Bill pontikakis ip strategy and open innovation policy

IP Strategy & Open Innovation Policy
Innovation & Entrepreneurship in Universities

Bill Pontikakis © 2013

Bill Pontikakis

Why a Change in IP Philosophy?

To position any educational ecosystem, as a
leader in Innovation & Entrepreneurship within
the traditional University boundaries

To aid the educational ecosystem to become
a key contributor in the local and national
economic development through the creation of
new startups and through the completion of
innovative projects as mandated by the
industry (Both SMEs and larger corporations))

Place Your City on the Map of Top
World Innovation Ecosystems
Top World Start-up Ecosystems 2012 [1]


The Traditional Approach to IP
Strategy

Control and exploit your
IP to the greatest extend
allowed by law at every
instance [2]

The traditional IP model
is mostly used as a driver
of revenues, both directly
and indirectly, in the form
of free cash flow [2]

This traditional way of
thinking about IP has a
negative and limited
impact, leading to
shortsighted decisions [2]


The “Medusa Effect” of the
Traditional IP Approach
“Medusa Effect” – through
excessive patenting, overly
stringent IP policies or the
prohibiting of
communication between
company researchers and
those outside, potentially
productive collaborations
will look elsewhere [3]

Siemens Aktiengesellschaft
and Procter & Gamble Co.
recently reported that they
use a mere 10% of their
patents but pay millions in
annual renewal fees to the
remaining 90% [3]

Their unused generated IP
can create patent thickets
that inhibit potential
collaborations [3]

Traditional Approach to IP
Economic Consequences
99% of patent-licensing
revenue in the U.S. is
generated by companies
that own 40% of ALL U.S.
patents [3]

The remaining 60% of the
patent holders receive just
1% of the revenue [3]

By insisting that IP may only leave a
company if it is paid for, that
company eliminates the possibilities
for cooperating with others on those
technologies and benefiting from
related or 2nd generation
innovations that may create [3]


Traditional Approach to IP
Stories from the Educational System

Universities, by insisting
on owning the IP create a
major barrier to
collaboration with the
industry

Rolls Royce plc [3]
- Finds that it takes 18
months to negotiate a
research collaboration
agreement with a
university partner

Because of these delays,
the company is
considering whether to
terminate its extensive
network of university
research centers

Traditional IP Strategy is Failing
Even with the Most Successful, in License
Income, U.S. Universities
Top 10 U.S. Universities in Licensing Income vs. Research
Expenditures (1996-2008 Cumulative)
$Billions

Licensing Income

$12

Research Expenditure

$10
$8
$6
$4
$2

$33.3B

$-

Source: Association of University Technology Managers (AUTM) survey, 1996-2008


IP Licensing Creates High Revenue
Not Really
Annual Average IP Revenues Earned as a % of Research Expenditures
Top 10 U.S. Universities in terms of License Income (1996-2008) [4]
%

Annual Average % Return

4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

Source: Association of University Technology Managers (AUTM) survey, 1996-2008


Canadian Universities
The Trend is Worse
…and it Doesn’t Improve Over Time
IP Revenues Earned by U.S. and Canadian Universities 1991-2008 [5]


The New Philosophy
Open Innovation (OI) Policy
Open Innovation
The company’s use of internal as
well as external ideas, and
internal and external paths to
market, as it looks to advance
its technology [6]

The “one-size-fits-all”
approach to IP is
generally unhelpful to
OI

GOAL of Open Innovation Policy
To create an ecosystem around
your IP or “a system of value” to
multiple parties

Closed Innovation (CI) vs.
Open Innovation (OI)
[7]


IP as a Disabler or Enabler of
Open Innovation
[3]


How to Create Value with
Open Innovation (OI)
Rather that use IP rights
to prevent others from
exploiting certain
technologies, grant free
access to large portion
of your IP basis. IBM and
Nokia have granted free
access to large portions
of their IP basis

You are creating an Ecosystem,
and parties who might join the
ecosystem to use the open
technology as a basis for their
own products and services, will
in so doing also increase the
total value of the ecosystem for
the original company or
university

You might give away a core
technology and profit from
the growth of ecosystems
through complementary
products and services

How to Create Value with OI
IBM – Eclipse Project

IBM in 2001 released to
public its Eclipse project,
a developer tool worth
some $40 million at that
time

Strategy: To replace
other softwaredevelopment products,
such as the ones supplied
by Microsoft Corp, and
Sun Microsystems Inc.,
with a standard
framework into which
might better integrate its
Rational software product
line

Eclipse is now one of the world’s
most widely used software
development tools, actively
supported by almost all the
major players in the software
industry

GlaxoSmithKline Pharma – Patent Pool
GlaxoSmithKline Pharma recently created a “patent
pool” of 800 of granted or pending patents that
researchers can license freely in order to develop and
produce new products and formulations to combat
neglected tropical diseases in least developed
countries [3]

BENEFIT
It generates public goodwill
for GlaxoSmithKline
Pharma

BENEFIT
Helps generate a network
of potential collaborators
with whom the corporation
can license IP for profit

University of Glasgow - Easy Access IP [8]
Open Innovation provides
an alternative channel for
commercializing IP

Represents a philosophy
of making better use of
the results of research to
stimulate innovation

Under the scheme, IP and
granting rights are
provided free in a standard
legal page legal
agreement

Most of the 25 licenses
executed under Easy
Access IP terms have been
with SMEs which are known
to find it difficult to
interact with universities

