WIPOD – Intellectual Property Matters: Transcript of Classroom Conversations – Episode 10

Using Intellectual Capital from Mind to Market

Karen Lee: Welcome to Intellectual Property Matters. In this WIPO podcast, we explore the fascinating world of creativity, innovation and intellectual property. Let's listen, learn, and get inspired.

Natalie Humsi: Hello, everyone. Thanks for tuning in to today's episode of Classroom Conversations, a WIPO Academy series, and I'm joined today by Susan Karamanian. She is the Dean of the College of Law at Hamad Bin Khalifa University in Doha, Qatar. WIPO Academy and the Hamad Bin Khalifa University College of Law recently teamed up to launch trainings on international capital for small business owners.

And today we'll be breaking down what intellectual capital is, and what lessons you can take from the experiences of companies like Walt Disney World, which runs the theme parks that we all know, and Apple, on how to translate your intellectual capital into financial success. So to start off, Susan, can you briefly explain to our listeners, what is intellectual capital? I think they about know intellectual property (IP), but not really what intellectual capital is.

Susan Karamanian: Well, thank you Natalie, and it's an honor to be part of the WIPO Academy series, and the topic builds on a conference that we hosted here in Doha, late last year. When we think of a company and particularly the value of a company or an enterprise, immediately, what comes to our minds are the tangible assets of the company. Okay, yet there are intangible assets that reflect value too. And it's these intangible assets that I think are recognized as the knowledge based aspects of an entity that are at the heart of what is referred to as intellectual capital.

So, when I was a child, my parents took me to Disney World, and of course Disney expanded into Florida. So let's take a look at the Walt Disney World. Okay? And the theme park that is in Orlando, Florida. And when we think of Walt Disney World, you probably immediately think of the castles, water rides, parks, restaurants, the tangible aspects of Walt Disney World. Yet, the company's value is more than what we can see and feel, as a company's intangible assets can even be more important than the tangible ones. And so it's these intangible assets that are the focus of the intellectual capital.

Natalie Humsi: And so what role does intellectual property play into intangible assets like intellectual capital as well?

Susan Karamanian: Let's step back and look at intangible assets just in a little more detail, okay? And then we'll focus on intellectual property. We can break it down, because intellectual property is just one form of an intangible asset that may be associated with an enterprise.

When you think of Walt Disney, perhaps an image comes to your mind. You smile. You think of Mickey, right? You think of Mickey Mouse? Or you could also think about the music of your childhood, the songs that your parents introduced you to. You would hear them on the TV and the like. The theme parks, the Walt Disney World theme parks, conjure up images as well. We have the smiling faces of the employees that greet families when they arrive at the park. The approach the employees take to their work which is linked to the spirit of the founder of the company, Mr. Walt Disney himself.

We have the value of copyrighted images and songs. We have relationships that the company may have with its customers. We have the brand name, the important brand name of Walt Disney. It signals something unique and something of value. We have the layout of the park. We have the names of the streets and the neighborhoods in these parks. We have the knowledge that Walt Disney World has about its likely customers as well as about its suppliers. You can see there are a wide range of intangible assets that constitute intellectual capital. Yet within this broad group, there is intellectual property. Okay?

And when we look at intellectual property, we're going to be focused a lot on patents and trademarks, copyright, and trade secrets… the usual. And depending upon the business, the intellectual property may be a critical component of intellectual capital.

For example, if you look at tech companies take, for example, Apple. A large portion of the value of Apple is linked to its IP assets. The same is true for Microsoft as well. So we have intellectual capital, which is the knowledge asset of a company and within that intellectual capital is a component of IP. That IP could be in certain instances a substantial aspect of intellectual capital or it could just be a smaller component of the entity. It depends on the nature of the business.

Natalie Humsi: So to summarize for our listeners, basically intellectual capital is the equivalent of the intangible assets of a company?

Susan Karamanian: The tangible assets are what we would not refer to as intellectual capital.

Natalie Humsi: Okay. So intellectual capital is basically another way of saying intangible assets?

Susan Karamanian: Yeah. The intangible assets. Yes.

