Intellectual Property Protection

23 Results


Patent Trolls

Clearly defined property rights are essential for well-functioning markets. In the case of intellectual property (IP), however, property rights are complex to define; unlike ownership of physical assets, the space of ideas is difficult to clearly delineate. A solution employed by the United States and many other countries is the patent-a property right allowing an idea's owner sole commercialization rights for a period of time. A new organizational form, the non-practicing entity (NPE), has recently emerged as a major driver of IP litigation. NPEs amass patents not for the sake of producing commercial products, but in order to prosecute infringement on their patent portfolios. In this paper the authors provide the first large-sample evidence on the litigation behavior of NPEs. They show precisely which corporations NPEs target, when NPEs litigate, and how NPE litigation impacts the innovative activity of targeted firms. NPEs behave, on average, as patent trolls. This means that NPEs target firms that are flush with cash or that have just had positive cash shocks. NPEs even target conglomerate firms that earn their cash from segments having nothing to do with their allegedly infringing patents. The stakes of how to organize intellectual property disputes are massive. If the United States becomes a less desirable place to innovate because NPEs are left unchecked, innovation and human capital, and the returns to that innovation and human capital, will likely flee overseas. But innovators will also leave if they feel they are not are protected from large, well-funded interests that might infringe on innovative capital without recourse. Read More

Dragging Patent Trolls Into the Light

New research by Lauren Cohen and colleagues shows that patent trolls are not just the stuff of fairy tales. Open for comment; 5 Comments posted.

Return Migration and Geography of Innovation in MNEs: A Natural Experiment of On-the-Job Learning of Knowledge Production by Local Workers Reporting to Return Migrants

Since the mid-1990s, a large number of multinational enterprises (MNEs) have set up research and development centers in China, India, and other emerging markets. Such MNEs face constraints in expanding their "geography of innovation" —that of producing and transferring knowledge across borders—because for the MNE knowledge is likely to be localized within larger, more established centers of knowledge production. How do MNEs in emerging markets circumvent this constraint? In this paper, the author uses personnel data from a Fortune 50 technology firm and studies the role of return migrants in facilitating patenting at the emerging market R&D center. The author also studies on-the-job learning of knowledge production by local employees who report to return migrants at an emerging-market R&D setting. The findings generate insights into the functioning of 'internal labor markets' of multinationals. The results are also important for managers: Given the great many Fortune 500 MNE R&D centers in countries such as China and India, and the large fraction of these centers managed by return migrants, the findings may assist those who set up and manage current and future MNE R&D centers. Read More

Modularity and Intellectual Property Protection

Modularity is a means of partitioning technical knowledge about a product or process. The authors investigate the impact of modularity on intellectual property protection by formally modeling the threat of expropriation by agents. The principal has three options to address this threat: doing nothing, licensing the focal IP ex ante, and paying agents to prevent their defection. The principal can influence the value of these options by modularizing the technical system and by hiring clans of agents, thus exploiting relationships among them. The paper also gives examples of how managers arrive at a strategy in practice. Overall, the study contributes to the theory of profiting from innovation in three ways: First, it shows how the innovator's best choice of action against expropriation by agents-doing nothing, licensing, or paying agents-derives from the characteristics of the system, i.e., the share of trustworthy agents, the number of agents, the intensity of competition, the size of clans, the number of modules, and the degree of complementarity. Second, the innovator can use clans and modularity to increase profits, and the paper shows how clans and the modular architecture of the system interact to either reinforce or mitigate each other. Third, social relationships and norms of fairness affect the normative implications of an analysis based on rational choice theory. Implications for managers are also discussed. Read More

Resolving Patent Disputes that Impede Innovation

Technical standards both spur innovation and protect the innovators, but abuses in the intellectual property protection system threaten US competitiveness. Josh Lerner and Jean Tirole discuss remedies. Open for comment; 2 Comments posted.

Encourage Breakthrough Health Care by Competing on Products Rather Than Patents

For too long, the science behind breakthrough therapeutics has been locked behind patents held by universities. Richard Hamermesh proposes the market compete on solutions rather than intellectual property rights. Open for comment; 0 Comments posted.

