Description\n \n\n\n\n\n\n\n\n\n\n Course Learning Outcomes-Covered\n \n\n\n\n\n\n\n\n\n\n\n Explain of the concepts, models for formulating strategies, defining the organizational strategic directions and crafting a deployment strategy.\n \n\n\n\n\n\n\n\n\n\n\n Reference Source:\n \n\n\n\n\n Textbook:-\n \n\n\n\n\n Schilling M.A (2020),\n \n Strategic Management of Technology Innovation (6th Edition)\n \n . Mc-Graw Hill Education. Electronic Version: ISBN-13: 978-1260087956ISBN-10: 1260087956, Printed Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956\n \n\n\n\n\n\n\n\n\n\n\n\n Assignment 2Weight:\n \n\n\n 15 Marks\n \n\n\n\n\n\n\n\n\n\n\n\n\n Students are requested to read chapter 9 “Protecting Innovation” from their book Strategic Management of Technological Innovation.\n \n\n\n\n\n\n\n\n\n\n\n\n Based on the conceptual knowledge and understanding obtained from the readings: -\n \n\n\n\n\n\n\n\n\n\n\n\n 1-Select a world-renowned company give a brief introduction and identify the legal protection mechanisms (patents copyright, trademarks & service marks) used by it to safeguard its innovations.(5 Marks) (Max 750- Min 500 Words)\n \n\n\n\n\n\n\n\n\n\n\n\n 2 -What factors do you believe influenced the choice of protection mechanisms used to safeguard its innovations? Do you think thestrategy was a good choice?\n \n\n\n\n\n\n (5 Marks) (Max 750 – Min 500 Words)\n \n\n\n\n\n\n\n\n\n\n\n\n 3- With a thorough research of your selected company identify and explain an incident when trade secrets were more useful than the legal protection measures identified above. (5 Marks) (Max 750 – Min 500 Words)\n \n\n\n\n\n\n\n\n\n\n\n\n Note :-\n \n\n\n\n\n\n\n Only reading the textbook will not be enough to score grades or answer the questions appropriately.\n \n\n\n\n\n\n Do adhere to the word limit strictly, mere one or two sentence answers will not be entertained, they need to be supported with further explanation and facts.\n \n\n\n\n\n\n It is mandatory to support each answer with at least two scholarly, peer-reviewed journals.\n \n\n\n\n\n\n\n\n\n\n\n QUESTIONS:\n \n\n\n\n\n\n\n\n\n\n Directions:\n \n\n\n\n\n All students are encouraged to use their own words.\n \n\n Use Saudi Electronic University academic writing standards and APA style guidelines.\n \n\n Use proper referencing (APA style) to reference, other styles will not be accepted.\n \n\n Support your submission with course material concepts, principles, and theories from the textbook and at least two scholarly, peer-reviewed journal articles unless the assignment calls for more.\n \n\n It is strongly encouraged that you submit all assignments into the safe assignment Originality Check prior to submitting it to your instructor for grading and review the grading rubric to understand how you will be graded for this assignment.\n \n\n\n\n\n\n\n\n\nالمملكة العربية السعودية\nوزارة التعليم\nالجامعة السعودية اإللكترونية\nKingdom of Saudi Arabia\nMinistry of Education\nSaudi Electronic University\nCollege of Administrative and Financial Sciences\nAssignment 2\nManagement of Technology (MGT 325)\nDue Date: 12/11/2022 @ 23:59\nCourse Name:Management of Technology\nStudent’s Name:\nCourse Code: MGT325\nStudent’s ID Number:\nSemester: 1st Term-Semester-1\nCRN:14635\nAcademic Year:2022-23\nFor Instructor’s Use only\nInstructor’s Name: Dr. Umme Hani\nStudents’ Grade: 00 /15\nLevel of Marks: High/Middle/Low\nInstructions – PLEASE READ THEM CAREFULLY\n• The Assignment must be submitted on Blackboard (WORD format only) via\nallocated folder.\n• Assignments submitted through email will not be accepted.\n• Students are advised to make their work clear and well presented, marks may be\nreduced for poor presentation. This includes filling your information on the cover\npage.\n• Students must mention question number clearly in their answer.\n• Late submission will NOT be accepted.\n• Avoid plagiarism, the work should be in your own words, copying from students or\nother resources without proper referencing will result in ZERO marks. No exceptions.\n• All answered must be typed usingTimes New Roman (size 12, double-spaced) font.\nNo pictures containing text will be accepted and will be considered plagiarism).\n• Submissions without this cover page will NOT be accepted.\nCourse Learning Outcomes-Covered\n➢ Explain of the concepts, models for formulating strategies, defining the organizational\nstrategic directions and crafting a deployment strategy.\nReference Source:\nTextbook:Schilling M.A (2020),Strategic Management of Technology Innovation (6th Edition). McGraw Hill Education. Electronic Version: ISBN-13: 978-1260087956 ISBN-10:\n1260087956, Printed Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956\nAssignment 2Weight:15 Marks\nStudents are requested to read chapter 9 “Protecting Innovation” from their book\nStrategic Management of Technological Innovation.\nBased on the conceptual knowledge and understanding obtained from the readings: 1-Select a world-renowned company give a brief introduction and identify the legal\nprotection mechanisms (patents copyright, trademarks & service marks) used by it to\nsafeguard its innovations. (5 Marks) (Max 750- Min 500 Words)\n2 -What factors do you believe influenced the choice of protection mechanisms used to\nsafeguard its innovations? Do you think thestrategy was a good choice?\n(5 Marks) (Max 750 – Min 500 Words)\n3- With a thorough research of your selected company identify and explain an incident\nwhen trade secrets were more useful than the legal protection measures identified above.\n(5 Marks) (Max 750 – Min 500 Words)\nNote :-\n➢ Only reading the textbook will not be enough to score grades or answer the\nquestions appropriately.\n➢ Do adhere to the word limit strictly, mere one or two sentence answers will not be\nentertained, they need to be supported with further explanation and facts.\n➢ It is mandatory to support each answer with at least two scholarly, peer-reviewed\njournals.\nQUESTIONS:\nDirections:\n✓ All students are encouraged to use their own words.\n✓ Use Saudi Electronic University academic writing standards and APA style\nguidelines.\n✓ Use proper referencing (APA style) to reference, other styles will not be accepted.\n✓ Support your submission with course material concepts, principles, and theories from\nthe textbook and at least two scholarly, peer-reviewed journal articles unless the\nassignment calls for more.\n✓ It is strongly encouraged that you submit all assignments into the safe assignment\nOriginality Check prior to submitting it to your instructor for grading and review the\ngrading rubric to understand how you will be graded for this assignment.\nChapter Nine\nProtecting Innovation\nThe Digital Music Distribution Revolutiona\nFraunhofer and MP3\nIn 1991, Fraunhofer IIS of Germany developed an algorithm that would set in\nmotion a revolution in how music was distributed, stored, and consumed. The\nalgorithm (commonly referred to as a codec) allowed compression of digital\naudio to approximately one-tenth of its original size with minimal compromise\nin audible quality. The format also enabled song information such as the song\ntitle and artist to be embedded within the file. This format for compressed audio\nfiles was later dubbed MPEG-1 layer 3—a.k.a. MP3. By 1995, software programs\nwere available that enabled consumers to convert tracks from compact discs\nto MP3 files. This technology transformed how music could be manipulated—a\nsong was now a file that could be kept on a hard drive, and the file was small\nenough to be shared over the Internet. The MP3 format became wildly popular by users sharing their music online, and software companies began releasing many variants of MP3 encoders (utilities that compress files into MP3s) and\ndecoders (utilities that play back MP3s). Hardware manufacturers decided to\ncapitalize on this new trend and several hardware MP3 players began appearing\non the market.\nWith the growing popularity of the file format, Fraunhofer was faced with\na dilemma—should it enforce its patent on the use of the MP3 algorithm and\nattempt to collect royalties for its use, or should it allow users and software/hardware manufacturers to make free use of the algorithm, allowing the momentum\nof the format to build? If it was to limit the use of the algorithm, it faced the risk of\nestablished rivals such as Microsoft and Sony developing competing formats, yet\nif it allowed free use of the algorithm, it would be difficult to profit on its invention.\nFraunhofer decided to pursue a partially open licensing approach, partnering with Thomson Multimedia as the exclusive licensing representative of MP3\npatents in 1995.b Thomson, in turn, negotiated agreements with several companies including Apple, Adobe, Creative Labs, Microsoft, and many others. Such a\nbroad base of MP3 licensees (100 by April 2001) provided consumers with easy\naccess to encoders, decoders, and the format in general. Licensees generally\n197\n198 Part Two Formulating Technological Innovation Strategy\nopted to provide decoders free of charge, while charging a nominal fee to those\nwho wished to encode MP3s.\nFraunhofer continued to innovate, introducing the mp3PRO format and working on the Advanced Audio Coding (AAC) format with Dolby that Apple would\nlater use. Many other companies also developed or adapted their own audio\ncompression codecs including Sony (ATRAC codec, originally developed in 1991\nfor use with Mini Discsc) and Microsoft (WMA, launched in April 1999d). However,\nby 1996, MP3s could be found on computers worldwide, and it appeared that\nMP3 had won the battle for dominant design in compressed audio formats.\nNapster Takes the Lead\nIn 1999, while a student at Northeastern University in Boston, Shawn Fanning\nreleased Napster—a software program that allowed users with Internet access to\neasily share MP3 files. Napster provided a user-friendly solution to music fans wishing to share and find music online. Napster provided a user interface with a search\nbox that pointed individuals to other users with the files they wished to download.\nThe Napster servers did not host any MP3 files; rather they hosted a database with\ninformation on which users had which files to share and whether they were online,\nand connected one computer to another for downloading. Napster was one of the\nfirst widely adopted “peer-to-peer” applications, and helped popularize the term.\nNapster was free, and as the growing number of people with Internet access\nrealized, so was the music that it allowed them to access. Users were increasingly trading copyrighted material—commercial records and songs. In fact, the\ngreat majority of music downloaded through Napster was copyrighted material.