52190659100-290286-261257Summer Semester 2018
CET- Innovation and enterpreneurship
00Summer Semester 2018
CET- Innovation and enterpreneurship
Ismet Anil Duman
Ismet Anil Duman
Table of Content
What is Innovation?
Concept and Types of Patenting
Why Companies opt for Patenting
Use of patent information for planning and monitoring of innovation
Patent in case of
Sony and Sharp;
What is Innovation
Innovation is a concept which is evolved from development that simplifies processes or way a work is done. Innovation primarily is concentrated towards development and deployment of technologies, but it’s not limited to technology alone but also on inventions which simplifies task. Eg. Wheel was an innovation which simplified travelling and even a pen which simplified writing. In the present case we will focus on technological aspect of innovation.
Concept and Types of Patenting
Once an invention is done and is unique i.e. not close to anything which is not available in the market or for consumption but has huge potential and is radically different then Individual/Organization go in for patent. A patent is a grant of protection for an invention. It’s granted by the Patent and Trademark Offices (PTO) and has a term of 7 to 20 years depending on the country applied for. Hence patent has to applied individually for each country where a company wish to operate or safeguard its interest.
Owning a patent gives the right to stop someone else from making, using or selling invention without permission. Patents protect inventions and new discoveries that are new and non-obvious. There are many types of patents but most commonly used patents are : utility patents or Improvement patents and design patents. Each type of patent has its own eligibility requirements and protects a specific type of invention or discovery; hence, it’s possible for a product/Service invented or discovered to have more than one type of patent. Types of Patent and its explanation:-
This type of patent covers processes, compositions of matter, machines, and manufactures that are new and useful. For Example – Utility patent issued in the fashion industry relate to shoes, such as Nike’s “automatic lacing system,”. or for iPhone for making touch screen with multitouch.
A utility patent can also be obtained for new and useful improvements to existing processes, compositions of matter, machines, and manufactures. This type of patent is to add something to an existing product, incorporate new element/technology into an old product, or find a new use for an existing product. Most patents granted today are improvement patents. These patents protect the differences between a new product and previously existing products and services of the same kind. Improvement patents can be further broken down into “addition” or “substitution” inventions.
Addition inventions -An addition invention adds something to what came before. Example -The Gillette Mach3 razor, for example, had three blades where previous razors had two.
Substitution inventions – Jeff Bezos, substituted the “one-click” purchasing feature for the prior virtual shopping cart model — a substitution invention.
A design is defined as the “surface ornamentation” of an object, which can include the shape or configuration of an object. In order to obtain this type of patent protection, the design must be inseparable from the object. While the object and its design must be inseparable, a design patent with only protect the object’s appearance. In order to protect the functional or structural features of an object, a person must also file for a utility patent. For Example. Patent filled by K ; N Engineering, Inc for Cylindrical Pleated Air Filter With Top and Sidewall Filtering Areas or Patent filled by Coca-Cola for the glass bottle in 2015.
Why Firms opt for Patenting
Patenting has various benefits when one breakthrough invention and a lot of time and is invested in the invention and there has been growth of patent that are filed by organizations/individuals . As per statistics there was a growth of 5.2 % patents issued in US. So below are the benefits of getting patents:-
A patent gives the right to stop others from copying, manufacturing, selling or importing your invention without your permission.
