Reflections on Intellectual Property and Open Innovation
Intellectual property rights used to be the key topic at open innovation conferences a few years back. Although still an important topic, this is no longer the case as companies mature on open innovation and find ways to solve these issues.
This development led me to downplay the significance of IPR when it comes to open innovation. Maybe I went a bit too far on this. I am reflecting on this after a session in my Danish network group in which we had a great visit by Jørn Vestergaard-Jensen, a Danish lawyer with good insights on IPR issues for open innovation.
Here I share some of the insights gained and reflections made by myself and the other participants.
Business before legal
I was glad to hear that Vestergaard-Jensen had a business mindset. One of his key points was that the business case should take lead over legal issues, not the other way around. He also said that in his world – the lawyer community – good/skilled people have this mindset implicating that less skilled people might focus on reducing risks rather than seeing opportunities in open innovation. I suspect we could agree that there are less good/skilled people than the opposite…
Don’t be too naive
We had an interesting discussion on how “naïve” you can afford to be in open innovation partnerships. Many people in the Nordic region (myself included) take pride in our fairly open and trusting approach in which we believe in the best of people and do not always see reasons to be suspicious and thus protect yourself legally. Some cultures – probably led by the US – have a different mindset on this.
I still believe that the open minded approach is the best in the long run as innovation is moving from a more transactional to a relationship-based approach, but the discussion did prompt several of the participants to consider whether their approach to legal protection should be adjusted.
Protect the core; stay flexible on the layers
Another topic was the fast pace of change and how this results in smaller windows of opportunity – and thus less time to make money on successful innovation. This requires innovation units to be fast and flexible, but they also need to protect their ideas and assets. A way to do this could be to develop strong platforms for the core of the company – technology, business models, processes or other corporate strengths. These platforms must be protected to a high degree while allowing for more flexibility and less protection in the outer layers of the products and services being developed.
Risk and consequences
Vestergaard-Jensen listed some potential risks and consequences on open innovation having the perspective of a lawyer:
• loss of patenting opportunities
• loss of trademark secrects / confidential information
• design/copyright risks
• new competitors can be created based on the sharing of information
• loss of freedom to operate (sharing too much can hinder own actions)
• outright theft
Three characteristics for B2B agreements
According to Vestergaard-Jensen, a B2B agreement on open innovation should be divided into three key characteristics:
1. Main business aspects (business goals, definitions of development work, each party’s obligations, deliverables, project management, etc.)
2. IP / Results
3. Boiler Plate Clauses (force majeure, notices, entire agreement, severability, etc)
Vestergaard-Jensen also advises companies to pay attention to IPR issues in three phases: before, during and after. Although a bit mundane, it is still very important to emphasize that the key challenge is to strike the right balance on how much to share and when to share it.
More secrets in an open world
It was also interesting to hear the participants agree that the world is getting secretive and closed in many ways. Companies in the Nordic region – and probably also many others – will experience that the current culture in which almost anything is shared with everyone will change as there will be a higher need to protect what you know in a world that is otherwise opening up in a seemingly faster and faster pace. This might sound counter-intuitive, but the challenge will be to know when to open up and when to protect your knowledge. Some will succeed at this better than others.
Entrepreneurs, small companies and inventors get pinched
As an overall reflection, I feel sorry for entrepreneurs, small companies and inventors who get involved with open innovation efforts with bigger or even multi-national companies. The latter companies are building an arsenal of legal “weapons” and the former just don’t have the bandwidth, understanding and financial resources to counter this. Let’s hope the big companies will try to build open innovation platforms that strive for win-win situations. This will bring out the best innovation for the benefit of all. Unfortunately, I am quite sure this will not always be the case.
Balance is key
My closing remark is that – as it often is – striking the right balance is key. Let me know what you think of this and please feel free to share your own insights and reflections on this topic.
You can also get more information and inspiration in this blog post: Intellectual Property Rights and Open Innovation – check the links at the bottom of this post
Some of the IP issues become less prominent if/when big companies look at open innovation as a two-way process. Too often, "open innovation" for a big company means acquiring innovative products or leads from the outside world, and not any transfer of new products or leads to the outside world. Inventors and small companies are justifiably suspicious.
One solution is for large companies to be more honest about their capabilities for true innovation, and respect their own non-compete and confidentiality agreements. Big companies need to identify their core competencies, and be open about things not in their core competencies.
Stefan,
great article and good reflections!
The recent research for my Masters paper involving OI showed almost all business i spoke to still raised IP and loss of competitive advantage as their #1 concern.
However, interestingly, i found the more 'mature' a company is in operating within OI, the more they consider real value is in how they apply/use their IP and not the IP itself. This mind-set and confidence, enables them to both collaborate widely and also increase performance returns.
You make a good point in saying that fast pace results in smaller windows of opportunity – and less time to make money on successful innovation.
and this was often raised. But the counter-point is: despite the shorter window to make returns; by operating earlier stages in an open environment often results in a much shorter R&D phase and more efficient delivery propositions. Leading to lower costs, and proportionally increased overall profits.
Just some observations; let me know what you think…
Couldn't let this discussion get away without weighing in. . . .
My startup company is in the early stages of working with a large company that wishes to examine our battery fast charging technology for their product lines. I have also spearheaded discussions with literally dozens of potential partners over the last year or so. As the protector of my company's IPR (which at this time is our only real asset), I must choose my partners carefully. One thing that strikes me as highly significant to how IPR will play out in an OI context is the attitude of the potential partner from the first conversation. Those companies that put up all sorts of legal roadblocks in order to have a first substantive conversation are those that are probably going to make the IPR issues complicated (and likely will overreach if we move forward). Those companies that are cautious but open seem (so far) to be willing to set out win-win collaborations.
Just because a company is small and has limited resources shouldn't make them desperate to partner with the first big company who comes along. This sets one up for a "bad marriage" where it is more likely that IPR will become an issue like you discuss above. Reading the attitudinal signals early has been key for our being able to tell several big companies "thanks but no thanks–we don't think this is a good match" (which has surprised more than one of them). Our ability to remain a free agent and continue to date has created the opening for our current partner–if we had partnered up with a big company previously, we would not have been available for our current partner, who just might be our perfect match.
While my years of experience as an IP and business expert likely puts me in a better position to judge IP issues than most small company CEO's, but so far my experience dealing with big companies in OI has been a fairly smooth journey and IPR issues have not deterred our discussions.
Having been involved in OI and IP for some years I have probably been fortunate enough to have understood the issues involved from all sides – Creators, Corporates, Lawyers etc – and I agree with many of these comments regards making IP less complex within OI or within collaborative innovation per se.
To address these very issues Creative Barcode (www.creativebarcode.com) was launched in September 2010 – and has been hailed as the first innovation in the IP sector for more than 3 decades, importantly addressing issues of early-stage safe-disclosure built on a trust based yet legally robust model
It works because it is simple and its Trust Charter co-joining Creators with third party recipients of innovation concepts has just two key warranties.
1. The Creator warrants to the recipient that the works disclosed are authentic, original and theirs to disclose
2. The recipient warrants to the Creator not to use the works in any manner without the Creators permission
It's all that is required and can't get much simpler than that. Any breech would be contained to breech of permission based usage agreement and not a complex, expensive and probably weak copyright dispute
I am all for open-protection to support & open up innovation rather than restrict it
And its good to see a discussion that raises the issue but respects that there are not just two choices – heavy legal works before discussions or total vulnerability – but instead a simpe and respectful position that puts the value of relationships at the forefront.
Without safe, early-stage conversations taking place, innovation will be restricted –