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Manager of Invention
Prof. David Teece on Patent Strategy
By Ronna Kelly
Google’s $12.5 billion acquisition of cell phone maker Motorola Mobility Holdings earlier this year is a very big example of how important patents are to innovation - a topic Professor David Teece has been studying for decades.
With the acquisition, Google gained ownership of more than 17,000 patents that the tech giant hopes can strengthen the position of its Android smartphone operating system against rivals Apple and Microsoft.
Google’s strategy is one of two business model approaches outlined by Teece in his article “Innovation in- Multi-Invention Contexts: Mapping Solutions to Technological and Intellectual Property Complexity,” co-authored with alumni Deepak Somaya, PhD 02, of the University of Illinois, and Simon Wakeman, PhD 07, of the European School of Management and Technology in Berlin. The piece won the best article award from the Haas School’s peer-reviewed journal, California Management Review, which published the paper in its summer 2011 issue.
In the article, the authors note that in many industries, commercializing new products requires combining large numbers of inventions. That, in turn, requires innovators to choose between two basic organizational models: integrated or non-integrated.
In the integrated model, companies control as many of the technologies and assets as possible in-house. In the nonintegrated model - sometimes known as open innovation, a term popularized by Haas alumnus and Adjunct Professor Henry Chesbrough, PhD 97 - companies create market relationships with other entities by licensing their technology or selling components. Consequently, products contain intellectual property elements from a variety of sources.
One significant challenge with an integrated approach: It is very difficult to stay at the cutting edge of innovation in multiple fast-moving technology domains. “Even for a pioneer, maintaining a comprehensive technological advantage across multiple fields can be difficult, if not impossible,” notes Teece.
On the other hand, nonintegrated models are prone to disagreements about the value of the inventions contributed by different firms and strategic conflict between partner organizations with dissimilar or opposing goals.
Using case studies of such firms as Blackberry developer Research in Motion, the authors provide a framework to help managers maximize their chances of succession in multi-invention environments. Advises Teece: “To win the competitive battle, a firm must align its patent strategy with its business strategy and model from the beginning - not merely as an afterthought.”