Imperfect Information, Patent Publication, and the Market for Ideas

The market for ideas improves the innovation process by promoting division of labor between upstream inventors and downstream developers. Frictions such as asymmetric information and search costs may hinder the smooth functioning of the market and delay, or even block, mutually profitable transactions between buyers and sellers. In this paper, the authors study the effects of an important disclosure mechanism, the publication of patent applications, on mitigating these frictions and, thus, facilitating transactions in the market for ideas. In particular, they employ an important policy change in the American Inventors Protection Act (AIPA), which required that U.S. patent applications filed beginning on November 29, 2000 be published 18 months after the application date. Findings show that post-AIPA patents, on average, are licensed 8.5 months earlier than pre-AIPA inventions. This shortening of the licensing lag is economically significant, given the 20-year duration of U.S. patents, and can translate to millions of dollars in profits and licensing revenues. Read More

The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Market

Patents and patent enforcement strategies have become an essential part of firms' competitive strategies: They are used as isolating mechanisms to protect intellectual property or as defense mechanisms to help obtain access to external innovations. Using data from the global smartphone market, the authors of this paper investigate the effect of escalated patent litigations—the so-called patent war—on firm strategy. The smartphone industry is a classic example of a business ecosystem, as participants in this industry are highly interconnected and this interconnectivity means that effects on some ecosystem participants are likely to extend to affect the rest. The authors' findings show that the efficacy of patent enforcement systems across markets plays a significant role in firm strategy during patent wars, and ultimately shapes the global competitive landscape. As the patent war intensifies, smartphone vendors, even those not directly involved in patent litigations, gradually shift their business foci to markets with weaker intellectual property (IP) rights protection. This shift, however, is attenuated for vendors with stronger technological capabilities and is more pronounced for vendors whose home markets have weak IP systems. Together, these changes shape the competitive landscape for platform competition. Read More

Risky Business: The Impact of Property Rights on Investment and Revenue in the Film Industry

Films are a risky business because much more is known about the quality and revenue potential of a film post-production than pre-production. Using rich data on the US film industry, this paper explores variation in property right allocations, investment choices, and film revenues to find empirical support for three predictions based on property rights theory. (1) Studios underinvest in the marketing of independent films relative to studio-financed films. (2) Because of underinvestment, independent films have lower revenues than comparable studio-financed films. (3) If production cost and marketing investment are complementary, underinvestment in marketing harms large-budget films more than small-budget films, making it more likely that large-budget films will be studio-financed. Kuppuswamy and Baldwin's paper may be the first to provide evidence that vertical integration affects the revenue of specific products through its impact on marketing investments in those products. Read More

HBS Cases: Branding Yoga

As yoga's popularity has grown into a $6 billion business, a cast of successful entrepreneurs has emerged with their own styles of the ancient practice. Yet yoga's rise underscores a larger question for Professor Rohit Deshpandé: Is everything brandable? Closed for comment; 19 Comments posted.

The Impact of Modularity on Intellectual Property and Value Appropriation

Distributed innovation in open systems is an important trend in the modern global economy. In general, distributed innovation in open systems is made possible by the modularity of the underlying product or process. Carliss Y. Baldwin and Joachim Henkel provide a systematic analysis of value appropriation in closed and open modular systems, with implications for managers. Modular systems are made up of components that are highly interdependent within sub-blocks, called modules, and largely independent across those sub-blocks. Despite the technical benefits of modularity, history shows that it is not always straightforward for firms to capture value in a modular system. The paper argues that strategies for capturing value in an open, modular system must be formulated at the module level. But modularity is not a single strategy: it is rather a large set of strategic options and related tactics that can be deployed in different ways depending on the interplay of countervailing forces. Read More

Intermediaries for the IP Market

Some assets are traded in liquid markets with the help of many, thriving intermediaries: houses and apartments, financial products, books, DVDs, electronics and all sorts of collectibles. Intellectual property (IP) in general, and patents in particular, are not among those assets. In fact, one could argue that the market for patents is one of the last large and inefficient markets in the economy. IP is the ultimate intangible asset and extremely hard to value. Moreover, there are high search and transaction costs on both sides of the market, and the risk of litigation makes all potential participants even more cautious. Despite these difficulties, there could be attractive opportunities to create intermediation mechanisms to match patent creators with patent users and facilitate transactions between them. In recent years, a variety of novel intermediaries has emerged, all using different business models while attempting to bring more liquidity to the patent market. In this paper, Andrei Hagiu and David Yoffie explore the fundamental economic issues responsible for the low liquidity in the market for patents and provide a brief overview of patent intermediaries. They next focus on platform-type intermediaries (i.e., who enable search and transactions without ever taking possession of IP assets) and discuss the reasons for their lack of traction to date. The authors then turn to merchant-like intermediaries and the factors that have made them comparably more successful and influential than platforms. Finally, they discuss efficiency questions raised by patent intermediaries. Read More

