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IP Strategy ROBERT PITKETHLY, University Lecturer, Said Business School; Fellow and Tutor in Management, St

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IP Strategy ROBERT PITKETHLY, University Lecturer, Said Business School; Fellow and Tutor in Management, St CHAPTER 5.1 IP Strategy ROBERT piTKeTHLY, University Lecturer, Said Business School; Fellow and Tutor in Management, St. Peter’s College; and Senior Research Associate, Oxford Intellectual Property Research Centre, University of Oxford, U.K. ABSTRACT this protection benefits the innovator.1 However, This chapter gives an overview of the aims of an IP (in- such a view emphasizes too strongly the private tellectual property) strategy and discusses management benefits that can accrue to IP rights holders while issues involved in implementing such a strategy. Other chapters in this Handbook provide more-detailed infor- neglecting the important public benefits provided mation about managing intellectual property; the purpose by an IP system. Viewed broadly, an IP rights of this chapter is to provide an integrated framework for system has several components that contribute to giving IP rights the balanced consideration they deserve. the system’s overall effectiveness. These roles need to be kept in balance, so that private interests do 1. InTRoduCTIon not dominate the public interest. Nor should IP (intellectual property) strategy can mean many public interests, considered in the short term, things. In order to understand the relevance and dominate the long-term private interests that implications of the term, we first need to look at drive the system. what is meant by the terms intellectual property and IP rights are beneficial in a number of ways. strategy, how they work in combination, and the By providing incentives or rewards for innova- implications of an IP strategy for organizations. For tion, by packaging or defining intellectual assets, some people, it means the tactics used to manage and by diffusing technical information and con- an IP rights program, with detailed attention to li- trolling intellectual assets, they are a powerful en- censing, filing, and litigation strategies. For others, gine for innovation. In contrast to these utilitar- the term refers to a general business strategy that ian functions, IP rights also can be seen to protect uses IP rights to manage technology. Still others a natural, even moral, right of inventors to their might assume that an IP strategy is only a concern creations, a view that has its origins in Lockean for large for-profit corporations and irrelevant to conceptions of property.2 smaller or not-for-profit organizations. However, Whatever theoretical justifications are used to an IP strategy, and the informed use of IP rights, is support them, the difficulty with IP systems is in important to organizations of all sizes. striking the optimal balance between private rights and public benefits. From a public-policy perspec- tive, this goal is elusive, and even after several hun- 2. InTELLECTuAL pRopERTy dred years of debate by economists, political lead- IP rights are commonly regarded as simply a means ers, and inventors, a precise way of balancing these of protecting innovation, with the assumption that competing concerns has yet to be found. Pitkethly R. 2007. IP Strategy. In Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices (eds. A Krattiger, RT Mahoney, L Nelsen, et al.). MIHR: Oxford, U.K., and PIPRA: Davis, U.S.A. Available online at www.ipHandbook.org. © 2007. R Pitkethly. Sharing the Art of IP Management: Photocopying and distribution through the Internet for noncom- mercial purposes is permitted and encouraged. HANDBOOK OF BEST PRACTICES | 459 PITKETHlY IP systems play a significant but uncertain 2.1 Organizational roles of IP rights role in policy measures used to encourage in- Although the different justifications for IP systems vestment in innovation. Fritz Machlup is often and the different national strategies for implement- cited, for example, to support the view that the ing them are worthwhile topics, this chapter has a uncertainty inherent in the patent system makes more pragmatic goal, to help provide an under- that system difficult both to implement and to standing of the practical implications of the vari- abolish.3 But Edith Penrose made this same ous IP systems. Accordingly, it considers the four point seven years earlier in her study of the in- practical roles of an IP system. These are (1) acting ternational patent system: “If national patent as an incentive system for innovation, (2) packag- laws did not exist, it would be difficult to make a ing intellectual assets, (3) diffusing technical infor- conclusive case for introducing them; but the fact mation, and (4) controlling intellectual assets. that they do exist shifts the burden of proof and An IP system’s role of providing incentives or it is equally difficult to make a really conclusive rewards for innovation is achieved through pro- case for abolishing them.”4 Penrose was referring tecting that innovation by restricting use by oth- to the 19th century debate about patents, and