\nBy March 2000, 5 million copies of Napster had already been downloaded.e At\nits peak, there were 70 million Napster users.f\nWhile “music pirates” around the world embraced Napster, the Recording\nIndustry Association of America (RIAA), the trade group that represents the leading music business entities in the United States, grew increasingly alarmed. The\nRIAA worried that the growing illegal trade of music would result in a loss of profits for its constituents—record labels that owned the rights to much of the popular\ncommercial music that was being traded online. The RIAA initiated legal action\nagainst Napster and Napster users in an effort to take the service offline and\ncurtail illegal file sharing. This move was controversial for several reasons. Some\nanalysts believed that it would be difficult to fight a technological advance such\nas this by legal action alone, and that the RIAA would not be successful unless it\noffered a legitimate alternative for users who wished to purchase music online.\nOther analysts took an even stronger stance, arguing that the record labels were\nnot only fighting to protect the rights of artists, but to protect a business model\nthat had become outdated.g They argued that the popularity of Napster was partially due to the rigid and overpriced traditional music distribution model, where\nfans were forced to buy albums for prices that some felt were inflated, and did\nnot have the choice to buy individual songs. This was not the first time the entertainment industry had resisted a change in business models and was reluctant\nto embrace a new technology. A 2001 article in The Economist pointed out that\n“Phonographs were going to kill sheet music, the rise of radio threatened to\nChapter 9 Protecting Innovation 199\nundermine sales of phonograph discs, video recorders were going to wipe out\nthe film industry, and cassette recorders spelt doom for the music business. . . . In\neach case, their fears proved unfounded. The new technologies expanded the\nmarkets in unprecedented ways.”h Some commentators believed that the new\ntechnology could be beneficial for the recording industry. If harnessed appropriately, it could enable an inexpensive distribution method, as well as direct\nintimate interaction with consumers that allowed for targeted marketing.\nIn 2001, Napster offered the RIAA a partnership that included a legitimate digital distribution model that would make online music available via a subscription\nservice. The RIAA declined, and instead continued to pursue a legal judgment\nagainst Napster. In July 2001, the court ruled in the RIAA’s favor, and the Napster\nservice was taken offline. It was a blow to peer-to-peer fans worldwide.\nThough the record labels had won the battle against Napster, they began to\nrealize the war was far from over. Services similar to Napster began to sprout up\nonline, offering “users in the know” the opportunity to continue pirating music.\nThe record labels continued to pursue legal action against peer-to-peer services and users who engaged in illegal file trading, while coming to terms with\nthe need to offer a legitimate alternative service. Subsequently, Warner Music\nteamed up with BMG, EMI, and RealNetworks to introduce MusicNet, and Sony\nEntertainment and Universal created Pressplay, both of which were subscription services that enabled individuals to download music legally from the Web.\nHowever, in an attempt to control their music catalogs, the labels used proprietary file formats and severely limiting digital rights management (DRM) schemes\nthat confused users. Furthermore, neither service offered the breadth of selection offered by unauthorized peer-to-peer services such Kazaa or Gnutella. The\npopularity of peer-to-peer music swapping continued to grow. The RIAA needed\na savior. Steve Jobs offered to be that guy.\niTunes Just in Time\nOn April 28, 2003, Apple opened its iTunes Music Store. After striking agreements\nwith the five major record labels (Sony, Universal, BMG, Warner Music Group, and\nEMI), iTunes launched with an initial catalogs of 200,000 songs for purchase at\n99 cents per song.i iTunes showed immediate signs of success, boasting 50 million\ndownloads within the first year, and quickly became the leading distributor of music\nonline.j Apple got the blessing of the recording industry after guaranteeing them\nthat the files offered via the Music Store would allow for protection against illegal\nsharing thanks to the “FairPlay” DRM scheme. In essence, the iTunes Music Store\noffered audio in two file formats—Advanced Audio Coding (AAC) and modified\nMP3s. With Apple’s Fairplay DRM, song files could be loaded on up to five computers only, and could not be played on non-iPod MP3 players. In addition, the files\ncould not be e-mailed or distributed over the Web, and files were “hidden” on the\niPod through a subdirectory structure that made it difficult to copy songs from a\nfriend’s iPod. All of these features helped to prevent users from mass-distributing\nsongs to others, helping to ease the minds of record company executives.\nThe success of iTunes was fueled by a number of factors. The company\nhad a “cool” image that was attractive to the recording industry and users alike.\n200 Part Two Formulating Technological Innovation Strategy\nThe company also used the familiar MP3 format, offered an attractive price tag\nfor online music, and its licensing agreements with all five major labels enabled\nit to offer a one-stop source for customers. In addition, the FairPlay DRM was not\nas restrictive as other competing formats,k and this was important to many users.\nThe success of iTunes was also accelerated by the success of Apple’s iPods.\niPods are hard-disk–based portable MP3 players that are well designed, well\nmarketed, and user-friendly. Though there had been some criticisms concerning their dependability (chiefly related to battery life)l and sound quality issues,m\ncasual music consumers took to these players in large numbers. To the appreciation of the RIAA, the iPods required synchronization with one’s music collection\nvia the iTunes application, thereby making it difficult to share music stored on the\niPod, or purchased from iTunes.\nThe recording industry had found a new channel of distribution that earned\nsignificant revenues (about $0.70 of every $0.99 sale on iTunes is delivered\ndirectly to the record labelsn), and Apple had licensing agreements with all the\nmajor labels, which afforded Apple access to huge catalogs. Apple leveraged\nthese catalogs to entice users to buy music through its iTunes Music Store, and\nthis in turn helped drive sales of the Apple iPod, since files bought on iTunes\ncould not be played on rival MP3 players. Apple was well positioned, but threats\nloomed on the horizon.\nIn March 2006, the French National Assembly approved a bill requiring Apple\nto open its FairPlay DRM technology to industry rivals in France.o This meant that\nApple would have to allow songs downloaded from the French iTunes Music\nStore to be played on non-iPod MP3 players, and that iPods would need to play\ncompeting file formats, such as Sony’s ATRAC3 files purchased through the Sony\nConnect online music store. Many users could appreciate this interoperability, yet\nit would challenge the “single operator license model” that had eased the minds\nof the recording industry and created a large and loyal customer base for Apple.\nInitially analysts speculated that Apple would withdraw from the French market,\nbut instead Apple began working on negotiating fewer DRM restrictions from\nthe record labels. By March of 2009, Apple had convinced all the major labels\nto permit their songs to be sold through iTunes without DRM. In return, Apple\nadopted the tiered pricing model that the major labels had long requested.\nThe rise of smartphones that could hold users’ music digital libraries in addition\nto offering a host of other useful functions helped to fuel the growth of digital music\nsales. By 2011, digital music sales exceeded physical sales in both the United\nStates and South Korea, and by 2016 digital music sales exceeded physical music\nsales in roughly half of the major music markets of the world.p However, an even\nbigger transition was also changing the landscape of music. Rapidly growing services such as Spotify, Pandora, and Apple Music were now streaming music over\nthe Internet, enabling listeners to hear whatever music they wanted, whenever they\nwanted, on a wide range of devices, without the user ever taking ownership of the\nmusic. Though many had feared that a transition to streaming would be disastrous\nto the recorded music industry, instead paid music streaming subscriptions fueled\nrecord-setting market growth. In 2016, the global recorded music market grew by\nalmost 6 percent—the highest rate since 1997—to a total of US$15.7 billion.\nChapter 9 Protecting Innovation 201\nDiscussion Questions\n1. What industry conditions led to the revolution in audio distribution described\nabove? Which stakeholders stand to benefit most (or least) from this revolution?\n2. Why did the music stores created by the record labels fail to attract many subscribers? What, if anything, should the record labels have done differently?\n3. What factors led iTunes to be successful?\n4. How do you think a move away from owning music led to record-setting\nmusic revenues?\na\nAdapted from a New York University teaching case by Shachar Gilad, Christopher Preston, and Melissa\nA. Schilling.\nb\n“Thomson Multimedia Signs 100th mp3 Licensee,” press release (PR Newswire), April 18, 2001.\nc\nJunko Yoshida, “Sony Sounds Off about Mini Disc,” Electronic World News, no. 41 (June 3, 1991), p.15.\nd\nJack Schofield, “Music Definitions,” The Guardian, October 5, 2000, p. 3.\ne\nKarl Taro Greenfeld, “The Free Juke Box: College Kids Are Using New, Simple Software Like Napster to\nHelp Themselves to Pirated Music,” Time, March 27, 2000, p. 82.\nf\nMichael Gowan, “Easy as MP3,” PC World 19, no. 11 (November 2001), p. 110.\ng\n“The Same Old Song,” The Economist 358, no. 8210 (January 24, 2002), pp. 19, 20.\nh\nIbid.\ni\nMichael Amicone, “Apple Took a Big Bite Out of the Market,” Billboard 116, no. 16 (April 17, 2004), p. 2.\nj\n“iTunes Music Store Downloads Top 50 Million Songs,” press release, March 15, 2004.\nk\nIbid.\nl\n“Apple Faces Class Action Suits on iPod Battery,” Reuters, February 10, 2004.\nm\nRandall Stross, “From a High-Tech System, Low-Fi Music,” New York Times, July 4, 2004, p. 3.\nn\nAlex Veiga, “Recording Labels, Apple Split over Pricing,” Associated Press, April 2, 2006.\no\nRob Pegoraro, “France Takes a Shot at iTunes,” WashingtonPost.com, March 26, 2006, p. F06.\np\nInternational Federation of the Phonographic Industry Global Music Report 2017.