Licensing Trends: From "The Sieve" to "Open Innovation"

Often, a company thinks of product development as a sieve – its developers throw in their ideas, most are filtered out, and a few pass through the sieve and eventually become marketable products. Increasingly, however, companies have come to think of the sieve as too rigid a model for modern times. Enter "Open Innovation". Open Innovation is a model in which ideas either can result in products for the company, or can be licensed out to others. This ensures that good ideas are not simply lost because they don't fit within the company that developed them. The sieve model actually made sense when big companies were responsible for the bulk of research spending, but less so when a growing amount of research is coming from smaller companies. A major shift has occurred in the software industry as intellectual property is moving more freely between companies. Companies have emerged to acquire technology that is not being fully used. Businesses can even decide to sell those technologies they are using, leasing back the right to use them in their own industry while the buyer puts such technologies to work in other applications. The topic of Open Innovation was the centerpiece of a recent seminar held in Silicon Valley in which Microsoft acknowledged that the competitive landscape is indeed changing the context of innovation. However, as was pointed out at the seminar, open innovation is not risk-free. Intellectual property can be difficult to value and the process of protecting it can be complex and costly. Another business issue is the so-called "winner's curse" in which executives stand to be criticized for licensing out a technology that ultimately makes millions for another company. For a more complete report on the Silicon Valley seminar, see: http://makeashorterlink.com/?A28E15E7D Summary by: Heather Watts