Aon’s David Joo – EMEA Intellectual Property Lead, within the Digital Transaction Advisory Services – explores the importance of developing a multi-layered intellectual property (IP) value protection strategy for R&D-intensive mobility businesses innovating to stay ahead of the competition.
A failure to ‘innovate or meet customer needs’ ranks within the top ten risks businesses are most concerned about, finds Aon’s 2023/24 Global Risk Management Survey of business leaders worldwide. This concern is particularly evident in the mobility sector where innovation is highly prized and recognised as the key to delivering a competitive edge and, in turn, driving customer and business value.
But, given much of this innovation can be characterised as IP – whether it comes in the form of hardware and software – many of these intangible assets are often overlooked from a risk perspective, especially in early stages of research and development (R&D). That means IP items like trade secrets, even though they can be an organisation’s most valuable assets, are vulnerable to leakage or theft.
It’s a serious shortcoming that underlines the need for R&D intensive and tech heavy mobility businesses to develop a multi-layered IP security strategy that extends beyond just digital security and emphasises IP value protection.
Key IP Risk
One of the major issues in an R&D intensive business can be the disconnect between internal groups who should control an interest in an organisation’s IP. Within a typical large corporate, for example, there might be a chief information security officer, a chief innovation officer, and heads of legal and R&D. These individuals and their respective teams generally sit in different parts of the business which, because they do not have a cohesive view on the IP portfolio, can lead to problems in communication and misalignment on value protection strategies. It is often the case that IP falls outside the mandate of CISOs or even CIOs, while in-house IP departments frequently sit under the legal team rather than R&D. To address this shortcoming, there needs to be a centralised system for IP governance to bridge the gaps and establish a comprehensive and robust IP value protection strategy. Better collaboration is also a way to help drive innovation and increase enterprise value throughout the organisation.
Security by Design
Another pressing requirement is around the mindset for IP value protection. There is a continually evolving approach in the cyber security space that focuses on security by design, covering areas such as operating procedures and information technologies, where the purpose can be summarised as ‘ensuring that security is not treated as an add-on to any new design or development of a product; it’s effectively baked in from the outset.’ This feels like the corporate mindset needed when it comes to IP value protection for mobility companies given the rise of new IP being developed around areas like system design, testing frameworks, batteries, and chips.
IP Exposure to Cyber Risk
As we look towards other R&D-intensive sectors, IP theft is now often cited as a core motive for cyber-related attacks, generally experienced alongside financial theft. One obvious reason is due to top sensitive data being generated, analysed, and disseminated across the business. According to CrowdStrike’s 2024 Global Threat Report, nation-state adversaries were active in 2023 with a target on IP. The report states that “adversaries continued to operate at an unmatched pace across the global landscape, leveraging stealth and scale to collect targeted group surveillance data, strategic intelligence and intellectual property”.
Unfortunately, R&D-intensive businesses operate highly sophisticated systems where cyber vulnerabilities are typically quick to find for attackers and slow to fix for cyber security teams. Specific to mobility, there is a clear rise in cyber exposure within the industry. As IoT becomes embedded into the automotive space, for example, key cyber risks are elevated such as connected cars presenting an immediate network entry point for disruption and connected roads infrastructure causing aggregate exposure levels.
For manufacturing businesses this means there is a need for effective business continuity plans as system outages due to malware penetration may cause significant losses. Although insurance programmes may cover portions of the loss incurred, there is a gap in relation to loss of IP due to cyber-attacks and, therefore R&D-intensive businesses should look to implement physical and digital best practice to protect IP value. One recommendation to link up cyber security and IP is to factor in IP discussions when developing a defence strategy, which can further justify security investment based on value protected.
Human Capital at the Core of Innovation and Risk Mitigation
Mobility also has a big challenge around human talent and IP vulnerability. With an evolving need to access talent pools with expertise ranging from AI, engineering, and telecommunications, understanding talent in one of the most technologically interconnected sectors and how that influences the IP generation for enterprise value growth is vital. But individuals in an R&D function hold key knowledge and technical skills that are difficult to replace (and these are not necessarily the very senior roles). How well, for example, do the processes work when talent moves to a competitor? How is the IP managed so that it doesn’t leave with a departing employee? How well are exit interviews conducted? What about working with partners? How can companies make sure that IP is not exposed or lost? With heightened movement of talent, combined with the tremendous amount of innovation, valuable IP being created within the ecosystem can be subject to leakage or theft.
People are the gatekeepers for protecting trade secrets and establishing the growth in IP portfolios more broadly. A talent retention solution is crucial and can vary widely from business to business. For R&D-intensive businesses, an incentive plan around IP generation, talent development for future skills to overcome the risk of failure to innovate (i.e. advancing knowledge), as well as performance and productivity tracking can significantly impact the value creation engine.
IP is Too Valuable to be Neglected
Having considered many of these risks, mobility businesses might look at the role of insurance and where it sits in their IP protection strategy. The first line of defence always needs to be in protecting the business through digital and physical security measures, implemented by people and supported by cyber capabilities, but, in parallel to that, there are risk transfer solutions available that can extend valuable protection in areas such as IP liability. IP insurance helps companies leverage valuable intellectual property by covering the legal expenses to enforce IP rights against third parties. And while insurance cannot replace a robust IP value protection programme, it can complement it.
Developing a Multifold IP Security Strategy
Mobility businesses focused on R&D require a multifold IP security strategy which extends across digital cyber security, IP rights protection (e.g., patent filings), IP risk transfer solutions, and contractual protection (e.g., when working in collaboration with others). A business’s ability to capture innovation from R&D, understand the R&D workforce, and create enterprise value to establish a competitive edge means an accelerated understanding of IP value protection strategies cannot be overlooked.
David Joo is a dynamic strategist, with diverse experience across consulting and legal services, specialising in IP matters in the context of M&A at Aon. Aon provides future mobility businesses who are experiencing differentiated challenges because of their business models – with new solutions to solve for their emerging needs. From those looking to evolve mature business models to those driving rapid growth from a start-up, we are a partner supporting a client’s growth cycle, helping them to make better decisions to protect assets, attract and retain the best talent and control risk. Contact David Joo david.joo@aon.co.uk
The information contained in this document is intended to assist readers and is for general guidance only.
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