Embrace Cognitive Dissonance to Build More Sophisticated IP Rights

Intellectual property owners often hold conflicting beliefs about their IP rights, such as having too many and too few registrations. This dichotomy similarly presents as having spent too much and too little on IP, and seeking too much and too little to license IP.

Having just one of these beliefs can lead to a desire to assign fault. But maintaining both contradictory beliefs at the same time can lead to discomfort. If untreated, you may see self-defeating or deviant behaviours such as settling disputes too soon, for too little money – or even giving up on IP.

I believe feeling cognitive dissonance is a recognition that we may be simplifying the nature of the IP right and its possible value. By understanding why we feel troubled, we can improve our IP strategies. To get there, it may help to appreciate some unusual qualities of IP rights.

IP rights are weird

We can usually value a right in real property by walking its boundaries, checking clear title and comparing it to similar properties. By comparison, the value of an IP right is and always remains opaque.

We value an IP right by examining the shadows it casts. The brighter the light we shine, the better we can see the consequence of the choices made to create it, and the more clarity we may get as to its probable value. We make rough guesses as to potential value during an invention disclosure meeting.

We can make increasingly better estimates through:

• discussions with potential investors;
• private negotiations with market competitors;
• litigation with a competitor; and
• multi-party, multi-court, complex and repeated patent litigation (the brightest lights we shine, and thus the most certain valuations we typically get in this now-belaboured analogy to Plato).

Each event generally requires a progressively longer interval between the choices we must make to create and protect the IP right and the opportunity for a clearer IP valuation. The longer the interval, the more likely the valuation will be affected by changes in technical, legal and market conditions. The result: what may have been a fair valuation early on, resulting in a then-appropriate commitment of corporate resources, can turn out later to have been both genius advice and a waste of resources.

While we get clearer feedback, we are also subjecting the IP right to greater risks. For example, before a government grants a private party what amounts to an artificial monopoly that can reduce consumer choice and increase prices, it requires us to satisfy certain technical and legal standards. Before a court adds its public imprimatur of validity and infringement to the value of our IP right, it gives opponents every chance to identify errors suggesting the IP owner should not be permitted to enforce the right, and it does so at the risk of non-mutual collateral estoppel.

This is the long way of saying that at the same time we are measuring the value of an IP right we are affecting its value, and the better visibility we can get, the more we may affect the value – for better or worse. In this sense, IP isn’t just intangible, it shares a measurement weirdness with quantum mechanics.

There is no IP right

We can hold a ceremonial copy of an IP right in our hands and show it to a jury. We snail mail them to clients and mount them on walls. Despite this, IP rights remain intangible and also probabilistic (as are IP valuations).

IP rights are legal descriptions of future probabilities. For example, Erwin might be of two minds as to the value of his new trademark application for CATBOX. If Erwin were to ask his IP lawyer to assess his chance of using the right to stop a competitor, he may get an estimate that he has a 45% to 65% chance of success. Regardless of the method and rigor used to reach this estimate, it reflects a bespoke combination of probabilities of possible outcomes for each variable the lawyer perceives, based on past experiences, knowledge, facts and perhaps some measure of randomness.

While there are many tools and algorithms available for shining these lights on IP rights to derive a value, the valuations each can produce are replaced (the probabilities collapse) upon a significant measurement event such as a court’s decision on damages or payment of an IP licence fee. Until those moments, even the most experienced IP owner and practitioner may be of multiple minds as to the value of the IP right.

Try asking your trial attorney to predict an outcome while the jury is out (before Schrödinger lifts his box).

Cognitive dissonance is a guide

It is hard for us to maintain the cognitive load needed to think in probabilistic terms, and it can be easy to default to deterministic thinking.  When we do, a feeling of cognitive dissonance is a form of feedback or recognition that we may be oversimplifying.

I hear clients expressing dissonance when they face decisions about committing resources, limiting or abandoning rights, subjecting rights or their company to extraordinary risks and when they need to justify their efforts to others.

What can we learn from these moments of cognitive dissonance that may improve our IP strategies?

I offer the following as my own suggestions:

• Confront it – As a preliminary matter, when I hear what sounds like dissonance from a client, it tells me that the client may need more input, whether it be data, analysis, experienced advice or simply my time as a sounding board. It helps to have systems and reminders to provide these at critical moments with less prompting.
• Note when it is absent – When I don’t hear the dissonance, it tells me to check-in to make sure we’re giving timely attention to difficult decisions, as avoidance can be a normal response to dissonance.
• Skew probabilities upwards – Consider strategies that shift the entire range of probable IP valuations higher; or that tend to narrow the range of probabilities to give you more reliable valuations. For example, start your IP strategies by focusing on why you want IP rights, and use those to drive what you file and where (draft applications for your most important markets first using local experts).
• Build more complexity into your IP strategies – Use tools and methods that handle more complexity and randomness. Shift from using lists to charts and tables that accommodate known risks and interdependencies and critical deadlines. Consider using trees and game theory.
• Use time wisely – Realising value from IP requires a long time horizon. Use it to skew probabilities in your favour. Consult your IP attorney earlier and more regularly to compound the value of the advice. Earlier advice can broaden the scope of a potential IP right that might otherwise be narrowed or lost by missing deadlines. Once drafted, unnecessary limitations or mistakes in the right propagate and can become very difficult to identify and fix.
• Seek more experienced foresight – While hindsight provides clarity in apportioning blame to prior legal advice that may be unfair, it is not necessarily incorrect. The more experience your IP advisor has in the trenches contesting and defending IP at the point where the range of probable outcomes is collapsing, the more likely your advisor will spot similar issues and apply strategies that may minimise similar risks to your next IP right from the start.

Our cognitive dissonance may not wax eloquently, but it can remind us there may be a better path.