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What is Open Innovation and Why Should We Care?

What is Open Innovation and Why Should We Care?. Jay P. Kesan, Ph.D., J.D. Professor & Director, Program in Intellectual Property & Technology Law University of Illinois College of Law. What is Closed Innovation?. Only one way to access your own IP: Access it from within your own firm

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What is Open Innovation and Why Should We Care?

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  1. What is Open Innovationand Why Should We Care? Jay P. Kesan, Ph.D., J.D. Professor & Director, Program in Intellectual Property & Technology Law University of Illinois College of Law

  2. What is Closed Innovation? • Only one way to access your own IP: Access it from within your own firm • Only one way to deploy your IP: Make and sell your own products based on your IP • Consequently, low utilization rate of IP • You have internal R&D costs, and you generate your own market revenue • Examples: IBM (1945-1980); Procter & Gamble until 2002

  3. Economics of Innovation • Costs of technology development are rising, e.g., even consumer products—$20-50 million; semiconductor fabrication facility—$2-3 billion • Product life cycles are becoming shorter, expected shipping lives are being lowered dramatically • The combination of these two forces makes the closed innovation model untenable

  4. Open Innovation 1 • Useful knowledge may exist all around you • Sustain innovation by licensing in external IP while developing and deploying your own IP • Link the management of IP to your R&D and innovation processes and your business model • Add new sources of revenues from licensing, new spin-offs, and sales/divestitures

  5. Open Innovation 2 • Many firms are developing new ways of using a new/emerging technology, and many new technologies can be incorporated into a new/emerging product • The value chain is becoming complicated • Open innovation creates new intermediate markets for innovation and IP where ideas, technologies and IP can be bought and sold

  6. Open Innovation Business Models • Open innovation business models are dynamic • Creating and managing your IP and identifying and capitalizing on the IP out there are key issues • Examples: Red Hat, Rambus; and new intermediaries such as Intellectual Ventures, Ocean Tomo • Henry Chesbrough’s examples: • Qualcomm; Procter & Gamble; Genzyme; Chicago

  7. Open Innovation Business Models • Creates opportunities to exploit your IP • Creates opportunities to leverage others’ IP • Social networking reduces the costs of seeking, sharing, and evaluating IP • As we link IP to new business models, the desire to find new opportunities is compelling • But there are perils in not adequately protecting your IP, and in not taking precautions while disclosing your IP

  8. Open Innovation Business Models • Relationships with external firms and individuals have to be carefully managed • Efficient management of your own IP is both an opportunity and a potential problem • There is room for opportunistic and strategic behavior by external parties that has to be recognized

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