Large companies increasingly work with an ecosystem of partners to deliver and manage disruptive innovation.
Working together in ecosystems is more than a collaboration between one organization and another- it's about bringing together lots of different companies that previously might not have worked together.
However, working together in ecosystems typically creates new complexities in managing and leveraging underpinning intellectual property (patents, trademarks, and trade secrets). Some of them might be competitors, some might be large, some might be small, and many have their preordained expectations around how to manage (their) IP.
At our recent Innov8rs Connect on Startup Collaboration & Ecosystem Engagement, Phil Webster, Principal – Technology & Innovation Management at Arthur D. Little shared some of his lessons learned with regards to managing intellectual property in innovation ecosystems. Throughout his career, Phil has witnessed that within the areas of convergence, the main problems are likely to arise precisely around IP management. Working with others, even major competitors, in different jurisdictions and countries with their own IP laws and expectations is not easy. Here's a summary of the session.
Why Ecosystems?
Companies are increasingly threatened by new sources of disruption and big global challenges. As the Match-Maker Ventures & Arthur D. Little analysis showed, almost 65% of today’s Fortune 500 joined only in the past 20 years.
Disruption is progressively happening at “areas of convergence” between conventional industries. Internet of Things, renewable energy, smart cities, power generation, fiber optics, and financial services are a few examples of areas of convergence between traditional sectors like engineering, construction, telecommunication, information technology, and more.
It follows that even corporations and industries that usually don’t work with one another need to collaborate to survive disruptive pressures and find valuable solutions to global challenges- e.g., sustainability. And that means creating new ways of working through ecosystem development.
There are several drivers forcing companies to seek for these types of collaborations:
· Resource constraints: innovation budgets are not getting any bigger while results are expected to be faster.
· Intractable problems: problems are becoming more challenging to deal with and more expensive to solve.
· Startups disruption: lots of incredible startups (and scaleups) have started to emerge on the scene more predominantly. They're both a source of ideas and also a source of competitive threats.
· Convergence whitespaces: areas and points of industry convergence where established players don't exist yet, and where there's much room for innovation to happen.
It Starts With a Mindset Shift
A good starting point is a mindset shift: filing patents and trademarks is not just an administrative activity that gets in the way of innovation. It's a strategic asset that can even be monetized.
However, IP is often just seen as a reactive R&D support function for filing patents, managing renewal fees, and ensuring competitors don't infringe IP; or as a business support function to identify new technologies and partners.
Setting Ground Rules (and Expectations) for IP Upfront
It’s crucial to define ground rules and expectations for who's doing what in terms of ensuring IP integrity, what to do when it comes to disclosing inventions, and how to handle background IP and open-source materials. However, when it comes to “doing the deal” there’s a need for a certain amount of flexibility in provisions around licensing terms, ownership, and assignments to ensure that whoever is best positioned to create value from the IP does so.
Accordingly, arriving with a completely rigid perspective on what you will and won't do from an IP perspective isn't necessarily the right way forward, particularly when it comes to realizing some of the benefits associated with creating IP in the first place, says Phil.
The following are key, basic components of an IP policy:
· Who owns the IP?
· How will revenues/benefits from the commercialization of IP be shared?
· Who will manage IP assets, including negotiation of licenses and royalty-sharing?
· How will the costs of IP protection and maintenance be paid?
· How should any invention disclosure procedure be managed?
Creating a Special Purpose Vehicle
A special purpose vehicle is an entity to which all IP is licensed that can be independently managed by the different organizations involved. However, this vehicle can be hard to set up in the first place. Yet to avoid starting from scratch, it's possible to use existing templates.
Phil brings in some examples from the UK and the Republic of Ireland, where there are a lot of model agreements already in existence – e.g., The Lambert Agreement, a toolkit for universities and companies that wish to undertake collaborative research projects with each other.
The pre-defined models typically comprise decision guides, model research collaboration agreements (including multiparty), heads of terms and collaboration agreements. And the main advantage of using these “starting points for collaborative research negotiations” – in Phil’s words – is reducing the time, money, and effort of contractual negotiations.
You can avoid starting from scratch by also working with some of the incubation and acceleration vehicles. Phil cites MISTA, a food tech accelerator in San Francisco that works with competing companies like Givaudan, Ingredion, Mars, Danone, and many others in a pre-competitive environment. Working with a vehicle like MISTA breaks down many barriers in terms of having expectations set out upfront and what arrangements for sharing IP are needed.
Make It Repeatable
Eventually, a model for multiparty collaboration is inherently successful if it can be repeatedly used over time. Accordingly, it should:
· Rely on trust
· Bring mutually shared benefits and prestige to collaborators
· Be agile and move quickly between testing and learning
· Learn from other stories of success
People or Patents?
Phil wrapped up his session with a provocation, asking the audience: what if we moved people rather than patents?
Creating collaborative research arrangements around projects, safeguarding IP, lawyers, and very complex terms can be highly challenging. So what if you could move people rather than patents? Does that break down some of the barriers associated with some of these quite complex arrangements? Some such models already exist – for instance, the UK Knowledge Transfer Partnerships enable people from the academic world to go work for a private sector company for an established period of time.
In Summary
What makes ecosystems and intellectual property (IP) management successful? The first point is to have a good view of the value of IP. Rather than being a defensive or administrative thing, consider it a key strategic asset that can steer and thus monetize R&D.
Accordingly, having some clear ground rules upfront regarding policies and procedures that are relatively lightweight, easy to follow, and not too bureaucratic enables parties to follow and adhere to them. And because it’s difficult to build collaboration models that work from scratch, existing model agreements can come in handy.