Protecting growth options in dynamic markets: The role of strategic disclosure in integrated intellectual property strategies

California Management Review

Volumn 55, Issue 4, 2013, Pages 121-142

  Peters, Tilo ^a   Thiel, Jana ^b   Tucci, Christopher L ^a  

^a EPFL   (Switzerland)

^b ESADE BUSINESS SCHOOL   (Spain)

Author keywords

Innovation management; Intellectual property; Patents

Indexed keywords

EID: 84919327001     PISSN: 00081256     EISSN: 21628564     Source Type: Journal    
DOI: 10.1525/cmr.2013.55.4.121     Document Type: Article

References (57)

1. Dr. Andreas Popp, Vice President Global Intellectual Property, BASF SE, telephone interview with author, February 1, 2013.
2. The qualifications for patenting are novelty, non-obviousness, and utility; the fact that a chemical is novel and has one use, such as reacting with other compounds, makes it patentable. In the case of a group of patented compounds (US-5814341, US-6162447, & US-6162449), the utility of some 2, 000 potential compositions containing the compounds had not been established. However, by publishing the compositions in an IP.com Prior Art Database Disclosure () and thereby obviating their novelty, BASF prevented the possibility of being locked into a one-to-one relationship wherein BASF could only supply the otherwise holder of the patent for a given composition.
3. James G. Conley, Peter Bican, and Holger Ernst, "Value Articulation: A Framework for the Strategic Management of Intellectual Property", California Management Review, 55/4 (Summer 2013).
4. D. Somaya, D. Teece, and S. Wakeman, "Innovation in Multi-Invention Contexts: Mapping Solutions to Technological and Intellectual Property Complexity", California Management Review, 53/4(Summer 2011):47-79;
5. D. Somaya, "Patent Strategy and Management: An Integrative Review and Research Agenda", Journal of Management, 38/4(July 2012):1084-1114.
6. D. J. Kappos and T. S. Rea, "Report on the Prior User Rights Defense", United States Patent and Trademark Office, January 2012.
7. The subtle difference of the U. S designation of first-inventor-to-file (FITF) versus first-to-file (FTF) is that under 102 (b) (1/2) (B) the inventor has the right to publish or otherwise reveal the invention up to one year prior to filing for a patent. It has been argued that, through this exception, the FITF system has become the first-to-publish system. Brad Pedersen and Christian James Hansen, "Statutory Construction and Policy Arguments for a Symmetric Approach to Promulgating Guidelines for New Section 102 (B) Subparagraphs (A) and (B) - The First-to-Publish Grace Period Exceptions to Prior Art", October 1, 2012, available at SSRN: .
8. Uncertainty in the patent system has a counter-intuitive effect; instead of using it less, firms are choosing to file for more patents, most of which are defensive in nature. I. Hargreaves, "Digital Opportunity: A Review of Intellectual Property and Growth", 2011, London, Intellectual Property Office, . Specific institutional details of the copyright system are beyond the scope of this article.
9. S. J. H. Graham, R. P. Merges, P. Samuelson, and T. Sichelman, "High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey", Berkeley Technology Law Journal, 24/4(2009):255-327;
10. P. Ozcan and K. M. Eisenhardt, "Origin of Alliance Portfolios: Entrepreneurs, Network Strategies, and Firm Performance", Academy of Management Journal, 52/2(April 2009):246-279.
11. These are results from a survey of 98 high-tech CEOs across Europe. See J. Thiel and T. Peters, "Intellectual Property Strategy in Innovative SMEs-A Case for Strategic Disclosure", Annual Meeting of the Academy of Management, Boston, MA, 2012. In contrast, Henkel and Lernbecher find that 70% of the largest German public firms use the practice of defensive publication. .
