An Innventure Insights Interview with David Rikkers
From radar systems officer to architect of $1.5 billion in IP deals, David Rikkers brings a rare perspective on how aerospace and defense technologies can take flight beyond their original purpose—if you can navigate the complex terrain of commercialization.
Few sectors present as many unique challenges and opportunities as aerospace and defense.
Following a thought-provoking panel discussion at the 2024 LES Annual Meeting in New Orleans, Innventure sat down with David Rikkers, President of Expedited Climb Capital LLC, for a deeper exploration of technology commercialization in the aerospace and defense sector.
His unique background spanning military service, legal expertise, and business leadership, Rikkers offers invaluable insights into an industry where national security concerns, complex supply chains, and specialized customer relationships create a commercialization landscape unlike any other.
With over two decades of experience in IP law and having overseen deals valued over $1.5 billion, Rikkers offers unique insights into the evolving landscape of IP strategy and technology commercialization.
Bridging Military, Legal, and Business Perspectives
Q: You have a distinctive background – from Air Force officer to IP counsel to leading major monetization efforts. How does this diverse experience inform your approach to technology commercialization?
A: I think everyone's background shapes how they see opportunities and challenges. As an Air Force officer leading engineering for radar and air defense system programs, I had the benefit of seeing the big picture early in my career. I was not only getting incredible insight into the military mission and how technology was and wasn't working, my role was to work with others to convert concepts and problems into requirements and solutions.
That was also my first exposure to the contracting world and the challenges of bringing large teams, including government and multiple contractors, together to solve problems. Becoming a lawyer later added other skills, but I think the most important part of my background influencing my approach to technology commercialization relates back to connecting a technical solution to problems people are experiencing.
Organizational Challenges in Aerospace and Defense
Q: During the panel, you noted that "many companies are not configured to make these decisions." As chair of the Aerospace Industries Association IP Committee, what particular challenges do you see in aerospace and defense?
A: In the panel discussion, this comment came up in the context of making decisions on spinning out technology, much like making a decision to divest of a product line. Most companies are instead focused on their products and how to make them better or a wider variety of them.
So even if a specific opportunity is presented, many companies have no attention focused on management decisions or even a clear way to get to a decision for what to do with their technology other than its use in their products.
Some parts of the aerospace and defense industries may be in markets with a limited number of customers that heavily influence the product or service details. A business like this that’s focused primarily on responding to detailed requests for proposals may be even more challenged to decide what technologies to remove from their future offerings, as there is always the view that it may be needed for a future customer request.
The management decisions may be focused on the details in each proposal, not on a comprehensive view of the future of the product or service. Contrast this with companies in other industries with many, many more customers, and the details of the product or service offerings and their future are driven internally by a different process.
Timing and Market Readiness
Q: The importance of timing in commercialization cannot be overstated – if it's too far upstream, by the time you develop it, the market may have changed significantly. How does this play out in complex systems like aerospace?
A: Traditionally, the answer was 'slowly.' However, technology that is revolutionizing how the technology details are managed by engineers and implemented on the floors of manufacturing facilities is speeding that up. And that is especially evident in complex systems. Trends are also moving toward increased modularization, which can be a way to enhance the predictability of what the customer will be looking for in the future.
Interfaces enabling communications between modules can take complex forms in aerospace, in both software and hardware. Aircraft instrument panels are an example of this, as you will find components from multiple manufacturers working together and communicating properly with much more data than traditional instruments were capable of.
A well-structured commercialization transaction can balance risks between parties, so while perspectives that drive valuation may be more diverse, even very early spin-out transactions can be a great idea for both parties. This is especially true if the party receiving the technology is a better fit for the effort, such as being more knowledgeable of the target market and capable of development. Because in any industry, a product too far ahead of its time will not have as many sales because customer adoption will not be as strong or there at all.
Keys to Successful Commercialization
Q: Innventure's model focuses on "commercial control" rather than rigid IP ownership structures. Based on your experience in aerospace and defense, how might this approach need to be modified to address the unique national security and regulatory requirements in these sectors?
