The Difficulties in Understanding of the IPRs Role in Innovations - Research Paper Example

 As a R&D team we worked for Ticketmaster to create and substantiate an idea of an innovative product – a seasonal festival debit card, which would provide a secured cashless catering service and would also work as a ticket for entry into the festival site, as well as a personal ID at the Ticketmaster festivals. In our work we view innovation, as ‘the management of all the activities involved in the process of idea generation, technology development, manufacturing and marketing of a new (or improved) product or manufacturing process or equipment’ (Trott 2008: p.15). An output of innovation is an innovative product. We also consider creativity as one of the major factors, which are necessary for successful innovation. To provide our innovation, we have taken an active, fast follower style using incremental changes considering a collaboration between existing technology, the customer and suppliers needs to propose a product which will supply vast economies of scale to the business in terms of efficiency, sustainability and security. In the context of the 4Ps framework of innovation space we position our product as it is shown in Fig.1 Figure 1. The 4Ps innovation space Thus, type of our innovation is ‘product’ (what we offer the world) and ‘position’ (where we target this offering) (Tidd & Bessant 2009). Another classification of the innovation may be done according its relation to current technology. Since we make incremental changes in existing technology, creating a new product targeted to a specific market, our innovation can be considered as an ‘incremental’ one (Fagerberg 2005). According to Von Stamm (2008) it is also a market niche innovation, because it ‘opens new market opportunities through the use of existing technology, the effect on production and technical system being to strengthen established designs.’ (p.8). Our process is much close to the IDEO’s Innovation Methodology, introduced by Kelley & Littman (2001) (see table 1 and fig.2). Table 1. The innovation process comparing to the IDEO’s methodology. IDEO’s step Description Our project activity Understand Understanding of the market, client, technology and perceived constraints of problem Generation of the initial idea of the festival debit card Reflection on the idea Empathic research Observe Observation of real people in real-life situations - finding out what makes them tick Consumer survey First synthesis of ideas Market analysis Visualise Visualisation of the new-to-the-world concepts and the customers (brainstorming) – creating of simulations, models, prototypes etc. Series of brainstorming sessions Design of prototypes Further synthesis of ideas Completing of the innovation project proposal Evaluate and Refine Evaluation of prototypes Getting input from all involved participants. Presentation of the innovation project and its evaluation by the tutor and classmates Implement Implementation of the new concept for commercialisation We have not yet reached this stage, as our innovation proposal is still evaluated. Figure 2. IDEO’s Innovation Methodology Cycle. Source: Smith 2009: p.41. Ideas generation approach In ideas generation we mostly embraced the IDEO’s design thinking approach. Following Von Stamm (2008), we understand the design thinking as ‘a human centred approach to problem solving’ (p.22) Brown & Wyatt (2010) explain ‘Design thinking is a deeply human process that taps into abilities that we all have but are overlooked by more conventional problem-solving practices. It relies on our ability to be intuitive, to recognize patterns, to construct ideas that are emotionally meaningful as well as functional, and to express ourselves through means beyond words or symbols.’ (p.32) In order to stimulate idea generation, various creative thinking methods were exploited: brainstorming sessions, open discussions, visualising, real-life observation and surveying. Evaluation of the teamwork and innovation climate Within our team we were fortunate enough to have most Belbin’s roles covered (see Table 2). We had team members who were creative and generated ideas effectively, and team members who were critical enough to stop flows in these ideas. There was not a Coordinator among us, but, nevertheless, there were other team members, who were effective in getting the team to stay focused, keep tasks running and coordinated. We finally had team members who were specialised and focused to get us to the finishing point of the process (Belbin 2010). Table 2. The Belbin’s roles in the project team. Role Description Person Implementer Puts ideas into action Hannah Completer / Finisher Ensures thorough, timely completion Edward Resource investigator Explores outside opportunities William Plant Presents new ideas and approaches Chloe Monitor / Evaluator Analyses the options Ben Specialist Provides specialised skills Fallah Our group was cooperative and rather effective in terms of