Disruptive Innovation and IP

11 Oct 2010 Sandeep Mehta

A quick article that elaborates on something that I have observed in many firms:

Though it may be difficult to convince a business to invest millions in pursuit of a speculative disruptive innovation, it is much easier for a small team to gain support in pursuing low-cost intellectual assets in the name of mitigating potential threats. 

I have actually seen empirical data that the aggregate investment in these speculative patents far exceeds the net investment in innovation!  The author repeats what many managers believe – patents are cheap so use them to protect markets:

A two-pronged approach is proposed that builds on the authors’ experience at Kimberly-Clark Corporation in dealing with disruptive threats and opportunities. The approach calls for generation of intellectual assets, often using small proactive teams

Specifically, the author suggests:

  1. Protect yourself form other’s disruptive innovation by patenting first; 
  2. Use patents to create new business.
This approach though popular, is not easy to execute.  It takes more than five years for a patent to issue.  If one waits for patent issuance to decide which R&D projects to invest in, they will be far behind competitors and never be able to catch up.  Millions of patents are issued each year.  
It is pretty much impossible to keep up with issued patents, much less figure out who is infringing your patent and prevent them.  So patents are a pretty weak approach to speculatively reducing competitive pressures.  We sometimes see Motorola suing Apple.  But Motorola has 10,000+ patents in cell phones.  The cost of obtaining those patents $300M!
Even if one finds infringement, patent assertions are expensive and a pretty inefficient way to drive R&D strategy.  In most cases, assertions take years to conclude.  So from the time the inventor had an idea to asserting and changing market landscape will take 10-15 years at the minimum.  How can one drive R&D strategy with that kind of a lag?
Finally, if the organization really knows which innovations are valuable, they could develop them in the first place.  This approach of trying to do work around poor management decision making can lead to nothing but wasted effort.
Take home message from me is exactly the opposite of what the author suggests.  Patent ONLY when you believe it is going to help you develop a significant product.  Speculative patents should be limited to foundational technologies not individual products.

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