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The Challenges of Intellectual Property: Creating and Managing IP for a New Age of Innovation [Research Technology Management](Research Technology Management Via Acquire Media NewsEdge) Creating and Managing IP for a New Age of Innovation The pursuit of intellectual property (IP) that can be protected through patents, copyrights, and trademarks has tradi- tionally formed the cornerstone of many companies' strategies. The general rule of thumb is that IP, when it is well man- aged, yields sustainable competitive ad- vantage. 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 re- think their approach to IP. Other devel- opments 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 mor- phing 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 reshap- ing 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 technologi- cal change-are calling into question whether a patent or copyright can ac- tually yield a sustainable competitive advantage at all. Moving Forward in the Age of Open Innovation As the complexity of technology in- creases and open innovation spreads, it is becoming increasingly rare for a sin- gle company to have all the expertise and capabilities to fully create a tech- nology platform or solution. Moreover, innovation is happening at companies of all sizes, with smaller companies of- ten possessing the fleetness of foot to develop niche innovations more quickly and effectively than their big- ger cousins. Chesbrough (2003) popu- larized the term open innovation to capture the collaborative nature of the innovation process. Collaboration be- tween 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 inno- vation, we are beginning to see new challenges and problems. Just as the dissolution of a marriage requires the allocation of assets between the divorc- ing parties, the dissolution of business relationships creates the need to adju- dicate a complex web of IP assets. Com- panies have become increasingly aware of the need to plan for potential IP as- set 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 grow- ing in popularity, and some universities are questioning whether licensing is the best way to get university IP into practi- cal use. Inn°Centive (www.innocentive.com) recognized the power of using a globally distributed network of inventors and tinkerers to develop solutions to com- pany problems. Inn°Centive accepts problems from companies, called "seek- ers," 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. Inn°Centive, and the companies that have come after it, recognized the power of the crowd long before crowd- sourcing was even a popular term. Quirky (www.quirky.com) has taken crowdsourcing to new heights by offer- ing inventors a platform to post their ideas and receive feedback from poten- tial 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 innova- tion at the individual level. So what does all of this say about the current state of open innovation? Com- panies 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 pat- ent and copyright laws didn't neces- sarily 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 innova- tion. IP ownership, which was very clear in the days of the standalone re- search lab such as Xerox PARC, is much muddier today. Creation and Ownership of IP in the Age of Digital Manufacturing The roles of designer, producer, and customer have been well understood in the traditional supply chain. The rise of 3D printing, also called additive manu- facturing, muddles those roles-and the questions around the IP embedded in any product. Consider, for example, Shapeways (www.shapeways.com), a company that enables individuals to design, pro- totype, and buy or sell products online. At Shapeways, individuals can down- load a product design and then cus- tomize it, reload it to the Shapeways website, and have it produced by the company's 3D printers. Shapeways then ships the finished product to the cus- tomer. So who is the designer? Is it the primary designer-the person who first posted the design-or the individual who downloaded and customized the design, or both? Shapeways is one of the largest, but certainly not the only, service that will create physical products from digital files. And the creative landscape gets even more challenging with the advent of smartphone apps that enable a user to create digital design files from photo- graphs of physical objects. How does the owner of the IP embedded in the origi- nal physical object even track how it is used after a digital file is created? We have seen similar problems in the enter- tainment sector, where digital rights management was a critical enabler of the eventual protection of intellectual property. To date, no such standards ex- ist in the design/manufacturing space. What is emerging is a free-for-all mentality, often driven by entrepre- neurial individuals using digital tech- nologies that obfuscate traditional IP protection. In essence, 3D manufactur- ing takes the challenges of open inno- vation and magnifies them. Here is an example that will con- found both companies and individual inventors: as we currently understand it, IP associated with physical products is protected by patents. These patents are tied to the products themselves and to their production. Digital design files break these bonds, making it difficult for companies or individual inventors to attain the true economic value of their IP. The laws that will govern this new production environment have yet to be developed or tested. Defining Sustainable Competitive Advantage in the Digital Age Rita Gunther McGrath (2013) argues that we have entered a period in which the traditional linkages between strategy, innovation, and competitive advantage no longer fit the pace of change in the world. In the past, companies that in- vested in technology development and protected it through patents were able to attain a monopoly-like protection for a period of time, during which others could not apply that patent without compensating its owner. Although pat- ents are still important in some sectors, in industries where the pace of change overtakes the duration of the monopoly, investments in IP and patent protection don't yield the same long-term results. Instead, McGrath claims, competitive advantage is becoming transient, re- quiring companies to rethink their strategies