Collaboration Strategy: Develop, Claim, Share, Repeat

Closed innovation projects seem to be a thing of the past, with collaboration the new normal. For collaborations to reach their full potential, certain levels of openness need to be applied not only in day-to-day cooperation but also to intellectual property (IP) and trade secrets. How should companies combine open collaboration with appropriate protection of their strategic intellectual assets? This article proposes a methodical approach to each step of IP sharing in innovation collaboration.

In the industrial economy, it was common practice to engage in closed, proprietary approaches to innovation, and companies keeping to themselves were rewarded by the competitive advantage gained by excluding others. However, in today’s knowledge economy, going solo is seldom the best way forward. Since the 1990s, collaboration and partnerships have been increasingly promoted by policymakers, academics and enterprises as the recipe for competitive advantage, and today collaboration is claimed to be ‘the new normal’.

For collaboration to reach its full potential, companies need to make a transition to a more open innovation strategy. Openness in innovation can mean sharing R&D costs, knowledge reuse and access to partners and competitors’ valuable intellectual assets. As a result, companies adopting an open approach may enjoy the rewards of increased profits, market growth and making valuable contributions to society.

A significant problem with cooperative R&D, however, is the meaning of the concept of openness. The purpose of collaboration is to leverage the combined knowledge and capabilities of two or more parties. However, there may be different opinions on exactly how open the collaboration platform should be. Innovation collaborators should investigate the different levels of openness to make the most of their projects.

Project objectives
The first thing to consider in collaborative innovation is the project’s key drivers and objectives. A business’ own main objectives aren’t the only things to consider when identifying key drivers and objectives. Understanding business partners’ main objectives is equally important to ensure the outcomes of the project are as fruitful as possible.

After identifying a project’s key drivers and objectives, the parties should determine the best way to achieve these objectives. Innovation collaboration requires co-creation and sharing of IP, but there are several options for how to co-create and how to share IP. There is a broad spectrum of collaborative approaches that can be tailored and used in each area, industry and partnership.

A step-by-step approach: claim, access and improve
To comprehensively grasp, understand, and strategically utilise intellectual property in collaborations, traditional binary concepts such as ‘ours’ and ‘theirs’ have to be developed into more multifaceted concepts. We recommend using a structured step-by-step approach to viewing and determining control of IP, with the three key steps of claim, access and improve being undertaken based on the project objectives.

The first step, claim, seeks to evaluate what types of results may be generated by the project, to what extent these results can be covered by intellectual property rights, and, based on the outcome, to decide the best way to allocate the results with the project partners.

The question of claim is inseparable from the question of access, which is step 2. Can we gain access to other parties’ results or background, and how do we protect our own assets that are accessed by other parties?

The third step, improve, involves being aware that all results can be improved. Considering improvements before initiating the collaboration is essential to achieving the competitive advantage they may lead to.

Step 1: Claim

Defining expected results
In technology and knowledge-intensive contexts such as the life sciences industry, results from innovation projects are usually expected to be intangible assets. The problem, however, is that knowledge and intangibles are inherently challenging to manage. They are perceived as unspecified, diffuse and scattered knowledge, difficult to separate from each other. It is hard to establish a well-considered strategy for claiming results while also struggling to imagine what form they will take.

The first step, therefore, is to turn this nebulous collection of knowledge into well-defined and manageable intellectual assets. With the right packaging, it is possible to treat intellectual objects as intellectual property. Intellectual property, in contrast to unspecified knowledge, can be subject to commercial transactions, such as being assigned or licensed.

When trying to convert a collection of knowledge into property, the biggest mistake is to disregard anything that doesn’t constitute a patentable invention. Firstly, not all inventions are patentable for several reasons, but they may still be valuable for a business. Secondly, there are different types of intellectual assets other than inventions. Data is evolving to become the most valuable asset of our time. Other examples are software, technical drawings, models and instructions.

So why is it important to consider what types of knowledge will be created in the project? Thinking through what results might be generated may prevent you overlooking certain types of results completely. For example, if a technical solution is expected as a result, it will be equally important to claim the know-how of how to execute the invention. Knowing what you have is the first step towards exploiting it.

Secondly, depending on what types of results are expected from the project, different considerations need to be made when regulating how these assets should be owned and used. In this regard, it is important to stress that we are talking about intellectual assets, or intellectual property, and not intellectual property rights.

Possibilities for exclusively claiming intellectual assets and protecting them from being used by others under intellectual property law are quite narrow. Although some intellectual assets under the right circumstances may enjoy intellectual property protection through patents or copyright, the scope of protection is often limited. Moreover, in most cases data cannot be protected by any intellectual property right at all, or only be subject to protection of limited value, such as the protection of a database but not the data.

All of this underlines the importance of packaging knowledge and information as trade secrets. Obligations of confidentiality, and restrictions on use, in agreements enable trade secrets to be transferred and licensed as objects in the same way as intellectual property rights can be. This is why confidentiality agreements should always be the first step in every collaboration.

Ownership models
Once we know what types of results may come out of a project, and how they can and should be protected, we need to consider whether we want or need to own the results of the collaboration.

