IPRs As Collaboration Framework

Sometimes you just have to write a response to a comment up here at the top level of the blog rather than down in the depths of the comments section. Matt Asay took my last posting and went to town on it (although he had a more thoughtful approach to it on his other blog – where he finds the time I do not know). He, although I am loathe to say it, had a good point that I want to think more about. But the rest of his response on the InfoWorld blog doesn’t quite do it for me.

I’ll start with the good part of Matt’s comments. I like the point about the opaqueness of IP and the implications of that. A difficult one to be sure given how the business strategies around IP have developed over the years. I have long advocated a simple equation: transparency increases trust. But, I am also a believer in the caveat that perfect transparency does not equate with perfect trust. So, to the point about the role of transparency – one point to Asay. To the effect of transparency on business negotiations regarding IP – I am not ready to opine on that as I want to understand it far more deeply before I decide.

Matt also has a point about the nature of large IP holders vs. small. Clearly, the large IP holders are looking to use their assets to their advantage. Ok, fine. But the majority of patents in the U.S. are held by small companies. Many small players do look to a critical piece of IP to sustain their business. Now, they may not think of it in those terms, but if someone were to attempt to steal it, they would certainly turn to the IP law books to help them out.

I look at standards, or standards organizations to be more exact, to illustrate the point I was getting at. A standards organization is really a legal framework in which contributors and implementors alike may come together to collaborate. This collaboration is built upon a trust matrix that is absolutely framed by the IPRs. In fact, standards organizations are also legal frameworks that enable competitors to collaborate in such a way so that they do not come into conflict with anti-trust considerations as well. Now, I am not advocating (excuse the pun) for more lawyers. Nor I am singing a song about IPRs to no end. I am more interested in how we can progress around the topic of IP in general.

Open Source Software has absolutely moved the chess pieces around in the IP arena. The GPL is a sword and a shield. Look at the import of trademark to Red Hat. Think about the un-weighting of copyright and trade secret, and the natural increase of importance in patent and trademark. Powerfull stuff.

Over the past 6 years, my company has been wrestling with these changes and looking at how those changes affect our business. The report I reference in my last blog posting speaks to the fact that Sr. Executives of European firms are going through a similar process of addressing how IP can be used proactively to facilitate business growth (and not necessarily through enforcement, but rather through collaboration). Microsoft takes a full-spectrum view of IP and how it may be applied to the business. We now have a team that focuses on IP assets as a means of venture investment. We have folks that look at collaborations between companies. We are always focused on making sure our products are cleared for commercial consumption. There is more, but that is not what this posting is about.

I get it that there are problems with the system. But I don’t think that discounting the idea that IPRs create a framework for callaboration has merit either.

Comments (4)

  1. Tony Healy says:

    In economic terms, a dearth of intellectual property rights creates higher transaction costs.

  2. jasonmatusow says:

    I’m sorry, I don’ t know if I’m following you on that one Tony. Is it a dearth of IP rights, or a dearth of assets protected under those rights that is a concern?

    We have a defined set of rights that are applicable to intellectual assets. How much stuff is accepted to be within the scope of those rights, I think, is the issue. Right?

    If I’m not mistaken, there is a critical relationship to be looked at between the definition of the right, the expectation of protection granted in the right by people who have assets, and the enforcement of those rights.  So, trademark protection is defined by the government – I have an item I am bringing to market that I think is covered by that protection (and most importantly, seek to undertake commercial activities because of it including seeking profits, entering into negotiations with others based on an assumed value of my asset, and potentially seeking to block others activities that infringe on my perceived asset) – the reality is that until things move to enforcement (and a judgement) I don’t really know if that asset is protected.

    Thus, the economic impact of transaction costs? Is that the point you are making?

    I suggest that we look around at all of the commercial activity that happens without ever moving to enforcment because the minority of situations that do end up in an enforcment situation create an environment where people understand (in lieu of seeing) the boundaries for behaviors with those assets.

    I am not an economist, nor a lawyer, and have never seen studies to demonstrate these ideas in either direction. If you know of something I should read, I am very open to it.

    thx – Jason

  3. Tony Healy says:

    Jason, two papers that discuss this are:

    * Mann RJ, 2004, The Myth of the Software Patent Thicket: An Empirical Investigation of the Relationship Between Intellectual Property and Innovation in Software Firms, The University of Texas School of Law, http://ssrn.com/abstract=510103

    * Hall BH & Ziedonis RH, 2001, The patent paradox revisited: an empirical study of patenting in the U.S. semiconductor industry, 1979–1995, RAND Journal of Economics, Vol. 32, No. 1, Spring 2001

    Mann writes that patents provide several benefits to small firms, including excluding competitors, signal technical competence to VCs and converting tacit knowledge into a verifiable and transferable form.

    Hall and Ziedonis write that: "… stronger patent rights may have facilitated entry by specialized firms and contributed to vertical disintegration in this industry."

    There has been more work in this area as well.

  4. markovich says:

    Thus, the economic impact of transaction costs? Is that the point you are making?