Open innovation and IP: a case from the chemical industry

When Henry Chesbrough coined the term open innovation back in 2003, he defined it as: "A paradigm that assumes that firms can and should use external ideas as well as internal ideas and internal and external paths to market as the firms look to advance their technology". He depicted it as an innovation funnel with permeable boundaries where ideas can flow in out from the firm's internal innovation process. In this session, we are going to talk about the relationship between open innovation and intellectual property, or IP in short. In my job as a researcher, I often talk to executives about what role they see for IP in open innovation. It is common for people to assume that open innovation equals innovation without IP protection. However, at this point, we know that IP rights, such as patents, design rights or copyrights are important tools for enabling and managing open innovation.

Let's look into a case in the chemical industry that we started a few years ago. The case involved a large European corporation with more than 50000 employees and a small US R&D firm with only a few employees. The two firms partnered in an open innovation project aiming at developing new process technologies. The new technologies were to be used in the large firm's operations. But the small firm would also get the rights to continue to develop and commercialize the technology. After a few years, the collaborative project failed to reach the expected results. Then disagreements surfaced, even though the collaboration had been based on formal contracting, there was still room for disagreements due to incomplete contracting. For example, the large firm had used the knowledge from the joint project to develop substitute technologies in order to reduce its dependence on the small firm. Eventually, the small firm sued the large firm and they ended up in court. The main takeaway from this case is not how it developed in court. No, the main takeaway is what led the collaboration into an IP dispute. Central to the case were uncertainties and disagreements with regard to technology relevant to the collaboration project. These uncertainties and disagreements related not only to the IP developed within the product, but also to IP and technology developed outside the collaboration. These groups of IP are easy to forget when entering a project, but may create significant tensions.