performance (see fig.3) Figure 3. Evaluation of our team’s performance. Source: Smith 2009: p.15 We were effective, because we have: competent team members, respectful of each other; adequate, but nor excessive resources; a clear, common and elevating goal; unified commitment and shared standards; a collaborative climate and participation in decision-making. (Bessant & Tidd 2007: p.173) We were also creative, because we were able to create atmosphere, which: encouraged us to be creative (through open information flow, support for new ideas, work group); provided freedom, yet with deliberate responsibility (autonomy in the day-to-day conduct of work, a sense of individual ownership of and control over work); provided sufficient resources; provided a pressure – a positive challenging work. (Von Stamm 2008: p.2) Evaluation of the innovative proposal From my point of view, we well succeeded in our innovation proposal. We presented a comprehensive document, which covers many important points: our primary and secondary research results, detailed description of the product and corresponding processes, analysis of a target market, impact of the product on the market, values for different stakeholders, evaluation of IP protection, operational issues, and possible innovation barriers. We also introduced our team and showed a preliminary plan of the project. All of this will hopefully impress our investors, and we will continue the project. The next step will be a development of final full-scope project plan, comprising costs and risks management. 2. The role of IPR in the innovation and design Defining IP and IPRs Lutolf-Carroll & Pirnes (2009) define Intellectual Property (IP) as ‘what the human mind creates that has the potential to be commercially valuable.’ (p.15) This term covers a wide range of creative products from songs, paintings and other art objects to scientific formulas and technological inventions. The concept of Intellectual Property has emerged with the development of trade and technology in the Middle Ages. Granstrand (2005) asserts that the first formal patent code appeared in 1474 in Venice; it was aimed to protect workable inventions from imitation for 10 years. The practice has soon spread across Europe; it was the “national patent era”, because patent laws pertained to a single nation or even city. Industrialisation of economy in the late eighteenth century caused the “multinational patent era”, which was transformed into “international patent era” in the end of nineteenth century. The current era is called the “pro-patent or pro-IP era”, it is characterised ‘by stronger enforcement of a broader array of IPR-holder rights and by additional efforts at international coordination and harmonisation’ (Granstrand 2005: p. 273). In spite of that the IP concept has a long legal and economic history, until recently the Intellectual Property Rights (IPRs) issues were not much discussed in terms of corporate and national competitiveness or social welfare. Only in the last quarter of the 20th century, with the advent of the era of knowledge-intensive and innovation-based economy, the IPRs became one of the key questions in agendas of executives, economists and researchers. Teece (2000) emphasises an importance of IP as an aspect of property rights that augment the significance of knowledge assets in the capital structure of today’s organisations or nations. Organisational benefits of IP management It is considered that organisations can get significant benefits from a good IP management system (IPMS), which are linked with such organisational possibilities as: 1. To transfer knowledge effectively within and beyond an organisation. 2. To use IP of others in collaboration. 3. To get income through IP commercialisation. 4. To attract investment / sponsorship. 5. To influence the financial benefits of staff, ensuring better staff retaining and recruiting. 6. To encourage creativity and innovations in an organisation. 7. To rise publicity and to improve image of an organisation. 8. To facilitate collaboration and partnerships within and beyond an organisation. (IPO, Managing intellectual property: p.19) Role of IPRs in innovations Castle (2009) emphasises an existence of heated debates among professionals concerning the role of IPRs in present innovation systems. Many experts view IPRs as catalysts for innovation, especially in high-tech and knowledge-intensive areas, where patents are considered as rewards for risk-taking innovative behaviour and provide public access to inventions. Thus, Granstrand (2005) asserts, ‘IPRs, particularly patents, play several important roles in innovation systems – to encourage innovation and investment in innovation, and to encourage dissemination (diffusion) of information about the principles and sources of innovation throughout the economy’ (p.280). Some researchers believe that the main function of IPRS is just to coordinate actors in innovation systems. Others argue that, quite the contrary, IPRs set high