Category Archives: Intellectual Property

Technology Sustentation 89: IP & Patents

Intellectual property and patents are a good thing, right? They protect your inventions and prevent your competitors from stealing your innovation and making money off of them, right?

As per our initial damnation post, wrong. The theory is considerably different from reality. They don’t stop your competition from stealing your ideas and inventions, they only give you the right to go after your competitors in court for damages (but not necessarily succeed) if your competitors steal your inventions. And moreover, they make it easy for your competitors to duplicate your invention. (Remember, to patent an invention, you have to complete define the invention in enough detail for someone to easily reproduce it. It’s like handing a car thief the keys to your brand new custom made Ferrari and asking him if he’d like a joyride.)

And, as per our initial damnation posts, not only are lawsuits not guaranteed to succeed, but if the competitor who stole your idea has deeper pockets, it could bankrupt you. Heck, even if you don’t sue, nothing stops them from claiming prior art, trying to get your patent thrown out, and suing you for IP theft (for anything not explicitly covered in your patent that they claim they invented first).

But this is not the worst of it. Many companies file, or buy, patents not to protect their IP, but to prevent you from selling yours (and this has been going on for a decade as per SI’s classic post on how the patent pirates will plunder away). Plus, since patent clerks are not experts in anything but the rules associated with filing patents, and the reviewers are typically not experts either, many patents that are much broader than they should be, and that actually patent innovations that exist in prior art as part, or all, of the invention, get pushed through by firms with big pockets and persistent lawyers. These patents are then used by companies, known as patent trolls, with no intention of actually developing or selling such products to go after companies with similar technology and demand licensing fees under threat of a patent infringement lawsuit, whether the patent portfolio is violated or not. (The idea is that, since you know how much a patent lawsuit will cost, you’ll simply cave and pay a small license fee to “license” the patent you are not already using. These patent trolls know that all they have to do to bring you to court (in Marshall, Texas) is make a reasonable sounding (not reasonably effective) case to a non-technical judge who will allow them to bring you before a completely technophobic jury.)

It’s insanity, and since the US is not as smart as the EU (that does not allow computer-implemented inventions to be patented), the insanity is here to stay. So what can you do?

1. Keep great documentation on all inventions so you can always demonstrate prior art when you have it.

The minute something is invented and verified by a third party, gather irrefutable evidence and documentation and insure efforts are taken to guarantee its preservation.

2. Make extensive use of provisional patents.

These don’t have to be as finely detailed as full patents and give you a full year to hammer out the details of the invention and get a product to market before having to hand the plans over to your competitors in a full patent.

3. Plan to patent everything of of value that is invented by you.

Whether or not the organization ever intends to try to profit off of it is irrelevant, if it has value to someone, the value has to be protected because it will allow your organization to exploit that value.

4. Form an industry patent licensing cooperative.

Where each entity puts up a relatively equal share of relatively low value patents (to it) that all entities can use for a nominal licensing fee (of $1), where each member agrees to license each patent it holds to other members at a fair price in exchange for the mutual guarantee of no lawsuits (and to settle all disputes by binding arbitration at a shared cost), and where each party may use the entire portfolio to defend against patent troll lawsuits.

Will this prevent damnations from coming your way? Considering that the worst of the patent trolls believe they can take on anything, probably not, but it will certainly minimize the meaningless lawsuits and demand and mitigate damages.

One Hundred and Forty Five Years Ago Today

The first federal registration in response to the first federal trademark application was issued to the Averill Chemical Paint Company for a design with an eagle and a ribbon and the words, “Economical, Brilliant”.

This particular trademark may not be in use today, but trademarks can survive a long time. For example, the lodes U.S. trademark still in use was registered on May 27, 1884 — over 131 years ago. That’s a long time for a company to have exclusive rights to a mark, label, name, signature, or logo that exclusively identifies that companies products and/or services.

And given the importance of brand, societal damnation 39, this is an important legal advantage that cannot be overlooked.

45 Years Ago Today

Your intellectual property became safer throughout most of the world when the WIPO Convention entered into force and formally established the World Intellectual Property Organization.

The goal of WIPO is to provide a global policy forum where governments, intergovernmental organizations, industry groups, and civil society come together to address evolving IP issues. In addition, it manages the International Patent System that allows an individual or organization to seek patent protection by filing one international application and provides an international Alternative Dispute Resolution service to resolve IP disputes outside the courts in a neutral forum that can save you time and money. While big American companies prefer the courts, IP cases can run up legal bills in the hundreds of thousands of dollars, often more than the patent is ultimately worth.

Perks and pitfalls of knowledge diffusion in the supply chain

Today’s guest post is by Professor Ralf W. Seifert & Olov H. D. Isaksson.
Ralf W. Seifert is Professor of Operations Management at IMD and he teaches in the “Leading the Global Supply Chain” (LGSC) program.
Olov Isaksson is a PhD candidate at the Chair of Technology and Operations Management at EPFL, specializing in buyer-supplier relationships. He previously worked at Henkel as a supply chain project manager.

Do you collaborate with, and learn from, your suppliers, or are you serving them the knowledge to compete with you head-on on a silver platter? This question is increasingly relevant in today’s global competitive environment. Firms are routinely leveraging global sourcing to gain cost advantages but competition nowadays occurs between supply chains, rather than businesses. Thus keeping an eye on your supplier’s ambitions is vital.

