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Open Innovation Partnerships

A Framework for Managing IP in Open Innovation Partnerships: Before, During, and After

Partnering for research and development, a business strategy commonly called Open Innovation and popularized by Henry Chesbrough, has been increasingly adopted by corporations seeking growth and new sources of ideas. Establishing partnerships through Open Innovation can combine the strengths of partners -- such as value chain position or technical expertise -- to increase the chances of success in the marketplace. Partnerships can take many forms, including joint development, joint venture, collaborative research, and licensing

For Open Innovation to work, however, it must be supported by intellectual property (IP). Without IP, competitive advantage is short-lived and commoditization occurs quickly. Companies need to have a solid, yet agile IP strategy in place to protect their investments in innovation and to manage the deployment of a variety of IP weapons - patents, technical publications, copyrights, trademarks, and trade secrets.

Embracing Open Innovation introduces complications in managing IP, including those belonging to each partner and the IP created by the partnership itself. Ownership of IP should be governed by the partnership agreement. Specific areas that should be addressed in the agreement include:

  • Protecting each party's IP portfolio that precedes the partnership
  • Governing the sharing of existing IP needed success during the partnership
  • Defining ownership/management responsibilities of the IP created by the partnership
  • Handling the IP at the end of the partnership or unexpected dissolution ("divorce")

ipCapital is working with its clients using our unique "deal strategy framework," to prepare for and manage IP issues in Open Innovation partnerships. With a basic structure that can be easily modified for the intricacies of a specific deal, situation, or entity, this framework is particularly valuable for addressing IP concerns and issues and helping to create solutions that are amenable to all parties. A company can also use this framework to optimize its position in the partnership.

The deal strategy framework can evolve throughout the partnership process. Specifically, the framework can be used for the following:

  • Before a deal:
  • Identify potential partners
  • Prepare for discussions and negotiations, including prioritizing your IP interests and building an understanding of the partner's position and needs
  • Find a balance of IP terms that is win-win for the parties involved
  • Develop new IP in areas that add strength to the company and build a stronger position in the partnership

During a partnership (at initiation):

  • Generate a "collaboration" perspective among both parties, meaning that the partnership becomes its own independent entity with separate goals, plans, and priorities
  • Develop a joint IP strategy and assign responsibilities
  • Set benchmarks and determine metrics related to IP that will be used to gauge success
  • Ensure that the necessary partnership IP is developed

During a partnership:

  • Track metrics for success
  • Modify the IP strategy as needed
  • Deal with any issues or concerns related to the IP

At the end or after a partnership:

  • Execute an exit plan
  • Continue the management of the IP as previously agreed upon, e.g. payment of maintenance fees
  • Limit fallout from an unexpected dissolution of the partnership

Deal Strategy Framework

The deal strategy framework uses five "IP Points of View" (Alignment, Support, Value, Types of IP and Return on Investment). Other perspectives may be added, but we have found that these five are the most valuable to start. The other parameters are considering what should be done before, during and after the partnership and the "entity," which includes the company itself, the potential partner, and the culminating partnership. This creates a three dimensional framework. Each intersection of the parameters launches a dialogue about the IP issues, needs, and action items in that space. Although the framework is focused primarily on IP issues and concerns, it does have broader application to building mutual respect and understanding between partners prior to entering a deal, in areas such as business goals and priorities. The framework has the added benefit of being a systematic brainstorming tool to overcome the many roadblocks and fears in any new partnership.

Like any partnership that requires a legal contract, the agreement structure, usually a boilerplate, has limited scope and flexibility. This deal strategy framework has particular utility for creating innovative agreement structures that cover these unique points of views. Using this framework to negotiate and generate a win-win deal provides a straightforward structure for writing a much more substantial term sheet and final contract.

The framework is used in facilitated sessions with key team members from business, technical, legal, and marketing. The high level points from the discussion are typically noted on the matrix, so that the facilitation session results are summarized into a single document. The document serves to capture and communicate the results of the session and ultimately drives the term sheet and final contract.

Contact us now for discussing the Open Innovation IP Framework and its use in your business. info@ipcg.com