entry barriers to innovation systems and generate patent thickets and follow-on patents, which cause defensive and blocking innovative behaviours (Roox et al. 2008). Castle (2009) explains the difficulties in understanding of the IPRs role in innovations mainly by the difficulties in relationships between IPRs and innovations. Innovations are linked with and influenced by a number of factors, which besides IPRs includes legislations, contracts, business models, corporate culture, financing, marketing, collaboration and other organisational aspects. Thus, it is extremely difficult to define the impact of IPRs on innovations accurately. The term of “innovation system” itself is also rather ambiguous, because it is defined subject to the context where it is used. For example, an innovation system can be understood in a global sense, and, at the same time, regarding to national, regional or even local (within university or research institute) settings. However, the most of studies discuss innovations and IPRs within a particular national system. In this paper we also reflect on the IP issues related mostly to the National System of Innovation (NSI), which, according to Holbrook (2009), is characterised by the following factors: ‘Firms are part of a network of public and private sector institutions the activities and interactions of which initiate, import, modify and diffuse new technologies; An NSI consists of linkages (both formal and informal) between institutions. An NSI includes flows of intellectual resources between institutions. Analysis of NSIs emphasises learning as a key economic resource and that geography and location matters.’ (p.26) Objectives and values of IPRs The main objective of IPR is to support and promote human creative efforts, rather than to prevent or staunch them. In other words, the intellectual property is aimed to reward creative individuals and inventors for they share results of their efforts with other people, thus encouraging a growth of total human knowledge in the world (Lutolf-Carroll & Pirnes 2009). This is a motivational value of IPRs. ‘Intellectual Property, often known as IP, allows people to own their creativity and innovation in the same way that they can own physical property. The owner of IP can control and be rewarded for its use, and this encourages further innovation and creativity to the benefit of us all.’ (IPO, Managing intellectual property: p.17) Another objective of IPRs is to ensure protection of knowledge assets and to prevent trading on creativity and reputation of other people. This is a defensive value of IPRs. Nevertheless, while a creative idea or an invention exists only in a human mind as intangible mental activity, it can not be protected under the IPR law. In order to be protected, it should become tangible and explicit. When an owner of created IP gets a legal power to protect this property from copying, to control the rights of its using and to receive payments of any kind for the usage, then one can say that the ownership of this IP gains a commercial value (Lutolf-Carroll & Pirnes 2009). Thus, the commercial value of a certain IP is either in restriction of using of this IP by others (thus, for example, causing a lowering of business incomes of a competitor), or in forcing others to pay for the IP usage under a license agreement. Elsworth (2008) notices the licensing may be used in many ways. For example, entering on international market, one can license the technology to some partner organisation for working in the particular target territory. Such strategy allows ‘a very wide market for technology to be built with little requirement for capital. It is also very useful where products are by their nature cheap to manufacture but expensive to transport. ‘(p.297) Types of IPRs Every organisation that creates IP must be aware about methods of IP protection in order to be able to choose the best possible way to protect an invention of a certain kind. Business Link points out that nowadays the IP law typically includes four main IPRs: patents, trade marks, design rights, and copyright. In addition, there are several others, such as: confidentiality agreements, plant breeder’s rights, publication rights, performers’ rights, database rights or trade secrets. All of them may be successfully used in dependence on nature of IPRs and organisational requirements to the IP protection system. A significant practical distinction between IPRs is a requirement for formal registration, as some of rights are dependent upon the formalities, while others enter upon life automatically. Another distinction is the nature of the right, it can be either creative or aimed to commercial reputation and goodwill of a company (see table 1). Table 2 compares IPRs in some essential features and shows limitations and risks, related to each of PIRs types. It helps to understand better which of the IP rights suits more to a certain innovation and a certain business. Table 1. Taxonomy of intellectual