This document discusses integrating intellectual property (IP) protection with open innovation business practices. It provides an overview of an event on this topic, including presentations from Bob Ford on open innovation business practices and John Harris from Gowlings law firm on protecting and licensing IP in open innovation models. The document also includes background information on open innovation, describing it as using internal and external ideas to accelerate innovation. It discusses expectations businesses have of institutional partners in open innovation clusters.

1. Integrating IP Protection
with Open Innovation
Business Practices
SpringBoard Atlantic
Moncton, NB
November 13, 2012

2. • Open Innovation Business Practices:
An Overview
Bob Ford
• Protecting and Licensing IP in Open Innovation
Business Models:
John Harris
2

3. Gowlings
One of Canada’s largest national law firms
• 750 professionals across 8 Canadian offices and Moscow and
London
Cross-disciplinary:
• Intellectual Property
• Advocacy
• Corporate Finance
• Licensing, Strategic Alliances and Joint Ventures
• Mergers and Acquisitions
• Regulatory, Government Relations and Product Liability
services
3

4. com·mer·cial·i·za·tion
com·mer·cial·i·za·tion
1. to manage on a business basis for profit
2. to leverage in quality for more profit
The What, How and Why of IP Commercialization
“Commercialization is a set of activities which add value to a discovery
by bridging the gap between conception and creation of a
marketable product or process, to create financial gain for inventors,
investors and their respective institutions and stakeholders.”
“Innovation is the ability to turn knowledge into new and improved goods and
services.”
(Conference Board of Canada)
4

5. What is Open Innovation
• “Open innovation is the use of purposive inflows and outflows of
knowledge to accelerate internal innovation, and expand the markets
for external use of innovation, respectively. [This paradigm] assumes
that firms can and should use external ideas as well as internal ideas,
and internal and external paths to market, as they look to advance their
technology.”
• Henry Chesbrough, Open Innovation: Researching a New Paradigm
"...Companies can no longer keep their own innovations secret unto
themselves; ... the key to success is creating, in effect, an open
platform around your innovations so your customers, your employees
and even your competitors can build upon it, because only by that
building will you create an ongoing, evolving community of users,
doers and creators."
Randall Rothenberg, editor, strategy+business (published by Booz
Allen Hamilton)
5

6. Henry Chesbrough
• The term Open Innovation was first developed by Henry
Chesbrough in 2003, when he published Open Innovation: The
New Imperative for Creating and Profiting from Technology
(HBS Press).
• According to Mr. Chesbrough, Open Innovation is the use of
internal and other companies' ideas to develop new
businesses. He identifies five key elements in the new
innovation process, i.e.:
1. Networking
2. Collaboration involving partners, competitors, universities, and users
3. Corporate Entrepreneurship, especially through corporate venturing,
start-ups and spin-offs
4. Proactive Intellectual Property Management: to buy and sell
intellectual property and so create markets for technology
5. Research and Development (R&D): to obtain competitive advantage
on the marketplace
6

7. Innovation Ecosystem
Industry Association
Academia &
Researchers University IP
Grants/Basic Science Favorable Tax
Funding Structures
Domestic &
International VC Success Service Organizations
Capital
Equity Markets IP Laws
Entrepreneurs Anchor Companies

8. Canadian IT Innovation Ecosystem
8

9. .
Booz & Company
The 2012 Global Innovation 1000: Introduction and Key Findings
• Every year since 2005, Booz & Company has conducted the
Global Innovation 1000 study, which investigates the
relationship between how much companies spend on R&D and
their overall financial performance and long-term financial
success—and every year, the study reinforces the conclusion
that there is no correlation between the two. Instead, it is how
companies leverage their R&D investments in conjunction with
other resources and internal structures—such as personnel,
capabilities, and decision-making processes — that determines
their ability to execute their innovation agendas.
• For the third year running, management consulting firm Booz &
Co. has named Apple the world's most innovative company in
its annual report, Global Innovation 1000 Study: Making Ideas
Work. Booz & Co. bases its rankings on an analysis of the
"fuzzy front-end" of innovation -- the ability of a company to
turn ideas into commercial successes.
9