\nOVERVIEW\nA crucial element of formulating a firm’s technological innovation strategy is determining whether and how to protect its technological innovation. Traditionally, economics and strategy have emphasized the importance of vigorously protecting an\ninnovation in order to be the primary beneficiary of the innovation’s rewards, but the\ndecision about whether and to what degree to protect an innovation is actually complex. Sometimes not vigorously protecting a technology is to the firm’s advantage—\nencouraging other producers (and complementary goods providers) to support the\ntechnology may increase its rate of diffusion and its likelihood of rising to the position of\ndominant design. In this chapter, we first will review the factors that shape the degree\nto which a firm is likely to appropriate the returns from its innovation, and the mechanisms available to the firm to protect its innovation. We then will consider the continuum between a wholly proprietary strategy and a wholly open strategy, examining\nthe trade-offs inherent in decisions about whether (and to what degree) to protect or\ndiffuse a technological innovation. The chapter concludes by listing factors the firm\nshould consider in formulating its protection strategy.\n202 Part Two Formulating Technological Innovation Strategy\nAPPROPRIABILITY\nappropriability\nThe degree to\nwhich a firm is\nable to capture\nthe rents from its\ninnovation.\ntacit\nknowledge\nKnowledge that\ncannot be readily\ncodified or transferred in written\nform.\nsocially\ncomplex\nknowledge\nKnowledge\nthat arises from\nthe interaction\nof multiple\nindividuals.\nThe degree to which a firm can capture the rents from its innovation is termed\nappropriability. In general, the appropriability of an innovation is determined by how\neasily or quickly competitors can imitate the innovation. The ease with which competitors can imitate the innovation is, in turn, a function of both the nature of the technology itself and the strength of the mechanisms used to protect the innovation.\nSome technological innovations are inherently difficult for competitors to copy; the\nknowledge underlying the technology may be rare and difficult to replicate. A firm’s\nunique prior experience or talent pool may give it a foundation of technical know-how\nthat its competitors do not possess. If this knowledge base is tacit (i.e., it cannot be readily codified into documents or procedures) or socially complex (i.e., it arises through\ncomplex interactions between people), competitors will typically find it very difficult to\nduplicate.1 For example, a firm that has a team of uniquely talented research scientists\nmay have a rare and difficult-to-imitate knowledge base. While some of the skill of the\nresearch scientists may be due to imitable training procedures, talent typically implies\nthat an individual (or group) has a natural endowment or ability that is very difficult,\nif not impossible, to replicate through training. Furthermore, if the unique capabilities\nof the research team arise in part from the nature of the interactions between the scientists, their performance will be socially complex. Interactions between individuals can\nsignificantly shape what each individual perceives, and thus what each individual—and\nthe collective group—discovers or learns. The outcomes of these interactions are path\ndependent, and thus are idiosyncratic to the combination of individuals, the moment of\nthe interaction, and the nature of the interaction. This means that knowledge can emerge\nfrom the interaction of a group that could not be replicated by any individual or any\ndifferent group.\nMany innovations, however, are relatively easy for competitors to imitate. Individuals and firms often employ legal mechanisms to attempt to protect their innovations.\nMost countries offer legal protection for intellectual property in the form of patent,\ntrademark, copyright, and trade secret laws.\nPATENTS, TRADEMARKS, AND COPYRIGHTS\npatent\nA property right\nprotecting a process, machine,\nmanufactured\nitem (or design\nfor manufactured\nitem), or variety\nof plant.\ntrademark\nAn indicator\nused to distinguish the source\nof a good.\nWhile patents, copyrights, and trademarks are all ways of protecting intellectual property, they are each designed to protect different things. A patent protects an invention, and a trademark protects words or symbols intended to distinguish the source\nof a good. A copyright protects an original artistic or literary work. Thus, a typical\ncomputer might have components whose designs are protected by patents, logos such\nas the Starbuck’s mermaid that are protected by trademark law, and software that is\nprotected by copyright (though as discussed later in the section on patents, many types\nof software are now also eligible for patent protection).\nThe purpose of intellectual property protection is to provide recognition and incentive for creative work. Patents and copyrights, for example, provide a legal means for\nindividuals to protect their creative work and earn rewards from it, in exchange for\nmaking the knowledge underlying their work public. Making this knowledge public is\nimportant because it helps others to build upon that knowledge, driving technological\nChapter 9 Protecting Innovation 203\ncopyright\nA property right\nprotecting works\nof authorship.\nand social advance. In absence of those protections, people might prefer to keep their\ndiscoveries and inventions secret.\nPatents\nIn many countries, inventors can apply for patent protection for their inventions. An\ninvention can be a product, such as a new type of battery, or a process, such as a new\nway to manufacture bagels. In the United States, patents are categorized into different\ntypes such as a utility patent for a new and useful process, machine, manufactured item,\nor combination of materials; a design patent for an original and ornamental design for\na manufactured item; or a plant patent for the discovery and asexual reproduction of a\ndistinct and new variety of plant.\nEach country has its own patent system with different requirements, and unless a\npatent is filed under a regional patent office or an international treaty, the rights it is\ngranted are applicable only in the country in which the patent is filed.\nTo qualify for a patent, an invention must usually meet the following criteria:\n1. It must be useful (i.e., it must produce a desirable result, solve a problem, improve\non or propose a new use for an existing development or show potential of doing so).\n2. It must be novel (i.e., it must not already be patented or described in public literature, or be in public use for more than a year).\n3. It must not be obvious (i.e., a person with experience or skill in the particular art\nof the patent would not be expected to achieve the same invention with a normal\namount of effort).\nIn most countries, the discovery of scientific principles that pertain to natural laws\n(e.g., gravity) cannot be patented because they are considered to have always existed.\nAdditionally, the following are not typically patentable:\n∙\n∙\n∙\n∙\n∙\nSubstituting one material for another (e.g., plastic for metal).\nMerely changing the size of an already existing device.\nMaking something more portable.\nSubstituting an element for an equivalent element.\nAltering an item’s shape.\nPrinted materials are not typically patentable, but it may be possible to protect them\nby copyright, as discussed in the next section. Historically software algorithms were\nnot considered patentable, but in 1998, a U.S. Supreme Court case upheld a patent\non a computerized method of managing mutual funds that relied on software algorithms, unleashing a flood of patent applications for software. From 1997 to 2000,\npatent filings in the United States for software-enabled methods of doing business\nincreased more than 700 percent.2 For example, Amazon patented its “1-click” system\nthat streamlines the process by which customers place orders.3\nPatenting an invention is a serious undertaking. To apply for a patent, the inventor must explain how to make and use the invention, and make claims about what\nit does that makes it a new invention. Drawings of the new invention are also often\nrequired. In the United States, this application is reviewed by a patent examiner who\nmay modify the scope of the claims made by the patent. The patent is then published\n204 Part Two Formulating Technological Innovation Strategy\nFIGURE 9.1\nPatent\nApplications\nin 2015 and\n2016 in the 10\nLargest Patent\nOffices around\nthe World\nSource: WIPO Patent\nStatistics Database,\nSeptember 2017.\nAustralia\nCanada\nRussian Federation\nIndia\nGermany\nEuropean Patent Office\nRep. of Korea\nJapan\nUnited States\nChina\n–\nPatent applications 2016\n500,000\n1,000,000\n1,500,000\nPatent applications 2015\nfor a time in which other inventors can challenge the patent grant (if, e.g., they believe\nthat the patent infringes on previously granted patents). If the standards for patentability are met, the patent is then granted. The entire process from application to granting\nis lengthy. For example, the time from filing to grant is between two and five years\nin the United States, three and five years in Europe, five and six years in Japan, and\nfive and seven years in India. In industries in which product lifecycles are short, such\ndelays significantly diminish the usefulness of patenting. This has led to a number of\nproposals for how the patenting system might be reformed to make it more efficient.\nThe number of patent applications being filed is growing around the world, but\nnowhere faster than China, which had both the largest number of patent applications\nin 2015 and 2016, and the largest rate of growth in patent applications (21.5 percent)\nbetween 2015 and 2016 (see Figure 9.1).\nA number of costs are also involved in filing and maintaining a patent. Fees vary\nby patenting office. In the United States, the entire patenting process for a “small\nentity” (e.g., an independent inventor, a small business, or a nonprofit organization)\ncosts around $1500 in filing fees (and roughly double that for large entities), and\n$5000–$10,000 in attorney fees. In most countries, patent protection lasts for 20 years.\nIn a major study of historical success rates for U.S. patent applications, Michael\nCarley, Deepak Hegde, and Alan Marco followed the history of the 2.15 million new\npatent applications filed at the USPTO after 1996 and found that only 55.8 percent\nof the applications became granted. Patent applications in the “Drugs and Medical\nInstruments” sector had the lowest success on average (42.8 percent), and applications\nin the “Electrical and Electronics” had the highest (66.6 percent). They also found that\nsuccess was generally lower for small firms and that overall, success rates for all types\nof applications had gone down over time.4\nMajor International Patent Treaties\nThere is currently no “world patent,” and a patent granted in one country does not\nautomatically provide protection in other countries. In some regions, however, there\nChapter 9 Protecting Innovation 205\nare regional patent offices (such as the European Patent Office and the Africa Regional\nIntellectual Property Organization) that grant patents valid in all the member nations\nof that program.