A: The same focus on having a competitive advantage applies in aerospace and defense (A&D), as in any other sectors. The Innventure model’s flexibility on IP ownership works well in all sectors, including A&D. The “commercial control” objective I view as a shorthand for an autonomy to exercise the appropriate barriers to entry of others that intellectual property (IP) is designed to provide. That barrier concept is even part of our US Constitution, to secure rights of exclusivity for authors and inventors.
There are differences in how IP concepts are implemented in some aspects of A&D, but as in other markets, IP ownership is not needed to benefit from IP and achieve a competitive advantage. The economic incentives to attract technology and investments into A&D can vary depending on the nature of the product or service offering. Qualifying as a commercial product or service, formerly called a commercial item, can be a great first step in structuring an A&D business opportunity.
I think the “commercial control” approach is a very helpful model focus in A&D. As with any assessment of a market opportunity, understanding how customers will buy the product or service and how the competitive advantage is established and sustained are all important. This becomes even more of a case-by-case analysis in A&D because the characteristics of the product/service drive how A&D customers view market-appropriate IP terms and even the available enforcement actions. For example, patents are subject to a different framework when the government is involved. And because of that, trade secrets are often considered even more critical in an IP strategy to achieve a competitive advantage.
I do not see a need to modify the “commercial control” approach for A&D, except to highlight the importance of basing the analysis and model execution on the unique market conditions and applicable IP. A&D, more so than many other markets, often drives different IP strategies, as IP concepts can play out very differently than in other markets.
Q: You mentioned "misfit" technologies as good candidates for external commercialization. How do you see this concept applying to Innventure's approach of targeting high technical readiness level innovations that don't align with a corporation's immediate priorities?
A: There is a good synergy here, especially where the commercialization may require significant investment or management attention. Both of those are unlikely to be provided by the company and can be readily provided to projects that Innventure pursues. By targeting high technical readiness levels (TRLs), a common benefit is that the invested resources are able to rapidly scale the technology to achieve sales revenue sooner. A high TRL external commercialization candidate has also benefitted from the team that created the technology, already mitigating technical risk. This usually means the technology has evolved to the point that its benefits, applications, and production costs are better understood especially when compared with a less mature technology that would inherently also require more time to achieve substantial sales revenue.
Q: Drawing from your experience managing large patent portfolios and leading $1.5 billion in IP monetization deals, what separates successful technology commercialization efforts from failures?
A: Speed to market. If you never get to market with the product, someone (perhaps everyone) will likely consider that a failure. And getting to market first, with great technology suited for the market, is a great recipe for success.
What helps speed to market is what technology commercialization transactions can provide: getting access to existing technology and patents, and in some cases, a completed product, to start from. Many successful technology commercialization deals are doing just that with a manufacturer or company to service a market (geographic or otherwise) that you are not.
It can even be the same product you are selling but to different types of customers or in different counties, states, or countries. Or, in other cases, you are enabling someone else to service the same customer later in their product experience timeline. Examples of this are repair shops that are licensed to use repair information and approved processes provided by the manufacturer.
Many other deal types provide patent rights and/or a head start with technology artifacts, like software and drawings, to the party receiving the technology. This may be with immature or partially mature technology where most commercialization activities are worked only after the transaction is completed. Especially in such cases where the receiving party is taking on a lot of risk, properly structuring the transaction to enable the receiving party to succeed while the providing party is motivated to see that success is key.
"Time kills all deals" is a phrase I did not coin, but I and many others know this to be true. Really true. In most cases, the deal itself is on the critical path of speed to market. Informed and empowered people on both sides of the transaction are a good cure for this. If they are also motivated to seek a deal, that is best.
Sometimes assembling the right people takes a while, but identifying this issue early as an objective can be helpful, especially with larger companies. And companies of any size if one or both do not do commercialization transactions regularly.
Structuring Organizations for IP Commercialization Success
Q: How can corporations better structure themselves to identify and act on IP commercialization opportunities outside their core business?
A: Most IP commercialization opportunities are about the use of technology outside the company. That provides an incredible spectrum of possibilities. So, just identifying IP commercialization opportunities worth considering can be challenging. And then acting on those IP commercialization opportunities, in my experience, requires different skill sets and processes for successful implementation.
