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Know-how: Building block of innovation

February 7, 2011

I was reading through a white paper of MindMatters Technologies, Inc. which states that ‘U.S.-based companies lose an estimated $45 billion annually in Intellectual Property (IP), yet 62 percent have no procedures for reporting information loss and 40 percent have no formal IP protection program. This is frightening when you consider that Intellectual Property can represent up to 70 percent of company’s valuation’. This is the state of foremost nations in enforcing Intellectual Property. Think about the new or poorly developed nations in IP rights.

I perceive that most common problem arising in managing IP is managing know-how. One of my professors told one day in the class that people come up to her and say that ‘our business is protected by trade secrets and that they have a bunch of trade secrets preserved with them’. The next question any attorney would ask is ‘how do you protect them?’ Biggest misunderstood notion in IP amongst people is that merely stating that one has a protected trade secret does the job. You have to do more. One has to take measures to protect it, keep it secret and do not have IP Leaks occurring in his/her firm, have tight confidentiality and non-compete agreements with the employees, and lastly do not disclose it to anyone either intentionally or unintentionally.

There might be no statistics available on this, but experts believe that almost 70% of Intellectual Property in any innovating organization is Know-how and not patents, copyright, trademark etc. Know-how is generally framed as ‘Private IP’. It is the asset which company owns by gaining experience or conducting a series of experimentation to get a hold over a technology or innovative concept. It does not need to have a degree of novelty as required in patent regime. Even a small innovative change of book-keeping technique useful for the company is know-how. Innovative Organizations need to be aware of managing know-how, as it is the building block of IP generate in that organization. They must understand that know-how leads to ideas which get conceptualized later to generate patent protection over an innovative technology.

For further reading, I would suggest some sections from the IP Handbook. It is a good read for innovation managers.

Trade Secrets and Trade-Secret Licensing by Karl F. Jorda, IP Handbook –

Trade Secret in India, IP Handbook –

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