\nSignificant differences exist in national patent laws. For example, in most countries, publication of information about the invention before applying for a patent will\nbar the right to a patent, but the United States allows a one-year grace period (i.e., an\ninventor can publish an invention up to a year before applying for the patent). Thus,\nif international patent protection will eventually be sought, inventors must uphold the\nstricter standard of applying for patent before publishing information about the patent, even if they plan to first patent the invention in the United States. Many countries\nalso require that the invention be manufactured in the country in which a patent was\ngranted within a certain time frame (often three years) from the time the patent is\ngranted. This is called the “working requirement,” and it effectively prevents inventors from patenting inventions in countries in which they have no intention of setting\nup production.\nMany inventors wish to patent their inventions in many countries simultaneously.\nTo make that easier, several international treaties have been negotiated between countries that seek to harmonize the patent laws around the world. Two of the most significant are the Paris Convention for the Protection of Industrial Property and the Patent\nCooperation Treaty.\nThe Paris Convention for the Protection of Industrial Property (also known as the\nParis Convention Priority) is an international intellectual property treaty adhered to by\n177 countries as of March 2018. Under the Paris Convention, a citizen of any member\ncountry may patent an invention in any of the member countries and enjoy the same\nbenefits of patent protection as if the inventor were a citizen of those countries. That\nis, the Paris Convention eliminates (for its member countries) any differential patent\nrights afforded to citizens of the country versus foreign nationals. Furthermore, the\ntreaty also provides the right of “priority” for patents and trademarks. Once an inventor has applied for patent protection in one of the member countries, the inventor may\n(within a certain time period) apply for protection in all the other member countries.\nThe time period is 12 months for utility patents and six months for design patents and\ntrademarks. Most important, the applications to these later countries will be treated as\nif they were made on the same date as the first application. This enables the inventor to\nestablish priority over any other patents applied for in those countries after the inventor made the first application. For example, if an inventor applied for a utility patent\nfor an invention in Madagascar in January 2003, and another inventor applied for a\npatent for a very similar invention in France in June 2003, the Madagascar inventor\ncould have applied for patent protection in France in December 2003 and claim priority over the French invention. The French inventor would have to prove that his or her\ninvention was substantively different from the Madagascar invention, or the French\ninventor’s patent would be denied.\nAs mentioned previously, in many countries, public disclosure of an invention\nmakes it impossible to subsequently patent that invention. However, with the priority\nrights established under the Paris Convention, an inventor who patents an invention in\none of the member countries can then publicly disclose information about that invention without losing the right to patent the invention in the other countries—each patent\n206 Part Two Formulating Technological Innovation Strategy\napplication will be treated as if it were applied for at the same time as the first application, and thus as if it were applied for before public disclosure. Without this treaty, it\nwould be nearly impossible for an inventor to patent an invention first in the United\nStates and then in other countries because U.S. patent applications are made available\nto the public.\nAnother very significant international patent treaty is the Patent Cooperation\nTreaty, or PCT. This treaty facilitates the application for a patent in multiple countries. An inventor can apply for a patent to a single PCT governmental receiving\noffice, and that application reserves the inventor’s right to file for patent protection in\n152 countries for up to two-and-half years. Once the inventor has filed the application,\na PCT governmental searching office will perform the patent search for the application\n(this search verifies that the invention is not already subject to a prior claim). Once the\nsearch is completed, the inventor can choose to enter Chapter II of the process wherein\nthe PCT governmental office assesses the patentability of the invention subject to the\nstandards of the Patent Cooperation Treaty. Eventually, the inventor must have the\nPCT application filed in each of the national patent offices in which the inventor is\nseeking protection.\nFiling a single PCT application offers numerous advantages. First, applying for the\nPCT patent buys the inventor the option to apply to multiple nations later without committing the inventor to the expense of those multiple applications. With a PCT application, the inventor can establish a date of application in multiple countries (protecting\nthe inventor’s priority over later claims), while paying only the single PCT application fee rather than the numerous national application fees. Though the inventor will\neventually have to pay for national applications in the countries in which protection\nis sought, the inventor can delay those costs. Thus, the inventor has time to assess the\nlikelihood of the patent being granted and the potential profitability of the invention. If\nthe PCT process suggests that the patent will not be granted or if it appears the invention has limited potential for earning returns, the inventor can forgo the expense of\napplying to the national offices.\nAnother advantage of the PCT process is that it helps make the results of patent\napplications more uniform. Though individual countries are not required to grant a\npatent to those inventions that are granted a patent by the PCT governing office, the\ngranting of the patent by the PCT provides persuasive evidence in favor of granting the\npatent in the individual national offices. As of August 2015, there were 148 member\nstates of the Patent Cooperation Treaty.\nPatent Strategies\nIt is typical to assume that an inventor seeks a patent because they desire to make and\nsell the invention themselves. However, inventors and firms may monetize patents in a\nrange of different ways, including licensing the technology to others or selling the patent rights to another firm that can better utilize the technology.5 Furthermore, whereas\nthe conventional wisdom is that most inventors prefer to keep the details of their invention secret before the patent is granted (to prevent rivals from having access to their\nproprietary knowledge), this turns out not to be the case. A study by Stuart Graham\nand Deepak Hegde found that the vast majority of patentees prefer to disclose their\npatent applications before they are granted. Both large and small inventors, across\nChapter 9 Protecting Innovation 207\npatent trolling\nA pejorative term\nfor when an individual or firm\nmisuses patents\nagainst other\nindividuals or\nfirms in attempt\nto extract money\nfrom them.\npatent\nthickets\nA dense web\nof overlapping\npatents that can\nmake it difficult\nfor firms to compete or innovate.\nall major technology fields exhibited this preference for early disclosure, presumably\nbecause it allows them to publicize their invention’s quality and scope to competitors, external investors, and potential licensees. Disclosure via patent application also\nestablishes the date from which patentees can enjoy provisional patent rights.6\nFirms may also seek patents just to limit the options of competitors or to earn revenues through aggressive patent lawsuits. These actions are sometimes referred to as\n“patent trolling.” A patent troll’s primary purpose in owning patents is to extort\nmoney from other firms. For example, a patent troll might buy a patent from a bankrupt firm to sue another company that it claims is infringing on the purchased patent. Apple claims to be the number one target for patent trolls, having faced nearly\n100 lawsuits between 2011 and 2014.7 According to RPX Corporation, a firm that\nhelps companies resolve patent lawsuits through licensing, patent trolls filed more\nthan 2900 infringement suits in the United States in 2012.8 This type of predatory patenting has sparked an effort by the U.S. Federal Government to make patent granting\nstricter and to impose penalties against spurious patent lawsuits.9\nIn industries with complex technologies such as computers, software, and telecommunications, a dense web of overlapping patents known as “patent thickets” can\nmake it very difficult for firms to compete without falling prey to patent suits by\nother firms in that technology domain. This can seriously stifle innovation and has\nresulted in the rather peculiar strategy of firms buying bundles of patents to create\nwar chests that they hope will deter the patent attacks of others. For example, in 2011,\nthe bankrupt Nortel auctioned off its massive patent portfolio. The auction was won\nby a consortium called Rockstar Bidco that included Microsoft, Apple, RIM, Sony,\nand Ericsson, who paid $4.5 billion for the war chest, beating out Google which bid\n$4.4 billion. Google subsequently bought 1030 IBM patents that covered a range\nof technologies, from the fabrication of microprocessing chips, object-oriented\nprogramming, and other business processes. These patents were not necessary for\nGoogle’s business directly; rather they provided a retaliation threat to others that\nmight attack them through patent suits.10 Google also bought Motorola Mobility for\n$12.5 billion the same year, and it was widely believed that the purchase was almost\nsolely for Motorola’s patents, which would bolster Google’s position in the lawsuit\nthey expected would arise from the Nortel patents.11 In October of 2013, confirming\nGoogle’s fears, Rockstar Bidco filed suit against Google and seven companies that\nmake phones for Google’s Android operating system.12 Google countersued based on\nits own patents, and in November 2014, it was reported that Google and Rockstar had\nreached a settlement.13\nTrademarks and Service Marks\nA trademark is a word, phrase, symbol, design, or other indicator that is used to distinguish the source of goods from one party from the goods of others. The “Intel\nInside” logo on many computers is one example of a trademark, as is the familiar\nNike “swoosh” symbol. A service mark is basically the same as a trademark, but distinguishes the provider of a service rather than a product. Often the term trademark is\nused to refer to both trademarks and service marks.\nTrademarks and service marks can be embodied in any indicator that can be perceived through one of the five senses. Most marks are embodied in visual indicators,\n208 Part Two Formulating Technological Innovation Strategy\nsuch as words, pictures, and slogans. However, marks are also registered that use other\nsenses such as sound (e.g., tones that are associated with a particular company or\nbrand) or smells (as in fragrance). Trademark rights may be used to prevent others\nfrom using a mark that is similar enough to be confusing, but they may not be used to\nprevent others from producing or selling the same goods or services under a clearly\ndifferent mark.