Open innovation: implications for IP agreements?

We should all be adopting an open innovation model when developing and commercialising technology. So say an increasing number of commentators, consultants, businesses and people in the know. But what exactly is open innovation, and how does it affect the content of IP agreements?

The term was first coined by Professor Chesbrough in his book, Open Innovation: The New Imperative for Creating and Profiting from Technology (HBS Press, 2003).

To understand the concept fully, clearly we need to read the book, but not everyone has the time or interest to read a professor’s books (shame). Open innovation has become a buzz-phrase, connected only loosely with its source, and seems to mean whatever people want it to mean. Humpty Dumpty would approve.

Part of the concept seems to be that companies should engage in collaborative development of technology, rather than hoarding and hiding their developments within the company. At one level, the university technology transfer model is based on the premise that companies are willing to collaborate with universities and in-license technology, rather than keep their R&D in-house. So perhaps we have been doing open innovation for years, without realising it, like writing in prose?

When open innovation is mentioned in the same breath as intellectual property, the speaker may have something more in mind than a bilateral relationship between a buyer and seller of IP, or between the parties to an exclusive IP licence agreement. Chesbrough doesn’t seem to object to exclusive licensing in a technical field of application. This blogger has the distinct impression that advocates of open innovation in a university setting have in mind non-exclusive licensing, patent pools and the like, rather than the relatively closed model of exclusive licensing that is usually considered necessary for pharmaceuticals.

Perhaps some people think of open innovation as a variant of open source licensing, where a non-exclusive, free-for-all model is used (subject to contract terms, of course, and with different rules for commercial exploitation). But open source and open innovation are very different animals, whose biggest connection is the word “open” in the title.

Alternatively, some people may be advocating open innovation as a convenient label for their concerns about how university technology transfer offices approach licensing. A familiar complaint is that TT offices are focussed too much on the exclusive licensing model, with large licence fees and royalties, that has been successful for pharmaceutical and biotech inventions, and that they should use a different model when seeking to commercialise developments in, for example, the IT field. This other model may look more like open source licensing or conventional non-exclusive licensing, and may for this reason be tagged with the modish label of open innovation.

According to a presentation by Iain Gray, Chief Executive of the UK’s Technology Strategy Board in 2009: “Open innovation means …ideas should be able to flow to where they can be most efficiently researched, developed and commercialised, regardless of where they originated, thereby generating maximum value for all of the organisations involved.” It is difficult to argue with a sentiment expressed in such general terms.

It seems that open innovation is a high-level concept, whose practical implementation does not follow any single pattern. The connection between an open innovation approach and particular terms in IP agreements is difficult to see.