property. Whether formalities required Basic nature of the right Creative Commercial reputation and goodwill Artistic Industrial Formalities required Registered designs Patents Plant varieties Trade marks Formalities not required Copyright Rights in performances Unregistered design right Passing off Malicious falsehood The law of breach of confidence Source: Bainbridge 2007: p.4 Table 2. Comparison of main IPRs in the UK IP System. Patents Trade marks Registered Design Right Copyright Term / Time limitation Up to 20 years (subject to annual renewal) Rights can lost forever (renewals every 10 years) Up to 25 years Life plus 70 years* Protection / Geographical limitation Throughout the UK Throughout the UK Throughout the UK Throughout the UK and much of the world Protects against Idea being used, sold or manufactured The use of trade mark by others without permission Product being manufactured, sold or imported Work being copied or reproduced in communication or performance What is protected? IP type limitation Inventions Brand identity, including words, logos and other signs What the product look like Music, art, firm, literary works and broadcasts * Broadcast and sound recording copyright lasts for 50 years, typographical arrangement for 25 years Source: IPO, Intellectual property explained, p.2. IP protection strategies The IP protection is often associated with high costs, in particular regarding to patents. Philpott (2008) asserts that, ‘Application fees, translation costs and patent attorneys’ services can easily reach €50,000 when trying to get patents granted in the major European countries. Add another €15,000 for the United States and Japan. These are just ball-park figures, and vary from one technology to the next.’ (p.41). Moreover, to keep the patent in force, one must pay the annual renewal fees, which are counted for hundred Euros per country. It is not surprisingly that many SMEs and start-ups tend not to use the patent system. Yet, one will agree with Carter (2008) who says, ‘Intellectual property protection can be costly. Not having IP protection can be more costly’ (p.199). Small and growing business should develop their IP protection strategy matching it closely to business goals and spending wisely. Philpott (2008) explains that companies, which don’t want to spend money to own patents, can, nevertheless, use the patent system to create a competitive advantage - they can publish patent applications. Once published, the applications will be in the patent database and can be detected by many people, who make a ‘commercial intelligence’ search, including customers, partners, and investors (Philpott 2008: p.43). The application remains in the database even it does not go further to granting. Taking into account the global accessibility of the patent databases, and in comparing to the advertising costs in some trade magazine, such patent application publishing seems rather effective marketing strategy. Furthermore, as it was discussed above, the patent system is relevant only for the relative minority of businesses, for those involved in industrial invention. Companies that work in service or creative industries don’t need using patents, though they innovate a lot, often suffering from ideas stealing and imitations. Carter (2008) gives these companies a good advice – before to rush in an expansive protection of all ideas, they should build the IP protection strategy by answering two key questions: what to protect and how to protect. They should determine the cornerstone of their offer, competitive features of this offer and implicit revenue streams. Then an appropriate protection method should be applied. It makes sense to pay close attention to IPRs that come into existence automatically, for example to the copyright. In some cases trade secrets, confidentiality agreement or non-disclosure agreement protection would be effective. Stronger registered trade marks or registered designs can be put in force as well. A combination of the available rights works very well too, for example, ‘use design rights to protect the outward appearance of something where that has significance and trade marks to protect your name and logo.’ (Carter 2008: p.201). IP protection strategies should also consider geographical aspects; if a company plans to develop international business, it is quite reasonably for it to get cost-effective protection in multiple countries, e.g. through European Patents. References Bainbridge, D.I. (2007) Intellectual property. 6th edition. Harlow, Pearson Education. Belbin, R.M. (2010) The management of teams: Why they succeed or fail. 2nd edition. Oxford, Butterworth-Heinemann. Berkun, S. (2010) The myths of innovation. Sebastopol, CA, O’Reilly Media. Bessant, J. & Tidd, J. (2007) Innovation and entrepreneurship. Chichester, John Wiley & Sons. Brown, T. & Wyatt, J. (2010) Design Thinking for Social Innovation. Stanford Social Innovation Review, Winter. pp.30-35. 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