Open Innovation and IP – What's your policy?

by Kevin McFarthing

Open Innovation and IP - What's your policy?A lot has been written about Intellectual Property (IP) and Open Innovation (OI). It’s not surprising, because it’s often one of the thorniest problems facing collaborators. Recent research from the IACCM (International Association for Contract and Commercial Management) shows that IP is the fourth most commonly negotiated term in contracts; yet it doesn’t reach the top ten of terms leading to disputes. So why the focus on IP?

IP is the foundation for many, but not all products and services. Within IP, companies usually talk about patents much more than other elements such as trademarks or design rights. Although it is very rare for ownership of brands to change hands in an OI relationship, brand licensing enables brand owners to benefit from the efforts of others in extending and promoting their brand; but ownership is retained.

The standard collaborative relationship involves two parties bringing existing property to the bargaining table, so-called foreground IP, the ownership of which is rarely in dispute. There are then two main areas of potential disagreement:

  1. Does ownership transfer from one party to another (usually from smaller company to larger company) before exploitation?
  2. Who owns new IP generated as a result of the collaboration, the arising IP?

This is where company policies get in the way. It seems a contradiction to be active in OI but still want to own all the IP supporting your products. This approach stems from a belief that control is everything, just in case a future revenue stream is cut off by challenge from a competitor that subsequently invalidates a core piece of IP.

There are many solutions to the IP dilemma in OI. As Nestlé demonstrate in their Sharing is Winning program, the IP inventor owns it, the applying party owns the rights in their field of interest. As long as you have a contract clearly outlining your licensing rights, including field, duration, geography etc, you should be protected.

This approach also allows your partner to license rights in other fields to their benefit and with no impact on your application. Anything that allows your OI partner to profit without affecting you is to be welcomed. It strengthens them, gets more use of the technology and ultimately could help you.

Of course, there will be examples of where things have gone wrong in the past. Two things need to be taken into account when these case studies are raised. First, what is the chance of the same thing happening? Second, what is the impact if it does happen? If the answers to both are comforting – they can never be never – and you judge that there are clear benefits, why would you not proceed?

There is an important caveat to mention on IP ownership in OI. If you don’t own the IP, your licensing contract must have clear obligations on the licensor to maintain and defend it. If they decide not to, the ownership should revert to you at your discretion.

So does your IP policy get in the way? Go through it, and really ask yourself whether it helps or hinders your OI efforts. You may find that you should change your IP policy for one word – flexibility, and apply it project by project.

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Kevin McFarthingKevin McFarthing runs the Innovation Fixer consultancy, helping companies to improve the output and efficiency of their innovation, and to implement Open Innovation. He
spent 17 years with Reckitt Benckiser in innovation leadership positions, and also has experience in life sciences.

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