ers. The restriction, by protecting the inventor, Machlup and Penrose’s earlier discussion of the enables them to command monopoly prices and 19th century patent system controversy dealt, in benefit from the innovation to a greater extent large part, with the debate over its abolition.5 than would be possible without such protection. However, they observed in the same article that This has implications for strategy in that potential “little, if anything, has been said for or against the restrictions on use confer control, and that con- patent system in the 20th century that was not said trol can be exercised not just to limit but also to equally well in the 19th.” That statement is also expand the market for an innovation. likely to be true for the 21st century. With technology-based innovation, IP sys- Indeed, despite the longstanding theoretical tems also help package and define intellectual as- uncertainty about IP rights systems, they have sets. Intellectual assets, by definition, start as tacit proved remarkably resilient in the countries that ideas, literally embodied in the inventor. IP rights, have implemented them. It is arguable that IP and particularly patent specifications, facilitate rights systems are, so far as we can tell, better these tacit inventions by providing a more eas- than any of the alternatives that have been pro- ily transmissible and protectable embodiment for posed over the years. Of course, this raises the these intellectual assets. This ability to enable pre- possibility of interpreting IP strategy as that at viously tacit or secret information to be identified the national not corporate level. In fact, there are and made the subject of transactions and com- many interesting examples that could be studied munications is a critical function of Intellectual in support of this claim.6 The U.S. Constitution, property, and this dimension of IP rights has for example, provided for IP rights from its in- strategic implications. For example, this function ception.7 And Japan’s rapid modernization from facilitates licensing. Kenneth Arrow’s informa- a feudal society in the 1850s to an industrialized tion paradox, where transactions in confidential nation by the early 1900s included the relatively information are made more difficult where trust rapid adoption of an IP rights system.8 Even in is absent, can be eased by the use of IP rights and the United Kingdom, the gradually evolving the laws of contract.10 patent system had a role to play in the first in- An IP system—especially a patent system— dustrial revolution.9 Patent systems are known plays a key role in diffusing technological to support the interests of industrialized nations, information. The threat of free riders and and in most cases such systems also played a role competition may tempt an innovator to keep an in encouraging early industrialization efforts. invention secret. Historically, there have been This suggests that some form of IP strategy, at a cases, notably the Chamberlen family’s secret use national level, is relevant to all nations regardless of obstetric forceps in their medical practice for of their level of industrialization. more than 130 years, where society has been denied 460 | HANDBOOK OF BEST PRACTICES CHAPTER .1 life-saving technologies because an invention was Patents were obtained by the National Research kept secret.11 Modern analytical methods and job and Development Organization (NRDC), which mobility make such tactics less likely today, but was then responsible for commercializing univer- an IP system still has an important role in both sity-based inventions.13 Using the royalties derived facilitating the publication of inventions and from licensing these patents, the two main inven- making information easier to find. The challenge tors, Guy Newton and Edward Abraham, set up is, of course, that an IP system must be arranged two charitable trusts, the E. P. Abraham Research so that the rights granted to innovators do not Fund and the Guy Newton Trust, which still to- end up costing the rest of society more by unduly day support medical, biological, and chemical re- hindering access to other innovations. search in Oxford. Finally, intellectual property rights may be The point behind these two stories is that, in thought of as a means of, not just protecting, but, the first case, control and financial benefit were controlling, the underlying intellectual assets. This effectively ceded to subsequent developers of crit- is particularly critical when IP rights are consid- ical enabling technology. In the second case, pat- ered from the point of view of organizations or ents were used to not only retain that control but individuals with a concern for the public interest. also to put financial proceeds under the inventors’ The fact that IP rights give the power to prevent control—in this case, for charitable purposes. A use means that they also give the right to license similarly significant financial decision was made use, which enables IP rights holders to exert sig- by the NRDC many years later when it did not nificant control over their innovations.
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