\nIn most countries, the rights to a trademark or service mark are established in the\nlegitimate use of the mark and do not require registration; however, registration provides several advantages. First, registering the mark provides public notice of the registrant’s claim of ownership over the mark. Second, marks must be registered before\na suit can be brought in federal court against an infringement of the mark. Third,\nregistration can be used to establish international rights over the trademark, as when\nthe U.S. registration is used to establish registration in other countries, and to protect\nthe mark against infringement from imported products. As of April 2018, the U.S.\nPatent and Trademark Office charged between $275 and $375 application fee to register a trademark. It normally took 10 to 16 months to receive certification from the\nU.S. Patent and Trademark Office, but the protection offered by the registration of the\ntrademark begins from the date of filing. Unlike patents and copyrights, trademark\nprotection can last as long as the trademark is in use, but the registration requires\nperiodic renewal.\nMajor International Trademark Treaties\nNearly all countries offer some form of trademark registration and protection.\nNational or regional offices maintain a Register of Trademarks that contains information on all trademark registrations and renewals. To eliminate the need to register\nseparately in each country (or region), the World Intellectual Property Organization\nadministers a System of International Registration of Marks governed by two treaties:\nthe Madrid Agreement Concerning the International Registration of Marks and the\nMadrid Protocol. Countries that adhere to either (or both) the Madrid Agreement or\nMadrid Protocol are part of the Madrid Union. Any individual that lives in, is a citizen\nof, or maintains an establishment in a Madrid Union country can register with the\ntrademark office of that country and obtain an international registration that provides\nprotection in as many other Madrid Union countries as the applicant chooses. As of\nApril 2014, there were 91 member countries of the Madrid Union.\nCopyright\nCopyright is a form of protection granted to works of authorship. In the United States,\nthe authors of original literary, dramatic, musical, artistic, and certain other intellectual works can obtain copyright protection.14 Like trademarks, the rights of copyright\nprotection are established by legitimate use of the work. This protection is available\nwhether or not the work is published and prevents others from producing or distributing that work. Under section 106 of the 1976 Copyright Act, the owner of the copyright has the exclusive right to do (or authorize others to do) the following:\n∙ Reproduce the work in copies or phonorecords.\n∙ Prepare derivative works based upon the work.\nChapter 9 Protecting Innovation 209\n∙ Distribute copies or phonorecords of the work to the public by sale or other transfer\nof ownership, or by rental, lease, or lending.\n∙ Perform the work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works.\n∙ Display the copyrighted work publicly, in the case of literary, musical, dramatic,\nand choreographic works, pantomimes, and pictorial, graphic, or sculptural works,\nincluding the individual images of a motion picture or other audiovisual work.\n∙ Perform the work publicly by means of a digital audio transmission (in the case of\nsound recordings).\nThere are, however, limitations to these rights. In particular, in the United States,\nthe doctrine of fair use stipulates that in most circumstances it is not a violation of\ncopyright for others to use copyrighted material for purposes such as criticism, comment, news reporting, teaching, scholarship, or research. Furthermore, some types of\nwork cannot be protected by copyright. For example, work that has not been fixed\nin a tangible form of expression (e.g., a choreographed dance or improvisational\nspeech that was not notated or recorded) is not eligible for copyright protection. Titles,\nnames, short phrases, slogans, familiar symbols, and lists of ingredients also cannot\nbe copyrighted.\nUnlike patent protection, copyright protection is secured automatically when an\neligible work is created and fixed in a copy or phonorecord for the first time. No\npublication or registration with the Copyright Office is necessary to establish this\ncopyright, though registering the copyright is advantageous in that it establishes a\npublic record of the copyright claim and is required before filing an infringement\nsuit in court. As of April 2018, basic online registration of copyright with the U.S.\nCopyright Office costs $35, and it took about 3 to 10 months to receive a certificate\nof registration.\nBefore 1978, copyright protection lasted only 28 years from the time it was secured\n(though during the last year the author could opt to renew the protection for an additional term). Revisions to U.S. copyright law, however, give copyright protection to\nworks created after 1978 that lasts for the author’s life plus an additional 70 years.\nCopyright Protection around the World\nAs with patents and trademarks, no international copyright law automatically protects\nan author’s work throughout the world. Copyright protection varies from country to\ncountry. However, most countries do offer copyright protection to both domestic and\nforeign works, and there are international copyright treaties for simplifying the process of securing such protection. One of the most significant is the Berne Union for\nthe Protection of Literary and Artistic Property (known as the Berne Convention).\nThe Berne Convention specifies a minimum level of copyright protection for all member countries, and it requires member countries to offer the same protection to both\nits own citizens and foreign nationals. Other treaties include the Universal Copyright\nConvention (UCC); the Rome Convention for the Protection of Performers, Producers\nof Phonograms and Broadcasting Organizations; the Brussels Convention Relating to\nthe Distribution of Program-Carrying Signals Transmitted by Satellite; and the World\nIntellectual Property Organization Copyright Treaty.\n210 Part Two Formulating Technological Innovation Strategy\nTRADE SECRETS\ntrade secret\nInformation that\nbelongs to a\nbusiness that is\nheld private.\nRather than disclose detailed information about a proprietary product or process in\nexchange for the grant of a patent, inventors or firms often will choose to protect their\nintellectual property by holding it as a trade secret. A trade secret is information that\nbelongs to a business that is generally unknown to others. Trade secrets need not meet\nmany of the stringent requirements of patent law, enabling a broader class of assets\nand activities to be protectable. For example, while the formula for a beverage is not\npatentable, it can be considered a trade secret. Trade secret law traces its history back\nto Roman law punishing individuals who induced someone to reveal the details of\ntheir employer’s commercial affairs.15\nInformation is typically considered to be a trade secret only if it (a) offers a distinctive advantage to the company in the form of economic rents, and (b) remains valuable only as long as the information remains private. Examples of trade secrets might\ninclude information about a firm’s customers, its marketing strategies, or its manufacturing processes. Trade secret law protects such information from being wrongfully\ntaken by another party. In the United States, trade secret law is implemented at the\nstate level, but the Uniform Trade Secret Act attempts to make these laws consistent\nfrom state to state.\nFor information to qualify as a trade secret under the Uniform Trade Secret Act, the\ninformation must meet the following three criteria:\n∙ The information must not be generally known or readily ascertainable through\nlegitimate means.\n∙ The information must have economic importance that is contingent upon its secrecy.\n∙ The trade secret holder must exercise reasonable measures to protect the secrecy of\nthe information.\nIf information meets these criteria, the Uniform Trade Secret Act stipulates that its\nowner can prevent others from benefiting from this information without the owner’s\npermission. In particular, the act states that no individual or group can copy, use, or\notherwise benefit from a trade secret without the owner’s authorization if they meet\nany of the following conditions:\n1.\n2.\n3.\n4.\n5.\nThey are bound by a duty of confidentiality (e.g., employees, lawyers).\nThey have signed a nondisclosure agreement.\nThey acquire the secret through improper means such as theft or bribery.\nThey acquire the information from someone who did not have the right to disclose it.\nThey learn about the secret by mistake but have reason to know that the information was a protected trade secret.\nIn most regions, if owners of a trade secret believe that another party has stolen\nor improperly disclosed their trade secret, they can ask a court to issue an injunction\nagainst further use of the secrets, and they may also be able to collect damages for\nany economic harm suffered by the improper use of the trade secret. For example, in\nNovember 2002, Procter & Gamble sued Potlatch Corporation, claiming that Potlatch\nhad stolen trade secret methods used to produce Bounty paper towels and Charmin\nChapter 9 Protecting Innovation 211\nbath tissue by hiring away two of Procter & Gamble’s paper manufacturing experts.\nPotlatch is a large, private-label tissue manufacturer that produces toilet paper, facial\ntissues, napkins, and paper towels for grocery store chains such as Albertsons and\nSafeway. By March 2003, the two companies had reached an agreement to settle out of\ncourt, keeping the terms of the settlement confidential.16\nTHE EFFECTIVENESS AND USE OF PROTECTION MECHANISMS\nopen source\nsoftware\nSoftware whose\ncode is made\nfreely available\nto others for use,\naugmentation,\nand resale.\nThe methods used to protect innovation—and their effectiveness—vary significantly\nboth within and across industries.17 In some industries, such as pharmaceuticals, legal\nprotection mechanisms such as patents are very effective. In other industries, such\nas electronics, patents and copyright provide relatively little protection because other\nfirms can often invent around the patent without infringing on it (as IBM discovered\nwhen Compaq was able to produce a computer nearly identical to its personal computer design). It is also notoriously difficult to enforce patents protecting industrial\nprocesses such as manufacturing techniques. If patents provide little protection, the\nfirm may rely more heavily on trade secrets; however, the ability to protect trade secrets\nalso varies with the nature of the technology and the industry context. To protect a\ntrade secret, a firm must be able to expose its product to the public without revealing\nthe underlying technology, but in many cases, revealing the product reveals all.