10. Booz & Company
The 2012 Global Innovation 1000: Introduction and Key Findings con’t.
10

11. Booz & Company
The 2012 Global Innovation 1000: Introduction and Key Findings con’t.
• “….Overall, money handed out for research and development continues to
increase steadily, even in the face of widespread economic difficulties.
According to the report, 2011 represents the most money ever collectively
spent to turn ideas into commercial products and services -- a whopping 10
percent increase to $603 billion over the previous year.….
• ….Although Apple spends a sizeable amount on R&D ($2.4 billion), the
Cupertino-based company only ranked 54th in terms of annual research
spending. In fact, one of the report's key findings (and the reports before it) are
there is virtually no correlation between budget, innovation and success. Only
three of the top 20 spenders were considered top innovators…...
• ……Despite recent high-profile coverage of companies seeking innovative
ideas from social networks, “the wisdom of crowds,” and open innovation
contests, in reality, the majority of new ideas still come from traditional
sources. By far the most popular method for generating ideas is “direct
customer observation” (ranked as one of the Top 5 most used methods by 42
percent of survey respondents). Other categories that were cited by less than
15% of respondents included tools such "social media network mining", "seed
funding for exploratory research", "external idea scouting", and "cross
business unit communities/sharing"….”
11

12. Booz & Company
The 2012 Global Innovation 1000: Introduction and Key Findings con’t.
• “……Another noteworthy survey finding is the limited use of open
innovation in idea generation. In the past decade or so, the concept of
open innovation has generated a great deal of buzz, and a small but
growing number of companies are seeking out new ideas from a
variety of sources outside their conventional domains, including
innovation contests and social networking. However, less than 15
percent of all companies ranked mining social media for ideas and
using open innovation as important. We see indications of why some
companies see value in the techniques while others are left cold.
Companies in more consumer-oriented industries, including software
and Internet, computing and electronics, consumer, telecom, and
some healthcare sectors, are twice as likely to employ social media in
their search for new ideas than are companies in sectors with more
highly engineered products and services, such as auto, industrials,
aerospace, and chemicals and energy, where these methods seem to
have less efficacy.”
12

13. By Open, Participative Innovation there is a multiple win:
• The business get scalable solutions and faster and richer innovation cycles
• The citizens get personalized, better optimized and affordable solutions
• The services providers (for example, the public sector) can find new approaches in their service
provisions, making the service creation and personalization more affordable also for them
• Source: https://sites.google.com/site/openinnovationplatform/open-innovation
13

14. Conference Board of Canada - Council for Innovation and
Commercialization
According to the Conference Board of Canada’s
Report Card on Innovation, Canada receives a
"D" grade and ranks 14th out of 17 OECD
countries on innovation performance. Our
economy remains a below-average performer on
its capacity to innovate ……The general
consensus is that there is a lack of progress
being made in both innovating and adequately
commercializing the intellectual property being
developed.
14

15. OECD Economic Survey of Canada 2012
“ …Indeed, innovation is high on the
government’s agenda. While Canada has made
great strides in macroeconomic and structural
policy settings, and its academic research is
world class, the pay-off in terms of business
innovation and productivity growth has not been
large. Business R&D is particularly low, despite
significant policy support, suggesting
substantial scope for improvement…. Reforms
are needed to improve knowledge flows to
business and strengthen the process of
commercialization.”
15

16. Business Models for
Technology Commercialization
Closed Innovation ruled the 20th century
Open Source emerged early 1990s
Open Innovation emerged mid-late 1990s

17. Closed Innovation
Research Product Market
development
University IP Firm's boundary
Internal
research
projects
Firm's boundary
Govt R&D IP
Product pipeline
University IP Firm's boundary
Internal
research
projects
Firm's boundary
Govt R&D IP
Product pipeline
© Henry Chesbrough, 2003, “Open Innovation”

18. Stall of Closed Innovation
• mid-1970s oil crisis broke NA auto monopolies
• late 1980s-early 1990s – end of Reaganomics
• mid-late 1990s – Japanese “Tiger” free-fall
• 1999-2000 – “dot.com” bubble burst
• 2000s – S. Korea & China become economic powers
• 2008 – world-wide recession / depression
• Globalization/Flat World/R&D budget restrictions.
 Companies looking for alternatives to internal R&D in
the early 1990s – more so today!

