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Companies Need Better Mix of Business, Patent Strategies

Deepak Somaya (Univ. of Illinois)

Deepak Somaya (Univ. of Illinois)

Science and engineering companies often develop innovations based on multiple discoveries, which calls for better integration of their patent and business strategies, according to study by three intellectual property analysts. The paper by Deepak Somaya at the University of Illinois in Champaign-Urbana college of business (pictured left), with David Teece of University of California at Berkeley, and Simon Wakeman of the European School of Management and Technology in Berlin, appears in the current issue of California Management Review.

Somaya and colleagues discuss the problem posed by the commercialization of complex products based on multiple inventions, whose ownership is often spread across a number of organizations. Scientists and engineers, eager to jump into development of their discoveries for the marketplace, find it tempting to put aside these intellectual property questions. Somaya urges just the opposite: “To essentially defer intellectual property strategy until after you’ve become successful,” says Somaya, “is invariably going to be a costly mistake.”

The authors offer in the paper a guide for firms and innovators in multiple-invention conditions to help them devise suitable business models and patent strategies. To maximize the chances for success in multiple-invention contexts, say the authors, innovators must determine the costs and benefits of different business models, and choose the most effective model for the given context.

The paper provides four case studies to show how theoretical concepts are applied in real-world conditions. The case studies discuss strategies used in the development of smartphones, genetic diagnostics, semiconductors, and computer memory chips. The paper then derives guidance for three types of business models based on the four cases — licensing, componentization, and integration.

The paper also offers three main strategies for managing their intellectual property: proprietary, defensive, and leverage. Proprietary strategies build tight protection at the outset that make licensing unlikely. Defensive strategies build patent portfolios preemptively, although the strategy is not easy to accomplish under multiple-invention conditions. Leveraging strategies use intellectual property as a means to other business ends, such as revenue generation and alliance building.

Somaya says innovative enterprises need to simultaneously think about patent and business strategies, that combine inventions and complementary assets in ways that maximize their chances of success, and then figure out how best to appropriate value from these combinations at the same time. “For example, if you’re a component manufacturer or licenser of technology,” says Somaya, “then it becomes much more important for you to use a proprietary strategy for your intellectual property.”

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