Chap009 [호환 모드]

Copyright © 2013 by Prof. D. J. Lee, Kyung Hee University All rights reserved.McGraw-Hill/Irwin

Chapter 9Chapter 9

Protecting InnovationProtecting Innovation

9-2

Overview

• Firms must decide whether and how to protect their technological innovations.

• Protecting innovation helps a firm retain control over it and appropriate the rents from it.

• However, sometimes not protecting a technology is to the firm’s advantage – it may encourage others to support the technology and increase its likelihood of becoming dominant.

9-3

Appropriability

• Appropriability: The degree to which a firm is able to capture the rents from its innovation.• Appropriability is determined by how easily

or quickly competitors can copy the innovation. • Nature of technology: Some innovations are

inherently difficult to copy (tacit, socially complex, etc.)

• Legal mechanism: Firms may also attempt to protect innovations through patents, trademarks, copyrights or trade secrets.

9-4

Patents, Trademarks and Copyrights

• Patents, trademarks and copyrights each protect different things. • Patents apply to inventions• trademarks to words or symbols intended to

distinguish the source of a good• copyrights protect original artistic or literary work

Patent

Copyright

Trademark

9-5


• Patents: rights granted by the government that excludes others from producing, using, or selling an invention.

• Must be useful, novel, and not be obvious.• Utility patents protect new and useful processes, machines,

manufactured items or combination of materials.• Design patents protect original and ornamental designs for

manufactured items.• Plant patents protect distinct new varieties of plants.

• Discovery of scientific principle and printed material can not be patented

• In 1998, many software algorithms became eligible for patent protection.(Business Model patent)

9-6


종 류 사 례

특 허

(patent)

사용할 때마다 잉크를 묻혀 사용하던 펜에 잉크 지지축을 설치하여 구성된 만년필

실용신안

(utility)

내부에 고무재의 잉크 보유수단을 갖거나, 양복주머니에 보관 가능하게 클립수단으로 구성된 개량된 만년필

9-7


종 류 사 례

의 장

(design)

화살표 또는 깃털 형상의 클립을 갖거나 전체 유선형으로 형성한만년필

상 표

(trade mark)

만년필 또는 포장상에 표시한 상품의 이름 및 표장

9-8


• The process of applying for a patent• the submission of drawings and/or

explanation of use and a description of the manufacture and differentiating element.

• Submission of materials is followed by a review by a patent examiner and a publication period that gives others the right to challenge the patent.

• If all tests are passed and the request is unchallenged the patent is granted.

• 2-5 years, $3,000 - $8,000• 20 years

9-9

Patents, Trademarks and Copyrights• 특허 출원 및 등록 절차

명세서및도면준비

사정 및 보정

출원공개

심사

출원공고

등록사정

등록

변리사를 통하는게 바람직

보통 출원에서 등록까지2년 정도 소요

비용 소요

9-10


• Patent Laws Around the World• Countries have their own laws regarding patent

protection. • A patent granted in one country does not provide

protection in other countries(territorial principle)• Some treaties seek to harmonize these laws.

• Paris Convention for the Protection of Industrial Property

• Foreign nationals can apply for the same patent rights in each member country as that country’s own citizens.

• Patent Cooperation Treaty (PCT)• Inventor can apply for patent in a single PCT receiving

office and reserve right to apply in more than 100 countries for up to 2 ½ years. Establishes date of application in all member countries simultaneously. Also makes results of patent process more uniform.

9-11

• Countries that are members of Patent Cooperation Treaty


PCT Covered countries

Non-PCT Covered countries

9-12


• Trademarks and Service Marks: a word, phrase, symbol, design, or other indicator that is used to distinguish the source of goods form one party from goods of another (e.g., Nike “swoosh” symbol)• Rights to trademark are established in legitimate use of

mark; do not require registration.• However, marks must be registered before suit can be

brought over use of the mark. • Registration can also be used to establish international

rights over trademark.• Two treaties simplify registration of trademarks in

multiple countries: Madrid Agreement Concerning the International Registration of Marks, and the Madrid Protocol. Countries that adhere to either or both are in Madrid Union (84 members)

9-13


• Copyright: a form of protection granted to works of authorship.• Copyright prohibits others from:

• Reproducing the work in copies or phonorecords• Preparing derivative works based on the work• Distributing copies or phonorecords for sale, rental, or

lease• Performing the work publicly• Displaying the work publicly

• Work that is not fixed in tangible form is not eligible.• Copyright is established in first legitimate use.• However, “doctrine of fair use” stipulates that others can

typically use copyrighted material for purposes such as criticism, new reporting, teaching research, etc.

