Closed Innovation and Open Innovation

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    Business Models of Innovation

    Closed Innovation and Open

    Innovation (Topic 7 (c))

    Belgrade, June 21 and 22, 2011

    NATIONAL WORKSHOP ON INNOVATION PROMOTION AND

    TECHNOLOGY TRANSFER

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    What is Open Innovation?

    Open innovation is a paradigm thatassumes that firms can and shoulduse external ideas as well as internalideas, and internal and external pathsto market, as the firms look to advancetheir technology.

    Henry Chesbrough

    Image - Henry Chesbroughpresentation on the OECD Conferenceon New Business Strategies for R&D

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    What is the Difference - Practical Approach

    Rules of the sandpit

    The toys must be sharedYou cant have it all your way

    You must behave yourself

    Closed Innovation Open Innovation

    Benefits of the sandpit

    You dont have to pay for all the toys

    You can use the toys others dont want

    You can negotiate to play with other toys

    You can play alone or together

    Source: Alexander Damvelt, Philips3

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    Models of Innovation and Intellectual

    Property (IP)Closed Innovation

    Exclusive use of internal R&D

    Technology invented, protected, developed,

    brought to the market and distributed by thesame company

    Full internal control of the innovation fromR to D to C

    Technology exploited only through internalbusiness model

    IP generators of new technologies mainly

    companiesIP barrier to entry not source of revenue

    Huge IP non-performing portfolios

    Companies usually selling but not buyingIPRs (advantage no confusion about IPownership)

    IP valuation method Discounted Cash

    Flow Net Present Value of thetechnology

    Lack of IP market .

    Open innovation

    Use of internal and external R&D and inventions corresponding to the particular business models

    Openness to external business models

    Variety of IP generators and collaborators othercompanies, public universities and R&D institutions,users, customers, suppliers

    Active IP asset management of the companies IPportfolio matching technologies with innovative(inside or external) business models to add value toIP

    More proactive assertion of IP policy

    Development of Intermediate IP Markets

    semiconductors, biotechnology, chemicals andconsumer products and Innovation Intermediaries(facilitators)

    Use of more complex IP valuation methods suchas Real Option imposed by very intensive anddiversified IP commercialization models reassignment of the IP to different partners duringits legal life, selling/buying, licensing (to companiesor start ups)

    IP - an asset which can (and should) be managedthrough an adequate business model in order toincrease value and become a reliable source ofrevenue.

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    Intellectual Property and

    Open InnovationHow Intellectual Property influences Open InnovationStrategic IP asset management is the essence of the Open Innovation Business Model

    Protection of inventions and other creations of the human mind and IP ownership are thenecessary preconditions for technology transfer and IP commercialization (we can manage onlythose assets which are owned by us or those to which we have the consent/license of the IPowner to use them).

    Transfer of technology in business transactions is transfer of knowledge and IP rights registered (patents, trademarks, industrial design, copyright) and unregistered ( know-how, tradesecret).

    One of the biggest advantages of the Open Innovation business model is access to the know-how of the other party.

    The intangible nature of IP and the ability to be the subject-matter of business relations with manypartners, often at the same time, corresponds to the basic idea of Open Innovation the ultimateuse of inventions as solutions for multiple needs, incentives for innovation, maximum creationand extraction of the value of the IP asset through the application of different business model.

    The potentially most frequent source of collaboration conflicts in Open Innovation lies inundefined IP ownership relations Who is going to own the IP in the jointly-developedtechnology? Joint ownership who and under what conditions is going to use the joint IP(different legislations impose different legal conditions with or without consent of the otherparty)? It is necessary to clarify this at the beginning of the collaboration.

    Open Innovation collaboration without territorial limits in conflict with the territorial nature of theIPR (valid only in countries where protection is granted).

    Dispute resolution in the Open Innovation multiple collaborations particularly complex becauseof the IP involved Who is the owner of the final product developed through multiplecollaborations? The potential risk of infringement is high. Litigation what would be theapplicable jurisdiction? Particular problem lack of efficient enforcement systems in manycountries, scarcity of IP skilled judges, etc. Professional Mediation and Arbitration can be a wayout.

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    Intellectual Property and Open Innovation

    How Open Innovation Influences IP

    More dynamic and interactive use

    of IP companies are not onlyselling but also buyingtechnologies

    New ways of building upcompanies IP portfolio throughbuying patents (Nortel, Alcatel)

    Creation of Intermediary IPMarkets in different sectors(graphics on the right Intermediary market in the IThardware industry source Henry

    Chesbrough Open BusinessModel How to Thrive in the NewInnovation Landscape.

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    Intellectual Property and Open Innovation

    Innovation Intermediaries forsearching and evaluating newtechnologies

    The field of use of thetechnology is increasing

    Increases total value of thetechnology incentive forinnovation

    Innovation more productive more users

    Benefit for society moresolutions for different needs,

    job creation, diminishing ofbrain drain effect..

    New and More Efficient FinancialInstruments for fundingbusinesses based on technologies(IP) VC funds, loans based onIP as collateral necessaryprecondition for fostering localcreation and innovation

    Introduction of new actors intoinnovation processes companies, universities, R&D,users, suppliers even

    governments and regionalorganizations (EU) are taking amore active role in order to createa supportive environment for thecreation and transfer of technology

    Open innovation permits new

    global partnerships with actorssuch as universities, R&D andstart-ups from developing andcountries in transition, whichencourages the local creation of IPin these countries

    IP is recognized and used as avaluable source of revenue andnot only as a mean of exclusion.

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    Intellectual Property and Open Innovation: New Partners from Emerging,

    Developing and Countries in Transition

    Emerging, developing and countries intransition do have significant researchresults and know how to develop efficienttechnologies in the specific areas of theircompetitive advantage.

    Major IP Generators - universities andR&D institutions.

    Small percentage of businesses have theirown R&D only in particular areas of astate economy such as the oil industry inBrazil (Petrobrais) or Malaysia(Petronas) have their own R&D.

    Small and medium size enterprises (SMEs), which represent a great majority ofbusinesses rarely base their businessmodels on innovation developed inside oroutside of the SME.

    In most of the cases there is little or nocollaboration between the public and theprivate sector in the domain of technology

    transfer.Businesses either do not have confidencein locally developed IP solutions or do nothave the ability to absorb newtechnologies.

    What is Lacking ?

    Necessary Basic Preconditions forEfficient Technology Transfer System

    Adequate Legal Framework(national and institutional

    level)Organizational Infrastructure(technology managementorganizations and units)

    Funding (government andventure capital)

    Skilled professionals

    (scientists, technologymanagers, IP professionals,etc.)

    Education to providesustainable flow of skilledpeople

    Supportive IP System

    There is a lack a market economyexperience and a developed privatebusiness community.

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    Intellectual Property and Open Innovation: Potential

    Benefits for Partners from Emerging, Developing andCountries in Transition

    New openings for technologydevelopment and IPcommercialization throughinnovative business models of , inparticular for universities and R&D

    institutions (local businesses arenot interested or do not have thecapacity)

    Great learning opportunity fromthe technology and businessmanagement point of view

    Development of the necessarymarket experience with moreexperienced partners.

    Solution to one of the greatest

    challen