\nFor some competitive situations, protecting a technology may not be as desirable\nas liberally diffusing it. In industries characterized by increasing returns, firms sometimes choose to liberally diffuse their technologies to increase their likelihood of rising to the position of dominant design. As discussed in Chapter Four, learning-curve\neffects and network externalities can cause some industries to demonstrate increasing\nreturns to adoption: The more a technology is adopted, the more valuable it becomes.18\nThis dynamic can lead to winner-take-all markets that create natural monopolies.\nA firm that controls the standard can reap monopoly rents and can exert significant\narchitectural control over both its own industry and related industries.19\nThis enviable position can be so lucrative that firms may be willing to lose money\nin the short term to improve their technology’s chance of rising to the position of\ndominant design. Thus, firms may liberally diffuse their technologies (through, e.g.,\nopen source software or liberal licensing arrangements) to accelerate the technology’s proliferation and thereby jump-start the self-reinforcing feedback effect that can\nlead to the technology’s dominance. However, the firm often faces a dilemma: If it\nliberally diffuses the technology to would-be competitors, it relinquishes the opportunity to capture monopoly rents when and if the technology emerges as a dominant\ndesign. Furthermore, once control of a technology is relinquished, it can be very hard\nto regain; thus, such diffusion may result in the firm losing all hope of controlling the\ntechnology. Finally, liberal diffusion of the technology can result in the fragmentation\nof the technology platform: As different producers add improvements to the technology that make it better fit their needs, the “standard” may be split into many nonstandardized versions (as with UNIX, as described in more detail later in the chapter).\nTo resolve these trade-offs, firms often adopt a strategy of partial protection for their\ninnovations, falling somewhere on the continuum between wholly proprietary systems\nand wholly open systems.\n212 Part Two Formulating Technological Innovation Strategy\nWholly Proprietary Systems versus Wholly Open Systems\nwholly proprietary systems\nGoods based\non technology\nthat is owned\nand vigorously\nprotected through\npatents, copyrights, secrecy,\nor other mechanisms. Wholly\nproprietary technologies may be\nlegally produced\nand augmented\nonly by their\ndevelopers.\nwholly open\nsystems\nGoods based on\ntechnology that\nis not protected\nand that is freely\navailable for\nproduction or\naugmentation by\nother producers.\nWholly proprietary systems are those based on technology that is company-owned\nand protected through patents, copyrights, secrecy, or other mechanisms. Such technologies may be legally produced or augmented only by their developers. Wholly\nproprietary systems are often not compatible with the products offered by other manufacturers. Because their operation is based on protected technology, other manufacturers are often unable to develop components that may interact with the proprietary\nsystem. Proprietary systems typically provide their developers with the opportunity to\nappropriate rents from the technology. However, they might also be less likely to be\nadopted readily by customers as a result of their higher costs and the inability to mix\nand match components.\nIn wholly open systems, the technology used in a product or process is not\nprotected by secrecy or patents; it may be based on available standards or it may be\nnew technology that is openly diffused to other producers. Wholly open technologies may be freely accessed, augmented, and distributed by anyone. Such technologies\nare usually quickly commoditized and provide little appropriability of rents to their\ndevelopers.\nMany technologies are neither wholly proprietary nor wholly open—they are partially open, utilizing varying degrees of control mechanisms to protect their technologies. It is useful to think of a control continuum that stretches from wholly proprietary\nto wholly open (see Figure 9.2). For instance, most of the major video game console\nproducers (Nintendo, Sony, and Microsoft) utilize a wholly proprietary strategy for\ntheir consoles, but a limited licensing policy for their games. The licensing policies are\ndesigned to encourage developers to produce games for the systems, while enabling\nthe console producers to retain a great deal of control over the games produced. All\ngames developed for the consoles must be approved by the console producer before\nthey can be made commercially available. For example, in the case of Microsoft,\nwould-be Xbox games developers must first apply to the Xbox Registered Developer\nFIGURE 9.2\nExamples on\nthe Continuum\nfrom Wholly\nProprietary to\nWholly Open\nWholly\nProprietary\nLimited Licensing\nModerate\nLicensing\nLiberal\nLicensing\nWholly Open\nMicrosoft’s\nXbox video game\nconsole;\nMonsanto’s\nRoundup before\n1999\nVideogames for\nthe Microsoft\nXbox console;\nMonsanto’s\nRoundup from\nJanuary 1999 to\nSeptember 2000\nMicrosoft\nWindows\nSun’s Java\nGlyphosate\n(the base\ningredient of\nMonsanto’s\nRoundup) after\nSeptember 2000\nChapter 9 Protecting Innovation 213\noriginal\nequipment\nmanufacturers\n(OEMs)\nFirms that\nassemble goods\nusing components made by\nother manufacturers, also called\nvalue-added\nresellers (VARs).\nProgram (for established games developers) or the Xbox Incubator Program (for\nsmaller or newer games developers). If accepted into one of these two programs, the\ndeveloper will receive access to development tools, but this does not guarantee the\napproval of any resulting game titles. The games are subjected to a separate, rigorous\napproval process.\nBy contrast, the licensing policies for Microsoft’s Windows are more open. Windows is protected by copyright, and Microsoft defends its exclusive right to augment\nthe software; however, it also permits complementary goods providers to access portions of the source code to facilitate development of complementary goods, licenses\nthe rights to such providers to produce complementary applications, and licenses\noriginal equipment manufacturers (OEMs) to distribute the software by bundling\nit with hardware. Those who purchase a license for the software can execute and bundle the software with other goods but may not augment the software. For example,\nsoftware applications developers may produce and distribute value-added applications\nfor use with Windows as long as those applications do not affect the functionality of\nthe Windows program itself.\nAs described in the Theory in Action section later in the chapter, Sun’s “community\nsource” (as opposed to “open source”) policy for Java is even more open. This policy\ngrants anyone immediate access to the complete source code for Java and allows users\nto develop commercial applications based on the code, or to augment the code for\ntheir own implementations. These developers pay no license fee to Sun. However, any\naugmentation to the core structure of Java must be approved by the Java Community\nProcess, which is managed by Sun. Sun’s “community source” principle is meant to\nencourage the broader software community to improve Java and develop complementary applications, but it allows Sun to retain some control over the core platform to\nensure that the platform does not become fragmented through unmanaged development by the software community.\nMany technologies that were once wholly proprietary or partially open become\nwholly open once their patents or copyrights expire. For instance, Monsanto’s highly\nprofitable Roundup herbicide is based on a patented chemical ingredient called glyphosate. This extremely potent herbicide was adopted by farmers in more than 100 countries and accounted for a substantial portion of Monsanto’s sales.20 However, facing\nimpending expiration of its patents, Monsanto began to license the rights to glyphosate production to a few other companies (including Dow Agrosciences, DuPont, and\nNovartis) in 1999. In September 2000, the U.S. patent on glyphosate expired, and any\nchemical company was free to produce and sell glyphosate-based herbicides in the\nUnited States, making glyphosate a wholly open technology.\nAdvantages of Protection\nBecause proprietary systems offer greater rent appropriability, their developers often\nhave more money and incentive to invest in technological development, promotion,\nand distribution. If a single firm is the primary beneficiary of its technology’s success, it has much greater incentive to invest in further developing the technology. The\nprofits from the technology may be directly reinvested in further improvements in the\ntechnology. The sponsor of a proprietary technology might also adopt a penetration\npricing strategy (i.e., it may offer the technology at a low price or free) to rapidly build\nTheory in Action IBM and the Attack of the Clones\nIn 1980, IBM was in a hurry to introduce a personal computer. When personal computers first began to emerge\nat the end of the 1970s, most of the major computer\nmanufacturers considered it no more than a peculiar\nproduct for a hobbyist market. The idea that individuals\nwould want personal computers on their desks seemed\nludicrous. However, as total U.S. personal computer\nsales reached $1 billion, IBM began to worry that the\npersonal computer market could actually turn out to\nbe a significant computer market in which IBM had no\nshare. To bring a personal computer to market quickly,\nIBM decided to use many off-the-shelf components from\nother vendors, including Intel’s 8088 microprocessor\nand Microsoft’s software. However, IBM was not worried\nabout imitators because IBM’s proprietary basic input/\noutput system (BIOS), the computer code that linked the\ncomputer’s hardware to its software, was protected by\ncopyright. While other firms could copy the BIOS code,\ndoing so would violate IBM’s copyright and incur the\nlegendary wrath of IBM’s legal team.\narchitectural\ncontrol\nThe ability of a\nfirm (or group of\nfirms) to determine the structure, operation,\ncompatibility,\nand development\nof a technology.\n214\nHowever, getting around IBM’s copyright turned out\nnot to be difficult. Copyright protected the written lines\nof code, but not the functions those codes produced.