SEN 650: Software Marketing

Module-04

Lec 04: Basics of Intellectual Property

Innovation Process:

“The successful exploitation of new ideas”

• Generating ideas is (comparatively) easy...

• … it’s screening, selecting, researching, developing, prototyping, taking to market that’s tough..

Innovation S-curves:

S-curves visually depict how a product, service, technology or business progresses and evolves over time.

S-curves can be viewed on an incremental level to map product evolutions and opportunities, or on a macro scale to describe the evolution of businesses and industries.

Innovation S-curves…:

On a product, service, or technology level, S-curves

are usually connected to “market adoption”

since the beginning of a curve relates to the birth of

a new market opportunity, while the end of the

curve represents the death, or obsolescence of the

product, service, or technology in the market.

Usually the end of one S-curve marks the

emergence of a new S-curve – the one that

displaces it (e.g., video cassette tapes versus

DVDs, word processors versus computers, etc.).

Example from software?

Innovation S-Curve:

Innovation Adoption Pattern:

Product Maturity and Decline of Unit Cost of Production:

Proprietary Knowledge

content

In the initial “Proprietary Advantages” stage, the technology can be used by an individual company as, in effect, a proprietary resource and can thus be the basis for a lasting advantage.

The high cost, risk, and difficulty of using the technology during this stage provide strong barriers against competitive replication.

It can take years for rivals to catch up. When American Airlines built its Sabre reservation

system, for instance, the IT infrastructure was at such an immature stage that the system created a strong competitive barrier.

IrrationalExuberance

HolySh*t

Reality Maturity Obsolescence

Emotional Zenith

Reality HangoverReminiscing

Denial

Requiem

IrrationalExuberance

HolySh*t

Reality Maturity Obsolescence

Emotional Zenith

Reality HangoverReminiscing

Denial

Requiem

IrrationalExuberance

HolySh*t

Reality Maturity Obsolescence

Emotional Zenith

Reality HangoverReminiscing

Denial

Requiem

IrrationalExuberance

HolySh*t

Reality Maturity Obsolescence

Emotional Zenith

Reality HangoverReminiscing

Denial

Requiem

Time

Con

fid

en

ce

IrrationalExuberance

HolySh*t

Reality Maturity Obsolescence

Emotional Zenith

Reality HangoverReminiscing

Denial

Requiem

Business emotional lifecycle

Emotional Zenith

Reality HangoverReminiscing

Denial

Intellectual Capital and Its Major Components:

Human Capital

Know-how

Skills

Creativity

Intellectual Assets

Programs Methodologies

Inventions Documents

Processes Drawings

Databases Designs

Intellectual Property

Patents

Copyright

Trademarks

Trade Secrets

Elements Comprising Intellectual Capital:

Human Capital

Customer capital

Intellectual property

Structural capital

R&D

Intellectual assets

Codified knowledge

Innovation

IT

Tacit knowledge

Users of Intellectual Capital (IC):

The users of intellect capital tend to fall into several groups as listed below, each with strongly held and sometimes vehemently defended points of view: Knowledge and learning Knowledge management Innovation management Capital markets Shareholders Company mangers

How does IC bring value to a firm?

Profit generation Income from products and services Income from patents Price premium Increase in sales Improve productivity Cost reductions

Strategic positioning Market share Leadership (technology, innovation etc) Standard setting Brand Customer loyalty

Strategy of Using IP and Its Effect on Value: Different kinds of firms uses different strategies to

obtain different mixes of value from their intellectual capital.

Firms that physical products often protect their product innovations by patenting them.

In other words, they seek innovations from their human capital that will make the company’s products differentiated from those of their competitors and attractive to customers.

Other kind of firms profit by selling the knowledge of their human capital. Consulting firms, law firms, software service firms.

IP Utilization and Types of Firms

The fundamental nature and functions of a firm may be a primary determinant of its strategy and the kind of value it can and should extract from its intellectual capital. Based on the strategy of extracting value from IP, companies can be divided in four broad categories:

Differentiated products company Commodity products company A network services company: this type of firm uses

technology to create a network over which customers communicate with one another. Innovations focuses on creating, improving and maintaining network quality and on creating and improving products and services. Telephone and utility companies are examples.

Direct services companies: Law firms, consulting firms.

A Brief History of IC:

The subject of IC appeared on the business scene in the 1990s.

However, this history actually began in the early 1980s, as managers, academics, and consultants around the world began to notice that a firm’s intangible assets, its intellectual capital, were often a major determinant of the corporation’s profit.

What is intellectual property (IP)?

