1. Business Models and Managing Intellectual Property (Chapter 8) Strategic Management of Technology Professor: Deok-Joo Lee, PhD Presented by: Pablo Rosales May 10, 2010

2. Presentation Contents 1. Presentation Goals 2. Background 3. Strategies for Managing Intellectual Property 4. Intellectual Property and Business Models 5. Intellectual Property Strategies in Action 6. Conclusions 7. Questions and Answers 8. References

3. 1. Presentation Goals To present: 1. The relevant concepts about Intellectual Property. 2. The strategies to manage Intellectual Property in the Open Innovation Paradigm. 3. The relation between Intellectual Property and Business Models in the Open Innovation Paradigm.

4. 2. Background: Relevant Concepts About Intellectual Property (IP)

5. 2. Background 2.1 What is Intellectual Property ? 2.2 What is protected with IP ? 2.3 The logic behind IP 2.4 Related terms 2.5 Positive aspects of IP 2.6 Negative aspects of IP 2.7 The IP Market

6. 2.1 What is Intellectual Property ? Definition 1 [Chesbrough] : the subset of ideas that have the following characteristics: CharacteristicMeaning NovelIt is something new UsefulIt can be used to benefit somebody TangibleIt can be perceived Managed according to the law It is registered in a certain legal institution Its use is subject to legal rules

7. 2.1 What is Intellectual Property ? Novel Useful Tangible Managed according to the law Ideas, Knowledge Protectable Knowledge Protected Knowledge

8. 2.1 What is Intellectual Property ? Definition 2 [IPOUK] : “Intellectual property results from the expression of an idea. IP can be owned, bought and sold.”

9. 2.1 What is Intellectual Property ? Types of IP IP typeDefinition Patent“Patents protect what makes things work” [IPOUK] Trade mark“Trade marks are symbols that distinguish goods and services in the marketplace” [IPOUK] Copyright“Copyright is an automatic right which applies when the work is fixed, that is written or recorded in some way.” [IPOUK] Design“Designs are what something looks like” [IPOUK]

10. 2.1 What is Intellectual Property ? Example of IP types Patent: on-screen finger swipes in the iPhone Design: iPhone case Trade mark: Apple Logo Copyright: a legal document

11. 2.2 What is protected with IP ? Intellectual creations InventionsDesignsSongsBrands

12. 2.3 The logic behind IP Why does IP exist ? What motivates its existence ? To protect legally and dissuade others from committing: a) Counterfeit b) Piracy of ideas that could damage the interests (for example, economical or reputation) of a company.

13. 2.3 The logic behind IP What are the threat forms that exist ? Counterfeit Clothing Pharmaceuticals Footwear Piracy CDsSoftwareMusicDVDs

14. 2.3 The logic behind IP Who are the involved parties in IP ? Creator and owner of the idea IP violator IP office Licensee Specialized Lawyers

15. 2.3 The logic behind IP What is the process to protect ideas ? 1. Something new is created 2. The company or individual decides whether to protect the idea or not 3. File the patent with the IP office 4. IP office reviews the claim 5. IP office issues the patent [ Invention is novel, useful, nonobvious, adequately explained ] [ Protect the idea]

16. 2.3 The logic behind IP What is the duration of the process to protect IP and what are the costs of IP (for patents) ? CountryApproximate Duration Approximate Cost (US$) USA25 months, on average 15,000 – 25,000 on average

17. 2.4 Related terms License: is a right that the owner of a kind of IP grants to a licensee for using it (the IP) Royalty: usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an IP right.

18. 2.5 Positive aspects of IP Why is it important for companies to protect their IP ? Strategic reasons To keep their competitive advantage over their competitors. To invest in further innovations. Economic reasons To gain money for their innovation efforts +

19. 2.6 Negative aspects of IP Time Benefits of patenting are not immediate: it takes an average of 25 months to get it Money Most patents are not worth. It may be expensive: US$ 15,000 to US$ 50,000 per patent Strategic value It is very difficult to know the value of a patent beforehand - -

20. 2.7 The IP Market Creator IP office Licensee Specialized Lawyers Royalties License Patent Fee Professional honoraries Specialized legal services

21. 3. Strategies for Managing Intellectual Property

22. 3. Strategies for Managing IP 3.1 What is IP Management ? 3.2 Why to manage IP ? 3.3 Who is responsible for managing IP ? 3.4 What are the strategies for managing IP under the OIP ?

