Significant value is within reach for the numerous activities that are now being disrupted by edge technologies. Rules for how to practise disciplines such as accounting, legal, education and many others are being re-written. At present, it is only a few who are fully realising this potential for innovation and intellectual property. Most find themselves missing out or falling short. Such outcomes are by no means inevitable. It is just a matter of how you go about it.

In this age of digital transformation, the prospect of a highly productive three-step strategy is opening up for those who can join up the pieces of disruptive ideas:

• Clearly articulate the challenge for your market.

• Set a technical problem for your engineers.

• Create a series of solutions that you can patent.

As a side effect, such an approach can radically improve the efficiency of patent portfolios in three significant respects:

• The chances of patenting an edge technology can significantly improve, reaching close to 90 percent in our experience.

• A switch from patents centred on technology to those inspired by the market will bring into focus the few that really make a return, giving more time to shed those that don’t.

• Capital risks can also be reduced by investing proportionately more in IP, and less in research and development.

A disruptive mindset

You cannot adopt a conventional mindset in how you respond to edge technologies. You will be too far behind the curve in creating value from them. Instead, take a disruptive cue from a pioneer such as Elon Musk at Tesla or from a breakthrough technology like blockchain. In both cases, the originality lies in articulating a problem that manifests itself in the market. First, you have to grasp the size and shape of a nontechnical challenge, such as autonomous mobility or a digital currency. Only then, do you pass it on to your engineering and IP teams to design a technical solution.

They may well feel uncomfortable about being asked to step outside the safe confines of their own domain. They may well tell you that you will struggle to tie down the IP. However, if you can pair a disruptive insight with a technical solution, streaming them alongside each other,

you have every chance of lining up IP that gives you an edge in accounting tech, legal tech or any other kind of tech.

Find the purpose, not the difference

Engineering teams are incremental by nature. They work on the basis of identifying improvements to existing technologies. They are typically responding to requests by their managers for more speed, less weight, more stability or better security.

Patent offices work in the same way. They look for the differences between your invention and the prior art. Like engineers, they are not responding to the market. They want a defined platform from which to start.

A breakthrough like blockchain doesn’t even try to improve the prior art. It starts with a question such as how could we go about creating a secure digital currency? The solution, which links a chain of digital signatures across blocks of data, bypasses any directly comparable

technologies. As an innovation, it manages to articulate what the market requires and frames the technical challenge in a way around which developers can invent.

Inventing on demand

Essentially, we are at a bottleneck between our old system of engineering and prior art, which relies on a spirt of incremental improvement, and a new system of disruptive insights and data innovation, based on edge technologies, such as artificial intelligence and blockchain.

The challenge is to build a bridge between the two. Don’t feel that you have to be a genius like Elon Musk. Invention on demand is a process that you can follow. First, find the courage to think disruptively. Then deploy the strengths of your existing engineering and IP systems to create a technical solution and secure a commercial advantage.

It matters how you manage this sequence. If you think conventionally too soon, your chances of gaining a patent with edge technologies are probably 50 percent at best. If instead, you learn to invent on demand, our experience suggests that your odds rise to 90 percent.

In some cases, the gap between outcomes is much wider. From the point of view of a technology like 5G, engineering teams may see little scope for invention and no potential for patents. When configured from the perspective of the market, however, a rich stream of innovation opens up, which would otherwise have been missed.

As a technology, it builds on previous transmissions and protocols. The fundamental difference lies in how you can design the network.

By using slices, you can scale it up or down, depending on whether you are making a phone call, screening augmented reality or sending signals to a driverless car. The speed and quality of the service are what matter in each case.

Designs for these ‘network slices’ are becoming a highly sought and lucrative form of IP. By adjusting its mindset and framing questions differently, a 5G operator can halts its slide towards commodity status and turn itself a digital innovator.

Map the non-technical onto the technical

At first sight, many of your digital inventions will appear to lie beyond the scope of patents, the most reliable way of making a return on investments in technology. Historically, mental acts, including data, are excluded.

However, software inventions can be translated into the technical domains that patents require. Like a chameleon, it is a question of changing colour to match the demands of your environment, so making it possible for inventive algorithms with technical effect to gain protection.

On a digital gambling game, for instance, the patterns for displaying apples and oranges might have been inventive, but could not be patented. The resolution was to protect the underlying scheme for random signal processing without making any reference to the game.

In the same way, you can transfer inventions in accounting or educational software into a technical resolution that falls within the scope of a patent.

Technology management

The logic of such invention on demand depends on catching a technology at the right point, not too early, not too late, but just at the sweet spot when it stops emerging and starts to grow.

All technologies follow a lifecycle as they emerge, grow and mature. At the start, everything is new. There is no history. Comparisons are hard to draw. Platform IP can be secured at relatively little cost, even if it is hard to know which technology trend to follow and the risk-to-reward ratio is speculatively high.

At the growth stage, innovation becomes more incremental, driven more by R&D and less by inventors. Many more patents are filed, the scope for protection narrows, IP costs rise and the risk-to-reward ratios drop.

Once a technology matures, innovation plateaus, IP becomes expensive to maintain and the risk-to-reward ratio reaches its low point. Much of the budget is spent on enforcing the IP.

The focus of far too many companies is still on conservatively managing the risks in innovation and taking a view that is too centred on technology. The whole process is geared towards maintaining the status quo. By playing it safe, they end up with late-stage technologies that no one wants to buy.

IP portfolios

In conventional portfolios, only 1 to 3 percent of IP ends up having any significant value. The remainder is a legacy of the days when IP was considered a defensive necessity, rather than an active asset. Edge technologies present a second chance to run portfolios more efficiently.

Decisions about the value of an innovation can be made at the beginning, not after a technology has been created. More responsibility for them falls on business units and less on IP departments.

When the emphasis is on creating value in the market in this way, decisions about whether to invest in IP, as opposed R&D, come more into focus. By buying in IP, instead of creating their own, companies can significantly reduce their capital risk and create an asset that it is similar in nature to a financial option or derivative. Here they are following the smart money.

IP investments

For those investors looking for exposure to high-growth technologies, the logic of patented inventions on demand is starting to make itself clear.

Conventionally, early-stage investors pick a promising start-up and line up €10 million in equity. As a formula, it remains fraught with difficulty. Even the smartest investors only expect to make a significant return on one investment in ten.

The question many are asking themselves is: can we save ourselves the risk of losing all our capital, while still retaining the option for a gain on the upside? In other words, instead of investing in a ‘hard asset’, such as equity, can we use a ‘soft asset’ with the characteristics of a derivative?

In the case of technology, patents can be a highly effective equivalent. Under the Patent Co-operation Treaty, you can gain up to 31 months to determine whether to go ahead or not. The capital at risk is roughly 1 percent of the commitment to a start-up.

As a technique, it remains for now the domain of specialist investors, able to find the sweet spot at the point that an emerging technology establishes itself. However, the signs are clear that money is gravitating towards inventing on demand as a process and that the winners from digital transformation will be those who can best configure their innovations round insights into emerging sources of value.