Will our part­ner steal our IP? Re­sponse

Ex­perts give their in­sights into this prob­lem

Finweek English Edition - - FEEDBACK - MATS H OLS­SON © 2013 Har­vard Busi­ness School Pub­lish­ing Corp. Dis­trib­uted by The New York Times Syn­di­cate.

Mats H Ols­son, a se­nior vice pres­i­dent of Eric­s­son Group and the pres­i­dent of Eric­s­son North East Asia, of­fers a so­lu­tion to the fic­tional case study pub­lished in the pre­vi­ous edi­tion of Fin­week (28 Fe­bru­ary).

It might be in Prime’s in­ter­est to guar­an­tee Blue Sky some form of ac­cess to its source code. If that seems coun­ter­in­tu­itive, let me back up a bit. I be­lieve strongly that a com­pany must se­cure its in­tel­lec­tual prop­erty (IP) as­sets. Prime has spent years in­vest­ing in re­search and devel­op­ment, and its pro­pri­etary tech­nolo­gies rep­re­sent its fu­ture rev­enue stream.

The mo­bile com­mu­ni­ca­tions in­dus­try, in which Eric­s­son is ac­tive, dif­fers from the au­to­mo­tive sec­tor be­cause of the need for in­ter­op­er­abil­ity (you can use your smart­phone in China as eas­ily as in the US). Some of Eric­s­son’s patents are es­sen­tial for the devel­op­ment of in­dus­try stan­dards; t here­fore, t hrough an ex­ten­sive li­cens­ing pro­gramme based on “fair, rea­son­able and nondis­crim­i­na­tory” terms, we make those patents widely avail­able. This gives us a solid re­turn on our R& D in­vest­ment, ben­e­fits es­tab­lished com­pa­nies and en­ables new com­pa­nies to en­ter the mar­ket.

At the same time, we in­vest in pro­pri­etary so­lu­tions – our equiv­a­lent of Prime’s source code – to dif­fer­en­ti­ate our­selves. We don’t pro­vide our com­peti­tors with those so­lu­tions, and we pro­tect them with ev­ery tool avail­able to us.

We pur­sue le­gal ac­tion both when a stan­dard adopter un­rea­son­ably re­jects our li­cens­ing pro­gramme and when we see unau­tho­rised use of our pro­pri­etary so­lu­tions.

Given the threat to its IP, Prime is pru­dent to em­bed tacit knowl­edge in its soft­ware. That can pro­vide some pro­tec­tion. But the em­bed­ded-knowl­edge ap­proach is be­side the point i f a part­ner sim­ply de­mands a tech­nol­ogy’s un­der­ly­ing IP, as Blue Sky has done. That’s a threat Prime ap­par­ently didn’t ex­pect.

Prime’s re­ac­tion was to per­ceive two equally un­ap­peal­ing op­tions – give in to the part­ner, or give up on the ven­ture. But there could be le­git­i­mate strate­gic con­cerns be­hind Blue Sky’s de­mand, and if Prime can un­der­stand them, it might be able to craft a so­lu­tion that ben­e­fits both sides.

Blue Sky might have doubts about Prime’s prospects in the hy­brid-car in­dus­try. It is cause for con­cern that Prime has strug­gled to win big cus­tomers. If Blue Sky makes a size­able in­vest­ment in Prime and Prime’s auto unit gets into trou­ble or goes belly up, the Chi­nese com­pany’s busi­ness could be in jeop­ardy. In that case, ac­cess to the source code would be a life­line.

If that is the worry, Prime could pur­sue an es­crow op­tion, in terms of which the source code would be un­avail­able to Blue Sky as long as Prime’s auto unit is in busi­ness. If any­thing hap­pened to that unit, though, the Chi­nese com­pany would be granted ac­cess. That’s a fair ar­range­ment and one Blue Sky would un­doubt­edly ac­cept, as­sum­ing its in­ten­tions are good.

Prime’s dilemma points to a larger is­sue: The firm needs to be­come ex­pert at IP and li­cens­ing.

All ma­jor tech­nol­ogy com­pa­nies en­gage in ex­ten­sive cross-li­cens­ing. Eric­s­son has more than 90 agree­ments in place, in­clud­ing sev­eral with Chi­nese firms that are our com­peti­tors. Our agree­ments are global, and if they are breached, we can take le­gal ac­tion wher­ever the in­fringe­ment oc­curs.

Sim­i­larly, if Blue Sky were to copy Prime’s tech­nol­ogy and sell the re­sult­ing com­po­nents out­side of China, Prime could pur­sue law­suits in those mar­kets. Re­course would be more dif­fi­cult within China, be­cause de­spite ob­vi­ous im­prove­ments in the past few years, leg­is­la­tion is not al­ways en­forced in a pre­dictable way, and the courts are not yet fully trans­par­ent.

If Prime wants a place among the in­no­va­tive sup­pli­ers to the high-tech auto in­dus­try, it needs to treat IP rights as a core com­pe­tency.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.