Open Innovation and IP Contamination: Are you at risk?
This blog post originally ran on the Edge of Innovation Blog.
Open Innovation (OI) refers to the practice of accelerating innovation by leveraging ideas and technologies from outside sources. Since the introduction of the term in 2003, OI has become a way of being for companies looking to keep an edge on the competition, from large corporations to small and medium size enterprises. The blossoming of an OI community, expansion of the crowdsourcing craze, and accessibility to a wider pool of startups, universities and inventors all encourage companies large and small to look outside their walls for inspiration, partnerships, and licensing opportunities.
But how open is too open? As OI initiatives mature and grow, it is imperative that companies protect their internal investments and limit their exposure to unwanted confidential information. Intellectual Property (IP) Contamination describes the phenomenon of a company receiving information from an outside source that dovetails with, replicates or reads on an internal R&D effort. When this occurs, the receiving company is at risk of IP lawsuits claiming that a commercialized product or process was stolen from the submitter, an unenviable position to say the least. The media is riddled with stories of such lawsuits, including a 2016 $3B suit against Nike for having allegedly received and reviewed a submission for a concept similar to the Nike+ (dismissed as frivolous after 12 days of litigation), and a 2009 suit against Clorox brought by a company that allegedly shared microwavable film technology with Clorox under NDA and later saw that technology deployed on Birdseye brands. IP Contamination issues may arise from either unsolicited submissions or structured partnership conversations; it is important to consider putting standards into place to address both scenarios. Below are some best practices to mitigate IP contamination risks:
Limit points of entry for outside information. Both unsolicited and solicited information can arrive in hardcopy or digital formats, potentially reaching anyone in the company. Having a designated point of entry, whether a siloed internal innovation team or third party that handles the receipt, triage and forwarding of information limits corporate liability and creates a smooth runway to documenting information flow. As a bonus, using a third party frees up internal efforts and ensures that only non-confidential information reaches your organization. For digital submissions, create a portal of entry so that submitters know how to access the company and are also required to agree to send only non-confidential information.
When evaluating partnerships or licensing opportunities, decide early on what information is needed for a go/no-go decision and pursue that information on a non-confidential basis. Do you need the exact specs, or will general information do? Can you purchase a sample to learn more? Do you need access to the testing or only to know that it has been done? Evaluating clear indicators of fit prior to entering into a confidentiality agreement can limit problems associated with dropped partnerships while alleviating the need to track information and silo employees.
If you must go under NDA, consider carefully how that NDA should look and who should have access to the information. Should all information be reduced to writing? How will you know what is and is not confidential? Do you need or want a two-way or one-way NDA? If you have an internal program that might be at risk, how will you set up, document and maintain an information firewall? It is crucial for both parties to understand the value of information shared as well as the risk to internal programs. Limiting the number of employees with access to privileged information may also be a critical protection.
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