Natalie Humsi: And intellectual property forms part of those intangible assets?

Susan Karamanian: Exactly.

Natalie Humsi: It depends on the case and each business. Okay. So businesses need to be aware of intellectual capital, as they are aware of their tangible assets, like their restaurants and all of that, they need to be aware of their intellectual capital for business growth and success. Do the consumers – do I need to be aware of this next time I go to Disney World? Like, who does this concern really?

Susan Karamanian: The first thing is before we get to the consumer, and I'm happy to get there, I think we need to step back and say, what does this mean for a company or an enterprise? And if I could continue with Apple, okay, and focus on intellectual property – the intellectual property of Apple.

IP for Apple has given it a tremendous competitive advantage. The design of the products that are very user friendly, the technology that is being used, they're protected under the appropriate IP protections, and they can't be copied, okay, largely due to a very deliberate policy that Apple has put in place with regard to the protection of intellectual property and patents.

Apple is known for its strict secrecy. Okay? And that in itself creates an aura. You know, there's always a buzz. When will Apple come out with something new and the like? And people anticipating what changes will happen. When we think of the button at the bottom of the iPhone, that button was duplicated on the iPad. Okay? It gives the product a tremendous advantage. We don't have to worry about flipping something. We don't have to worry about side buttons. We don't have to worry about an obstruction on the device. We just have this little simple button, and we can do so many things just with that button.

And so when we look at the competitive advantage for Apple, I mean, papers have been written about, you know, Apple's IP and the way it has managed its IP to become competitive. But we could also look at a company again like Walt Disney World. We can think about the family orientation of the brand. We can think of the fact that Walt Disney World, which has the Florida theme park, and then there are the other theme parks around the world and the Disneyland in Anaheim. The relationship it has to the Walt Disney company, okay, and the ability of Walt Disney World to draw on the many characters and themes of the Walt Disney Company. And the Walt Disney company being a huge media company.

So for the companies, it is identifying relationships that they can develop to add value, and that could be with other entities, it could be, you know, within their own offices, developing certain technology and getting it protected as well. But for consumers, the opportunities for example, with Apple have been tremendous. We know the button. We know the Apple screen. We know that our iPhone mirrors our iPad. We know that the devices can be linked to a MacBook or a desktop of some sort.

The systems can talk to each other with relative ease. We have a sense of predictability. Right? We know with these devices what to expect. The button on one acts the same way as the button on the other. And if we have problems with our Apple technology, the Apple employees are trained as Apple Geniuses. They have a Genius Bar, okay? So, think of how that attracts you. I'm going to go to the Genius Bar, and I'm going to talk to an Apple Genius. Whether they're a real genius or not really isn't relevant. It's just that I'm going to go see my Genius about a technology problem I have with my Apple product, and they do help, and they deliver.

Now I know Apple are exploring online ways to take that service and bring it to its customers in a more structured way and the like. But I think for Apple, it understood its ability to leverage existing intellectual capital and to basically create brand new products, and enter new markets. We have Apple AirPods. We have Apple Music. We have Apple Watches. We have Apple TV. We have AirTags, think of the benefit all of this gives to the consumers, and it's not just in terms of the options. It's in terms of the knowledge of the product. And the comfort you have in dealing with the specific product.

Natalie Humsi: In a way, I would say intellectual property and intellectual capital are kind of part of the DNA and the identity of a company in what it offers consumers, in terms of the relationship it builds with consumers. Am I right in saying that?

Susan Karamanian: Yeah. And I think, you're absolutely correct in it. I think the question is how the company, enterprise or entity elects to do business. And will it build a business base on intellectual capital? It's going to need probably some of the tangible assets, okay? But particularly in this era of digitalization, we're seeing more focus on the intangible assets.

Natalie Humsi: I'm thinking of other companies and examples as well that kind of deliver this messaging very well when it comes to intellectual capital, and that's like Spotify, which is where this podcast will be hosted amongst other platforms. And Spotify also developed similarly strong intellectual capital and relationships with its consumers, with Spotify Wrapped, which is an enhanced statistical report that was marketed in a genius way for consumers, as an example, and just its relationship with artists and so on.

