Intellectual Property Management in Small Firms And

8/14/2019 Intellectual Property Management in Small Firms And

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Jari Kuusisto www.scr.fi1

Intellectual property management insmall firms and in service context

RESEARCH SEMINAR

Prof. Jari Kuusisto

March 8, 2010

BRIGHTON


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2 Jari Kuusisto www.scr.fi

Outline of the presentation

Background

Growing importance of intangibles

Key research results

Variation across the industries

Use of IPR and informal methods

Informal IP protection and management methods Case examples of publishing

IP protection and innovation life-cycle

IP landscape - some future issues

User roles in innovation process

Concluding comments Policy issues


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Growing importance of intangibles


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Growth of intangible assets

80% of S&P 500 Value is Intellectual Property

1975 1985 1995 2005

Source: www.metrics2.com/

http://www.metrics2.com/blog/2006/12/18/80_of_sp_500_value_is_intellectual_property_new_et.html


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Intangibles and corporate value t1

Corporate value

Tangible capital

Physicalassets

Financialassets

Humanresources

Intellectualassets(IP)

Intellectual capital

Source: Heiden (2008)


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Intangibles and corporate value t2

New broader scope of intangible value

Corporate value

Physicalassets

Physical

assets

Financial

assets

Human

resources

Intellectual

assets

Intellectual capital

Source: Heiden (2008)


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Research project

Report is based on an extensive research in the UK and Finland

Intellectual property initiative

ESRC / UK Patent office research programme involving 11 research groups

Intellectual Property and Innovation Management in Small Firms

The relevance of IPR system to the needs of small enterprises Key finding: Importance of informal IP protection in SMEs

Characteristics and the use of informal methods among the SMEs SC-Research carried out 3 year research programme analysing 350 SMEs in the UK and Finland

Strengths and weaknesses of informal IP protection methods


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Key research results

The way SMEs make use of the IPR system depends onthe business sectorwhere they operate and the size ofthe business

For many SMEs the patent system has little or norelevance At the same time many SMEs stress the importance of the R&D for the

business

Forresearch-intensive sectors patenting is crucial

E.g. SMEs in biotechnology and electronic sectors


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Variation across the industries

Metal- and electronicsindustry

- patents are commonlyused

- fairly good knowledgeon IP-related issues

Software industry- rather negative attitudestowards patenting

- speed of developmentand commercialisation iscrucial

Knowledge intensiveservices

- problems with IP-protectionare recognised

- use of copyrights and trademarks varies between firms

Informal protection

Formalprotection


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Variation within the service sector


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Adoption of formal IPR among KIBS

Patents9 %

91 %

Utility models6 %

94 %

Copyrights

31 %

69 %

Trademarks

36 %

64 %

Using

Not using

Many SMEs have realised thevalue of their IP, and understandhow to manage their assets

Still the use of formal IPRmethods that require registrationis limited, especially in services

business


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Use of informal IP protection practices

Secrecy

90 %

10 %

Publishing

51 %49 %

Restrictions

80 %

20 %

Enhancing the

commitment

84 %

16 %

Division of duties

80 %

20 %

Circulation of duties

68 %

32 %

Documentation

84 %

16 %

Technical protection

68 %

32 %

Fast innovation cycle

14 %

86 %

Using

Not using

SMEs tend to prefer informalmethods instead, and they areperceived as:

Effective

Cheaper, and

Within the control of the company


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Knowledgeprotection and management methods

- Secrecy- Publishing- Restricted access to knowledge- Circulation of duties- Confidentiality / trust- Customer relations management- Effective sharing of information- Documentation- Fast innovation cycle- Technical protection methods

Complex designTags / dongles

- Packaged service products- Circulation of duties- Trade organisation membership- Employee loyalty building

Informalprotection methods

Contracts

- Non-competition- Confidentiality- Recruitment freeze- Employee inventions- Non-disclosure

Formalprotection methods (IPRs)

Industrial property rights

- Patent- Utility model- Desigh right- Right to business name

Copyrights


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Contracts

Contracts are legally binding and flexible Parties can agree on many types of things between themselves

Can be difficult to enforce effectively without legal procedures

Non competition agreements covering Employees, business partners

Suppliers, sales channels, sub-contractors

Confidentiality NDAs with employees, customers, suppliers...

Recruitment freeze Can limit employees from working with the competitor for a certain

period of time

Employee inventions Set of rules and principles for compensation and the ownership of

inventions


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Informal IP management andprotection methods

Mostly informal methods are not legally binding

They can be both proactive and restrictive Limiting the flow of knowledge within the firm and out of the firm

Between the employees

Between employees - suppliers - clients etc.

Encouraging knowledge creation within the firm

Motivate and encourage employees to develop newinnovations

Encourage long-term employment


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Secrecy

Key-knowledge can be kept secret from employees,

suppliers, business partners or customers

One of the most common informal protection methods

May have negative impact on innovativeness Need for knowledge sharing Necessary and useful at the early stages of innovation life-cycle prior

to the IPR protection

In the longer term secrecy tends not to be a very effective method - at

some point secrets tend to leak to outsiders


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Publishing

New idea can be published as widely as possible and theinitial developer of the idea will become well-known asthe innovator

Seeks to prevent un-authorised copying

Very important protection method in the service sector For instance in advertising

Publishing can prevent others from claiming patents inthe same area Publish the results of a biotechnology research in the local newspaper in

Portugal


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Defensive publishing - Case 1

In an era of rapid change and heavy competition, does acompany still have the time - and the money - to patentevery innovation that comes along? Increasingly,innovative companies are finding a strategic alternative:defensive publishing

IBM Since 1982, IBM decided to switch from patenting to extensive publishing

of its inventions, thus in the same time, preventing competitors patentingas well

IBM Technical Disclosure Bulletin has emerged as the single most citedsource for prior art by the United States Patent and Trademark Office

Publishing websites Growing publishing platform

(Source: The Bridge, fall 2001)


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Hidden publishing - case 2

A small Portuguese bio technology enterprise publishes its newinvention in a local newspaper, in Portuguese language

Known competitors are highly unlikely to discover this information

Still, publishing can be used in blocking competitors patenting of the sameinvention


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Boston Consulting Matrix - case 3

Consultancy firms regularly publish their concepts and tools The business community knows the origin of the new concept regardless who is using it

Earn dividends via publicity & reputation


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Resticted access to key knowledge

Restricting the number of people who have access to thesensitive key-information

(employees, business partners, customers)

May lead into insufficient knowledge sharing

creates a barrier to innovativeness!