12. S. Baker and C. Mezzetti, "Disclosure as a Strategy in the Patent Race", The Journal of Law and Economics, 48/1(April 2005):173-194;
13. T. Bar, "Defensive Publications in an R&D Race", Journal of Economics & Management Strategy, 15/1(March 2006):229-254;
14. E. Von Hippel and G. Von Krogh, "Free Revealing and the Private-Collective Model for Innovation Incentives", R&D Management, 36/3(June 2006):295-306.
15. Our view is consistent with Dahlander and Gann in their classification of non-pecuniary revealing strategies that lead to indirect benefits for firms. L. Dahlander and D. M. Gann, "How Open Is Innovation?" Research Policy, 39/6(July 2010):699-709. In contrast with the above, however, we are more concerned with the different ways firms use strategic disclosure to gain competitive advantage rather than documenting its existence.
16. J. Tao, J. Daniele, E. Hummel, D. Goldheim, and G. Slowinski, "Developing an Effective Strategy for Managing Intellectual Assets", Research Technology Management, 48/1(January/February 2005):50-58.
17. R. Katila, J. Rosenberger, and K. Eisenhardt, "Swimming with Sharks: Technology Ventures, Defense Mechanisms and Corporate Relationships", Administrative Science Quarterly, 53/2(June 2008):295-332.
18. E. Brouwer and A. Kleinknecht, "Innovative Output, and a Firm's Propensity to Patent: An Exploration of CIS Micro Data", Research Policy, 28/6(August 1999):615-624;
19. A. Leiponen and J. Byma, "If You Cannot Block, You Better Run: Small Firms, Cooperative Innovation, and Appropriation Strategies", Research Policy, 38/9(November 2009):1478-1488.
20. James G. Conley, Peter Bican, and Holger Ernst, "Value Articulation: A Framework for the Strategic Management of Intellectual Property", California Management Review, 55/4 (Summer 2013);
21. Henry Chesbrough and Eric L. Chen, "Recovering Abandoned Compounds Through Expanded External IP Licensing", California Management Review, 55/4 (Summer 2013).
22. William W. Fisher III and Felix Oberholzer-Gee, "Strategic Management of Intellectual Property: An Integrated Approach", California Management Review, 55/4 (Summer 2013).
23. K. Blind, J. Edler, R. Frietsch, and U. Schmoch, "Motives to Patent: Empirical Evidence from Germany", Research Policy, 35/5(June 2006):655-672;
24. S. J. H. Graham and T. Sichelman, "Why Do Start-Ups Patent?" Berkeley Technology Law Journal, 23/3 (Summer 2008).
25. G. Pacheco-De-Almeida and P. B. Zemskyl, "Some Like It Free: Innovators' Strategic Use of Disclosure to Slow Down Competition", Strategic Management Journal, 33/7(July 2012):773-793.
26. J. E. Bessen and M. J. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (Princeton, NJ: Princeton University Press, 2008).
27. R. Agarwal, M. Ganco, and R. H. Ziedonis, "Reputations for Toughness in Patent Enforcement: Implications for Knowledge Spillovers via Inventor Mobility", Strategic Management Journal, 30/13(December 2009):1349-1374.
28. J. Bessen and M. J. Meurer, "Do Patents Perform Like Property?" Academy of Management Perspectives, 22/3(August 2008):8-20;
29. D. Encaoua, D. Guellec, and C. Martinez, "Patent Systems for Encouraging Innovation: Lessons from Economic Analysis", Research Policy, 35/9(November 2006):1423-1440;
30. J. Lerner, "The Importance of Patent Scope: An Empirical Analysis", RAND Journal of Economics, 25/2(Summer 1994):319-333.
31. N. F. Maloney, "The Defensive Publication: A Patent Alternative", New Hampshire Business Review, 25/8(2003):5B.
32. Baker and Mezzetti, op. cit.
33. Fees as stated by the United States Patent and Trademark Office, , accessed on July 15, 2012.
34. Our interview subjects indicate that this is the general range of costs for filing a single patent in a single jurisdiction, either the U. S or EU. These figures are derived from K. A. Moore, "Worthless Patents", Berkeley Technology Law Journal, 20/4(Fall 2005):1521-1552.
