Transparency vs. Protecting Tech IP

The issue of proprietary tech IP and whether to hold it tight at all times isn’t a common strategic topic that I’ve run across often in the high-tech world. It does get discussed piecemeal, like when the need to disclose something sensitive to a customer or partner pops up. In general, I’ve found folks tend to hold such information tight. Many senior managers of software and hardware companies have a long-held tendency toward rigid secrecy. Maybe they’ve been burned in the past. Or maybe they are just naturally unusually suspicious! In any case, I believe that in most companies this deserves a bit more attention and thoughtfulness as a strategic corporate topic. Here’s my view on some ways to frame the discussion:

Understand the nature of your business fully

Is your company’s competitive advantage based on proprietary IP? Or is it the power of your brand? Maybe it’s a fundamental cost advantage due to size and scale? Or something else? In my opinion, the place to start this strategy discussion is to fully understand your business and the role information plays in competing in the marketplace. If your advantage is heavily IP-based and backed by strong patent protection, the initial impulse may be to protect your IP at all costs. But if the patent protection is very strong, what is the advantage to your competitors getting a hold of it?

If you can afford the legal resources to protect it, there isn’t much they can do about it anyway. Besides, much patent information is necessarily disclosed in your filings. Plus, it might give you an even STRONGER competitive advantage to use this proprietary information freely in discussions with potential partners and customers. People like to work with winners. With a strong technological advantage, giving them a glimpse of how powerful your advantage is can be used to great effect. This is just one example of why to do a deeper strategic analysis of your business.  With respect to disclosure of proprietary company information, it may lead you to a different policy on secrecy vs. transparency. One that might not be obvious on the surface.

Honestly appraise the value of transparency vs. protection of tech IP

Suppose you’ve decided that you have tech IP, that all things considered, you’d prefer to remain low-key or completely secret. You should still consider the risk-versus-return trade-off of disclosing it in a particular situation. The point here is that even if you have something important, paranoia can work against you if you take IP protection to an extreme. After all, IP is only valuable if you use it. Sometimes this means embedding it deeply in software, SaaS, hardware, or semiconductor offerings. Where it appears to be safe from prying eyes (although this often is just a false sense of security).

In other situations, exploiting your IP to the fullest may require carefully considered, prudent exposure of it to potential customers, partners, and investors. This, of course, is a bit scary when you’ve put so much time, money and effort into creating an IP competitive advantage. To some, it’s downright terrifying. But you can’t let this emotion cloud your judgment. Consider each scenario individually when deciding how much to disclose in a particular business situation. Nearly EVERYTHING in business is about weighing risk vs. reward. Try your best to be objective in this important decision.

A balanced approach with basic guidelines, but allowing for case-by-case exceptions is usually best

Years ago I worked for a company whose base business was in defense industry services. I came in to start up a commercial software product startup unit. This was nearly the polar opposite from the existing business. The base business was government contracts, often involving “black ops and other highly classified activities. Because of this, the culture on disclosure and publicity was very secretive. All of this made perfect sense for the existing business. But not at all for the new venture I was starting up!

Yet I remember being in a meeting discussing launch activities for our first product. I mentioned that we needed to hire a PR firm. The response was “we don’t do PR here – next topic”. I was shocked and taken aback. This is such a basic business tactic on the commercial side of the tech industry. After a lot of discussion, explanation, and time, I finally got my PR firm. But the differences between my startup venture and the bread-and-butter defense parent company business were fundamental. So the topic of transparency — even when it was normal and important — was a constant struggle.

 What damage will disclosure do? In the long run, almost all information becomes transparent

One thing to consider when weighing this often difficult decision is to ask yourself, “What’s the worst thing that could happen?” Both in considering the decision to disclose — or not disclose. This puts a “floor” on the consequences of your decision. It’s also a good idea to take sound, basic steps such as getting a signed NDA before disclosing tech IP. If this is practical given the situation.

Here’s one example of asking not this question: “What’s the worst that can happen?”I often find executives reflexively refusing to discuss their financial or business metrics. Because they are a “private company”. I often hear “We’re a private company, we don’t discuss that” when I ask a simple question.  Such as how many employees a company has, or what their revenue run rate is! I tend to smile and shake my head.

A simple example

Why not? What is it that you would expect me to do with this information? Run off and immediately tell your most hated competitors? Not only do I have no reason or interest in doing such a thing ethically. But in this Internet era, I would risk ruining my reputation and impacting my ability to make a living. Even if I was so inclined to report this information to a competitor, what would THEY do with it? They might be interested in hearing it, but the likelihood that it would provide them with some significant competitive advantage is very low.

But by not disclosing this basic information, people often assume the worst. That you’re not disclosing it because you are very small in size,  have low revenue, etc. In many business discussions, the context of your developmental business stage can properly frame the discussion, making the discourse more valuable to you. This is just one simple example. If you think about it, I’m sure you can envision others.

This discussion of transparency and tech IP is a bit of an odd one. One that is not discussed often from a strategic perspective. But I believe it is very important nonetheless. What’s your view on how to balance these two disparate approaches? Leave a comment below with your own opinion and business experiences.

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