Having a defined process where all employees can submit ideas or concepts is already part of many companies' operations to receive invention disclosures or suggestions for improvement. Soliciting and looking for IP commercialization ideas can help broaden the lens for those submissions to be considered and follow-up actions to pursue IP protection.
If you aren't already asking your inventors for all the uses, markets and alternative applications of their innovative ideas through that process (both via online forms and in the invention review meetings), that is an easy add that will deliver value quickly.
Any company, when making decisions on their own products and how to engage in the market, can expand that process to take up the non-core, e.g. alternative and discarded, ideas separately. This separate focus better enables exploring alternative applications and markets, perhaps supplementing earlier decisions on IP strategies to pursue (or at least preserve) the additional commercialization opportunities.
Some great IP commercialization opportunities can exist in connection with the supply chain of a company. Transferring technology to a supplier, enabling the supplier to be the source of products or materials incorporating that technology, can provide multiple benefits. I think many companies do this but fail to implement it as an IP commercialization opportunity. So, the supplier ends up having free and unlimited use of the transferred technology for any of its customers.
Early Indicators of Commercialization Potential
Q: From your perspective in evaluating these opportunities, what are the key early indicators that a corporate technology has real potential for successful commercialization outside its original company?
A: A key early indicator is that it seems to be at least somewhat of a misfit at the original company. That might seem counterintuitive, but if it didn't have this, the original company would adopt it, or its reasons against doing so would likely be just as valid outside the company.
The misfit concept can be broad. Even just a high-cost structure at the original company for a manufacturing process that can be done at a significantly lower cost can be a solid misfit characteristic. A product or technology typically provided by a component supplier can be another example of 'misfit' as used here, in that the current approach already involves the current version being manufactured outside the company.
Absent a clear reason to change that, even a completely new approach to doing what that component does today in the original company's product may be an excellent early indicator of successful commercialization outside the company.
The most important key early indicators are those that point to the likelihood of success in market adoption, regardless of where it is commercialized. That can be price, features, or something like a change in the market. These days, changes in the market can take many forms, including scarcity of a necessary ingredient of the current market solution.
A company with great market insight for the new commercialization activity will be a great partner. So, the original company being an interested customer is a very strong key early indicator.
One example is the scenario mentioned above of a completely new approach to a component of its product. That can also suggest a market differentiation of the technology that will be of interest to other customers for similar components.
Systems Engineering and Commercialization
Q: Your recent MIT certification focused on managing complex systems. How do you see systems engineering principles applying to successful technology commercialization?
A: I pursued that to get insight into some of the latest engineering approaches in an area I anticipated the government would seek to leverage. And my intuition seems to have been correct. While systems engineering can be defined in many ways, it is generally used to varying degrees in the government and some industries.
While I see systems engineering principles being of increasing value to a well-rounded engineering team capability in a lot of contexts, I think we are still at a point where the concepts, and especially the tools to implement the concepts, are still being developed and refined. Frankly, even how and where a tool should be used for systems engineering is an open topic.
There will be many successful technology commercialization with and without systems engineering principles. Some might describe systems engineering being an investment that pays off over time and with technology that is deployed across a range of product variations.
The Role of Standards in Technology Commercialization
Q: As someone who serves on the LES Standards Board, what role do you see standards playing in successful technology transfer and commercialization?
A: A very positive one. I see standards in this area helping implement best practices that have been refined by the consensus-based efforts of industry experts. Some years ago, the Licensing Executives Society launched an ANSI-accredited Standards Development Organization and, in recent years, officially published the first American National Standards on IP!
We continue to develop the highest quality standards for the global community investing in, managing, leveraging, protecting, and transacting intellectual property. Topics include IP Valuation, IP Licensing, Intellectual Capital in The Boardroom, Management Systems for the Protection of Intellectual Property in the Supply Chain, and others.
About David Rikkers: David Rikkers leads Expedited Climb Capital, a veteran-owned firm focused on innovation & transactions in the aerospace and defense industry. After serving in the US Air Force, his career accomplishments have included intellectual property (IP) monetization transactions valued over $1.5 billion, leading IP-centric industry groups, drafting over 200 patents, prevailing in IP litigation against the US Army and favorably resolving many IP-centric disputes. David has over two decades of experience as IP counsel and continues to provide strategic legal advice via a law firm at datarights.law.
