Monday, October 12, 2009

The missing ingredient in Ireland's Smart Economy Strategy

My two passions are intellectual property and Ireland, the land of saints and scholars. I believe that IP has a role to play in Ireland's future development.

Below is the text of my opinion piece that appears in the current edition of "Business & Finance" magazine (used with permission).

Illustrations from the history of innovation

A simple history lesson of innovation includes the story of Alexander Graham Bell, who issued his patent for the telephone system at noon on February 14th 1876.

Elisha Gray, another inventor, registered an application for his own telephone invention a few hours later on the same day. Losing that race consigned Elisha Gray to a footnote in innovation history.

Despite parallel inventions by people such as Gray, Bourseul, Meucci, Reis, Manzetti and several others, every schoolchild will tell you that the inventor of the telephone is Alexander Graham Bell.

Apart from notoriety, the invention also brought him great commercial success. He founded the Bell Telephone Company whose successor still survives more than 130 years later as AT&T, ranked #8 in the Fortune 500.

The patent for the telephone is credited with being the most valuable patent of all time. Bell was fortunate to have the support of Gardiner G. Hubbard, a prominent lawyer and entrepreneur. Hubbard gave Bell the finance and access to patent legal advice. He also had the political connections to change the regulatory environment to enable the creation of a telephone infrastructure and industry.

There are numerous similar examples throughout history of parallel development of inventions. The Nobel prize-winning transistor was invented by AT&T in the USA in 1948. It was invented independently in the same year by two German physicists. Canon in Japan and Hewlett Packard in the USA both came up with the concept of the inkjet printer in 1997. Colour photography, the thermometer and the typewriter are other examples of near-simultaneous multiple invention.

The first person to protect the invention with a patent becomes the victor in a winner-takes-all race.

Astronomers looking for new stars have the best chance of being first if they have (a) the most powerful telescope and (b) previous experience in finding stars.

It is the same for inventors. Inventions happen in disproportionately greater numbers where there is a large amount of activity geared specifically towards discovery. According to research at Harvard University, there is a greater probability of success where large multi-disciplinary teams are specifically charged with the task of innovating.

What does this mean for Ireland’s Smart Economy?

It is vital for Ireland to continue investing in R&D. However, it would be foolish to think the country can easily acquire the capacity to punch above its weight on the global stage. As an illustration, Science Foundation Ireland's stated target is to increase patent filings to 500 over the next 5 years. Germany's Robert Bosch company will file more than 6,000 patent applications in the same period.

The title "Smart Economy" carries so much potential. It conjures up the image of our economy being rescued by the brains that have been cultivated in the Land of Saints and Scholars.

The logic behind that goes something like this:
If enough money and effort is invested in R&D, the sheer weight of the effort will produce inventions.

  1. If a sufficient number of inventions are produced, some of them will be novel, inventive and useful.
  2. These inventions are capable of being protected by patents.
  3. If enough patents are produced, some of them will be commercially successful.
  4. With luck, some of them will generate enough income to justify the whole R&D effort.

However, this is like a sequence of funnels. The outputs of each stage cascade into the next one with losses accumulated at each stage. Just like the astronomer looking for new stars, the probability of success is greater if there is sufficient quantum of investment combined with a very large measure of luck.

Push and Pull Strategies

In all the talk of “Smart Economy”, people have become so dazzled by the word “Smart”, that they have forgotten the second word “Economy”.

Successful strategies involve a combination of Push and Pull. Investing in R&D is the smart “push” element. Commercialising the IP leads to a profit, which is the economic “pull” element. Merging these two gives the unbeatable combination of a Smart Economy.

Commercialisation is the process whereby intellectual assets such as patents, copyright, trademarks etc. are put to use and profits generated. The intellectual assets can be home-grown or they can be generated elsewhere. Commercialisation of IP is a lower-risk proposition because it is dealing with IP that has already been generated. While the value of the IP may not be clear, there is no R&D uncertainty about whether or not the investment will generate IP at the end of the process.

It goes without saying that different skills are required to commercialise the knowledge from those necessary for its generation. Patent commercialisation requires the artful combination of three competencies:

  • Legal, because the patent is a legal protection. It requires understanding of the patent assets, infringement, legal remedies and licensing contracts.
  • Technical, because the subject matter of the patent is essentially technical. There must be an ability to identify products that potentially infringe the IP.
  • Commercial, because of the complex negotiations involved in reaching agreement.

Ireland’s advantage, Ireland’s opportunity

The nature of Ireland’s education system and global economic exposure through the recent years means that there are pools of these competencies readily available.

If Ireland can become a centre for commercialising IP from corporations around the world, we build an unassailable reputation as a smart economy by leveraging the fruits of other countries' R&D.

That clear path to profit from knowledge is an economic incentive to invest in R&D that may even outweigh grants or tax reductions.

About the Author:
Raymond Hegarty, based in Luxembourg, is CEO of IP Foundation. He has broad experience of intellectual property and global technology transfer.

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