19. Open Source
• early 90s – huge lay-offs by IBM & Xerox
=  unemployed highly qualified technical expertise
• emergence of stand-alone personal computers
• goal was to reduce dependency on IBM, Xerox &
related software vendors
• free re-distribution of software in source code form
• shared rights to use the technology
• no monetary rewards to the innovators
• fast-tracked development of
(a) software applications &
(b) systems architecture/operating systems for desktops

20. OPEN INNOVATION
is not the same as
OPEN SOURCE
20

21. Open Innovation (How it works)
Other companies' IP
University IP
Govt R&D IP
University IP
Govt R&D IP
Other companies' IP
© Chesbrough et al., 2006, “Open Innovation; Researching a New Paradigm””

22. Open Innovation (Principles)
• takes advantage of others’ knowledge, successes & IP
• accelerates speed of commercialization
• based on rapid diffusion – adoption – imitation
• patents used as “currency” & “inducements”
(not as barriers)
• focus on extensive licensing (non-exclusive)
• licensing-in
• licensing-out
• cross-licensing

23. Open Innovation (Principles)
• requires brokering of knowledge & IP & collaborations
• greatly expands value capture from protected IP
• existing patents
• developmental agreements (funding)
• staff placements
• corporate research shifting from “exploration” to
“exploitation
• corporate “discovery” research now includes
searching for complementary external IP

24. Open Innovation
Cluster
SME’s IP
Start-up’s IP
University IP
Govt R&D IP
University IP
Govt R&D IP SME’s IP
Start-up’s IP

25. Open Innovation Cluster Criteria
Every successful Open Innovation
Cluster requires & depends on
three things
1. Sources of ideas
2. Sources of capacity and capability
(knowers and doers)
3. Sources of funds (risk bearers)

26. Open Innovation Cluster Criteria
Overview:
• Industry, university, government, college partners
• Multiple members for multiple years
• Large pools of resources
• Common objectives, common interests,
cooperative projects
• All IP is shared by participants in the cluster
• Must facilitate rapid transition of technology from
institutions to industry to markets

27. Open Innovation
Business Expectations of Institutional
Partners in Open Innovation Clusters
1. Delivery on agreed-to promises & timelines
2. Clear understanding of project milestones & objectives
3. Close coordination of industry & institutional researchers
4. Mutual alignment of research objectives, priorities & time
horizons
5. Agreed-to criteria for measuring progress & performance

28. Open Innovation
Business Expectations of Institutional Partners
in Open Innovation Clusters (cont’d)
1. Up-front defined IP ownership and license rights
2. Adequate time to decide license options
3. No publishing without prior company review & approval
4. Protection of high-value IP with high-quality patent
applications
5. Company-directed patent prosecution

29. Open Innovation
Summary of Business Expectations
1. Long-term research partnerships that share risk
2. Access to technical expertise that delivers
3. High-quality commercially valuable IP that is shared
within the cluster
4. Input & control over development & prosecution of IP
portfolios
5. Flexibility in agreements on a case-by-case basis

30. Open Innovation Institutions
1: Business-friendly culture:
• Visible – accessible – approachable
• 1 entry point for technology shopping
• “Walk their walk – talk their talk”
• Opportunity focused, opportunity-capture motivated
• Focus on business needs and motivation (not the “deal”)
• Flexibility to negotiate value-added licenses
• Know how to: (i) negotiate
(ii) put a deal together
• Proactive & timely processes

