IV. Protecting Innovation

Question 1

Imitation

Answer 1

• Increases supply of firm’s “uniquely” product/service
• Imitation is pervasive (allgegenwärtig) and can be deadly
• Legal and managerial mechanisms for protection

Question 2

Managerial mechanisms for protection

Answer 2

• • Managerial mechanism consists of 1. Complementary Assets (Assets necessary producing and commercializing an innovation)/ 2. Time (brand, customer base, reputation, knowledge)
• Hard replicability if business idea involves several and interrelated activities/ External network/ Switching costs/ Time compression diseconomies in creation of complementary assets (e.g. brand and reputation)
• Complementary assets = Competitive Manufacturing/ Distribution/ Service/ Marketing Assets/ Regulatory
• If complementary assets are ready then owner of innovation is in driver’s seat (But if other firms have chokepoint they will extract a large share of profits)
• Lead time = First mover advantage (time is most important)

Question 3

Legal mechanisms for protection

Answer 3

• Patents
• Copyrights
• Trademarks
• Trade Secrets

Question 4

Patents

Answer 4

• Def: Right of the inventor to exclude others from using his invention
• Requirements: Filling a document and apply for patent/ 1. Novel/ 2. Useful/ 3. Not Obvious
• Time: 20 years from the day it is granted (Application usually takes 2 years)
• Application: 1. Inventor must explain how to make and use invention/ 2. Inventor must explain what’s new in invention
• Types: 1. Utility Patents (Processes, machines..)/ 2. Design Patents/ 3. Plant Patents
• Patents only protect of imitation but not substitution
• Granting date up on the page, Application date down, abstract defines the extend of the protection

Question 5

Difficulties related to business model and algorithm patents

Answer 5

• High scope of content to be reviewed
• Difficult to demonstrate as novel
• Highly debated
• Risky
• Expensive

Question 6

Trademarks

Answer 6

• Def: Trademark is an indicator that is used to distinguish source of good from one party from the goods of others/ Right to stop others from confusing your potential customers
• Time: Limitless duration as long as trademark is in use
• Requirements: Does not require certification but brings public notice and international legal security
• Can be a word, phrase, symbol, design and other indicators

Question 7

Copyrights

Answer 7

• Def: Form of protection granted to work of authorship/ Right to exclude others from using/reproducing creative work
• Only if work is fixed in a tangible form (e.g. not recorded speech is not)
• Requirements: Registration is not necessary (but it is useful)
• Time: Duration of 70 years after the authors death

Question 8

Trade Secrets Law

Answer 8

• Def: Trade secret is an information that belongs to a business/ Right to keep information or knowledge as a secret
• Time: As long as the information is kept secret and is not independently discovered
• Requirements: 1. Economical advantage to the company/ 2. Generally unknown/ 3. Remains valuable as long as information remains private
• Can be protected through 1. Confidentiality agreements/ 2. Non-disclosure agreements/ 3. Non-compete agreements (All requirements must be fulfilled in contracts)

Question 9

Copyright vs. Patents

Answer 9

• Idea (Patent) and Expression (Copyright)
• Functional (Patent) and Symbolic (Copyright)
• Non-literal (Patent) vs. Literal (Copyright)

Question 10

Twitter

Answer 10

• Copyright protection because logo is artistic expression
• Trademark protection because logo is face and brand of the company in commerce
• General: Trade-off between patents and trade secrets -> Patents give stronger protection but limited time/ Trade-secrets can be discovered randomly but are unlimited