Flashpoint

By RTM guest editors Irene J. Petrick, Thierry Rayna, and Ludmila Striukova

The pursuit of intellectual property (IP) that can be protected through patents, copyrights, and trademarks has traditionally formed the cornerstone of many companies’ strategies. The general rule of thumb is that IP, when it is well managed, yields sustainable competitive advantage. Recently, however, patent trolls—companies or individuals that buy up patents in bulk—have used as a weapon the very IP that was supposed to protect companies’ core inventions and provide competitive advantage. Wielding their IP ownership, these trolls have blocked its application in new innovations.

The rise of patent litigation, spurred by patent trolls but also by other forces, has put pressure on companies to rethink their approach to IP. Other developments will force an even more fundamental reconsideration of the nature of IP and its place in company strategy. Three specific factors come to mind. First, the ownership of IP is morphing as its development becomes spread among a diverse set of actors in collaborative innovation arrangements. Second, the digital revolution in design and manufacturing is already reshaping the conceptualization of patents and copyrights, perhaps redefining who holds the rights to use them. And finally, all these changes—together with the increasing pace of technological change—are calling into question whether a patent or copyright can actually yield a sustainable competitive advantage at all.

Moving Forward in the Age of Open Innovation

As the complexity of technology increases and open innovation spreads, it is becoming increasingly rare for a single company to have all the expertise and capabilities to fully create a technology platform or solution. Moreover, innovation is happening at companies of all sizes, with smaller companies often possessing the fleetness of foot to develop niche innovations more quickly and effectively than their bigger cousins. Chesbrough (2003) popularized the term open innovation to capture the collaborative nature of the innovation process. Collaboration between organizations attempting to solve a technical problem requires the sharing of core technical knowledge across organizational boundaries, often leading to patents or copyrights being held jointly.

After nearly a decade of open innovation, we are beginning to see new challenges and problems. Just as the dissolution of a marriage requires the allocation of assets between the divorcing parties, the dissolution of business relationships creates the need to adjudicate a complex web of IP assets. Companies have become increasingly aware of the need to plan for potential IP asset distribution, even before such assets have been created.

University research is also a strong source of technological advancement. In the past decade, the nature of the handoff between the university and the company wishing to acquire rights to the technology use has evolved. Formal licensing agreements are giving way to a more entrepreneurial approach by universities and their faculty members. University-spawned startups are growing in popularity, and some universities are questioning whether licensing is the best way to get university IP into practical use.

InnoCentive (www.innocentive.com) recognized the power of using a globally distributed network of inventors and tinkerers to develop solutions to company problems. InnoCentive accepts problems from companies, called “seekers,” and then posts these “Challenge Problems” to its network of “solvers.” Seekers pay a fee, and solvers earn cash prizes if their solution is selected. And the IP? It goes to the seeker.

InnoCentive, and the companies that have come after it, recognized the power of the crowd long before crowdsourcing was even a popular term. Quirky (www.quirky.com) has taken crowdsourcing to new heights by offering inventors a platform to post their ideas and receive feedback from potential customers to guide the refinement of the invention. The most popular ideas then become products that are sold through the site. The influencers, while often an important source of ideas, don’t own any rights to the resulting IP. This is a radical brand of open innovation at the individual level.

So what does all of this say about the current state of open innovation? Companies in today’s world need to be very savvy about how to access and use the crowd—and other companies’ IP assets—in ways that the original patent and copyright laws didn’t necessarily envision. This is creating gaps in the case law, when past intellectual property disputes don’t match up with the new realities of truly open innovation. IP ownership, which was very clear in the days of the standalone research lab such as Xerox PARC, is much muddier today.

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