\nCompaq was able to reverse-engineer the BIOS in a matter of months without violating IBM’s copyright. First, a\nteam of Compaq programmers documented every function the IBM computer would perform in response to a\ngiven command, without recording the code that performed the function. This list of functions was then given to\nanother team of “virgin” programmers (programmers who\nwere able to prove that they had never been exposed to\nIBM’s BIOS code).a These programmers went through the\nlist of functions and wrote code to create identical functions. The result was a new BIOS that acted just like an\nIBM BIOS but did not violate its copyright. Compaq sold a\nrecord-breaking 47,000 IBM-compatible computers in its\nfirst year, and other clones were quick to follow.\na\n R. Cringely, Accidental Empires (New York: HarperCollins,\n1992).\nits installed base, it may spend aggressively on advertising to increase awareness of\nthe technology, and it may even subsidize the production of complementary goods to\nincrease the desirability of its technology to customers. A firm may be willing to lose\nmoney in the short term to secure the technology’s position as the standard, because\nonce the technology has emerged as a standard, the payoff can be substantial and\nenduring. By contrast, when multiple firms can produce a technology, losing money\non the technology in the short term to promote it as a standard is highly risky because\nthe long-term distribution of the payoffs is uncertain. While the technology’s developer may have borne the bulk of the cost in developing the technology, multiple firms\nmay vie for the profits to be made on the technology.\nProtecting the technology also gives the developing firm architectural control over\nthe technology. Architectural control refers to the firm’s ability to determine the\nstructure and operation of the technology, and its compatibility with other goods and\nservices. It also refers to the firm’s ability to direct the future development path of\nthe technology. Architectural control can be very valuable, especially for technologies in which compatibility with other goods and services is important. By controlling\nthe technology’s architecture, the firm can ensure that the technology is compatible\nwith its own complements, while also restricting its compatibility with the complements produced by others.21 The firm can also control the rate at which the technology is upgraded or refined, the path it follows in its evolution, and its compatibility\nwith previous generations. If the technology is chosen as a dominant design, the firm\nChapter 9 Protecting Innovation 215\nwith architectural control over the technology can have great influence over the entire\nindustry. Through selective compatibility, it can influence which other firms do well\nand which do not, and it can ensure that it has a number of different avenues from\nwhich to profit from the platform.\nMicrosoft’s Windows is the quintessential embodiment of this strategy. Because\nWindows is the dominant operating system in the personal computing market and\nbecause it serves as the interface between a computer’s hardware and software, Microsoft has considerable market power and architectural control over the evolution of the\npersonal computer system. Among other things, Microsoft has been able to incorporate ever more utility programs into the core program, thereby expanding and taking\nover the roles of many other software components. Once a user purchased an operating\nsystem, uninstaller programs, disk-compression programs, and memory management\nprograms separately, but Windows 95 and 98 integrated all these products and more\ninto the operating system. This “feature creep” had a major impact on competition in\nthe industry; many utility producers such as Qualitas, Stac Electronics, Microhelp,\nQuarterdeck, and others were forced to abandon their once-profitable products.\nAdvantages of Diffusion\nThe primary argument for diffusing a technology instead of protecting it is that open\ntechnologies may accrue more rapid adoptions. If multiple firms are producing, distributing, and promoting the technology, the technology’s installed base may accumulate much more rapidly than if one firm alone is responsible for such activities.\nCompetition among producers may drive the price of the technology down, making\nit more attractive to customers. Both customers and complementary goods providers\nmay also perceive the technology as better (or its future more certain) if there are\nmultiple companies backing the technology. This perception can lead to much more\nrapid adoption of the technology by customers and complementary goods providers, which further stimulates more companies to back the technology. Thus, a liberal\ndiffusion strategy can stimulate the growth of the installed base and availability of\ncomplementary goods.22\nGoogle used a liberal diffusion strategy to help its Android operating system for\nsmartphones become widely adopted. Google’s liberal licensing policy for Android\nattracted many handset manufacturers and applications developers to the system,\nenabling its ecosystem to grow rapidly. A larger ecosystem with more phone models,\nprice points, and applications, in turn, attracted a wider range of customers.\nOpen technologies can also benefit from the collective development efforts of parties external to the sponsoring firm. For instance, Netscape Navigator, UNIX, and\nLinux are all technologies that have benefited significantly from external development. By making the source code freely available to the vast world of developers who\ncould benefit from the technology, the technologies reaped the advantages of having\na much larger pool of talent and resources directed at improving the technologies than\ncould have been rallied by the original developers.\nExternal development, however, poses some costs and risks. First, external development efforts typically lack the coordination of internal development. External developers may have very diverse objectives for the technology; rather than work together\ntoward some unified vision of what the technology could achieve in the future, they\n216 Part Two Formulating Technological Innovation Strategy\nmight work in different, possibly even conflicting, directions.23 Much of their effort\nmay be redundant, as different external developers work on solving the same problems\nwithout communicating with each other. Finally, whether and how these improvements\nget incorporated into the technology and disseminated to other users of the technology\ncan prove very problematic. UNIX provides a stark example of this.\nUNIX was an operating system first developed by AT&T’s Bell Laboratories in\n1969. Though a Department of Justice injunction forbade AT&T from selling software commercially, it made the source code for the product available through licensing arrangements. Early licensees (notably, University of California—Berkeley) began\nusing and adapting the software for their purposes, causing many incompatible versions\nof the software to emerge. Though the software community made several attempts to\nstandardize the UNIX operating language, their efforts failed. AT&T also challenged\nthe commercialization of several UNIX variants, but to no avail. Ultimately, AT&T\nsold the division responsible for UNIX to Novell, and Novell handed over the rights to\nthe UNIX trademark to the X/Open standards-setting body.24\nGiven the range of advantages (and risks) of protecting versus diffusing a technology, a firm must carefully consider the following factors in deciding whether, and to\nwhat degree, it should protect its innovation.\nProduction Capabilities, Marketing Capabilities, and Capital\nIf the firm is unable to produce the technology at sufficient volume or quality levels\n(or market the technology with sufficient intensity), then protecting the technology so\nthat the firm is its sole provider may significantly hinder its adoption. For example,\nwhen JVC was promoting its VHS standard for video recorders, its management knew\nJVC was at a disadvantage in both manufacturing and marketing capabilities compared\nto Sony (which was promoting the Beta technology). JVC chose to vigorously pursue\nboth licensing and OEM agreements, lining up Hitachi, Matsushita, Mitsubishi, and\nSharp to boost the technology’s production rate.\nSimilarly, if complementary goods influence the value of the technology to users,\nthen the firm must (a) be able to produce the complements in sufficient range and quantity, (b) sponsor their production by other firms, or (c) encourage collective production\nof the complements through a more open technology strategy. The only firms that have\nbeen successful in the U.S. video game industry were those that were able to produce\ngames in-house (ensuring that a wide range of games would be available at the console’s launch) and that encouraged third-party development of games (to ensure that\nthe number of game titles grew quickly). Both Nintendo and Sega had previous arcade\nexperience, and thus possessed considerable game development expertise. Microsoft\nhad long been a producer of PC-based video games, so it had some game developing\nexperience, and it also acquired a few small game developers (e.g., Bungie) to expand\nits expertise in developing console-type games.25 Sony had no prior game experience,\nbut aggressively acquired in-house developers, licensed external developers, and set up\na program with Metrowerks to provide developer tools that would make it easier for\nexternal developers to produce PlayStation games. If a firm lacks the production capability or expertise to produce a sufficient range of complementary goods, or the capital\nto acquire such capabilities quickly, it should encourage collective production of complements through a more open technology strategy and utilize forms of sponsorship.\nChapter 9 Protecting Innovation 217\nIndustry Opposition against Sole-Source Technology\nSometimes other industry members are able to exert strong pressure against the adoption of a technology that would give one (or a few) producer(s) undue control and\npower, causing a technology that is restricted to such production to be rejected or more\nhotly contested than a more open technology. This was the case with Sony and Philips’\nSuper Audio CD (SACD) audio format. Sony and Philips had jointly created the original compact disc (CD) format and split the royalties on every CD player sold, totaling\nhundreds of millions of dollars. The rest of the world’s leading consumer electronics\nproducers (including Hitachi, JVC, Matsushita, Mitsubishi, and Toshiba) and record\nproducers (including Time Warner and Seagram’s Universal Music group) banded\ntogether to form the Digital Video Disk (DVD) Audio consortium. This consortium’s\npurpose is to promote the DVD Audio standard that is intended to displace the CD and\nenable royalties to be split among the 10 companies that control the patents.26 Industry\nobservers note that a driving force underlying the formation of the consortium was to\nprevent Sony and Philips from controlling yet another generation of audio formats.