To get protection for a pre-determined period, allowing you to keep competitors at bay and use your invention yourself
Granting patents also incentivises innovators, offering them recognition for their creativity and enabling them to appropriate returns on investment. A patent may be a powerful business tool allowing innovators to gain exclusivity over a new product or process, develop a strong market position and earn additional revenues through licensing. Example- Despite being a Microsoft, Nokia is still earning royalties from the patents they have licensed
Patenting is 2 way process where one has to disclose the product/utility they are patenting for. So, in return for exclusive rights, the inventor must sufficiently disclose the patented invention to the public, so that others can access the new knowledge and can further develop the technology. The disclosure of the invention is an essential consideration in any patent-granting procedure. In this way the patent system is designed to balance the interests of inventors and the general public. Hence, the disclosure or patenting is a business call and completely depends on the business unit. Example – Coca-Cola, Pepsi they have kept there composition of beverage confidential for decades and hence they have a maximum share globally. The moment they apply for patent the composition will be made public and they will still hold the exclusivity rights but only for 20 years and thereafter competition will take on. On the other hand Apple applied for the patent of the touch screen with multitouch and made there invention open to public and is earning revenue from licensing, as they are aware that technology has a small life cycle and they will have to work constantly to evolve hence disclosing doesn’t make a lot of difference. Even for pharmaceuticals, patents are important both in terms of spurring innovation of new medicines and ensuring access to new medical technologies. Below is the process for patenting to licensing and once an organization develops a full scale version which is ready for commercial diffusion.
INCLUDEPICTURE “https://hub.globalccsinstitute.com/sites/default/files/publications/books/175988/images/fig01.jpg” * MERGEFORMATINET
Figure 1: Patents facilitate advances throughout the technology life cycle
Hence from the above explanation it can be noted that patents are crucial for innovation in the context where they apply. They can be used to generate revenues (from licences), encourage synergistic partnerships, or to create a market advantage and be the basis for productive activities. As such they create strong incentives for innovation in market-based economies.
Use of patent information for planning and monitoring of innovation
Patents/Patent applications has as a disclosure clause/Social Contract where the applicant has to disclose in public documents, important source of technical, legal and business information in lieu to receives a temporary exclusive rights. This disclosed information play’s :-
An Important role in the process of innovation by, for example, stimulating new ideas and inventions through disseminating known technology.
Also be used to assess RD;D trends, emerging technologies, innovation patterns and relevant markets of competitors. The public nature of patent information also helps to avoid duplication of efforts and unnecessary investments or infringement on patent owners’ IPR. When patent ownership and inventor data are public, competitors, as well as partners for collaboration, licensing and technology transfer, can be identified more easily.
Also used as an indicator for monitoring the innovation of technologies, the technology competitiveness of a country or the economic performance of a company or country. Example Of all the patents American companies accounted for 46% of patents granted in 2017, companies based in Asia accounted for 31%, and European companies accounted for 15%.
Patent data can also be used to indicate global trends for technology transfer. A patent that is granted in many countries suggests that the inventor foresees wide applicability.
Patent in case of Sony and Sharp
Sony is a Japanese company which is into entertainment consumer durables and Digital content production and telecast i.e. Consumer Durables – Televisions, Home theatres, Mobile phones, Play station etc. and Digital content and Telecast – Sony Music, Sony Pictures and Interactive Entertainment.
On the other hand, Sharp is again a Japanese MNC into entertainment consumer durables producing same Televisions, Mobile phones etc. having its own manufacturing of LCD.
Sony has been a pioneer in electronics with its CRT, Music Systems and Home theatres and was always considered premium as compared to its Korean rivals but they were losing its sheen in the battle against those brands as competition was catching fast with competitive pricing that is less than the Sony, hence people were more inclined towards new brands rather than Sony. Despite all the efforts to counter the competition Sony fell short and was not able catch the competition. Mainly because sony doesn’t have its own LCD manufacturing. Hence it decided to join hands with Sharp, also a Japanese electronics manufacturer to counter the competition by building its own factory for 2.5 billion Euros which was the most advanced factory to produce LCDs. The Idea was to decrease the production cost and be competitive in market. However this plan was not successful
Our case at hand is whether both Sony and Sharp after alliance and building of 2.5 billion Euros facility to produce LCD should apply for patent or not?
We will break the answer into 2 Part :-
Patenting for the Sony
Patenting for the Sharp
Sony from the beginning was not manufacturing LCD on its own and was relying on sharp/Samsung for the LCD for their product and hence they didn’t have an option to file for patent of LCD.