A preliminary piece of IP can
add to the portfolio of a
young company and help it
attract investment

University of Manitoba – IP Ownership [8]

Companies partnering with
U of Manitoba can gain
automatic ownership of IP
arising from collaborations

Financial returns in the form
of royalties on resulting
products only after a patent
starts generating revenues
for the industrial partner

Major objective
To allow the university to
increase its contribution to
local economy

Secondary objective
To increase the funding of
research programs through
the industrial collaborations
(Currently 80% of research
funding comes from the
government)

UC BERKELEY – Industrial Alliance Office [9]

Existing office, Office of
Technology Licensing (OTL)
focuses on the licensing of
University owned patents

New Office of Industry
Alliances Office (IAO) was
created to enhance
collaborations

OTL is a “push” effort,
pushing out University
patents for licensing in
industry

IAO is a “pull” effort,
trying to bring the private
sector to the University


UC BERKELEY – Collaborations

Some collaborations with
industry are structured to
be quite open, with results
publicly available to
everyone

[9]

Other collaborations are
organized as consortia,
with participating firms
having preferential access
to data and IP, compared
to firms that do not
participate

Other collaborations are
managed quite selectively, with
only one industry partner. These
are Sponsored Research Projects


UC BERKELEY – Benefits of OI [9]
This new approach has allowed UC BERKELEY to increase
income from $10 million / year from patent licensing to
more than $70 million / year through grants and other
outside funding

By NOT focusing too much on patents and establishing IP
rights for the university, UC Berkeley has succeeded in
attracting over 600 collaborative partners

Discussions & Suggestions on OI
It has been suggested [9] that
corporations should consider
creating intermediate
organizational structures to
accommodate the
differences between
universities and companies’
cultures

The suggested model works
well with large corporations
that have the resources,
however SMEs are lacking
such resources

Thus, Universities should
create intermediate
organizational structures to
assist the collaboration
between industry and
universities

Innovation and Incubation
centers, are functioning as
such intermediate
organizations


More Discussions & Suggestions on OI
The most vibrant University
Ecosystem will be the one
were students, faculty, and
industry don’t just “consume”
University products (courses,
research results, and IP in
the form of licensing) but in
fact volunteer their services
and donate money to help
innovate with and alongside
the University [2]

Innovation and incubation
systems are created for the
purpose of enhancing
competitiveness

The innovation and incubation systems will shape the
complex process of how some ideas initiated by faculty,
graduate, and undergraduate students, alumni, or
external corporations find their way to the marketplace
[2]


Benefits of Open Innovation Adoption

A proper IP policy can
improve innovation-led
growth by strengthening
links within the innovation
ecosystem

The new IP policy will
provide mechanisms that
create:
- New partnerships of
interaction
- Market knowledge
- Incentives that motivate
new entrepreneurship

The idea is to build a regional economic
prosperity in the society, not just institutional
advantage to the university [2]

Open IP Strategy – Value Creation

This new IP model will
create a stronger
BRAND for the
University that adopts
it, which is itself an
important form of IP [2]

The BRAND value of the University
strengthens when [2]
People to use its IP, even at no charge
This in turn raises the University’s profile
Will attract higher quality faculty and
students
Will increase future government grants
Will increase private & corporate donations

An open IP policy
- Might decrease revenues from
licensing
- Will increase revenues from tuition,
research grants, alumni donations [2]

Innovation and Incubation Centers
Recommendations for their IP Policy
Release any IP that has not
generated any licensing
income for the last 3 years to
the incubation center

Any new IP should have the
same grace period of at
least 3 years, after which, if
it has not generated any
income, it should be released
to the Incubation Center

The Incubation Center will
use that IP as a leverage to
attract collaboration with
SMEs or to assist new
startups with fund raising

Any new IP generated from
the collaboration, if
successfully commercialized,
can generate income for the
University (from licensing fees
or any other form of
monetization)

Open IP Strategy – The Goal

The new creative IP
strategy will spur
INNOVATION and
ENTREPRENEURSHIP

The University will be at the
center of the new innovative
Ecosystem

The University will be a key
contributor in putting their city
on the map of the top world
innovative ecosystems


References
[1] Cornell University, INSEAD, WIPO, “The Global Innovation Index 2013: The Local Dynamics of Innovation, 2013

[2] John Palfrey, “Intellectual Property Strategy”, The MIT Press, 2011

[3] O. Alexy, P. Criscuolo, A. Salter, “Does IP Strategy Have to Cripple Open Innovation?”, MIT Sloan Management
Review, vol. 51, no.1, Fall 2009

[4] The Kauffman Task Force on Law, Innovation, and Growth, “Rules for Growth: Promoting Innovation and
Growth Through Legal Reform”, Ewing Marion Kauffman Foundation, 2011

[5] CIC, Rights and Rents, Why Canada must harness its intellectual property resources, 2011

[6] Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology, Harvard
Business School Press, 2003
[7] F. Wippich, “Leadership in Open Innovation: Examining the Influences of Open Innovation on Competencies,
Control, and Behavior in R&D Environments”, Open Innovation in Firms and Public Administrations, pp. 97-125, IGI
Global, 2012

[8] Nature Biotechnology, “No-fee university licenses spur biotech partnerships”, vol. 31, no. 5, p. 376, May 2013

[9] Henry Chesbrough, Principal Investigator, “Open Innovation: Implications for Japanese Innovation, Report to
NEDO, March 2013


Bill pontikakis ip strategy and open innovation policy

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