35. E. F. Berrier, "Global Patent Costs Must Be Reduced", IDEA: The Journal of Law and Technology, 36/4(1996):473-511.
36. D. Lichtman, S. Baker, and K. Kraus, "Strategic Disclosure in the Patent System", Vanderbilt Law Review, 53/6(November 2000):2175.
37. Somaya (2012), op. cit.
38. ∗/-/1=2>.
39. S. Scotchmer, Innovation and Incentives (Cambridge, MA: The MIT Press, 2004).
40. Although something may be considered common knowledge if it has not previously been documented in technical detail, it could still be patented. Bessen and Meurer (2008), op. cit.
41. As demonstration of this fact, consider U. S Patent 6004596, a peanut butter and jelly sandwich;
42. U. S Patent 6360693, an "Animal Toy" which is effectively a tree branch;
43. or even U. S Patent 6368227, a method for swinging on a swing.
44. J. Bessen and E. Maskinl, "Sequential Innovation, Patents, and Imitation", RAND Journal of Economics, 40/4(Winter 2009):611-635.
45. Although it is possible to use the patent system to disclose findings without necessarily holding the intent to patent [for a discussion on this, see J. Henkel and F. Jell, Alternative Motives to File for Patents: Profiting from Pendency and Publication", April 8, 2009, available at ], none of the companies we spoke to had chosen such a solution. The reasons provided were: the procedural costs related to patent filings; the pendency period; and the fact that a withdrawn patent provides scientists with no reward, whereas journal publications provide reputational benefits to these inventors.
46. United States Patent 7537610.
47. All case information comes from Natural Dental Implants' website, , accessed on May 13, 2012, and a telephone interview with Ruedger Rubbert, Natural Dental Implants' CEO, June 22, 2010.
48. A. N. Afuah and C. L. Tucci, "Crowdsourcing as a Solution to Distant Search", Academy of Management Review, 37/3(July 2012):355-375.
49. Lisa Reinhold, VP of Client Services, telephone interview with author, February 5, 2013.
50. R. G. McGrath and A. Nerkar, "Real Options Reasoning and a New Look at the R&D Investment Strategies of Pharmaceutical Firms", Strategic Management Journal, 25/1(January 2004):1-21.
51. The identification of multiple market opportunities provides key benefits to entrepreneurial firms, even when they do not pursue all of them. M. Gruber, I. C. MacMillan, and J. D. Thompson, "Look before You Leap: Market Opportunity Identification in Emerging Technology Firms", Management Science, 54(2008):1652-1665. Thus a cost-effective means of protecting the option allows the firm to explore openly without expending resources to ensure a future right to pursue. We find other examples in the works of our colleagues in this issue, notably Henkel et al., who suggest integrating such potential even into the product development process.
52. Joachim Henkel, Carliss Y. Baldwin, and Willy Shih, "IP Modularity: Profiting from Innovation by Aligning Product Architecture with Intellectual Property", California Management Review, 55/4 (Summer 2013).
53. The reader might see interesting parallels to the thinking of our colleagues Chesbrough and Chen in this issue. Chesbrough and Chen, op. cit.
54. Cuypers, "Founder's Knowledge: Law and Intellectual Property Protection: Reflections from a Practitioner", Venture 2006 Seminar, Zurich, 2005.
55. Thomas Colson, CEO of IP.com, interview by Tilo Peters, Buffalo, NY, January 30, 2012.
56. J. O. Lanjouw and M. Schankerman, "Characteristics of Patent Litigation: A Window on Competition", RAND Journal of Economics, 32/1(Spring 2001):129-151.
57. Fabrizio Cesaroni and Andrea Piccaluga, "Operational Challenges and ST's Proposed Solutions to Improve Collaboration between IP and R&D in Innovation Processes", California Management Review, 55/4 (Summer 2013).