So that all builds into the different capital that this enterprise has. So thinking about it for a small business as we've talked about really the giants here, whether it's Walt Disney or Apple, or even Spotify. As a small business owner, how could they take those lessons and learn and apply what has been done well, and maybe what hasn't been done not that well and avoid that, when it comes to intellectual capital for business success?

Susan Karamanian: I think the first thing is the need to understand that intellectual capital can be harnessed to grow and sustain a business. And I think if we were to step back and look at Apple when it was going through its difficult period with Steven Jobs leaving initially and the like. Perhaps it could have just rested on the Apple-1 microcomputer or with a few of the desktops and that's it. And that could have been a business decision that they would make and probably would have been out of business by now.

Think about Walt Disney if it had just limited itself to what was the 1920s version of the Walt Disney Studio, which focused largely on animation. And so I think that one of the critical factors is the need for the proprietor, in particular, the leader of a small business, to think about their vision and to anticipate changes in technology, and to think about relationships that could help build their product market.

One of the big areas that intellectual capital research focuses on is the employee as well. Bringing in qualified employees, but also employees who have a certain ethos consistent with the culture of a company and the like. Some companies may elect not to put a lot of resources into this. They may just be very happy with manufacturing a certain product. But in this competitive world, you may be happy today, but your competitor will be thinking of other things when they put their head on the pillow at night. And so your entity may be short-lived.

If you're not thinking about ways, for example, that you could brand yourself or ways in which you could build strategic relationships at very little cost, the way you describe Spotify and how it has built these relationships and certain themes and the like.

And so I don't think this is a question of big company versus small company. I like to look at the big companies just because they're wonderful stories and they're companies I sort of grew up with. I just think it takes a vision. It takes an awareness. It's an understanding that the value of intangible assets is critical to the endeavor, if indeed a company wants to go down that path.

Natalie Humsi: From your experience in Qatar, are there any examples from the Middle East when it comes to companies harnessing intellectual capital for business success and growth?

I remember my colleagues told me at the training that was held at Hamad Bin Khalifa University last year that a few companies even presented some cases and examples, and that was very much the topic of discussion. So I would be curious to hear of any regional examples that could be used as well?

Susan Karamanian: Sure, there are a number of them. I'd like to talk, if I could about two of them. The first one is beIN Sports, and it is a communications company located here in Qatar that started by covering local sports, largely football, or in America, we would say soccer, and then developing expertise in the game and moving beyond just regional to World Cup coverage and the like. But now beIN Sports has moved on beyond just sports, there is other beIN content that you can get.

We learned about the way the company focused on this move strategically. Of course, it has important intellectual property assets, and those assets have been at times under fire, copying, had incidents in which some of these resources were taken and the like and so it emphasized the need to make sure that you have mechanisms in place to protect those assets. Even if you have those mechanisms, which they did, the need for legal remedies to enforce your rights under those assets is also important. And so the conversation with the lawyer from beIN was very insightful in terms of the progression of the company.

A second company that I am very interested in here, in Qatar, we weren't able to have them at the conference, but it's a company called The Perfume Factory. And The Perfume Factory is locally owned. They have their own manufacturing facility here in Qatar, and they’re making perfumes, because perfumes are very important for the region. Yet COVID-19 comes along, and so does the hand sanitizers with the local perfumes. And they are very creative in their locations. You can be at a metro. You get off the metro. You're thinking, oh, my hands are dirty. You look up. There's The Perfume Factory. It's right there.

And they sell the sanitizers in a way in which they're very user-friendly. I know we're on a podcast, but I have just one of their little sanitizers here. It's about as big as a business card. You can keep it in your pocket. You can squirt it at any time. People will come up to me and say, is that a sanitizer or is that perfume? What is this? Okay. It's taking advantage of their ability to work with the ingredients and the situation with COVID to have sort of like a win-win. And the location of the stores being very important.