Case in point, just look at the ongoing patent infringement lawsuits between Apple Inc. and Samsung Electronics Co. Apple turned to Samsung as a supplier for its new iPod and iPhone products back in 2005. At first the two companies jointly developed the components, which gave Samsung an insight into Apple’s technology and operations. Being the only supplier for the processors, Samsung also gained critical knowledge on Apple’s prediction of the market size for the iPhone. In 2010, Samsung launched its own smart phone and has since become Apple’s largest competitor. Today, Apple still remains dependent on Samsung, but it is trying hard to diversify its supplier portfolio.

The above situation exemplifies the negative aspects of knowledge spillovers in the supply chain — i.e. how important knowledge that exceeds the scope of the formal transaction can be diffused between customers and suppliers, and then be used in a rivalrous manner. At the same time, spillovers can also have positive effects and lead to a competitive advantage for the supply chain as a whole.

How does your desire to draw on trading partners for innovation balance with the need to protect strategic knowledge? And, to what extent do you take co-competition from suppliers into account in your supplier assessments? We engaged 34 executives from different high-tech firms and asked them about their opinion. Their consensus: recognizing knowledge spillovers is a critical issue in today’s supply chains. Both suppliers and customers are seen as important sources of information for innovation (see Fig 1).

“We get plenty of valuable information about the market, its players in the value chain and its main drivers from our customers and suppliers. My business relies on it. It is a great input for our R&D portfolio,” said Dr. Ir. Kees Joziasse, Director of Innovation at Corbion Purac.

Figure 1

While most high tech firms protect their innovations through patents, most of the executives stress that knowledge spillovers occur outside formal collaborations — to a large extent via personal interactions between employees of the firms (Figure 2).

Figure 2

Greg Nelson, Sr. Director R&D LED Systems at Philips highlights that employees possessing important knowledge must be conscious of the risks and rewards of knowledge spillovers when interacting outside the firm:

“Knowledge spillovers in the supply chain are a clear attention point. There is a need to create awareness up front with people who have these contacts and to have an explicit policy regarding what can be transferred. Policy restrictions must be balanced with the potential benefits that can be derived from collaboration and not hinder speed in the process. While policies and procedures are not always 100% effective, they do help create awareness in the organization to guard against unintended transfers.”

The Supplier Perspective

While a supplier can learn from its customers, it cannot choose who wants to buy its products/services. Still, Ted Smith, EMEA Sales Director at ON Semiconductor suggests that firms can leverage knowledge spillovers and gain a competitive advantage by carefully choosing collaboration/innovation partners.

“We typically don’t select which customers to do business with, but we do select customers to innovate with. We work with selected alpha-customers, or early adopters, who support supplier innovation in return for a head start in the market.”

The Supply Chain Perspective

Good and enduring partnerships can lead to a competitive advantage for the supply chain as a whole: Mukesh Singh, Senior Regional Manager at BASF explains that “Suppliers easily share their new learning/knowledge if the customer has a strong supplier relationship management program.”

However, it is important to agree upfront how innovative output that is generated in a collaboration should be divided. Dan Negrea, Managing Director AEMtec GmbH and Chief Technology Officer at ECMS exceet, elaborates:

“We strictly consider the background and foreground intellectual property (IP) in our cooperation with partners. The background IP is a source of information “for free.” The foreground IP is normally shared between our company and the customers. Product related IP goes to the customer and process related IP stays with us. In most cases, cutting edge products require the parallel development of a product and a manufacturing process.”

The Customer Perspective

Most executives viewed knowledge spillover as a positive phenomenon. Reflecting on the Apple-Samsung example, others might beg to disagree. Managers do need to protect important knowledge from potential competitors and patents offer only limited protection. Thus, strategic supplier assessments and a detailed supply chain contract are vital to mitigate this risk. If the knowledge in question is critical, in-house production or vertical integration of the supplier might still outweigh short-term gains.


Knowledge spillover readily occurs in your supply chain. Managers need to be aware of the risks of negative leaks, which can have detrimental consequences for the firm. At the same time, knowledge spillover can offer significant benefits for your supply chain if suppliers leverage newly acquired competences to your advantage. These are our recommendations:

  • Explicitly recognize the potential of knowledge spillovers in collaboration and sourcing decisions up-front! What do you need to protect from your competitors? Are there limitations in your supply chain contract? To what extent can your enforce non-use, non-disclosure and non-competition clauses in a global marketplace?
  • People buy from people. Make sure that employees are aware of the risks and benefits of knowledge spillovers! Create an appropriate policy regarding disclosures and interactions outside the firm!
  • Have a clear strategy with regards to each supply chain partner! Do you want a win-win situation or to squeeze a supplier? In collaborations, clearly agree upfront how innovative output shall be divided! If the knowledge is strategically important, in-house production or vertical integration of the supplier might be the safer option.

Thanks Ralf and Olov for this interesting take on Supply Chain collaboration.

The Right Thing To Say When A Vendor Offers to Sell You Custom Software …

… that it hasn’t built yet, as reported by Dan Gilmore in funny stories from a career in supply chain that were actually scary, sad, insightful, humiliating, and, well, just plain stupid (in that order), is the following:

How much are you going to pay us to teach you how to build this solution so you can eventually sell it to others?

The reality is that there are a lot of shops out there these days that can build a decent software solution, given a specification, but not many shops have the right business knowledge, experience, and insight to design a truly great solution. So, if the shop expects you to provide the IP, make sure you get a great deal on the solution because that IP is valuable.

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