Perhaps surprisingly, ownership is not always the most favourable option. There may be many reasons for this, one being the costs of upholding the IP rights protecting the asset, and another being the outcome of a previous evaluation of the types of results expected. For example, if the expected results are in a form that is only protectable as a trade secret and the project terms make it impossible to keep results confidential, ownership or sole proprietorship will be more or less worthless.

There are several models for how to determine who should own project results. If the results from the collaboration are expected to be of high value, a company should consider covering all the costs of the project. Taking on costs is a strong argument for why a certain party may claim full ownership of the results. However, if the value of the project is in gaining access to the other party’s pre-existing know-how rather than their capabilities, results are probably best owned by the party who generated them.

The option of acquiring the other party’s results comes somewhere in between. This may be a good alternative when a company does not have the financial power to fund the project on its own, but still has an interest in the results. If the other party has non-commercial interests (such as a university) or does not have the finances to commercialise the asset, it may be willing to negotiate a price for the asset.

Specific consideration needs to be given in relation to jointly owned results. Although there is contractual freedom between the joint owners of results, we see too few joint ownership agreements. Under Swedish law, if there is no specific agreement, more or less all acts of disposal regarding the asset must be performed in agreement between the parties. It is therefore best to avoid joint ownership where possible.

However, in some cases it may be impossible to separate the contribution of each party. In such case, many agreements state that results will be jointly owned. It is important to anticipate the risk of joint ownership in the collaboration agreement in order to sort out how to treat the most important acts of disposal before a valuable result is jointly created. It is unwise to leave all the principles to be negotiated after a joint ownership situation arises.

Another option is to decide how to allocate the results depending on the different interests, industries or fields of the parties. There is scope for creativity in this regard.

Step 2: Access

Gaining access
In many cases, favourable access rights may be just as good as being granted ownership, but they come with fewer obligations. Making a strategic decision on how to negotiate access to the pre-existing knowledge of other collaborating parties requires evaluation of the need for such knowledge.

The first question to be answered is whether access to the other parties’ knowledge will be needed to exploit the results of the project, or whether access is preferable. Determining the purpose (e.g. commercial or non-commercial) of such access is also key. Moreover, access rights can be limited to certain territories or limited in time, so it is important to consider whether limitations are acceptable. Finally, if a company expects it will need to sublicense the rights to the other parties’ IP within or even outside its own group, the collaboration agreement must clearly state that sublicensing is allowed.

Another factor when it comes to accessing other parties’ IP is whether it is worth paying for. It is common for access rights to pre-existing background IP to carry royalties. Although it may not be possible to set a level for the royalty before the project is undertaken, it is possible to set out the principles. Should access be royalty-free, should the royalty be fair and reasonable, or should it be up to the parties to negotiate the rate when the time comes?

Granting access
Being granted rights to the other party’s know-how probably also means sharing one’s own know-how. This is perhaps the riskiest part of a collaboration, and is the reason why companies sometimes hesitate over collaborating with others. But there are ways to protect knowledge just as there are ways to protect tangible assets.

First, intellectual property law enables intellectual property rights to be protected against unintended use. Infringement of IP can lead to large penalties and damages. Additionally, intangible assets that are not protected or even protectable by intellectual property rights can still be treated as intellectual property as long as the rights to them are contractually restricted. A non-disclosure agreement should therefore be in place before the parties start discussing what types of background they may bring to the project.

The next important question is what IP to share with the other parties. If the value of certain background IP depends on other parties not having access to it, it should probably not be included in any collaborative innovation project. On the other hand, if a company has the know-how, but not the capabilities to leverage it, sharing such background IP with the project to allow other parties to work their magic on it can be an advantage. Make sure you make informed decisions about what background the company wants to include, may include and wishes to exclude.

A great way to specify the background assets is to list them in an appendix to the collaboration agreement. However, this can be challenging. Background IP appendices often contain lists of patents, but lists of data sets or visualisations are less common. There is no reason to keep it that way. Finding ways of defining what background is included is a good means of protecting it. Just bear in mind that lists of background in appendices need to be updated if new background is added to the project. This requires good project management.

Collaboration agreements should also contain confidentiality provisions in order to protect the company’s own knowledge. Background IP should preferably be included in the definition of confidential information.

Step 3: Improve

The project results will most likely continue to develop after the project is finished. If the parties have granted each other cross-licences to background IP and results, both licensor and licensee may continue to develop these. The parties may enter into new collaborations in which the results are used as background IP, out of which new results are generated. Before entering into a collaboration, the parties should therefore consider what should happen after the collaboration has ended and the results continue to improve.

Significant opportunities may be lost if the licence to another party’s intellectual assets does not allow for modifications or improvements. The first step must therefore be to ensure that the company has the right to make improvements to other parties’ assets to which the company has access.

After this, improvements should be treated like any other intellectual asset. The same considerations should be made for any future improvements as for the expected project results prior to the start of the project: What types of improvements can be expected and how can they be protected? Who should own the improvements? Most importantly, make sure you regulate access to improvements.

Conclusion
Innovation projects in knowledge-based business should not be treated differently from projects relating to tangible assets. Companies’ use of the assets contributed to and generated from innovation projects requires a methodical approach. The step-by-step model based on claim, access and improve is one way to help companies make the most of their IP in collaboration with others.