Now they are starting, but maybe they were doing this earlier. I didn't have a chance to get one, but they are starting to sell some larger bottles of perfume too. That market here, the big perfume, expensive perfume market, is, I think, quite competitive. Their pricing is well below that. Okay? And so I'm sure they're branding themselves in terms of having the local oud, the aura of the Middle East at your fingertips for a reasonable price. An amazing concept, I think.

Natalie Humsi: That's an amazing example of how intellectual capital could be harnessed. And I think from hearing this example, it makes me think of smaller brands and businesses that I interact with that are developed by young entrepreneurs from all over the world that were able to market online, on TikTok and on social media, I'm thinking of, like, popular cosmetics brands and such, and they apply the same strategies that you just mentioned.

And I think there's definitely a few lessons there for other entrepreneurs who just need to be more aware of their intellectual capital for business success. So before we close, I just wanted to ask if you have any final closing wisdoms and advice for entrepreneurs who could be listening to our podcast?

Susan Karamanian: And I couch this in terms of saying I'm a law school Dean, I'm not a person running a business, although I’m constantly coming up with ideas about businesses in my mind. But I think the most important thing is every enterprise will have a mission and goals, and they need to be looked at regularly and revised. You do need to do a take stock of your existing assets, whether they be the capital, the tangible assets, but also the intangible assets. I think that's very important.

And then as to the intangible, the intellectual capital, it's important to prioritize in light of your mission and goals. For example, if you're just starting up a business and your business is going to be based on an app, you want to make sure that you got the appropriate IP protection for the app if indeed you created in the like, but some of this can be quite costly. So there's a way you could through license agreements, be able to build and the like. I think it's very important that companies understand once you go down the path, for example, of creating and applying for patents. It's a lengthy process and it’s expensive.

The other thing that I think is very important is the relationship with the employees, and we had in our conference a number of examples of ways in which the company contracts can be structured to ensure that the intellectual capital of the company is protected, but also it's more than a contract. It's more than a legal obligation. It really is the culture of a company. And ways in which employees feel like they have as much of a stake in the company as the owners do as well.

Natalie Humsi: Actually, this culture of the company and the relationship with the employees reminds me of a current trend on TikTok where people are showing examples of a “Disney Hug”. Apparently in the Disneyland Parks, the characters, they have a rule called the “Disneyland Hug” where you shouldn't let go of a child that's hugging you until the child is ready to let go of you, because parents or everyone sometimes just hugs the kid as long as they want, and then they let go whenever they want. But in Disneyland, the children choose how long the hugs they want them to be. And it can create such very heartwarming videos and content for online and social media that goes viral.

And I think that only contributes to the branding and the relationships that the whole experience is building for consumers, and also for the enterprise. I don't know if you've heard of it before, or something like it?

Susan Karamanian: No. I haven't, but it is another example of, you know, when we’re talking about this, what came to your mind? What came to your mind was this hug. And the role of Disney and processes and the like. And it goes on every five minutes in the business world. And many times, we're not focused on it. But when we sit back and think about it, then we're like, a lot of thought went into this. Sometimes thought doesn't go into it. Sometimes it just sort of happens.

And then you need to step back and say, it looks like our business may be going down this path. Is this a way in which we need to be bringing new resources in? Do we need to be protecting some of our assets that don't have protections in place? And the other thing we really haven't even talked about was the importance of customer relations too, and supply chain, all are critical aspects of intellectual capital.

Natalie Humsi: I think all of that is important for our listeners, especially those who are entrepreneurs or wanting to be entrepreneurs one day to think about and consider. And as you mentioned in your points, that it's also important to protect your assets.

Sometimes people are not aware of what assets they have, and that's why sometimes an audit to know of your assets is very useful.

Susan Karamanian: Yes.

Natalie Humsi: And I just want to thank you for all these wonderful insights. I think this brings us to the end of our Classroom Conversation for today.

Thank you so much, Susan, for this excellent explainer of intellectual capital with all these really well-known examples, and not so well-known examples, that are very inspirational. And most importantly, I would like to thank our curious listeners for tuning in and we'll catch you all next time on Classroom Conversations.