• Copyright for works created after 1978 have protection for author’s life plus 70 years.

9-14

Trade Secrets

• Trade Secret: information that belongs to a business that is generally unknown to others. • Firm can protect proprietary product or process as

trade secret without disclosing detailed information that would be required in patent.

• Enables broad class of assets and activities to be protectable.

• To qualify:• Information must not be generally known or

ascertainable.• Information must offer a distinctive advantage to the

firm that is contingent upon its secrecy.• Trade secret holder must exercise reasonable measures

to protect its secrecy.

9-15

The Effectiveness and Use of Protection Mechanisms

• In some industries, legal protection mechanisms are more effective than others• E.g., in pharmaceutical patents are powerful; in

electronics they might be easily invented around.

• It is notoriously difficult to protect manufacturing processes and techniques.

• In some situations, diffusing a technology may be more valuable than protecting it.

• However, once control is abandoned it is difficult to reclaim.

9-16

IBM and the Attack of the Clones• In 1980, IBM was in a hurry to introduce a personal

computer (PC). It used off-the-shelf components such as Intel microprocessors an operating system from Microsoft, MS DOS.

• It believed that its proprietary basic input/output system (BIOS) would protect the computer from being copied.

• However, Compaq reverse engineered the BIOS in a matter of months without violating the copyright, and quickly introduced a computer that behaved like an IBM computer in every way. Compaq sold a record-breaking 47,000 IBM-compatible computers its first year, and other clones were quick to follow.

Theory In Action

9-17

The Effectiveness and Use of Protection Mechanisms

• Wholly Proprietary Systems vs. Wholly Open Systems• Wholly proprietary systems may be legally produced or augmented

only by their developers.• Wholly open system may be freely accessed, augmented and

distributed by anyone.

• Many technologies lie somewhere between these extremes.

9-18

Advantage of Protection

• Advantages of Protection• Proprietary systems offer greater rent

appropriability.• Rents can be used to invest in further development,

promotion, and distribution.• Give the firm control over the evolution of the

technology and complements

• Advantages of Diffusion• May accrue more rapid adoptions if produced and

promoted by multiple firms• Technology might be improved by other firms

(though external development poses its own risks).

9-19

Theory in Action

Sun Microsystems and Java• In 1995, Sun developed a software programming language

called Java that enabled programs to be run on any operating system (e.g., Windows, Macintosh). This would lessen pressure for one operating system to be dominant.

• Members of the software community felt that Sun should make Java completely “open” – they argued that “Java is bigger than any one company.”

• However, Sun was afraid that if Java were completely open, companies would begin to customize it in ways that would fragment it as a standard.

• Sun decided to distribute Java under a “community source” program: no license fees, but all modifications to Java required compatibility tests performed by Java’s own standards body.

9-20


• Factors should be considered when deciding whether and to what degree a firm should protect its innovation:

• Production and marketing capabilities, and capital–if unable to produce or market the technology (and complementary goods) at sufficient volume or quality, protecting the technology may hinder its adoption.

• Industry opposition against sole source technology–other industry members may jointly be able to exert enough pressure so that a firm will offer the technology with fewer restrictions.

9-21


• Resources for internal development–a firm lacking in sufficient resources to invest in the technology’s functionality and ongoing improvements may not be able to compete in the market.

• Control over fragmentation–is important when standardization and compatibility are important.

• Incentives for architectural control–are especially high when the firm is a significant producer of complementary products.

Chap009 [호환 모드]

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