31. InnoCentive, Inc
31

32. Slide (Google’s) Prizes.org
32

33. Prizes.com
“Hello everyone, we wanted to take a moment to thank our Prizes community for all of
your support and provide a product update. Over the next six months, we will be
retiring the Prizes.org product. By January 31, 2013, Prizes.org across platforms--on
the web, Android or iOS--will no longer be supported.
We’re so grateful to all of you for your participation and engagement since we
launched last year, but the product isn’t experiencing the kind of adoption we had
hoped for. We wanted to provide you with advance notice and some additional
information about timing, exporting your text-based entries and cashing out your
remaining credits:
…January 31, 2013 -- last day to cash out any remaining credits via PayPal”
33

34. Networks Of Centres Of Excellence
Research-driven partnerships: 16 Networks of Centres of Excellence
• NCE networks are large-scale, academic-led virtual research centres that bring
together multi-disciplinary partners from academia, industry, government and
not-for-profit organizations. Networks perform R&D and “translation-
commercialization” activities, and enable Canadian researchers and students to
work with receptor communities to accelerate the creation and application of
knowledge. Examples include:
• Allergy, Genes and Environment Network – AllerGen
McMaster University, Hamilton, Ontario ($74,358,000 for 2004-19)
• Carbon Management Canada – CMC-NCE
University of Calgary, Calgary, Alberta ($25,000,000 for 2009-14)
• Graphics, Animation and New Media Canada – GRAND
University of British Columbia, Vancouver, British Columbia ($23,250,000 for 2009-14)
• Marine Environmental, Observation, Prediction and Response Network – MEOPAR
Dalhousie University ($24,997,535 for 2012-17)
• NeuroDevNet
University of British Columbia, Vancouver, British Columbia ($19,572,000 for 2009-14)
• Stem Cell Network – SCN
University of Ottawa, Ottawa, Ontario ($82,819,000 for 2001-15)
34

35. One Example: Orthopaedic Innovation Centre Inc. (Winnipeg,
Manitoba)
Mandate
• The Orthopaedic Innovation Centre (OIC) will
evaluate, create, acquire, protect, commercialize and
license novel orthopaedic medical technologies in a
multidisciplinary environment through industry
partnerships, government grants, and strategic
collaborations. The OIC will provide technical
services to Universities and industry while educating
and training Highly Qualified Personnel in the
process.
35

36. Summary
OPEN INNOVATION:
• Accessing & capitalizing on ideas of others
• Deriving ROI benefits from your no-core IP
• Putting the “right ideas” into the “hands of the
right people” to fast-track new products /
services into markets
36

37. Protecting and Licensing IP
in
Open Innovation Business Models
37

38. IP Protection
Types of Protection
• Patent
• Provides and protects a tangible asset
• Trademark
• Protects the reputation of the research
• Industrial Design
• Protects features of shape, configuration, pattern or ornamentation
• Copyright
• Protects artistic work including drawings, compilations, manuals, etc.
• Trade Secrets
• Not much opportunity for collaboration in an Open Innovation setting.
No Protection. No publication. No recourse.

39. The Patenting Process
Patenting is not
about the technology
It’s all about
protecting the
business opportunities
created by the
technology
39

40. What is Patentable??
Requirements:
Considering a Patent
1. Novelty - the invention is “new”
2. Non-obvious – the invention not a minor tweak
on what has been done before
3. Utility –invention does what it is described to do
4. Subject Matter
40

41. The Patenting Process
The Patenting Process
Step 1: Decision to patent
• Invention disclosure
• Commercial value assessments
• Patentability assessment
• Potential commercialization / licensing
= Go / No go decision
Based on potential business value
& licensing opportunities
41

42. The Patenting Process
Step 2: Patenting Decision-making
1. What is the invention?:
• product / process / system / method?
2. Product:
• what will it look like?
• how should it be packaged?
• handling, shipping, storage issues?
• fit with customers’ needs & comprehension?
3. Production:
• fit with existing equipment / systems?
• requires new systems that need to be developed?
42

43. The Patenting Process
Step 2: Patenting Decision-making
4. Customer
5. Market size
6. Competitors
7. Market Receptivity / Pushback
8. Product / Process Development
9. Marketing Partners
43

