The 2009 Open Innovation Summit was held in Orlando two weeks ago. The event was attended by corporate practitioners of Open Innovation, including people from P&G, GSK Consumer, Cisco, Whirlpool, J&J, HP (here are Phil McKinney’s slides), Clorox, and many others. Leading consultants in Open Innovation also attended, including Stefan Lindegaard of Leadership+ Innovation, Braden Kelley of Blogging Innovation and Robert Brands of Innovation Coach. A number of vendors of services were there, too. I thought this was a great knowledge share event, and a must do for folks wanting to learn more about Open Innovation. Another Summit is planned for August 201o in Chicago.
At the Summit, we spent much of the 3 days hearing how the attending companies, many of which include those in the Fortune 100, view Open Innovation as a critical aspect of sustainable growth and profits. We also heard about successes and lessons learned. Anyone interested in obtaining a sense of the discussion should check out the Twitter feed from the event. A table of bloggers including Braden Kelley, Andrea Meyer, Hutch Carpenter, Adam Hansen and myself live blogged the event, which serves as a record of the event for posterity. The Twitter feed is #ois09.
To me, a striking aspect of the Summit was the fact that none of the highly accomplished innovation professionals discussed how their respective companies including patents and intellectual property generally in Open Innovation processes. Indeed, for all of these companies, I was left with the distinct impression that no company substantively addressed IP in the front end their otherwise highly disciplined Open Innovation processes. This initially surprised me until my turn came to speak about how patents can be used to jump-start Open Innovation to, for example, lower costs, increase speed to market and reduce the risk of new product development. At that time, I asked for a show of hands of how many attorneys were in the audience; the answer–in a room of over 100 people from some of the leading corporations in the country–was 1 other than me.
Apparently, even at the most forward-thinking companies, Open Innovation largely happens without substantive participation of their lawyers on their business teams. In conversations with the Summit participants, I confirmed that many had experienced difficulty in dealing with internal lawyers, and a number stated that they actively sought out specific lawyers who “got it.” Others indicated that they avoided dealing with their corporate attorneys until absolutely necessary, which gave me the distinct impression that they operated under the philosophy that it was easier to ask for forgiveness from their attorneys when it was effectively too late for the attorneys to object than it was to ask the attorneys for permission in the first place.
These companies certainly manage to succeed under this paradigm, but one must wonder if there is a better way. No doubt, the failure of these companies to integrate their counsel on the front end of the innovation process causes time delays and cost run-ups at a minimum and, at worst, can result in unfortunate surprises when the lawyer ends up putting the proverbial kibosh on an Open Innovation project due to legal issues that are only found out by the business team when they finally run the idea past their lawyers.
So what is a better way? My experience as a full-fledged member of an innovation team at a major consumer products company demonstrated to me (and my team) that legal risks of new product and technology development can be significantly reduced or even eliminated by having a business-minded lawyer involved in the earliest stages. Rather than acting as a “traffic cop” for the business, IP counsel should set forth “guard rails” within which a business team should drive their innovation processes. As long as the business team stays within this range of activities in their innovation processes, risks can be managed and surprises avoided.
As one example of the benefit your organization may obtain from having an IP lawyer on your innovation team, I use the example of a recognizance team who advances ahead of infantry, where the team is akin to the lawyer who runs with your innovation folks. The recog team cannot ensure that the battle will be won, but it can let the infantry know which direction will be less populated with opposing forces. In the innovation context, a business-focused IP lawyer who understands the goals of your organization will be able to inform the team of areas that are highly populated with patents or other IP interests or those that are not.
Hopefully, the organization places business decisions in the hands of the business so that the leader of the innovation team will ultimately make the call of whether to go in a particular direction. If the numbers demonstrate that the ROI of the innovation pathway is such that the business rewards outweigh the IP legal risks, the innovation path will continue. However, if the business knows in advance that a product or technology path is rife adverse IP interests, your organization can prepare accordingly, such as by bringing in “reinforcements” e.g., outside lawyers, licensing professionals and business strategists to better manage this risk and more probably achieve the desired innovation return. Certainly, few business leaders would say that they would rather not know at an early stage that it was probable that a particular innovation pathway would lead to significant IP litigation risks or that it was unlikely that the resulting product or technology could not be owned.
Admittedly, it is difficult for most IP counsel to operate well in the ambiguities of innovation. If risk cannot be accurately measured, it is the nature of lawyers to want to tell a client that unknown risk equals significant risk and that should be mitigated. Innovation professionals would be well-served to recognize that many lawyers would likely shut down all innovation activities due to the uncertainties and risks involved. A sad, but true, state of affairs at many organizations.
If innovation teams need IP lawyers involved in their projects, but IP lawyers generally do not operate well in their space, what are innovation leaders to do? Here are a few suggestions:
- Ensure that your organization allows business leaders to make the ultimate call regarding innovation pathways. If lawyers can kill early stage programs because of uncertain risk profile, then innovation will probably never get done. In this case, it is better to keep in-house lawyers shielded for as long as possible from the innovation process.
- Align lawyer incentives in your organization with innovation process, not risk mitigation and cost control, at least for those who work with innovators. If your lawyers do not get in trouble if they did not absolutely mitigate risk but, rather, managed and communicated risk to their business teams, lawyers will more readily accept the role of placing guardrails for business, as opposed to being traffic cops.
- Realize that not all lawyers will operate well in the innovation space. Your organization may have to hire someone from outside who possesses the primary desire to be a business counselor, instead of being a rule-maker for the company.
- Recognize that the most forward-thinking businesses now put business-focused lawyers on their business and innovation teams. Some companies have even established new roles of “Chief IP Officers” (“CIPOs”) that report directly into the business. These steps do not mean that your organization will be able to reduce your budget for lawyers in your law department, as you will now probably need additional headcount for lawyers where you previously had one. However, your organization will be better able to obtain critical advice on the front end of the innovation process that can improve your overall returns on innovation investment and help reduce costly litigation issues.
There are no doubt other ways that businesses can better integrate their legal teams into the front end of their innovation processes. I welcome comments in this regard. In any event, as one of the pioneering ranks of IP Strategists, I am looking forward to the day when we look back and say “I can’t believe there was a time when IP lawyers did not participate fully in our innovation processes.”