with a focus on being more agile and flexible: "Practices that are de- signed around the concept of sustain- able competitive advantage . . . [and that] are designed to extract maximum value from competitive advantage be- come a liability when the environment requires instead the capacity to surf through waves of short-lived opportu- nities" (McGrath 2013, 5). Although McGrath applies her argument to all strategies within a company, its partic- ular relevance to an innovation strategy that has IP protection as a cornerstone is evident. The past decade has been punctuated by the stories of companies that have either reinvented themselves or with- ered. Think, for example, of IBM, Kodak, Blockbuster, or Garmin. No longer can executives and managers count on sus- tainable competitive advantage. Downes and Nunes (2014) describe these new dynamics of competition as "big bang disruptions" in which digital technolo- gies enter traditional sectors, bringing the pace of change described by Moore's Law into the physical world. In their view, competitive advantage in this emerging world comes through experi- mentation, rapid failure, and more ex- perimentation. Nowhere does long-term IP protection guarantee market success. Clearly, we have entered a period gov- erned by new-and faster-competitive dynamics. Our traditional views of IP and the benefit it conveys must be questioned, and must adapt. In fact, companies that pursue traditional beliefs about the relationship between IP and sustainable competitive advantage will face stiff-and often successful- competition from those companies and entrepreneurs that pursue the experiment-and-launch approach. Hindsight is 20/20, and regardless of who is ultimately right from a strategy and prediction perspective, it is folly to disregard the impact that the pace of change will have on the nature and value of IP in the future. Managing into the Future Because case law is by nature evolving, current laws and their interpretations will be ineffective to address several emerging aspects of IP. This is certainly not a time for the faint of heart in terms of the creation, protection, or manage- ment of IP. In this issue of Research- Technology Management, we have gathered articles that highlight some of the cur- rent and coming challenges for execu- tives, managers, and creators of IP. These articles address the effect of changes in IP laws and policy (Spivey, Munson, and Wurth), in technology (Kurfess and Cass), and in IP strategies in both the pri- vate (Granstrand and Holgersson) and public (Hall et al.) sectors. "Implications of the America Invents Act for R&D Managers," by Spivey, Munson, and Wurth, examines the im- pact of recent legislation, specifically the Leahy-Smith America Invents Act, on IP-related decision making; in particu- lar, the authors look at how the new US patent regime may require more se- crecy in the development stage and a more prominent role for R&D managers in developing IP strategy. Granstrand and Holgersson investigate another evolving aspect of IP strategy, the "chal- lenge of closing open innovation," a dis- cussion that is undoubtedly timely as the practice of open innovation matures and an increasing number of OI part- nerships come to an end. Likewise, Hall and colleagues focus on strategic issues related to IP and the commercialization of university research; a more open and diversified approach from technology transfer office managers, the authors suggest, is a key to leveraging IP more effectively. Finally, Kurfess and Cass examine how the recent developments in 3D printing technologies call for "Re- thinking Additive Manufacturing and Intellectual Property Protection." Indeed, they show that the wider availability of 3D printers will significantly chal- lenge traditional forms of IP protection. This issue is by no means exhaustive- that would probably require an entire series of handbooks!-but it does pro- vide an overview of the critical IP issues that lie ahead. References Chesbrough, H. 2003. Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston, MA: Harvard Business School Press. Downes, L., and Nunes, P. 2014. Big Bang Disruption: Strategy in the Age of Devastating Innovation. New York: Penguin-Portfolio. McGrath, R. G. 2013. The End of Competi- tive Advantage: How to Keep Your Strategy Moving as Fast as Your Business. Boston, MA: Harvard Business Review Press. Irene J. Petrick is a Penn State University profes- sor and managing director of the TrendScape Innovation Group. She is an internationally recog- nized expert in strategic roadmapping. Her re- search interests include technology forecasting, collaborative innovation, and business ecosystem development. She is actively engaged with a wide variety of organizations in their innovation and technology strategy activities. She has over 25 years of experience in technology planning, management, and product development in both academic and industrial settings. Irene is author or coauthor of more than 150 publications and presentations. [email protected] Thierry Rayna is a professor of economics at Novancia Business School in Paris. Previously, he spent 10 years in the United Kingdom, where he held positions at Imperial College London, the London School of Economics, University College London, and the University of Cambridge. His research investigates the consequences of tech- nological change and digitization on intellectual property strategies, business models, and inno- vation ecosystems. He has served as an advisor for national and international institutions, as well as for major companies in the media, telecom- munications, and cultural industries. He also men- tors startups. [email protected] Ludmila Striukova is a senior lecturer in the De- partment of Management Science and Innovation at University College London. Her previous expe- rience includes working as a market analyst for a statistical agency and as a researcher at King's College, University of London. She has published extensively in the area of innovation and technol- ogy management, and her research work has been used in numerous EU and national govern- ment reports. She also has used her telecommu- nications engineering background to mentor and advise technology-based startups and multina- tional corporations. [email protected] DOI: 10.5437/08956308X5705002 (c) 2014 Industrial Research Institute, Inc |