Today's business models are more collaborative than ever, with companies exploring unique partnerships intended to add new dimensions and value to their product lines. But without proper identification and protection of their intellectual assets, firms could find it difficult to reap the full reward of their inclusive policies.
"Firms increasingly practice open innovation, license technology out and in, outsource development and production and enable users and downstream firms to innovate on their products," explained Harvard Business School professor Carliss Baldwin in her latest working paper. "However, while distributed value creation can boost the overall value created, it may create serious challenges for capturing value."
For example, companies will often reveal formerly exclusive knowledge such as design specifications, or waive certain rights to give contributing partners access to the resources they need. To protect their own interest in the process, Baldwin suggested that businesses adopt what she called an IP-modular approach to patent management.
Baldwin discussed the case of an automaker which developed a stability control system that could be integrated into a braking system it originally acquired from an independent supplier. Instead of setting up agreements by which the supplier would have to incorporate the new features into all of its products, or produce two distinct product lines, the partners decided to treat the stability control system as a distinct module within the brake system assembly process coming with its own intellectual property protections.
In this way, the brake supplier benefited from the ability to market a safer product while the automaker was appropriately compensated for the components it developed in-house. And since the intellectual property protection associated with these two modules were incompatible, neither firm had to be concerned about the other infringing or misappropriating ideas down the line.