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ATRIP 39th Virtual Conference 2021 The Role of Corporate Governance as a Transparency Filter

8-10 November 2021, Faculty of Law, University of Copenhagen, Denmark

Associate Professor Dr Janice Denoncourt

BA, LLB, LLM, PhD

Solicitor England & Wales

Barrister & Solicitor, Western Australia ©J Denoncourt 2014-2021

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IPRs increasingly at the epicentre of corporate

governance in technology companies

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Interdisciplinary IP &

Corporate Governance Research

This Photo © J Denoncourt 2019

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The traditional role of corporate governance and reporting = shareholder protection

This Photo by Unknown Author is licensed under CC BY-NC-ND

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IP, technology and good corporate governance aims to deliver…great technology

This Photo by Unknown Author is licensed under CC BY-NC-ND

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Not this...

This Photo by Unknown Author is licensed under CC BY-NC-ND

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Or this?...

This Photo by Unknown Author is licensed under CC BY-NC-ND

This Photo by Unknown Author is licensed under CC BY-SA

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Investment in intangibles overtakes tangibles

This Photo by Unknown Author is licensed under CC BY-NC-ND

©J Denoncourt 2017-2018

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Burden of IP Ownership Power:

Accountability through Corporate Reporting

Responsibilities Obligations

Need for transparent decision-making Sustainable profit

Stakeholders beyond SHs Benefit sharing

©J Denoncourt 2017-2018

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Good governance & IP to protect technology supports growth to maturity

A strong portfolio of exclusive monopolistic IPRs have the potential to be ‘unique core strengths’ and one of the foundations for corporate longevity in the 21st century business environment.

IP ownership is positively associated with future growth and survival in the long term.

Source: B. Hall ‘Is there a role for patents in the financing of new innovative firms?’ (May 2018) Max Planck Institution for Innovation and Competition Research Paper No 18-06

Shareholders, employees, customers,

suppliers, communities and governments all

benefit from company longevity.

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My research...

IP, Finance and Corporate Governance

12 April 2018

©J Denoncourt 2014-2018

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IP, Finance and Corporate Governance

Table of Contents

Part One The Corporate Intellectual Property Landscape 1 Corporate governance and IP assets

2 Corporate governance: the IP and patent ecosystem

Part 2 The IP finance dimension: corporate governance and transparency 3 Bridging the gap between corporate finance and corporate governance Part 3 Accounting for IP: corporate IP assets and transparency

4 True and fair patent valuation: a corporate governance issue?

Part 4 The Corporate Governance Dimension 5 Transparency in corporate IP asset reporting

6 International initiatives in corporate narrative IP asset disclosure

7 Substance and form: developing a normative practice for corporate narrative IP asset disclosures

8 A triage-style ‘materiality evaluation model’ for IP and patent disclosures

9 Corporate governance and IP value creation reporting: reflections, conclusions and recommendations

Bibliography

©J Denoncourt 2014-2018

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A new challenge for the board is to meet the higher expectations of accountability for the company’s stewardship of corporate IP rights, IP-centric activities, IP policy & ethics.

Associate Professor Dr Janice Denoncourt

©J Denoncourt 2015-2021

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Corporate Governance as a Transparency Filter

to Support Exploitation of IPRs

My new research reflects on ‘lessons learned’ from corporate law

reform as potentially instructive for recalibrating IP law to better serve the societal goal of innovation and sustainable investment.

J. Denoncourt, Part I Chapter 4 ‘Company classification taxonomy and corporate intellectual property rights owners’ in: D. Gervais (ed.), The Future of Intellectual Property ATRIP IP Series (2021) Edward Elgar Considers and recommends UK corporate governance, transparency and disclosure reforms.

Step One: Better understanding of the types of corporate IP owners.

© J Denoncourt 2015-2021

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Pop Quiz!

What type of company should your pension fund invest in?

Big Pharma or Arms or Tobacco?

Ethical and sustainable investing

This Photo by Unknown Author is licensed under CC BY

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Pop Quiz! Ethical and sustainable investing

Big Pharma or FANGS or a Non-practising Entity?

This Photo by Unknown Author is licensed under CC BY

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Pop Quiz! Ethical and sustainable investing

Big Pharma A or Big Pharma B?

Covid-19 Vaccine Manufacturers?

Oxford/AstraZeneca Covishied™, AstraZeneca Vaxzevria™ Pfizer

BioNTech, Moderna Takeda™ and Jansen

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Pop Quiz! Ethical and sustainable investing

Step 2:

What information inputs would you need to arrive at a decision where to invest?

Step: 3

Where would you expect to find such information?

nb: No insider trading allowed!

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Will typical financial ratios help you understand a company’s IP portfolio?

1. Working Capital ratio

D ifference between a firm’s current assets and current liabilities

2. Quick ratio (or Acid Test)

Current assets less inventory

3. Earnings per Share (EpS)

4.Price-Earnings (P/E) Ratio

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Corporate Reporting underpins Accountability

Relying on accounting figures alone does not give an accurate picture of corporate IP value, IP

potential, corporate IP policy or its IP ethics.

