Use Design Choices to Prevent Imitation
Adding or removing design elements to your innovations can help protect intellectual property.
Matt Chinworth/theispot.com
Companies can use product and process design choices to protect innovations from intellectual property theft. By strategically adding or removing knowledge components, companies can deploy four design “plays” — careful coordination, tagging/cloaking, feinting/spiking, and ground staking — to frustrate imitators. This cross-functional approach offers companies a powerful complement to traditional IP protection methods.
Why would an inventor like Charles Babbage insert deliberate errors into the blueprints of the world’s first computer? And why did Apple mislabel early iPhone prototypes as iPods? Actions like these may not seem intuitive but are in fact central elements in an innovation strategy that has long flown under the radar.
Babbage, like many inventors since, was concerned about a rival gaining access to his blueprints and foreclosing his first-mover advantage. By adding errors to his blueprints, Babbage ensured that any competitor that obtained them would struggle to imitate his design.1 Similarly, Apple’s deliberate mislabeling of iPhone prototypes as iPods reduced the likelihood of the groundbreaking innovation being leaked before launch, which could have hurt the company’s ability to profit from it.
Managers often mistakenly assume that the knowledge underlying an innovation is something that is inherently imitable or inimitable. However, the above cases are examples of innovators proactively using design to manipulate the imitability of knowledge. This approach dramatically widens the scope for managerial choice in crafting an innovation strategy. More choice is critical in a world where the losses from intellectual property theft have reached dizzying heights — including an estimated $600 billion annually in the U.S. economy alone — and legal mechanisms for profiting from innovations are weakening.2
Our research shows that managers can make choices in the design of blueprints, prototypes, and products or services to frustrate the efforts of would-be imitators and improve their organization’s ability to profit from innovation.3 Such design choices can inhibit a rival’s ability to discern the knowledge underpinning an innovation, reduce their motivation to pursue efforts to imitate this knowledge, and increase the capabilities required for successful imitation. There are many design mechanisms that could frustrate a competitor’s attempts at imitation and improve an inventor’s ability to capture value from an innovation, but they can all be thought of as involving one simple decision: adding or removing knowledge components associated with an innovation.4
Four Design Plays for Profiting From Innovation
Joseph Schumpeter theorized that innovations emerge from combinations of different knowledge components — pieces of knowledge that often, but not always, manifest as physical or digital parts of an innovation during the research and development process. For example, Apple’s iPhone was famously announced as a device that combined three products into one: a widescreen iPod with touch controls, a mobile phone, and an internet communications device.
References
1. Personal correspondence with Doron Swade, former senior curator of computing at the Science Museum in London and author of “The Cogwheel Brain: Charles Babbage and the Quest to Build the First Computer” (Abacus, 2001), March 31, 2022.
2. “Update to the IP Commission Report: The Theft of American Intellectual Property: Reassessments of the Challenge and United States Policy,” PDF file (Washington, D.C.: National Bureau of Asian Research, 2017), www.nbr.org; and J. Alcácer, K. Beukel, and B. Cassiman, “Capturing Value From Intellectual Property (IP) in a Global Environment,” Advances in Strategic Management 36 (April 2017): 163-228, https://doi.org/10.1108/S0742-332220170000036006; and G.P. Pisano, “You Need an Innovation Strategy,” Harvard Business Review 93, no. 6 (June 2015): 44-54.
3. D. Sharapov and S.C. MacAulay, “Design as an Isolating Mechanism for Capturing Value From Innovation: From Cloaks and Traps to Sabotage,” Academy of Management Review 47, no. 1 (January 2022): 139-161, https://doi.org/10.5465/amr.2018.0413.
4. Thanks to Keyvan Vakili for his suggestion to frame the choices we consider in this way.
5. C.Y. Baldwin and J. Henkel, “Modularity and Intellectual Property Protection,” Strategic Management Journal 36, no. 11 (November 2015): 1637-1655, https://doi.org/10.1002/smj.2303.
6. R. Vemuri and S. Chen, “Split Manufacturing of Integrated Circuits for Hardware Security and Trust: Methods, Attacks, and Defenses” (Cham, Switzerland: Springer Nature, 2021).
7. A. Nagaraj and S. Stern, “The Economics of Maps,” Journal of Economic Perspectives 34, no. 1 (winter 2020): 196-221, https://doi.org/10.1257/jep.34.1.196.
8. Despite the judge finding this to be credible evidence for Google scraping Genius’s lyrics, Genius ultimately lost the case on copyright grounds.
9. S.G. Winter, “Knowledge and Competence as Strategic Assets,” in “The Competitive Challenge: Strategies for Industrial Innovation and Renewal,” ed. D.J. Teece (Cambridge, Massachusetts: Ballinger, 1987), 159-184.
10. C. Langinier, “Using Patents to Mislead Rivals,” Canadian Journal of Economics 38, no. 2 (May 2005): 520-545, https://doi.org/10.1111/j.0008-4085.2005.00291.x.
11. A. Arora, “Patents, Licensing, and Market Structure in the Chemical Industry,” Research Policy 26, nos. 4-5 (December 1997): 391-403, https://doi.org/10.1016/S0048-7333(97)00014-0; and D.A. Hounshell and J.K. Smith Jr., “Science and Corporate Strategy: Du Pont R&D, 1902-1980” (Cambridge, England: Cambridge University Press, 1988).
12. Hounshell and Smith, “Science and Corporate Strategy,” 89-90.
13. Ibid.
14. G. Pisano, “Profiting From Innovation and the Intellectual Property Revolution,” Research Policy 35, no. 8 (October 2006): 1122-1130, https://doi.org/10.1016/j.respol.2006.09.008.
15. M. Miric, K.J. Boudreau, and L.B. Jeppesen, “Protecting Their Digital Assets: The Use of Formal & Informal Appropriability Strategies by App Developers,” Research Policy 48, no. 8 (October 2019): 103738, https://doi.org/10.1016/j.respol.2019.01.012.
16. R.C. Levin, A.K. Klevorick, R.R. Nelson, et al., “Appropriating the Returns From Industrial Research and Development,” Brookings Papers on Economic Activity 18, no. 3 (1987): 783-820; W.M. Cohen, R.P. Nelson, and J.P. Walsh, “Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not),” working paper 7552, National Bureau of Economic Research, Cambridge, Massachusetts, February 2000, https://doi.org/10.3386/w7552; and B. Hall, C. Helmers, M. Rogers, et al., “The Choice Between Formal and Informal Intellectual Property: A Review,” Journal of Economic Literature 52, no. 2 (June 2014): 375-423, http://dx.doi.org/10.1257/jel.52.2.375.
17. Hall et al., “The Choice Between Formal and Informal Intellectual Property,” 375-423.
18. N. Argyres, L.A. Rios, and B.S. Silverman, “On the Heels of Giants: Internal Network Structure and the Race to Build on Prior Innovation,” Strategic Management Journal, forthcoming.
i. See, for example, S.D. Anthony, M.W. Johnson, and J.V. Sinfield, “Institutionalizing Innovation,” MIT Sloan Management Review 49, no. 2 (winter 2008): 45-53; and N.O. Fonstad, “Designing a Competitive Innovation Portfolio,” research briefing XVII-7, MIT Center for Information Systems Research, Cambridge, Massachusetts, July 20, 2017.
ii. J.-C. Friedmann, D. Lavie, L. Rademaker, et al., “The Hidden Battle for IP Protection in Alliances,” MIT Sloan Management Review 66, no. 3 (spring 2025): 35-41.