I spent a few days last week at the Innovation Cubed Conference in Orlando. While there, I heard two instances of use of a term that I absolutely hate, at least when it is used by innovation professionals to define in some manner the innovation processes of their respective organizations. This word is:
PATENT WHITESPACE ANALYSIS
Not only do I hate this phrase, I think that companies that utilize patent (or IP) whitespace analysis to define their product and technology development pathways are quite possibly setting themselves up for failure. And, it’s bad enough that a single innovation project might fail as a result of the faulty data inputs that can occur from relying on whitespace assessments, but I think that most corporate processes incorporating patent whitespace analysis are based upon faulty methodology, thus setting the organization up for sustainable failure.
For the uninitiated, when applied to the patent world, the term “whitespace” designates an analysis methodology that identifies the absence of patents in a particular product or technology area as a primary driver of innovation decision-making. This term has been used for some years by patent and business professionals alike to provide information about whether one can obtain patents and whether patent liability might result if the inquiring company moves into one or more technology areas. Many vendors and consultants have developed sophisticated sales and marketing collateral that demonstrate how their company’s whitespace analysis can effectively serve as the proverbial “magic bullet” for will solve your innovation problems–and, what corporate team responsible for identifying new product and technologies would not want such a tool? As a result, patent whitespace analysis has emerged as a common front-end innovation tool at many companies.
Patent whitespace analysis is no doubt an important aspect of any innovation assessment: if a company is introducing a new product or technology, it needs to know at an early stage whether it can own the fruits of its innovation efforts, and whether it might be sued for infringement by a third party. I have no beef with use of whitespace analysis in innovation processes; to the contrary, many of you know that I am indeed a strong advocate of putting patent expertise in the front end of innovation processes. (Here is a new article that I wrote on how patent landscaping can improve the ROI of innovation processes.)
But what I recommend is not the traditional form of patent whitespace analysis where the decision making process follows along along the lines of “hey, there are no patents over here, let’s innovate in this direction.” Instead, I say that whitespace is only relevant when–and only when–a business case has been properly formulated and one is choosing among various innovation opportunities. In other words, whitespace analysis should only be used to validate, not to drive, innovation pathways.Think about it: who the flip cares whether a particular product or technology area is free of patent coverage? Relying on patent whitespace analysis to determine innovation strategy is akin to making a decision on buying an investment property decision primarily on basis of the absence of other investors in the area. Few would contend that it would be prudent to invest without first conducting a multi-factored analysis of the available data that together would indicate that the property was more likely than not to increase in the desired value during the targeted time frame for investment. But, this is what happens when a company lets whitespace drive the innovation decision-making process.
To this end, I recently heard an innovation professional at a Fortune 100 consumer products company speak about his company’s use of patent whitespace analysis in its innovation processes. When pressed about the inclusion of patent landscaping very early in the innovation process, he said something along the lines of: “The whitespace analysis is not done until after the business strategy is identified.” I think this is just as bad as letting whitespace analysis drive the innovation pathway because it still effectively lets the technology tail wag the innovation dog. While R&D folks may imbibe some significance to the ability to get a patent on a particular product or technology, at the end of the day, all a patent means is that an invention meet the government requirements for patentability. The fact that 90 % or more of patents are absolutely worthless should serve as a stark reminder that patent issuance has almost no correlation (if any) to marketplace success.
When I hear someone say that they use patent whitespace analysis in their organization’s product and technology development, it is immediately apparent to me that their R&D and technical leaders likely serve as the primary decision makers. Sure, the marketing people likely define a short and long term business strategy, but they then leave it to the R&D folks to fill in the details and develop the go-to-market product strategy. Since decision-making is highly influenced by the ability to obtain and avoid patents, it follows that R&D effectively ends up defining the product and technology mix–the innovative nature of which is validated by the fact that no other company has ever obtained patents in those area. And. as long as they color within the lines drawn by the overall strategy defined by the business, they are serving innovations up to the business that meet the needs of the organization. Will this manner of operation lead to winning new product introductions? Sure. However, it is more likely that the R&D team will be offering technology focused products to their marketing teams, with the latter often wondering how the heck they are going to sell the dang product.
I also sincerely doubt that a R&D-directed product development strategy can lead to disruptive–or even stretch–innovation. Incentives for R&D departments today are typically aligned toward pipeline filling and product introductions. So, when R&D managers are given primary decision rights in go-to-market product development, they will invariably choose the path that leads to the most likely technical success, a result that normally does not conform to the broadest consumer innovation.
If the business case is strong enough, it shouldn’t matter if there are dozens or even 100’s of patents in a particular area because the financial model demonstrates the size of the opportunity for the company. Nonetheless, patent whitespace analysis is critical to determine the viability of the preliminary business case. The presence of patents in the area of the innovation pathway validates the financial model. That is, if there are many patents, it becomes less likely that broad rights can be obtained to the specific product or technology resulting from the innovation pathway, and it is more likely that development efforts will result in patent infringement liability will result. Either or both of limited patent scope and litigation necessarily reduce the NPV of an innovation opportunity, so it follows that whitespace analysis must be conducted at an early stage, but only as a stress test of the financial model, not as a driver of the development pathway.
Of course, if companies have established processes that incorporate whitespace analysis as a primary driver of product and technology development, that is their business, and they are unlikely to find my opinions compelling. I find such information most useful to gain insights into whether an organization truly walks the walk of customer-driven innovation. My guess is that companies that value the ability to obtain their own patents (or to avoid those of others) likely come up with some nifty technology that results in patents, but that very often these products fall flat with the consumer.