44. The Patenting Process
Step 3: Patent preparation
1. Title
2. Brief description of the prior art
3. Summary of your invention
4. Brief description of the drawings
5. Detailed description of the invention
6. Examples
7. Claims MOST IMPORTANT (define & limit the
scope of invention)
8. Abstract
Business Opportunity
should define the
Claim Strategy 44

45. Where to file
Three-step process over 2 ½ years
Step 1: file an application with CIPO or USPTO
• priority date / priority filing
Step 2: file an international patent application (PCT)
with WIPO through CIPO
• within 12 months of priority date
• defers “where-to-file” decisions & costs for 18 months
Step 3: national-phase filings in selected countries
• with 30 months from priority date (18 months after the PCT)
• file where there are business opportunities &/OR
• where competing products may manufactured
45

46. What Is IP Used For In
Open Innovation Approach?
1) Income Generation Through Licensing to:
1) Other institutions
2) Industry
3) Government
2) Sale of IP rights to advance research
3) Collaboration to advance research - NOT to increase
market share and prevent competitors from coming to
market
46

47. Claim Breadth
Specific research expertise
Variants
Portfolio/Niche

48. Claim Breadth – Open Innovation
Specific research expertise
Variants
Portfolio/Niche
Opportunity
Variants
Portfolio/Niche
Specific expertise

49. How to Obtain a Desirable Claim Scope
Filing of a full and complete disclosure
Disclosure of all contemplations of the invention.
Recognize your niche expertise and protect it.
Sound Prediction
You can only get protection for what you have done and shown in
the description and what you can soundly predict.
Demonstration of utility through test results whenever possible.
Carrying out the right tests and trials to ensure broad coverage in
the patent.
Selection Patents
Lack of full disclosure can lead to unduly narrow claims and possible
invalidity of the patent.

50. What is “Patent Value”?
• Validity
• Claim Breadth
• Scope of Protection
• Ownership
• Surviving an IP Audit
50

51. Validity
• Will the application survive the scrutiny of examination into
allowance and issue?
• Will the issued patent survive the scrutiny of litigation?
• Will the IP hold up under the microscope of an IP audit?

52. Validity
Mistakes that impact validity
• Prior disclosure
• Publications
• Presentations
• Collaborations without NDA
• Prosecution mistakes
• Double patenting/Voluntary divisionals
• Duty of Candor
• Claiming too Broadly
• Sound prediction

53. Scope of Protection
Market Analysis
• Value is increased if protection is obtained in all
relevant jurisdictions. Keep options open (PCT).
1. Where is the market for the product?
2. Where are my collaborators/partners/potential
competitors located?
3. Where is the R&D market?
• 20 year term
• Growing Economies
• China
• Where is the product manufactured?
• Prevent manufacture of product in strategic locations
• Import/Export Regulations

54. Scope of Protection
Consumer Markets
• USA High Population, Disposable Income
• Europe High Population, Disposable Income
• Canada Disposable Income, US Trading partner, Drug plan
• Japan High Population, Disposable Income
• China Highest Population, Increasing Disposable Income
Manufacturing Markets
• China Low cost manufacturing
Collaboration/Licensing Opportunity
• USA Institutional Density, Industry, Funding
• Europe Institutional Density, Industry, Funding
• Canada Institutions, Tax benefits
Enforcement
• China Emerging policing and government backing regarding
enforcement

55. Scope of Protection
U.S. Strategy
Consider continuation practice
• Obtain allowed claims to narrow scope and then file
continuation patent directed to broader claim scope. Allows
patentee to adjust the claims based on actions of
competitors or as R&D directs product evolution.
Terminal Disclaimers/Double Patenting.
Continuation-in-Part Applications for improvements.

56. Scope of Protection
Canadian Strategy
• No Continuation practice.
• No Terminal Disclaimers.
• Voluntary Divisional applications for broader claims likely to
invalidate divisional and even the parent on grounds of double
patenting.
• Forced Divisional applications.
• 5 year delay for requesting examination.
• 2 year+ backlog at Patent Office.
• Amendment after allowance.
• Reissue – 4 year deadline.