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Cultivating loyalty and commitment ofthe personnel

Seeks to establish long-term employment relations

In many fields employees are considered the mostvaluable asset of the business

Strategies to maintain staff loyalty include: Financial incentives

Training opportunities

Occupational development related incentives

Pleasant working environment

However, incentives given to individual employees mayalso harm the organisational climate


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Compartmentalising of work tasks

Work tasks can be divided between employees so, thateach one controls and has knowledge only on a smallfraction of the process

Individual members of staff do not know the entire product, process orservice concept

Minimises employee-related risks in the case of departure, or recruitmentby the competitor

More suitable for larger organisations

In small firms compartmentalisation is not a natural tendency


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Circulation of work tasks

Rotating staff between work tasks and making sure thatat least two members of staff know each of the key worktasks Serves as a way to decrease dependence on individual members of staff

Can be problematic for very small businesses Comprehensive documentation may be an alternative approach


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Documentation

Documentation of ideas and thoughts reduces the risk ofloosing key knowledge

By documentation a business can transfer tacitknowledge into a more explicit forms

(written documents, tapes, databases)

Should be carried out simultaneously with the evolvinginnovation

Two dimensions: Enables the effective sharing of knowledge

Reduces the risk of a sudden loss of IP in the case when a member of

staff leaves the business


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Fast innovation cycle

Maintaining the lead-time advantage

Continuous flow of new or improved products can reducethe risk of harmful copying Has a significant role in fast developing businesses, e.g. in software

industry

Fits well for small businesses due to their ability to respond quickly tothe changing market demands


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Technical protection

Provides large number of different instruments

e.g. dongles = security keys embedded in software

Can also involve incorporation of specific identificationcodes e.g. in software programs, in photographs or other

documents Also firewalls and passwords are widely used


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Innovation life-cycle and IP protection

IPR and informal IP protection caneffectively complement each otherover the innovation life-cycle

New technology

________________________________________________________ T

Informal Formal+informal /informal Saturation(Invention) (commercialising)

Next innovation

technological or

non-technological


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Comparing methods

INTELLECTUAL PROPERTYRIGHTS

Legal protection Lisence income (potential) Can be used as a bargain chip in

the negotiations Useful in securing external financing

Protection can be obtained only forknowledge that meets the criteria

Involves relatively high costs:application, maintaining anddefending

Complexity of procedures No protection unless the business

is able and willing to defend theirIPR

CONTRACTUAL PROTECTION

Legal protection Can be seen as an asset Relatively cost effective and easy

to apply Flexible, can be adapted to the

wide range of situations

Too strict or assymmetric contractscan have negative influence oninnovativeness

INFORMAL IP PROTECTION

Relatively cost effective and easyto apply

Flexible, can be adopted cross theindustries and even in the smallestenterprises

Can be adapted according to thesituational requirements

Can improve the overalleffectiveness of the business

Offer very little in terms of legallybased protection

Some informal methods requireconstant attention and updating


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IP landscape - some future issues


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Main forces changing the intellectual propertylandscape today

1. The globalization of the economy;

2. The development of new technologies;

3. The spread of Internet connectivity and broadband penetration;

4. The growth in economic importance of non-technological businessinnovations and resources not protected by existing intellectual

property regimes;5. The politicization of intellectual property issues; and

6. Changes in the ways businesses operate

More open innovation activities

Users increasing role in innovation activities

Source: ICC (2008) Current and emerging intellectual property issues for business - A roadmap for business and policy makers


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Developing

customer&user

understanding

Newresearchmethods

thatprovide

in-depthunderstandingoncustomers&users

SupplierdrivenR&Dandmarketresearch

Usersasdriversofproduct/servicedevelopment

Customers&usersas

actorsandresources

Newlevelofinterac8on

givescustomers/users

morepower&

responsibili8esintheR&D&Iprocess

U


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Concluding comments

Intellectual property rights (IPRs) represent only a tip of the icebergon the field of IP management and protection Yet, the research has almost fully focused on the formal IPR

IP related institutions focus on IPR

Also policy debate is very much centred around IPR

Knowledge economy and globalisation as drivers of change in IPprotection practices Intangible knowledge is increasingly important ingredient of business success

Copying of intangibles can happen globally in a matter of minutes

Protection of intangible IP requires informal methods as well as IPR

Successful commercialisation requires sufficient attention to formal& informal IP protection


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Policy issues

There is a need to create awareness of informal IPprotection within the business community SMEs and service sector as key target groups for practical advice

Informal IP protection manual and training DVD for SMEs

Linking IP services offer to the life-cycle of the business

More European research on the issue

Informal IP protection offers a new perspective It can be a challenge for existing institutions

At the same time it provides a good opportunity to improve the overallIP awareness and skills within the SME sector

Systematic utilization of informal IP protection can promote alsothe use of IPR system, first step


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Jari Kuusisto www.scr.fi35

Thank you for your attention!

[email protected]

Documents

Intellectual Property Management in Small Firms And