Since sharp was manufacturing LCDs and selling it to Sony, for them it made sense to patent the LCD, but till then most of the competition had already started to manufacture LCD in there plant at competitive prices.
Hence after the collaboration and investing 2.5 billion Euros in modern and new generation LCD manufacturing in our opinion patenting would have been not relevant as the both the firms.
Why didn’t it make sense for patenting?
Considering the evolution of television from its invention things have move really fast and every few years we see a new development every few years in Television and that’s evident from the exhibit below.
Exhibit 1 – Share the sales figure of CRT declining and LCD declining and LED picking momentum.
From 1946 to 2017, the television viewing has seen a tremendous shift from a CRT black and white TV to curved LED with internet. The firms are not shying away from experimenting new technological development and with Consumer Electronic shows every year, electronic companies are trying to showcase there superiority in terms of technology. Example LG showcasing its commercial production paper LED which is as slim as paper. Hence, if an organization applies for patent which take approximately 3-4 years by the time patent is issued competition would have prospered by leaps and bounds.
For Sony and Sharp as well the focus should be more on R&D and anticipate the technology of future and get the same patented rather than patenting LCD which will be common and obsolete in 3-4 years of time. Below is the exhibit which projects display evolution in past 30 years.
INCLUDEPICTURE “https://upload.wikimedia.org/wikipedia/commons/a/a1/Evolution_Of_TV.PNG” * MERGEFORMATINET
Patenting in the case of Big Point
The Bigpoint GmbH is a German software company that was founded in 2002 by Heiko Hubertz and focus on development and sales of browser and has specialized on online games. Big point was the first company to realise the potential of browser based games and was very successful in the first few years its operations and had robust investments from established player. Even the revenue model was self-sustained.
Our case at hand is whether both Big Point should apply for patent or not?
The Case is a classic example of something new and innovative. 2002 was an era of online with Orkut from google started its operation along with launch of Gmail and many other e-commerce picking pace. Bigpoint at that time had a radical idea and had realised the potential in the right time.
Bigpoint should have applied for a Utility patent which would have restricted the entry on competition which after 16 Years are more than 10 in number and are huge in online gaming.
According to the sources in 2002 people started investing in dedicated game consoles and game were hugely expensive as there were only EA( entertainment Art) and Ubisoft making franchise games like FIFA, grand theft, Need for speed, Game of thrones etc and making huge money. Opportunities for Big Point was Mobile Gaming with the launch of Android, Gaming computers and High graphic computers and high speed internet which was essential for surfing, downloading and playing heavy content. This was evident from the acquisition of 65 million users in Europe and USA which was highest at that time. Filling a utility Patent would have given them monopoly status in gaming, what facebook enjoys in social media.
Bigpoint association with EA and other gaming software gave Big point a much needed push in terms of reach as they could focus more on distribution and hardware/ server upgradation to compete with the console gaming. The market is expected to grow in future and digital sales of games is going up as shown in exhibit below.
Since the focus was on Bigpoint with expansion to various continent was to grow its user base, Big point must concentrate on the mobile gaming and develop apps for Andorid/Ios to get a bigger pie of the mobile game and created an ecosystem and should apply for another Utility Patent/Improvement patent for new usage of the online gaming platform. Since the smartphones are new upcoming gaming consumption platform which is evident from the below Exhibits.
Smart phone games such as angry birds, Temple run pulled the share of mobile gaming but the majority revenue was from the traditional online games like Call of Duty whose revenue reached $1 billion in 16 days.
So the patenting of Bigpoint concept at the right time would have limited the competition and they would have enjoyed the monopolistic status and created an ecosystem which is compatible with various gaming other platform right from Smartphones to Xbox to Play station instead of being sold for $ 80 Mns . Like every Big internet giant they would have various patent in their portfolio including improvement patents .