Co-Innovating Products: Who should own the IP rights?

Collaborative innovation, cocreation, innovation hubs, corporate innovation and innovation ecosystems are becoming increasingly mainstream.

This has brought to the fore the issue of how intellectual property rights are apportioned when multiple stakeholders are involved.

The more one stakeholder seeks to own the intellectual property rights from products and solutions produced via a co-innovative process, the more they are seen as controlling the process.

If co-innovators perceive high levels of control by one or two parties in a collaborative process, they are likely to hold back on the levels at which they are willing to contribute their time, expertise and resources, with negative consequences for a collaborative ecosystem.

On the other side of this coin, if there is too much openness in a co-innovative project, it is very difficult to fairly proportion the rewards from the outputs.

This delicate balance of control vs openness ties directly into the management of any intellectual property rights.

A strategy to manage IP rights will need to be contextual and customised to a co-innovation situation, but there are some key factors that will influence the direction of this strategy:

The maturity level of the collaborative ecosystem

Mature collaborative ecosystems are less concerned with traditional feelings of control, power and ownership rights and more concerned with solving the problem central to the ecosystem, with shared value cocreation for all involved.

These established collaborations recognise that an idea does not stem from one party, but is a notion that can come to the fore from multiple parties engaging in a variety of discussions. An individual could appear to have been the one with an inspired idea, but this spark may have been the result of several other crucial inputs from others along the way.

Co-innovators or co-creators will know what value they can and are required to bring to the solution and what value they will capture from the co-innovated solution. This value could be monetary in the form equity or revenue stakes, or it could be indirect benefits such as access to new markets, increased economies of scale or strengthened relationships with their respective customer bases.

In other words, the value captured from a mature collaborative ecosystem need not be tied directly to ownership of an idea itself.

Upfront agreement on how IP rights are earned and retained

The general rule of thumb for newer collaborative ecosystems is: the sooner written agreement is reached on how IP rights are structured, the better for the collaborative ecosystem.

This is especially relevant for co-created products in start-up ecosystems that involve both sweat equity contributions and financial contributions.

In a traditional start-up, cash is king. Those who put money in demand higher stakes, returns on their investment and increased levels of control. Founders who have put in their blood, sweat and tears, quit their jobs and risked it all to ensure the success of the product can end up coming in second best when the millions start rolling in.

In a start-up ecosystem, there is an opportunity to give more recognition and rights to those who have put in the ‘sweat’ through shared value cocreation models, with clear upfront agreements that protect those who bring other resources besides cash to the project.

It helps to have a ground rule that those parties who contribute money, should also be required to contribute time and expertise as fully involved co-creators. This puts the different types of contributors onto a more even playing field.

In a collaborative ecosystem, retention of rights associated with ongoing value that is captured is also important. Certain rights to value produced from an ecosystem should fall away if active contributions to the ongoing implementation of the ecosystem cease.

A form of technology in place to track or protect idea-based contributions

Technology tools that track contributions in open models can aid the feeling of fairness and help enable openness amongst value contributors, especially when it comes to ideas.

Blockchain technology is a great way to do this. According to a recent article by Kondrateva, Boissieu, Ammi and Seulliet, blockchain can register “smart assets” and allow for the recognition of each contribution and the traceability of ideas and inventions through smart contracts.

Pharmaceutical company Eli Lily is a great example of an organisation that has built software with secure networks to protect the IP rights of researchers who co-create with them. Researchers sign an upfront, no cost agreement and work with Eli Lily capabilities. Should these combined efforts fail, the researchers retain the rights to their research via these secure networks.

Conclusion

Working in collaborative ecosystems requires a different way of thinking and behaving as compared to traditional power, control and sole ownership mindsets. Collaborative ecosystems have upfront written agreements and technology at their disposal to track value and bridge the gap between old and new ways of thinking. More established ecosystems will embrace the fact that the heart of a collaborative ecosystem is shared access to value generated from a solving a shared problem and has less to do with one organisation clinging to intellectual property rights.