When to Sell Your Idea: Theory and Evidence from the Movie Industry

How completely should an innovator develop his idea before selling it? HBS assistant professor Hong Luo addresses this question in a theoretical framework that links the sales stage to the innovator's "observable quality." She uses the context of Hollywood movie script writing-looking at whether it's better to pitch the mere idea for a film or to write the entire screenplay and then try to sell it "on spec." Read More

Sharpening Your Skills: Leveraging Intellectual Property

Many companies lack a coherent policy for maximizing the value of their intellectual property. In this collection from our archives, Harvard Business School faculty offer insights on the importance of IP and how best to protect and use it. Read More

Protecting against the Pirates of Bollywood

Hollywood's earnings in India have largely been disappointing. Professor Lakshmi Iyer believes the problem has more to do with intellectual pirates than the cinematic kind. Open for comment; 13 Comments posted.

Modularity for Value Appropriation--How to Draw the Boundaries of Intellectual Property

Many firms have adopted models of "open innovation," in which they seek ideas from external sources such as university labs, independent entrepreneurs, customers, and other companies. While such a business model has the potential to create value, the inherent intellectual property issues can be sticky. This paper discusses how companies can address these issues by adopting a system of modularity, wherein innovation in one part of a project will not require changes in all the other parts. Research was conducted by Joachim Henkel of Technische Universität München and Harvard Business School professor Carliss Y. Baldwin. Read More

State Owned Entity Reform in Absence of Privatization: Reforming Indian National Laboratories and Role of Leadership

Is privatization necessary? In India and across emerging markets, state-owned entities (SOEs) continue to make up a large proportion of industrial sales, yet they lag behind private counterparts on performance measures. But SOEs may be able to significantly improve performance even in the absence of property rights, according to HBS doctoral candidate Prithwiraj Choudhury and professor Tarun Khanna. As they document, 42 Indian state-owned laboratories started from a base of negligible U.S. patents, yet in the period 1993-2006 (during which the Indian government launched an ambitious privatization program), the labs were granted more patents than all domestic private firms combined. The labs then licensed several of these patents to multinationals, and licensing revenue increased from 3 percent to 15 percent as a fraction of government budgetary support. Findings are relevant to firms and R&D entities around the world that depend on varying degrees of government budgetary support and government control, especially in emerging markets like India, where SOEs control up to one-third of all industrial activity. Read More

File-Sharing and Copyright

The researchers argue that file-sharing technology has not undermined the incentives of artists and entertainment companies to create, market, and distribute new works. The advent of new technology has allowed consumers to copy music, books, video games, and other protected works on an unprecedented scale at minimal cost. Such technology has considerably weakened copyright protection, first of music and software and increasingly of movies, video games, and books. While policy discussion surrounding file-sharing has largely focused on the legality of the new technology and the question of whether declining sales in music are due to file-sharing, the debate has been overly narrow. Copyright protection exists to encourage innovation and the creation of new works—in other words, to promote social welfare. This essay analyzes the landscape and identifies areas for more research. Read More

Monetizing IP: The Executive’s Challenge

Many companies fail to develop a strategy around protecting and monetizing their intellectual property. In this Q&A, Harvard Business School professor Josh Lerner discusses current trends in IP including the rise of patent pools. Read More

Who Owns Intellectual Property?

Online forum now closed. Is intellectual property becoming community property? While the impact of change on the valuation of IP is of concern to some respondents, others wonder whether the issues are overblown. HBS professor Jim Heskett sums up responses to this month's column. Closed for comment; 40 Comments posted.

Sorting Out the Patent Craze

Some companies patent anything that moves to block innovation by competitors. But what does this mean for standard setting organizations? Professor Josh Lerner explains the challenges facing SSOs in this HBS Working Knowledge Q&A. Read More

IPR: Protecting Your Technology Transfers

Countries are adopting stronger intellectual property rights to entice international corporate investment. But who really benefits from IPR? Should multinationals feel secure that their secrets will be protected? A Q&A with professor C. Fritz Foley. Read More

Does Speed Trump Intellectual Property?

Speed can enhance product development and innovation, but speed can also be used effectively by fast imitators to both save design costs and preempt market share. Closed for comment; 17 Comments posted.