This article has been written by Eriobu Aniede Onyekachi, pursuing a Diploma in US Intellectual Property Law and Paralegal Studies from LawSikho.
The purpose for the protection of intellectual property rights IPR is for the right holders to enjoy their rights without undue interference from others except with their consent through the instruments of licensing, franchise, or assignment. This phenomenon made innovation closed and within the reach of the right holders for the length of time of enjoyment of such rights. It, however, limited the commercial workings of such inventions and ideas to their original team creators and secluded the invention and its workings from the reach of external influences. This article aims to find a balance between IPR and open innovation because at the bottom of every invention is the desire for ultimate value which is best achieved through innovation; collaboration, incentive, and competition.
Innovation is the driving force of industry and every organization must keep innovating to remain relevant. Innovation as seen in the industry can either be closed or open. The traditional way of research and development R&D which is enclosed in the box and kept from external reach is known as closed innovation. Open innovation is the leveraging of internal R&D and adding external R&D to enhance a business. It involves consistent research to improve on an existing product, discovering more use and creating multiple channels for its commercialization. In the words of Henry Chesbrough, the father of open innovation, open innovation is “a paradigm that assumes that firms can and should use external ideas as well as internal ideas and internal and external paths to market, as the firms look to advance technology”.
In closed innovation, the invention is for the exclusive use and workings of the inventing community. Open innovation involves collaboration with research institutions, business partners, competitors and customers through a joint venture or licensing agreement. Licensing can be cross, vertical or horizontal. It is crossed if two or more companies exchange their inventions for the creation of new products and services. It is vertical if the invention of one serves as a raw material for the creation of products for use in another industry and it is horizontal if the end product for such an exchange is within the same industry.
Increased research cost
Reduced research cost
Limited use by internal members of a company
Accessible to external companies
Slow innovation process
Faster innovation through collaborations
Expansion of ideas and further inventions
Limited market shares
Newmarket shares evolve
Little or no royalties
Multiple sources of royalties
According to the World Intellectual Property Organisation (WIPO), a national IP strategy consists of a set of measures that are formulated and implemented by governments of the world to encourage and facilitate the effective creation, development, management, and protection of IP at the national level. It is a cross-cutting document, which outlines links with diverse policy areas to ensure effective coordination with other activities. An IP policy provides structure, predictability, and a beneficial environment in which enterprises and researchers can access and share knowledge, technology, and IP. It encapsulates in detail the terms of ownership of IPR, incentives for researchers, IP disclosure, commercialization of IP, recording, and accounting, IP management and conflicts of interest.
U.S IP policy
The US IP policy, like most jurisdictions of the world, lends support for the protection of IPR of their citizenry both in and outside of the US for the exclusive enjoyment of the right holders. The Office of International Intellectual Property Enforcement (IPE) was set up for this purpose; to present the mastermind of Americans to the universe. The US IP policy is important because IP is the bedrock of the US economy and it projects and reflects America’s creativity to the world. The importance of IP policy to the economy of a nation cannot be overemphasized. As a result, the World Intellectual Property Organisation (WIPO) assists developing and least developed countries (LDCs) to produce national intellectual property (IP) strategies by drawing on its unique global expertise to help nations avoid common pitfalls and ensure that the best possible strategies emerge.
The Office of Intellectual Property Enforcement (IPE) advocates for the effective protection and enforcement of intellectual property rights (IPR) around the world. The IPE team together with U.S. ambassadors and diplomats serving in different countries of the world, liaise to ensure that the IPR interests of Americans are epitomized abroad, and also showcase the important role that IPR protection plays in global innovation and economic development. So much is invested by the US in IPR protection because IP keeps the US as one of the most innovative nations of the world, it has led to the growth of the US economy and its IP policies assures scientists, innovators, and researchers that their rights shall be protected, enforced in the face of any breach and returns will be made on their investment and cost of research. An assurance that keeps the US inventing community constantly motivated.
The IPE promotes IPR systems to:
- deter access to counterfeit and pirated goods that can harm consumers;
- ensure that the interests of American IP rights holders are protected abroad;
- promote IP protection and enforcement as vital for economic development.
According to the U.S Department of State Division for Trade Policy & Negotiations, the U.S IP intensive industries account annually for;
- 38% of GDP;
- 52% of merchandise exports;
- 27.9 million jobs;
- 46% wage premiums.
While IP crimes cost the US economy on a yearly basis;
- $180 billion from theft of trade secrets;
- $18 billion from pirated US software;
- $29 billion in displaced legitimate sales from counterfeit and pirated goods.
The above analysis simply indicates that there is a gain in IPR protection and so nations should invest in strong IP policy.
In spite of the success rates of US research and development, the US IP policy is stringent and encourages closed innovation. It is a boost for the US economy but can its good and security be seen to help researchers, inventors, and right holders maximally enjoy their rights in a closed innovation system?
