Title

The Role of Patents in Fostering Open Innovation

Authors

John Dubiansky

Abstract

The patent system is at an inherent tension with contemporary practices of innovation. American patent doctrine reveres the lone inventor who, through the marshalling of extraordinary insight and experimental toil, conceives a novel invention. As a reward, the inventor is given the right to profit from his contribution through personal commercial exploitation. While this perspective may have reflected the practice of the mechanical arts at the time of the nation’s founding, it no longer reflects contemporary industrial research and development, where innovation is an increasingly networked process.

This disconnect is evidenced by the fact that contemporary patent doctrine has failed to balance the costs and benefits of its intervention in industrial market structures. Its benefits - primarily an increase in innovative output by American firms - have been on the decline in the past decade. Conversely - its costs - most notably manifest in the rise of opportunistic "patent trolls" seeking to exact royalties on unpracticed patents, are on the public rise.

This Paper studies the Open Innovation theory as a potential mechanism to increase the innovative output of established firms. The theory of Open Innovation is a contemporary management theory which teaches that corporations can increase their innovative output by importing ideas from outside the firm. Open Innovation holds much promise, in particular, as a means for small innovative companies to collaborate with large, established producers to create otherwise impossible radical innovations. This Paper analyses the role of patent protection in fostering these collaborations. The analysis first examines the commercialization and innovation processes and concludes that collaboration is most beneficial to both parties when the innovation improves an existing product, yet is from a technologically distant field. In these circumstances, patent protection fails to adequately protect the innovator, so alternative means of promoting collaboration must be devised.

The Open Innovation theory offers a beneficial analytical framework for two reasons. First, through analyzing the innovation process, it teaches a method whereby established firms can effectively increase their innovative output. Second, by demonstrating beneficial interactions between small-firm licensors and established producer-licensees, it offers a framework for productive licensing from non-manufacturing patent holders as an alternative to the wave of destructive “patent trolling” prevalent in contemporary industry.

Disciplines

Intellectual Property Law | Internet Law | Science and Technology Law

Date of this Version

March 2006