I can only note that China’s new focus on innovation comes at the same time that it is creating an IP focus as well.  Clearly the Chinese think that IP and innovation are related and necessary.  Why is it so hard for us to believe the same thing?

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1. What is Open Innovation (OI)? Open Innovation is a term popularized by Henry Chesbrough a Professor and Executive Director of the Center for Open Innovation at Berkeley.  It is a paradigm that assumes that firms can and should use both internal and external ideas to further their technology goals.
2. OI is NOT outsourcing.  With outsourcing, companies pay a third party to perform services they define as not strategic.  Outsourcing can be viewed as “throwing it over the wall” and not getting very involved in the implementation once it has been defined.  OI on the other hand requires constant interactions between companies and inventors.  It requires huge partnering capabilities on both sides.
3. OI includes sourcing for products, technology, intellectual property and ideas.
4. OI will not decrease a company’s costs – it will only move it among line items.  Prior to the event I spoke with several companies deep into OI and asked them for some tips.  This was one of the ones all the people I spoke with mentioned.  It is a fallacy that some executives still believe.  While it is true that your R&D budget may be less over time, it is also true that your Legal and Business Development budgets will increase immediately.  Why?  Well partnering requires an immense amount of contracting and IP fences.  Additionally, there is an increased monitoring cost to ensure confidentiality among all the participants.  And finally, since all the innovators no longer reside at your company, there will be increased travel and expenses just to keep up communications.
5. OI is a way to speed up time to market, but not an effective cost reduction strategy (see above comment).

Let me know if I have left off any crucial discussion points.

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What I found surprising reviewing the coverage of these two stories, was that the AST/OIN patent purchase was so prominent in the news, and yet was not a particularly new story in the IP world.  Microsoft sold some patents to AST and did not allow OIN to originally bid for them.  Subsequently AST sold to OIN.  So where is the news here?  Well perhaps it could be that AST’s “catch and release” program does in fact work.  Or maybe it could be that Microsoft wasn’t only interested in generating $$ from the patent sale.  If it had been interested solely on monetization then it would have allowed OIN to bid and run up the portfolio price.  Or perhaps as Joff Wild has speculated that Microsoft is seeking external validation that it’s patents read on Open Source.  While any and all of the above theories are possible, are they really front-page newsworthy?  From an IP perspective, I don’t think so.

The second Microsoft story in which the Federal Circuit vacated the $350M damages award against Microsoft and remanded a new trial just to determine what the appropriate damages should be, is definitely front-page news.  Why?  First and foremost it has the Federal Circuit weighing in on how patent damages should be calculated for where the infringing patents are not the predominant basis of customer demand.  Patently-O has the best description of the case (insert link).  Secondly, by the Federal Circuit tackling this issue directly, it takes the wind out of the patent reform sails as it were.  Will patent reform still be needed if the apportionment issue is handled directly?  And finally, can’t we all breathe a sigh of relief that trained professionals and not Congress will be weighing in on this issue?  That, in my opinion, is ultimately newsworthy.

I recently initiated several conversations with IP managers, asking them about their IP Strategy.  I purposely picked managers who were not in the ICM Gathering and, therefore, not privy to the kinds of discussions that group has had on this topic.  In virtually all cases, the IP Strategy that was pretty meager.  Paraphrasing what I heard, the responses went something like this:

Our IP strategy is purely defensive

We are looking for revenue

We use our IP defensively, but we would never litigate

Our IP strategy is to support corporate growth

What do you mean by “IP Strategy”?

I remember speaking to an audience of newly assigned IP managers at a course on IP management I was co-presenting.  My partner was an academician who had been teaching IP management for several years.  I told him that I wanted to insert an hour block in our program, covering IP strategy.  His response was to announce that such a topic would be unnecessary because everyone knew what an IP strategy was and how it may be used.  I nevertheless went ahead with the hour and at its beginning polled the class and received responses very much like those above.  Needless to say, my hour’s discussion was well-received and appreciated by the new managers.

I suppose it makes sense that IP managers don’t necessarily understand what an IP strategy contains and how it may be used to benefit their company.  After all, for those IP managers with a legal background, strategy isn’t taught in law school.  For those with a technical background, it isn’t taught in engineering school either.  In fact, I have come to believe that “strategy”, like “value” is one of those words everyone assumes they know about but, on examination, they really don’t.

I am in the process of putting together an article for publication, dealing with IP strategy. . . . what it is, what kinds of things it should contain, and how one can create one.  If anyone reading this b is interested in being interviewed or in providing their views as inputs to this article, send me an e-mail at: psullivan@icmgllc.com.  I’d love to hear your views on this topic.

As luck would have it in the audience was Jesper Kongstad, CEO of the Danish Patent & Trademark Office.  For those of you following the patent news (IAM Blog and Managing IP), Jesper recently announced his candidacy for the EPO head (replacing Alison Brimelow).  According to Jesper, the lack of movement on the harmonization front is largely a political one.  There is no good reason why harmonization cannot happen, it just needs the political will to be done.  Clearly on the US side, the USPTO had a number of other burning issues it was attending to (Tafas vs. Dudas, patent reform, etc) and on the European side it was much the same.  Interesting enough, Jesper sees the potential for patent moderates to make real headway in the next few years.  Now that Francis Gurry is the head of WIPO,  Jim Pooley is the Deputy Director of patents at WIPO, David Kappos’s nomination is (almost) complete as the head of the USPTO, and hopefully Jesper will be successful as the head of the EPO then the way is paved to have a pragmatic, business oriented IP view in key positions.  But will this help corporations?

At first I was skeptical as I listened to both Jesper and Professor Strauss.  After all, in most technology areas, cutting down the time to grant is not particularly interesting (why speed up a semiconductor patent from 7 years to 4 years when the market still hasn’t emerged?)  But my Aha moment came when they started discussing patent uncertainty and how harmonization could help reduce that.  Eureka!  And here is where it got interesting.

Legal risk has a number of components.  There are risks asociated with innovation (technology risk, adoption risk, market risk, etc).  There are also a number of intrinsic patent risks (invalidity, claims scope, etc) and finally there is environmental risk (a change in the legal or juducial environment).  Patent harmonization helps reduce uncertainty realting to both the innovation and intrinsic patent risk.  If companies can get faster and better validity decisions then some of the inherent legal risk is reduced which helps corporations make better patent related decisions and ultimately should increase their bottom-line.  Let me know what you think as well.