Companies Adopting Open Innovation Methodologies Must Incorporate Patent Information for Maximum Value Creation

Open Innovation can create joint ownership of inventions if care is not taken
Open Innovation can create joint ownership of inventions if care is not taken

Open Innovation is unquestionably becoming a “hot” area of focus for U.S. companies, especially in the current economic climate in which businesses are more than ever focused on smarter ways of doing business. And, why wouldn’t Open Innovation be an intriguing business model when companies can fill their product and technology pipelines for significantly lower cost and with more variability of ideas than typically is possible from their own R&D infrastructures? As a result, more and more business leaders are today viewing Open Innovation as a necessary direction in which to move their company’s innovation efforts.

A fundamental premise of Open Innovation is that good ideas can come from anywhere, even when a company operates in a very specialized core business. Moreover, innovations that come from outside of one’s core business, such as in packaging or transportation, are better left to those who specialize in those areas. Perhaps more controversial is the assertion that by relying only on the ideas generated from within, an organization’s core business innovations can become self-limiting because the pool of knowledge and idea generation may become somewhat myopic. When properly deployed, Open Innovation methodologies not only can be the source of ideas generated outside of the organization, but can also serve as a catalyst for the existing R&D infrastructure to become more creative. In its best forms, Open Innovation becomes a source of new products and technology, as well as a means to spur the creativity of one’s own people.In seeking to capitalize on the promise of Open Innovation for modern business, many companies are developing internal expertise or engaging consultants to assist them in meeting their goals. These efforts are no doubt critical for Open Innovation success. However, I believe that a missing piece in today’s existing Open Innovation methodologies is actionable knowledge regarding how patent information and analysis can be used to improve and accelerate the quest for promising ideas developed outside of one’s organization. This belief emanates from my substantive client experience, as well as discussions with innovation professionals from many organizations.

In the aggregate, most innovation professionals conceptually understand that patent information should serve as a source of Open Innovation subject matter. Nonetheless, few of these professionals fully appreciate how patents can be used to improve the efficiencies and successes of innovation processes. Moreover, few patent professionals possess the business competency to translate their specialized patent legal knowledge into a form deployable in the innovation context. As such, a disconnect currently exists between patent information and Open Innovation methodologies. Failure of organizations to fully capitalize on the information available in patents necessarily results in substantial reductions in the payoff obtainable from the adoption of Open Innovation methodologies by a company.

Why do I believe patents are a critical piece to Open Innovation methodology? Put simply–patents can serve as a vertiable “shopping list” for a company seeking to identify innovations available for adoption from outside the organization. By its very nature, a patent sets forth the fundamental basis of the subject matter that the patentee wishes to exclusively own. If the patentee developed a product or technology and later decided not to introduce it into the market, then that subject matter could be essentially market ready (or nearly market ready) for a significantly less cost than to develop a similar technology from scratch within one’s own organization.

And, another company’s cast-off products or technology are not necessarily “junk.” To the contrary, patented products or technology could have been discarded for a number of reasons such as:

  • The patentee’s strategy changed, thus meaning the products or technology were no longer of business relevance
  • The patented products or technology were a non-core aspect of an acquisition and, although valuable to the acquired company, are no longer relevant to the new corporate owner
  • The patented products or technology were “ahead of their time” and not appropriate for market introduction at the time the patentee developed them
  • The patentee is using one aspect of the patented subject matter, but the products or technology have relevance outside of the patentee’s market and could be licensed in an adjacent market

Moreover, patented innovations are by definition proprietary, and, if broadly patented, that innovation can comprise an exclusive product or technology offering to an acquiror. This better assures that the acquired innovation can truly be called a “differentiated” offering that is subjected to a lesser likelihood of being knocked-off by a competitor.

A further benefit to acquisition of another company’s discarded product or technology is the attendant “know how” associated with the patented subject matter. When a company identifies a product or technology as suitable for patenting, it is quite likely that it is working to develop that same subject matter as a potential customer offering. Thus, the company typically owns know how and other valuable information attendant to the subject matter of the patented product or technology. By acquiring such unwanted products or technology, a company can obtain much more than is evident from the patent itself. (And, it goes without saying that one should not reject a product or technology on the basis of what the patent itself discloses–there may be much more to the described subject matter than meets the eye.)

An additional, and maybe not obvious, benefit of using patent information as part of an Open Innovation methodology is that by reviewing third party patent information, an organization can develop an institutional knowledge of what is owned by others prior to engaging in substantive internal innovation efforts. That is, if an innovation team knows early the metes and bounds of third party patent ownership, the team can better direct the company’s efforts away from known products or technology into previously unexplored areas. This can reduce the potential for patent infringement liability, as well as improving the likely scope of patent protection for the team’s own innovations. In this realm, incorporation of patent information into the Open Innovation process can operate as a valuable directional signal for product and technology development.

There are no doubt many additional benefits to using patent information as an element of Open Innovation methodologies. I welcome the comments of others in this regard. At a minimum, however, patent information indisputably can serve as a great source of insight and direction for those organizations that seek to identify sources of innovation outside of their own infrastructures. An organization seeking to develop an Open Innovation infrastructure will fail to fully capture the value from such a program if it does not include patent information capture and analysis into its Open Innovation methodologies.

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