over 25 years later, we have a plethora of research centers, doctoral theses, certification programs and associations dedicated to task. Now, it is at the heart of how companies evolve and nations prosper.

A new field of Knowledge Economics – or what BusinessWeek labeled Innovation Economics - has emerged; and the Sustainability profession has institutionalized the need to document intangible factors (e.g., related to social and environment) to augment financial indicators.

We have tracked progress closely and have contrasted examples of new economic indicators from sources such bas The World Bank, The UN, the Milken Institute and more. In the process we have crystallized the Triple Knowledge Lens – the triangulation of the Knowledge-based ECONOMY (Markets, Business, and Commerce), Knowledge-based SOCIETY (Networks, Communities and Culture), and Knowledge-based INFRASTRUCTURE (Organization, Environment and Technology).

Of all the new value capital drivers which have evolved (e.g., diversity capital, reputation capital, brand capital, network capital, et al), there appears to be global agreement that intellectual capital falls into three categories: Human, Relational and Structural. Intellectual Property (IP) is one of these drivers, albeit likely one of the most important.

For more discussion and hotlinks to our TKL, the inventory of performance measures, and self-assessment, see:

As crude as some of the indicators might be, we have come a distance to understanding variables which were previously not even part of the discussion. There is even an International Forum on Knowledge Asset Dynamics [IFKAD] - - which enable significant academic rigor to these topics.

I suppose the greatest danger is those who just use the terms IC and IP interchangeably without having a sense of the difference…and potential impact.

Jackie Hutter said...

I tell people I would rather teach a good business person (MBA or not) enough IP to be able to manage their intangibles, than to take even the most talented IP lawyer and try to teach her enough business to manage intangibles from a non-legal perspective. The analogy can be of a master builder and an award-winning architech--they are both talented in their own right, but they do different things. But the builder knows how things fit together in a finished building, the architect often does not (witness the stories of leaky Frank Lloyd Wright houses).

This then begs the question of how much IP to teach in an MBA course--since IP is subsumed into the topic of intangibles, it would be my view that the course should start with the subject of intangible assets and then teach enough IP to understand how these more familiar (but still not managed by most business people) assets fit into the big picture of intangibles. As Mary Adams said above, MBA students should be taught enough IP to know when to call in the experts. I would add that they should also know enough to "call B.S." on the experts.

But also a note about the use of IC vs intangibles in the context of training: I have had very sophisticated business people look at me dumbfounded when I mention the term "intellectual capital". But when I then put this in the context of intangibles (eg. patents, trademarks, contracts, relationships, employees etc) they start to get it. Maybe in an educational context it is ok to set up the over-arching topic of IC, but I find it much more straightforward in a conversational context to talk about intangible assets. At the end of the day, it may just be "tomatoes"/"tomatos", though--the key is to get business people to start taking responsibility for their largest asset.

Mary Adams said...

To follow on Jackie's last paragraph...

Businesspeople experience intangibles every day. They just don't put that label on them. And labels aren't the goal.

Ultimately, the goal is awareness of the importance of intangibles and, having established that, then the implications they have on management, measurement and business models.

To me, the most powerful part of the IC message is the holistic view of the knowledge-economy business. Each piece (IP, relationships, people, IT, knowledge, to name a few) is important but we must also find the way to understand how these all work together in a system, what I call the "knowledge factory."

I hope that some day, all MBA students complete their degree with this holistic understanding of the role of knowledge in organizations--not as an abstract theory but as a tool to drive innovation, performance and growth.

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