Session 9

1. Protection Mechanisms besides IPR
The Smart Entrepreneur

2. Protectability
When Intellectual Property Rights are not available or not
appropriate, there are other kinds of protection mechanisms, e.g.
1.Trade Secrets
2.Complexity and Tacit Knowledge
3.Speed to market
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The Smart Entrepreneur

3. Secrecy
Protectability
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The Smart Entrepreneur

4. Trade secrets
An idea may be protected as long as the idea or the process
remains a secret inside the company
Ways to protect a trade secret:
• Confidentiality clauses in employee contracts
• Non-disclosure agreements (NDAs) with partners, manufacturers,
investors, etc.
• Use simple security measures such as locked file cabinets,
passwords on computers,…
• Provide escorts for office visitors
• Train employees to refer any sensitive questions to one specific
member of the company
• Use code names for ingredients on labels, etc.
• But: secrets can be difficult to enforce
• most investors will refuse to sign NDAs
• Famous (successful) example: the Coca-Cola recipe
Copyright of Bart Clarysse and Sabrina Kiefer
The Smart Entrepreneur

5. Patenting vs. Secrecy
Pros of Patenting: Cons of Patenting:
• Powerful protection enforceable in
the courts
• Must be applied for
• Cost
• Cost to enforce
• Publication/disclosure of invention
(but this is also often a pro)
Copyright of Bart Clarysse and Sabrina Kiefer
The Smart Entrepreneur

6. Patenting vs. Secrecy
Pros of Secrecy: Cons of Secrecy:
• Cheap in short term
• Can (perhaps) keep competitors in
the dark for ever (Coca-cola)
• Can also protect info that can’t be
protected with patents
• Once lost, it is lost forever;
• Susceptible to independent
discovery/ reverse engineering
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The Smart Entrepreneur

7. Protectability
Complexity and tacit knowledge
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The Smart Entrepreneur

8. Complexity and tacit knowledge
Protection may lie in the fact that a venture is too difficult to imitate.
For instance if:
• It is based on a complex idea or relationship of components/technologies
• even reverse engineering may not be possible, because a piece of the
knowledge is hidden
• It contains built-in safeguards
• e.g. a ‘Black box’ in ICT industries – configuring the product in such a way that
it gets destroyed if someone tries to open or ‘crack’ it
• It consists of interrelated parts of specialist knowledge held by different
people/groups
• an intangible or invisible ‘glue’ between all the separate elements makes it
hard to copy in a short time.
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The Smart Entrepreneur

9. Complexity, cont.
• It depends on highly developed processes and/or key implementation skills of
employees
• e.g.: a business in which a large part of the skill/value resides in analysis or
interpretation skills, such as analysis of chemical compounds – requires
developed expertise of the people performing the work
• It requires a lot of resources (time, money) and talent to re-create or imitate
• e.g. if other specialists are scarce, and development times are long, and you
already have a head start
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The Smart Entrepreneur

10. Protectability
“Speed to Market”
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The Smart Entrepreneur

11. Speed to market
Capture attention and market share quickly before your
competitors can react: ‘first mover advantage’ but with speed
• Note: this does not mean simply being first on the market with a
particular product:
• You have to find a way to create a sufficient critical mass of users
in a short time, before competitors or incumbents catch on
• You do this by finding a way to create a fast ‘pull effect’ to your
business
• methods may include ‘open system’ or ‘open source’ and dual
licensing strategies
• (offer product free for individual use, build user base then charge
royalties for commercial use)
• ‘freemium’ pricing model
• or other novel, compelling ways of offering the product
.
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The Smart Entrepreneur

12. Speed to market, cont.
• You have to consider whether you have the necessary resources to
do this, such as:
• enough capital/cash to ride out an early phase of low revenue (if
offering initial product for free)
• compelling value networks (see IE&D Toolbox) facilitating visibility
and access to the customer
• customer-friendly solutions to unmet customer problems
• Etc.
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The Smart Entrepreneur

13. Speed to market example
Sun Microsystems workstations
Sun was not ‘first to market’ with workstations, but it achieved
‘speed to market’ by introducing the ‘open systems’ approach:
• Building its system architecture from off-the-shelf components that were easy and
economical to replace or upgrade
• Basing its new products on existing industry standards to avoid compatibility
issues and switching costs for customers
• Thereby promoting easy and fast adoption of their products
• Captured the ‘network computing’ space by realising that customers needed ease
of installation, integration and maintenance, while incumbent competitors were
focussing on protecting proprietary technologies and components and locking
customers into their closed system architectures
Copyright of Bart Clarysse and Sabrina Kiefer
The Smart Entrepreneur