23. 3.1 What is IP Management ? A set of principles and strategies put into practice in a company with the aim of extracting business value from internal and external inventions that are under IP protecting measures. Principles + Strategies to drive this

24. 3.2 Why to manage IP ? To profit from internal R&D efforts. To avoid “reinventing the wheel” To protect a company’s inventions To leverage the inventions of others in a company’s own products and services. To find new markets for the products that do not fit current business models. 1 2 3 4 5

25. 3.3 Who is responsible for managing IP ? ◦ IP it is not relegated to the legal department ◦ IP is in CEO’s agenda ◦ CEOs consider IP in the design of a company’s strategies. Strategic levelManagement levelOperations level

26. 3.4 What are the strategies for managing IP under the OIP ? Strategies categories Employees- related Ecosystem interactions Business models - related

27. 3.4.1 Ecosystems interactions strategies Buy external IP that leverages a company’s products and services Sell IP (i.e. licensing) that can generate income from a company’s research efforts. Use IP to find mutual benefits with other companies: cross-licensing, alliances Ecosystems interactions

28. 3.4.2 Business models – related strategies View Business Models as a paramount element for managing IP. Seek for alternative Business Models for a company’s IP. Use Business Models as a tool for managing IP. In some circumstances licensing a technology may not be the course to take: publishing to the public a discovery/invention may be the most appropriate decision Business models - related

29. 3.4.3 Employees-related strategies Reward employees for: Their contributions not only in technology per se, but also in the discovery of the business models that leverage the technology. The identification and access of useful external IP Educate R&D personnel in the following facets: The company’s business model, so that the researchers can understand the potential connections early on in the research process. To identify and access external IP Employees- related

30. 4. Intellectual Property and Business Models

31. Business Models are useful to: find paths for internal IP that does not fit the current Business Models. maximize the business benefits of a company’s discoveries. understand where the value resides in other participants business and identify opportunities. decide how a company should manage a certain discovery: Keep it secret: when it is a key strategic differentiator Protect and license it: when it is not a strategic asset and profit can be made from it Make it public: when it helps to grow the ecosystem of complementary products and services

32. 5. Intellectual Property Strategies in Action

33. 5. 1 IP Strategies in Action Millenium, IBM and Intel used some of the basic strategies previously introduced, with some adaptations for their particular circumstances and interests.

34. 5.2 Millenium IP strategies Millenium understood what was valuable for their clients. They also comprehended where their competitive advantage was: in the use of their technological platform. Used their understanding of their own and their clients business models to find business opportunities Millenium retained the rights of some knowledge generated by themselves for their partners, but that was of little value for the latter. External IP introduction from their partners They licensed two key technologies to Eli Lilly, without compromising their business. Internal IP delivery to their clients

35. 5.3 IBM IP Strategies Problems that companies face in managing IP: The process of finding patents is troublesome. For new companies it is difficult to determine if they are infringing other companies’ IP. Used their understanding of their own and their clients business models to find business opportunities IBM created a patent database with helpful search capabilities and offered it to interested parties IBM offers its internal chip fabrication facilities to other companies Internal IP delivery to their clients

36. 5.4 Intel IP Strategies Access to university research funded by Intel, even if the results of research are not owned at all by Intel. External IP introduction from their partners Intel releases for free (Intel Technical Journal) some of their research results to leverage the company’s ecosystem. Internal IP delivery to their partners

37. 6. Conclusions 1. IP Management under the Open Innovation Paradigm is a strategic matter. 2. In an Open Innovation environment, a company should adapt the IP Management principles and strategies to their particular circumstances, to remain competitive. 3. Business Models play a key role in IP Management.

38. 7. Questions and Answers

39. 8. References [Chesbrough] Chesbrough, H, Open Innovation, Harvard Business School Press, Boston Massachussets, 2006. [IPOUK] Intellectual Property Office of the UK: http://www.ipo.gov.uk/ http://www.ipo.gov.uk/ [USPTO] US Patents and Trademark Office: http://www.uspto.gov/