IPR protection is fundamental for the right holders to reap the benefits of their creation to the exclusion of all others. The question is how much benefit can a right holder enjoy without commercialization? Patent holders would keep their invention strictly for their workings, export, import and sale without reaching out to their contemporaries or letting them in to assist in the full utilization of their technology. It is for this purpose that open innovation is seen as a better option for the enjoyment of IPR because a patent holder can license out or license in for the full workings of the potentials of the patent, thereby generating more royalties.
Open innovation does not connote open access without royalties or benefits. It does not mean that the IPRs are not protected, but rather that the IPR is shared amongst competitors on the ratio of their collaboration and as per agreement. For any organization to remain in business, it has to keep innovating but R&D is expensive and takes time, which is why collaboration is needed to mitigate cost and time in this age. It is observed that businesses that were thriving in the ’80s at a time monopoly were the order of the day, began to pack off early 2000 and such was the fate of IBM but for its establishment of Open Collaborative Research (OCR) program in 2006 to enhance open-source software research between research institutes and IBM. It further developed Eco-Patent Commons in collaboration with firms such as Sony and Nokia in January 2008, through which ecologically related patents were made available to the public with the aim of encouraging technology development in this area. On IBM’s contact page is the statement that; ‘IBM’s greatest asset is the IBMers. We believe our strength lies in the diversity of our employees. IBM encourages creative pursuits and passions outside of work because when IBMers can explore their curiosity, it gives all of us a new outlook on the world and its possibilities for emerging tech. Together, IBM can drive progress through meaningful innovation and action’.
Open innovation can be likened to the apprenticeship system that is prevalent in the South East of Nigeria whereby a business owner invites a group of young men to serve under him, learn his trade for about 4-6 years, he settles them with a good amount of money for them to start up their own business. What is predominant is that through the engagement of these young men, ideas are exchanged and the original business modules are improved upon leading to the expansion of the business through distributorship, sales outlets and entry into new markets. The circle continues with the settlement of these young men with a lump sum or shared asset, who also invest in a group of other young men thereby creating a network with huge net worth. Through this engagement, businesses that were not doing well, begin to do well, gain root in the market through goodwill and break into new market frontiers.
Open innovation like the business module explained above involves some push factors;
- Initial invention(s) or business module;
- Research and development;
- Motivation/incentives/ recognition;
- New business modules;
The spirit of inclusiveness is the bedrock of the collaborative system in open innovation, a factor that has proven to work magic over and above salary payment as with IAS and IBM. The team grows the business with the mindset that it is theirs and from its network they are established. Feedback is gotten through the customer’s patronage and the goodwill of the business. When settled, they go into the same business, a fall-out of the business or different business, and repeat the same circle.
In the words of Professor Ekekwe, ‘the Igbo Apprenticeship System IAS can be encapsulated like this; ‘a man goes into a business sector and wins market share. Then one day he decides voluntarily to give out market share and immediately creates competitors for himself’. This is what open innovation tends to achieve; a competitive market against a monopoly by IPR holders in a closed innovation. The AIS has been recognized as the largest business incubator-raising brands such as Innoson Motors, Capital Oil & Gas, Coscharis Group and more recently Cubana Group just to mention a few. The AIS is so powerful that the Harvard Business School and the Lagos Business School have taken recognition of its impact in creating a balance between the rich and the poor with ongoing discussions to capture the system as a business module.
IP application in an era of open innovation-implications
Back in the day, a patent could expire without generating royalties for the right holder but today, through collaboration between internal and external resources, more uses are discovered, new technology and business modules are developed by establishing; joint venture agreements, partnership, distributorship or licensing for the greater benefit of the right holders and investors. Open innovation creates a feel of conflict between IPR protection and the open nature of innovation. The two are in alliance to drive IP policies except that more rights are formed and more players benefit as against a single right holder. Rather than only license agreements, we see more joint venture agreements, partnerships, distributorship etc in an open innovation system. Today a patent holder can enjoy a multiplicity of license agreements and royalties through networking with external resources.
With open innovation, collaborators engage in different capacities; R&D funding, R&D research, creation of a new business module, breaking into new market frontiers, distribution, feedback and commercialization through multiple means. Open innovation leverages the strength of the various communities that come together for the research. With open innovation, an organization can take its product to the market through others and vice versa. The most important achievement of any IP policy is greater economic returns for the inventors and investors which is the main reason countries like the US formulate IP policies. In other words, open innovation does a greater good for IPR than closed innovation.
Like the IAS which leverages collaboration to break into new market frontiers, it is suggested that for organizations to continue to thrive in this age, they need to open up to the outside world in order to maximize the potentials of their technology and for the greatest return on their investment. However, they must do so with caution through the assistance of an IP professional who can help protect their interest in making sure that their openness is not abused by their counterparts. No matter how attractive more royalties and new deals can be, an inventor who has put in time and effort must ensure absolute but flexible control of the nuances in its contracts and due diligence checks in its IP portfolio.
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