Patent Reform Will Spell the End to Open Innovation

The America Invents Act, also referred to as patent reform, will spell the end to open innovation as currently practiced, starting in March of 2013
The reforms to patent laws, found in the America Invests Act, will spell the end to open innovation and crowd-sourcing.  Patent reform’s first to file provision will change how inventors respond to open innovation initiatives making open innovation slower to respond to opportunities, more expensive to acquire and more risky to pursue.  This change will demand a massive shift in activities impacting research & development (R&D) and new product development (NPD) processes that most US based companies and inventors are unprepared for.
Open innovation is a widely used tool within research and development (R&D) and new product development (NPD) organizations.  It is used to find and acquire innovations from outside a company’s internal innovation organization.  Sources of innovations for open innovation typically include; other companies, suppliers, consultants, academia and individual inventors.  Open innovation is utilized by leading US and global companies, including Apple, 3M, Starbucks, P&G, GE Medical, Kraft, General Mills, Dial, Unilever and others.  These initiatives often utilize web based portals to facilitate communication and outreach to inventors.  Some examples are P&G’s Connect + Develop, GE’s Healthymagination, and Unilever’s portal managed by Yet2.com.

Be Afraid, Very Afraid:
Patent Reform, officially known as the “America Invents Act” (AIA), was signed into law in September of 2011.  The law will go into full effect on March 16, 2013.  This change will demand a massive shift in activities impacting research & development (R&D) and new product development (NPD) processes that most US based companies and inventors are unprepared for.

  • Patent reform will change innovation, R&D and NPD strategy
  • Patent reform will change the time available for innovation
  • Patent reform will change how much budget is available for innovation
  • Patent reform will change which innovations can be protected
  • Patent reform will change how inventors respond to open innovation initiatives

First Inventor to File:
Starting on March 16, 2013, the US will change the definition of who has the right to be granted a patent for an invention.  The US will institute a ‘first to file’ system, also called “first inventor to file” system.  A first to file system grants the right of a patent for a given invention to the first person or organization to file a patent application for protection of that invention, regardless of the date of the actual invention.
Patent reform’s first inventor to file provision will have one major effect on open innovation:  Inventors will have to fully protect their inventions before disclosing them to other parties.  This effect of first-to-file should not be under estimated, as it is likely to lead to the end of open innovation as it is currently practiced.   The reason for this is three-fold:

  1. Inventors will be unwilling to disclose early-stage ideas, innovations and inventions for risk their ideas will be poached.  Inventors will no longer be proactive to submit their ideas until they have filed a full patent.  This will significantly delay the disclosure of innovations.  Provisional patents, because their protection expires in 1 year, will not be adequate protection all but well-funded and fully-developed inventions.
  2. Inventors will have much more time and money invested in their inventions raising the bar for negotiations and making it more expensive to purchase IP.
  3. There will be an increase in the participation of professional support market with inventors, more inventions will be represented by IP law firms and “patent trolls”.

The effects of these changes directly effect many of the advantages open innovation provide to R&D and new product development:

  • Patent reform will significantly delay the discovery of new ideas
  • Patent reform will significantly increase the cost of finding, assessing and acquiring innovations from outside sources
  • Patent reform will make open innovation more risky because IP holders, and their representative, will be much more sophisticated and proactive about filing suit against potential infringements.

The Four Innovation Tools Used by Leading Innovation Organizations
Without these advantages, open innovation initiatives will likely struggle to demonstrate value and performance.  They will no longer be able to capture and assess early stage ideas from inventors and suppliers.  Companies will lose technology-push innovations typical of open innovation programs.

In order to counter the negative effects patent reform will have on open innovation companies will have to make changes to their open innovation programs.  As the opportunities to identify early-stage technology push opportunities are reduced, there will be a greater need for strategic planning and execution.  In order to grow an innovation funnel after patent reform takes place, companies can implement four R&D and new product development (NPD) strategic management tools used by leading innovators:

These tools will not only counter the negative effects patent reform will have on open innovation, they will improve a company’s overall R&D and new product development (NPD) performance.  These tools contribute to improving outcomes, reducing time to market, reducing costs and increasing the predictability of innovation programs.  These four tools achieve these goals by providing the following:

  • Clearer vision of long-term trends in market/customers, competitors & technology
  • Better process to select the most promising innovation opportunities
  • Clearer & better process to plan and allocate development capacity
  • Better focus in product portfolio strategy priorities
  • Better focus in technology & manufacturing strategy priorities
  • Clearer & better process to optimize product & portfolio plans
  • Better process to determine which resources to build where
  • Better focus in product planning and faster product development

Next Steps Needed to Address Patent Reform:
Patent reform will likely cause the end to open innovation as it is currently practiced.  This change creates the opportunity for R&D and NPD organizations to implement changes to improve their overall performance.  Leading innovators utilize four key tools to achieve their leadership performance.  These four tools;  1) R&D Portfolio Management, 2) Technology Strategy, 3) Technology Platforms, and 4) Innovation Inventory Management, will not only counter the negative effects patent reform will have on open innovation, the tools will improve the performance of R&D, innovation and new product development organizations as a whole.

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  2. […] With the implementation of The America Invents Act of 2011 (commonly known as Patent Reform), companies, of any size, will be forced to more actively manage their R&D portfolio.  Patent Reform will change how inventions are patented and what inventions companies can protect.  The two major components to the law that will force companies to adapt objective R&D portfolio management software are First To File and Prior User Rights.  The components make it more difficult and expensive to create IP assets of value. More about the how patent reform will affect R&D, innovation and new product development can be found here, here and here […]

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