The Best IP Strategy Depends on What Your Overall Strategy Is

One of the points that I try to stress when I’m teaching about innovation is that there is no single approach to managing innovation that is right for everyone. In all cases, you have a series of choices available to you, and which choice is right depends on what you are trying to achieve. In order to make this point, I sometimes have to take some relatively extreme positions in order to get people to understand that there are multiple ways to view a topic.

One of the areas where I have to do this is intellectual property protection (and here’s John doing the same thing). If I just ask people how you best able to profit from your great ideas, the first and often only answer that people can think of is ‘patents’. I have to lay out some of the arguments against strong IP protection, and also show them statistics on what strategies firm actually use to get them to think about other options.

One of the best academic papers I’ve seen on the topic is by Pia Hurmelinna-Laukkanen and Kaisu Puumalainen. They studied 1000 firms in Finland working across a wide variety of industries. The key finding in the paper is that firms use different IP strategies depending on what overall strategy they are pursuing.

If they are looking for short-term profits, they tend to try to take advantage of lead time – getting out ahead of everyone quickly, then continuing to innovate to stay out ahead. If they are trying to build long-term profits, they tend to use strategies built around tacit knowledge, complexity of design, and complexity of collaborative networks. Firms are most likely to use patents and other strong forms of IP protection mainly when they are trying to exclude others from their slice of the market (building barriers to entry).

I thought of that study today when I ran across this site from the US Patent Office, which provides a number of interesting statistics about patent application processing in the US. Here’s one of the figures that jumped out at me – it shows the average amount of time (in months!) it has taken to reach a decision on all of the applications that were finalised in each month:

The average amount of time is close to three years. If you have to file an appeal, or submit any extra paperwork for your patent application, the average time to disposal goes out to five to six years.

Five to six years to get a patent. No wonder people trying to build short-term or even long-term profitability are less likely to use patents!

The point of all of this is not to say that using patents as a form of IP protection is wrong (I’ll leave that to Mike Masnick at TechDirt!). The critical point here is that the right choice for IP protection depends on your overall strategy.

Critically, though, if your overall strategy depends on speed to market or quickness of response to changing environmental conditions, patents won’t help much. They’re too slow.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.