57. Ownership
1. Clearly established ownership saves headaches and money
2. Establish ownership sooner rather than later
3. Grey areas:
• Employee agreements,
• Agreements to assign eventual IP,
• University policies for students
4. Roche v. Stanford

58. Summary – Protecting IP
• Identify your niche expertise and potential Industry and
Institutional collaborator
• Avoid pitfalls that lead to invalid patents or unduly narrow
claim scope
• Obtain proper claim scope that is supported or predicted
• Obtain broad patent coverage
• Keep options open
• Clearly establish ownership
• Obtain professional IP services as early as possible

59. Steps in Commercialisation of IP
1. Pre-patent
• Non-Disclosure Agreements
• Assignment of Rights (e.g. Joint Development Agreement)
2. Post-Patent
• Joint Ventures
• License Agreements
• Capital Raise through Equity or Debt
• Sale
59

60. Pre-Patent: Non-disclosure Agreements
- Protect confidential information under contract law
- Can be unilateral or bilateral (two way)
- Should be entered into at the very beginning of the relationship
prior to exchange of information
Purpose:
i) protect sensitive technical or commercial information from
disclosure to others;
ii) Prevent forfeiture of valuable patent rights (loss in patent rights);
iii) define exactly what information can and cannot be disclosed;
and
iv) prevent use by recipient for anything else but the Purpose, as
defined.
60

61. Pre-Patent: Assignment of Rights
Joint Development Agreements:
- like a prenuptial agreement and planned divorce
- written agreement that addresses important aspects of IP
rights before, during, and after the project
- identifies which inventor under the proposed patent will
ultimately own the patent post patent filing
61

62. Post-Patent: Joint Ventures
i) Contribution: What IP will be contributed by each partner to the
JV? For what field of use and on what terms (assignment v.
license, royalties, exclusivity)?
ii) Ongoing obligations: Will there be any on-going obligations to
contribute IP? If so, any limitations on this and how to implement
those limitations?
iii) Foreground IP: Who will own “Foreground IP” (IP created by the
JV either alone or in combination with the JV partners)? Any
different result if the Foreground IP is an improvement on a
partner’s IP?
iv) Ownership on Termination: Who owns IP on termination
(buy/sell, liquidation, run-off)?
v) Background IP: On termination, who will have continued access
to any “Background IP” (IP licensed by a partner to the JV)?
62

63. Post-Patent: License Agreements
• Gives an organization (or individual) the rights to use another’s
intellectual property, typically in exchange for royalties.
Special Considerations with Licenses
1. Exclusive v. Non-exclusive
2. Field of Use: Where can JV and each partner use IP? Unlimited?
3. Geographic Territories: worldwide vs. territorial
4. Term of License: Most often the term of the JV, or the duration of
IP rights, if shorter
5. Control over IP (Prosecution/Maintenance/Enforcement)
6. Representations and Warranties: On-going as opposed to time of
contribution?
7. Assignability/Sublicensing
8. Royalties/Fees
9. Perpetual vs. timed
63

64. Post-Patent: Capital Raise - Equity vs. Debt
• Alternative to JV or License Agreement
• Can raise capital through issuance of equity or debt financing
• Proceed to commercialization on your own
Equity
• No repayment obligations
• Potential loss of control
• Flexibility depends on type of investors (friend/family vs. VC/PE)
Debt
• Solvency issues
• Risk of default
• Difficult to obtain (issues with security)
• Maintain control
64

65. Preserve your Rations -
Stay Lean and Focused
• Capital efficiency for leaner times – spend only on
core assets and avoid infrastructure spending
• Articulate value proposition early in R&D as
regulatory scrutiny, etc. causes increased delays
and risk
• Focus on core technology; postpone other ideas
and pull the plug early
• Make technology as marketable as possible
(reduces sale effort)
• Need for increased R&D productivity – open
innovation models are useful where appropriate!
65

66. Thank You
John Harris Robert Ford
Partner, Patent Agent Partner
Phone: (613) 786-8671 Phone: (613) 786-0142
Email: john.harris@gowlings.com Email: robert.ford@gowlings.com
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