Open innovation – time to dispense with intellectual property rights?

In Insights, Uncategorized

12 September, 2014

First of all: open innovation – what exactly is it? It would be almost wrong to discuss open innovation(OI) without mentioning the man who coined the term.

Professor Henry Chesbrough (Haas School of Business, University of California, Berkeley) created the term open innovation back in 2003 to describe the conscious input and output of knowledge in order to accelerate internal innovation and to expand markets for the external application of internal innovations. This could involve companies and organisations inviting other parties to join their innovation processes rather than relying solely on their own R&D departments and other in-house resources. These companies and organisations have come to realise that they are not capable of possessing absolutely all necessary expertise in-house and that R&D and time-to-market can be sped up by working with others.

But what’s new here? Companies had been co-operating with each other, with customers and suppliers, licensed both in and out, and established joint ventures long before the concept of OI came into being. What has emerged in recent years is a growing realisation among organisations that they need to be humble enough to concede that they do not always know where to find the best expertise and/or partners in order to solve their challenges. And so they have started to approach “anyone”.

This shift is particularly conspicuous where companies conduct their OI processes as online competitions, by far the most common form of OI. The company (the “problem-setter”) is able to identify expertise and new partners without ever having met these potential “contributors” to the OI process and to the solution to the problem. This makes for a topic-based OI process, which means that the topic of the problem is known, while the potential contributors, or entrepreneurs as they are usually called in this context, are not defined. Completely open innovation occurs if the problem, too, remains undefined, i.e. we know we need help, but we don’t quite know what we need help with. This is perhaps where the greatest potential can be found.

How should we approach intellectual property rights during the OI process? What does the word open mean in this context? Open to whom? Many of those working with OI seem to believe that OI allows you to completely disregard everything to do with intellectual property rights. One of the reasons for this misconception is presumably that another misconception has arisen, whereby it is thought that open source is not subject to intellectual property rights and then applying this notion to OI as well. Well, the meaning of open in the context of OI is first and foremost that the problem-setter opens its doors to the world by suggesting a collaboration.

Once the step has been taken to open up, there are a number of factors to consider. For example, how do you deal with the so-called “background information” that both the problem-setter and contributors bring into the process? What should they share with each other? What should they do about know-how? What should be considered business secrets? The consequences of inviting “anyone” is of course that absolutely anyone can become a contributor – which is the most significant distinction between OI and traditional partnerships. New types of collaborators emerge, and new questions subsequently arise. The competitive element also attracts a great number of individuals. Are these individuals at liberty to contribute? Or are they bound by other contracts and/or employment terms in respect of the innovations that they contribute to the OI process in question?

IP contamination is another major concern. What would happen if, say, one of the contributions contains the same invention that the problem-setter has in the pipeline but has yet to patent or protect in some other way? A big business faces a significant risk of being accused of theft from the individual if it chooses to proceed with the invention/product at a later stage.

In order to protect intellectual property created during the process, it would be sensible to set out rules for how to do this before the process starts. Not in detail, as this may restrain the process, but in general terms so that the parties know how to act, how ownership rights will be defined, and not least so that the parties do not create obstacles early on in the process that may prevent them from acquiring IP rights at a later stage. So the important thing is to think ahead about the way in which “foreground information” – that is the flow of information occurring during the actual process – is handled by the parties involved.

If a decision is made not to acquire intellectual property protection and to define the word open as meaning that nothing created during the OI process should be “locked in” by intellectual property rights, it is still important to ensure that no party outside the sphere, a third party, is able to lock in what has been created. Attention must also be paid to third party rights and to the entity’s own freedom to operate in order to avoid unnecessary infringements on another’s intellectual property rights.

The benefits of inviting new expertise and new collaborations can be phenomenal, as it allows existing challenges to be solved and peripheral innovations to be taken to new markets. The key is to think ahead in order to minimise the risks and maximise the benefits of open innovation.

Cecilia Svantesson, Patent attorney

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