Property indicates legal ownership, that something is recognized by law as being “mine” or “yours”.

Can music be property? Can software be property? The term intellectual property could easily be called

information property. Intellectual assets that receive legal protection are

called intellectual property. Intellectual property law, the body of law dealings with

the protection of intellectual assets, recognizes five forms of legal protection.

Patents, copyrights, trademarks, and trade secrets are examples of IP.

These forms of IP are information and easily stolen, businesses must be alert to their misappropriation.

Patent Law: A patent is a type of property created by statute and recognized by the

government for a limited period of time.

This property applies to inventions, which are new applications of information.

To obtain a patent, an inventor must pay a filling fee and file an application with the patent and trademark office (PTO).

The application must in words and drawings (1) how to make and use the basic invention, (2) show why the invention is different from prior art, that is, from all previous and related inventions or state of knowledge, and (3) precisely describe what aspects of the invention deserve patent.

The PTO assigns an examiner to consider the application and there is usually a great deal of communication between the examiner and the applicant over the adequacy of application’s explanation.

Patentable Subject Matter:

Usual patentable subject matters are as follows: Processes Machines Composition of matter Improvements to processes, machines, or

composition of matters. Nonfunctional designs of a manufactured

article. Certain plants.

Overview of patent prosecution process:

Technology Research and Development

Inventor Disclosure Program

Patentability Determination and Valuation of Potential Scope of Protection

Patent Prosecution

Patent issued or granted

Patent Infringement:

Patent infringement takes place, if some one uses technology covered by a patent without permission of patent holder.

SUED for Patent Infringement

Settle, work out a licensing agreement or cease use of technology

Argue non-infringement and attack validity.

Check own patent portfolio

Counterclaim or separate suit for infringement of your patent(s).

Licensing, Selling, and Buying Patents:

Licensing without litigation

Negotiated Royalties

Litigation

Reasonable royalty

Lost profits

Increased damages

Interest and attorney fees.

Patent Duration and Enforcement:

The property represented by patents runs for limited duration.

U.S. constitution limits utility patents to 20 years, plant patents to 17 years, and design patents to 14 years. (patents which do not belong to plant and design are utility patents)

When a patent expires, the invention is in the public domain, and others may use it without limitation.

The explicit purpose of patent law is to make inventions public following the limited period of legal right.

For the duration of a patent, the owner can sue those who infringe on it. If successful, the owner can get an injunction prohibiting future infringement and damages.

Trademark:

Trademarks constitute a form of IP. Like patents, they can be registered with PTO. Recognizability or distinctiveness is the function of trademarks. Types of trademarks:

Trademark-any mark, word, picture, or design that attaches to goods to indicate their source.

Service mark – a mark associated with a service, for example bdjobs.com

Certification mark- a mark used by someone other than the owner to certify the quality, point of origin, or other characteristics of goods or services, for example US Cotton.

Collective mark- a mark representing membership in a certain organization or association.

Trademark Registration:

To be registered, a trademark must be distinctive. The PTO may deny registration in the following circumstances: If the mark is the same or similar to a mark

currently used on similar related goods. If the mark contains certain prohibited or

reserved names or designs. If the mark merely describes a product or

service. If the mark is generic.

Trademark Enforcement:

Trademark law protect the trademark’s owner from having the mark used in an unauthorized way.

Remedies for infringement include a variety of damages, injunctions, prohibiting future infringement, and orders to destroy infringing products to any one’s possession.

Trademark owners must be vigilant in protecting their marks.

Copyright:

Copyright gives a property a certain creative work that keeps others from reproducing it without owner’s permission.

Three criteria are necessary for copyright protection to occur: A wok must be original. It must be created, not

copied. The work must be fixed in tangible medium of

expression like a book, canvas, compact disc, computer disk.

The work must show some creativity.

Copyright Protection:

Although Copyright protection is automatic, an action for copyright infringement cannot be begun unless the author has properly filed copies of protected work with the copyright office.

The Copyright Act specifies that a fair use of copyrighted materials is not an infringement of the owner’s property.

In determining whether a particular use is a fair one, a court will consider:

The purpose and character of the use, including whether such use is fir commercial or nonprofit educational purposes.

The nature of the copyright work. The amount and substantiality of the portion used. The effect of the use upon the potential market for the

copyrighted work.

Trade Secrets:

Trade secret relates to any formula, pattern, device, or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.

Information that is general knowledge is not trade secret.

Many times employees who leave their employment to go into competition with their employers are accused of misappropriating trade secrets.

For a trade secret to remain a trade secret, a business must take reasonable steps to keep it from disclosure.