It’s all a bit blurry.

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Rockstar IP Investor Dr Herbie Wertheim

Optometrist Inventor Entrepreneur and self-made Billionaire Individual

Investor worth approx. $2.3 billion.

Prefers industry and technology

companies such as GE, Google, BP, Bank of America, IBM, 3M and Intel.

Chemistry and physics knowledge Inventor optometry technology

Source: This Self-Made Multi-Billionaire Is The Greatest Investor You've Never Heard Of - BroBible

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Covid-19 pandemic, UN SDGs & Sustainability

Heightened public interest in the global IP system

coupled with the rise of ethical and sustainable

investing means company directors need more

narrative reporting guidance.

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Corporate Value Closely Linked to IP & Technology

Directors and investors may have a distorted view of corporate strengths and weaknesses, inhibiting decision-making and

judging strategy.

Shareholders and other stakeholders seek more relevant,

accurate and timely information about corporate IP assets – the type of information known to internal management.

At the same time, public disclosure of IP information and

strategy invites both accountability and competitive exposure.

©J Denoncourt 2015

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Core fiduciary duty to

promote the success of the company (UK)

Section 172(1) Companies Act 2006

Intellectual assets are real value

How does specific IP relate to the company’s ability to generate revenue, earnings and cash flow?

See Royal Chartered Institute of

Surveyors Valuation of Businesses and Intangible Assets

(August 2018)

©J Denoncourt 2015-2021

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Step 4: Create bespoke regulatory guidance for corporate IP asset & strategy disclosure

Transparency problem!

Corporate regulator publishes guidance for corporate disclosure BUT no bespoke

guidance for IP assets.

Information and knowledge are

fundamental for sustainable, and indeed profitable, IP management.

Examine best practice principles

Aim is to enhance transparent corporate IP policy and ethics, board decision-making.

Avoid unexpected corporate collapses and insolvency of IP-rich firms.

©J Denoncourt 2015-2021

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New Tools Needed to Support Corporate IP Transparency & Shareholder Protection

Hard to argue against more transparency of corporate IP…

How should company directors fulfil existing obligations to provide ‘true and fair’ of corporate IP information in a corporate governance context according to domestic

corporate law?

We need good quality, concise, accurate and timely IP information.

Sensible approach to corporate governance regulation.

US-led Pride in Patent Ownership Act , 117th Congress (2021-2022)

© J Denoncourt 2015-2021

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UK Financial Reporting Council Consultation February 2019

Calls to reform the accounting (quantitative) and narrative reporting (qualitative) of intangible assets in response to the move to a knowledge-based

economy and the greater store of corporate value which resides in intangibles.

Ongoing in 2022…

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Publications

J. Denoncourt, ‘A Modern Role for Intellectual Property in Sustainable Finance, Prudential Banking and Capital Adequacy Regulation’ in: Rognstad and Orstavik (eds.) Intellectual Property and Sustainable Markets (24 July 2021) Edward Elgar Publishing

J. Denoncourt, Part IV Strategy, Chapter 22 ‘Corporate Intellectual Property Monopoly Rights and Technology’ In: C. Valeur and C. Fargeot (Eds.) Questions to Ask (24 September 2021) Routledge Taylor Francis, pp126-130

J. Denoncourt, Part I Chapter 4 ‘Company classification taxonomy and corporate intellectual property rights owners’ in: D. Gervais (ed.), The Future of Intellectual Property in ATRIP

Intellectual Property Series (2021 Edward Elgar Publishers

J Denoncourt, Part II Economic Aspects of Fairness, Chapter 7 ‘Corporate Intellectual property, Governance and Board Effectiveness Reviews in Large and Premium Listed UK Companies’ In: D. Gervais (ed.), Fairness, Morality and Ordre Public in Intellectual Property (2020) ATRIP Intellectual Property Series, Edward Elgar Publishing, pp141-172

J. Denoncourt, ‘Corporate Intellectual Property Assets and UN 2030 Sustainability Goal 9 Innovation’ (2019) Journal of Corporate Law Studies, In press.

J. Denoncourt, Intellectual Property, Finance and Corporate Governance (12 April 2018) Routledge Taylor-Francis

J. Denoncourt, ‘True and Fair Intellectual Property Information: A Corporate Governance Issue’

(2016) Journal of Business Law

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About me…

Associate Professor Dr Janice Denoncourt

1988 BA McGill University

1995 LLB University of Western Australia 1996 Australian Barrister & Solicitor

Herbert Smith Freehills, Perth, WA

1997 Graduate Institute of Company Directors 1998 In-house Counsel Australian plc

2001 Senior Associate IP Minter Ellison, WA Registered Trade Mark Attorney

2002 Chevening Commercial Law Scholarship 2003 Legal Affairs Manager, private UK company 2006 Solicitor England & Wales

2008 Senior Lecturer in IP, company, business law 2015 PhD, University of Nottingham

2018 Intellectual Property, Finance and Corporate

Governance (Routledge)

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Intellectual Property Research Group

IP law and practice IP law education

IP commercialisation

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Referencer

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