Does IP Strategy Have to Cripple Open Innovation?

How your IP strategy might be killing your open innovation activities — and what you can do to make it an enabler, even a builder of industrial ‘ecosystems,’ instead.

Courtesy of Siemens

The protection of intellectual property, or IP, would seem to be at odds with the pursuit of open innovation, or OI — companies’ use of “external ideas as well as internal ideas, and internal and external paths to market, as [they] look to advance their technology.”1 The selective use of research carried out elsewhere can bring new ideas and capabilities to a company, render it more productive and profitable, prevent the company from having to reinvent the wheel and save it a good deal of money as well. While many companies struggle to align these two approaches, often finding that their IP strategy is a disabler of their OI efforts, this need not be the case. Companies that know how to use IP strategically2 actually make it an enabler of their OI activities and an enhancer of those efforts’ returns.

The Leading Question

How can companies make IP an enabler rather than a disabler of open innovation?

Findings
  • Companies need to balance the use of open and proprietary innovation strategies.
  • IP can generate licensing revenue while also fostering collaboration.
  • Companies must drop the one-size-fits-all approach to IP.

When an IP Policy Can Be Toxic

If your IP department is calling the shots about when and with whom you should cooperate, your OI strategy will be seriously limited. Many large companies essentially have a “no patent, no talk” policy: They will not collaborate with another party if it does not at least have a patent application in place. While this approach may prevent them from being accused of stealing technology, it also means they miss out on a range of potentially valuable external ideas that are as yet unpatented, or unpatentable altogether. Such a “one-size-fits-all” approach to IP is generally unhelpful to OI. (See “When IP Disables, or Enables, Open Innovation.”)

Large companies are not alone in this potentially misguided policy. Increasingly, universities around the world are insisting on their own IP terms prior to working with industry. Such approaches present a major barrier to collaboration with some of the brightest minds, choking off a critical input to OI.

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References

1. H.W. Chesbrough, “Open Innovation: The New Imperative for Creating and Profiting from Technology” (Boston: Harvard Business School Press, 2003).

2. M. Reitzig, “Strategic Management of Intellectual Property,” MIT Sloan Management Review 45, no. 3 (Spring 2004): 35-40.

3. K.G. Rivette and D. Kline, “Rembrandts in the Attic: Unlocking the Hidden Value of Patents” (Boston: Harvard Business School Press, 1999).

4. J. Lambert and P. Ryan, “Acacia Research Corporation at Singular Research’s Annual ‘Best of the Uncovereds’ Conference Presentation,” September 9, 2008, http://seekingalpha.com

5. A. Arora, A. Fosfuri and A. Gambardella, “Markets for Technology: The Economics of Innovation and Corporate Strategy” (Cambridge: The MIT Press, 2001).

6. D. Kline, “Sharing the Corporate Crown Jewels,” MIT Sloan Management Review 44, no. 3 (Spring 2003): 89-93.

7. L.B. Jeppesen and L. Frederiksen, “Why Do Users Contribute to Firm-Hosted User Communities? The Case of Computer-Controlled Music Instruments,” Organization Science 17, no. 1 (2006): 45-63.

i. M. Dodgson, D.M. Gann and A.J. Salter, “The Role of Technology in the Shift Towards Open Innovation: The Case of Procter & Gamble,” R&D Management 36, no. 3 (2006): 333-346; and K. Laursen and A.J. Salter, “Open for Innovation: The Role of Openness in Explaining Innovative Performance Among UK Manufacturing Companies,” Strategic Management Journal 27, no. 2 (2006): 131-150.

ii. A.G. Lafley and R. Charan, “The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation” (New York: Crown Business, 2008).

Acknowledgments

We would like to acknowledge the support of the U.K. Innovation Research Centre — which is sponsored by the Economic and Social Research Council; the National Endowment for Science, Technology and the Arts; the U.K. Department for Business, Innovation and Skills; and the Technology Strategy Board — and the support of the Engineering and Physical Sciences Research Council.

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