\nThe degree of industry opposition to a sole-source technology needs to be considered\nwhen the firm formulates its technology strategy. If the industry is able to pose significant opposition, the firm may need to consider a more open technology strategy to\nimprove the technology’s likelihood of being chosen as a dominant design.\nResources for Internal Development\nIf a firm does not have significant resources (capital, technological expertise) to invest\nin the technology’s functionality, it may have difficulty producing a technology that has\nan initial performance level, and rate of improvement, that the market finds attractive.\nIn such instances, it can be valuable to tap the external development efforts of other\nfirms (or individuals) through utilizing a more open technology strategy. For example,\nwhen Netscape found itself in a race to match browser capabilities with Microsoft, it\nwas at a tremendous disadvantage in both human resources and capital. Microsoft had\nlegions of internal developers and a lot of money to invest in Explorer; there was no\nway that Netscape could match those resources internally. Instead, Netscape tapped\nthe external development community by giving them access to its source code and\nincorporating their improvements into the Navigator product.\nControl over Fragmentation\nFor technologies in which standardization and compatibility are important, maintaining the integrity of the core product is absolutely essential, and external development\ncan put it at risk. As the UNIX example illustrates, if the developing firm relinquishes\nall control over the development of the technology, the technology will have no shepherd with the ability and authority to direct its trajectory and ensure that a single standard remains intact. This suggests that the developer of any technology that requires\nstandardization and compatibility should retain some degree of control over the technology, or find/establish another governing body with the authority to do so.\nIncentives for Architectural Control\nArchitectural control over the evolution of a technology is always valuable; however,\nit becomes particularly valuable if a firm is a significant producer of complements to\n218 Part Two Formulating Technological Innovation Strategy\nthe technology in question. A firm with architectural control can typically design the\ntechnology to be compatible with its own complements and incompatible with those of\ncompetitors. If the technology is chosen as the dominant design, this architectural control allows the firm to ensure that it reaps the lion’s share of the rewards in complements\nproduction. Furthermore, by making the technology selectively compatible with some\ncompetitors and not others, the firm can exert great influence over the competitive field.\nArchitectural control can also enable the firm to direct the development efforts put\ninto the technology so that it exploits the firm’s core competencies. Technology trajectories are path dependent; minor events in their evolution can set them careening off\ninto unexpected directions. A firm that has a significant stake in a particular evolution\npath (because, e.g., it has technological competencies that are much more amenable to\none path of evolution than other potential paths) may place a high value on architectural control, which can enable it to co-opt or destroy less favorable development paths\nby denying their progenitors access to the market.\nSummary\nof\nChapter\n1. The degree to which a firm can capture the rents from its innovation efforts is\nlargely determined by the degree to which competitors can quickly and easily imitate the innovation. Some innovations are inherently difficult to copy; others are\ndifficult to copy because of the mechanisms the firm uses to protect its innovation.\n2. The three primary legal mechanisms used to protect innovation in most countries\nare patents, trademarks, and copyrights. Each mechanism is designed to protect a\ndifferent type of work or good.\n3. International treaties have helped to harmonize patent, trademark, and copyright\nlaws around the world. Most countries now have patent, trademark, and copyright\nlaws of some form, and in some instances protection can be applied for in multiple\ncountries simultaneously.\n4. Trade secrets provide another mechanism of protecting innovation. Firms that\nprotect their intellectual property as a trade secret often have legal recourse if\nanother party wrongfully takes and uses such property.\n5. Legal mechanisms for protecting innovation are more effective in some industries\nthan others; in some industries, inventing around a patent or copyright is relatively\neasy. Similarly, in some industries, it is nearly impossible to protect an innovation\nby using trade secrets because commercializing the innovation reveals its underlying technologies.\n6. Sometimes the choice between protecting versus diffusing a technology is not\nobvious. Both strategies offer potential advantages. Many firms use neither a\nwholly open nor a wholly proprietary strategy, but rather a partially open strategy.\n7. Protecting an innovation helps ensure that the firm earns the lion’s share of the\nreturns from the innovation. These returns can then be reinvested in further\ndeveloping the technology, promoting the technology, and producing complementary goods.\n8. Protecting an innovation also preserves the firm’s architectural control, enabling\nit to direct the technology’s development, determine its compatibility with other\nChapter 9 Protecting Innovation 219\ngoods, and prevent multiple incompatible versions of the technology from being\nproduced by other firms.\n9. Diffusing a technological innovation can encourage multiple firms to produce,\ndistribute, and promote the technology, possibly accelerating its development and\ndiffusion. Diffusion can be particularly useful in industries that accrue increasing\nreturns to adoption. It is also useful when the firm has inadequate resources to be\nthe sole developer, producer, distributor, and marketer of a good.\nDiscussion\nQuestions\n1. What are the differences between patents, copyrights, and trademarks?\n2. What factors should a firm considering marketing its innovation in multiple countries use in formulating its protection strategy?\n3. When are trade secrets more useful than patents, copyrights, or trademarks?\n4. Identify a situation in which none of the legal protection mechanisms discussed\n(patents, copyrights, trademarks, trade secrets) will prove useful.\n5. Describe a technological innovation not discussed in the chapter, and identify\nwhere you think it lies on the control continuum between wholly proprietary and\nwholly open.\n6. What factors do you believe influenced the choice of protection strategy used for\nthe innovation identified above? Do you think the strategy was a good choice?\nSuggested\nFurther\nReading\nClassics\nLevin, R., A. Klevorick, R. Nelson, and S. Winter, “Appropriating the Returns from\nIndustrial Research and Development,” Brookings Papers on Economic Activity,\nMicroeconomics 3 (1987), pp. 783–820.\nBound, J., C. Cummins, Z. Griliches, B. H. Hall, and A. Jaffe, “Who Does R&D\nand Who Patents?” in R&D, Patents, and Productivity, ed. Z. Griliches (Chicago:\nUniversity of Chicago Press for the National Bureau of Economic Research, 1984).\nJaffe, A. B., and J. Lerner, Innovation and Its Discontents: How Our Broken Patent\nSystem Is Endangering Innovation and Progress, and What to Do about It (Princeton,\nNJ: Princeton University Press, 2004).\nSchilling, M.A., “Protecting or Diffusing a Technology Platform: Tradeoffs in Appropriability, Network Externalities, and Architectural Control,” in Platforms, Markets\nand Innovation, ed. A. Gawer (Cheltenham, UK: Edward Elgar Publishing, 2009).\nTeece, D. J., “Profiting from Technological Innovation—Implications for Integration, Collaboration, Licensing and Public-Policy,” Research Policy 15, no. 6 (1986),\npp. 285–305.\nRecent Work\nFarre-Mensa, J., D. Hegde, and A. Ljungqvist, “What Is a Patent Worth? Evidence\nfrom the U.S. Patent ‘Lottery’ (March 14, 2017),” USPTO Economic Working Paper\n2015-5. Available at SSRN: https://ssrn.com/abstract=2704028 or http://dx.doi.org/\n10.2139/ssrn.2704028\n220 Part Two Formulating Technological Innovation Strategy\nFisher, W.W., and F. Oberholzer-Gee, “Strategic Management of Intellectual Property,” California Management Review 55, no. 4 (Summer 2013), pp. 157–83.\nGraham, S., and D. Hegde, “Disclosing Patents’ Secrets,” Science 347 (2015), no. 6219,\npp. 236–37.\nHolgersson, M., O. Granstrand, and M. Bogers, “The Evolution of Intellectual Property Strategy in Innovation Ecosystems: Uncovering Complementary and Substitute\nAppropriability Regimes,” Long Range Planning 51 (2018):303–19.\nSomaya, D. “Patent Strategy and Management: An Integrative Review and Research\nAgenda,” Journal of Management 38 (2012), pp. 1084–114.\nEndnotes\n1. J. B. Barney, “Firm Resources and Sustained Competitive Advantage,” Journal of Management\n17 (1991), p. 990.\n2. “Software Patent,” Bank Technology News 14, no. 3 (2001), p. 25.\n3. A. B. Silverman, “Software Patents for Methods of Doing Business—A Second Class Citizen\nNo More,” Journal of Management 52, no. 19 (2000), p. 64.\n4. M. Carley, D. Hegde, and A. Marco, “What is the probability of receiving a US Patent?” Yale\nJournal of Law & Technology, 17 (2015), pp. 204–223.\n5. D. Alderucci and W. Baumol, “Patents and the dissemination of inventions,” Journal of Economic Perspectives, 27 (2013), no. 4, pp. 223–26; D. Alderucci, “Monetization Strategies for\nBusiness Method Patents,” The Licensing Journal (2000), November.\n6. S. Graham and D. Hegde, “Disclosing Patents’ Secrets,” Science 347 (2015), no. 6219,\npp. 236–37.\n7. “Apple Complains of “Patent Trolls,” LA Times (2014), February 8.\n8. A. Jones, “Tech Firms Back Obama Patent Move,” Wall Street Journal, June 4.\n9. W. New, “White House Takes Major Action Against “Patent Trolls,” Intellectual Property\nWatch, (2013), June 4; “Hatch Introduces Measure to Stop Patent Trolls,” The Ripon Advance\n(2013), November 4; E. Wyatt, “FTC Settles First Case Targeting ‘Patent Troll’,” New York\nTimes (2014), November 6.\n10. S. Decker and B. Womack, “Google Buys 1,023 IBM Patents to Bolster Defense of Android,”\nBloombergBusiness (2014): September 14.\n11. Q. Hardy, “Google Buys Motorola for Patent Parts,” Forbes (2011), August 15.\n12. J. Mullin, “Patent War Goes Nuclear: Microsoft, Apple-owned “Rockstar” Sues Google,”\nArstechnica (2013), October 31.\n13. J. Roberts, “Apple-backed Rockstar Ends Patent War on Android, Deal Suggests,” GigaOM\n(2014):November.\n14. U.S. Copyright Office.\n15. The Trade Secrets home page.\n16. S. Decker, “Procter & Gamble, Potlatch Resolve Trade Secrets Suit,” Seattle Post Intelligencer,\nMarch 14, 2003.\n17. R. Levin, A. Klevorick, R. Nelson, and S. Winter, “Appropriating the Returns from Industrial Research and Development,” Brookings Papers on Economic Activity, Microeconomics 3\n(1987), pp. 783–820; and J. Bound, C. Cummins, Z. Griliches, B. H. Hall, and A. Jaffe, “Who\nDoes R&D and Who Patents?” in R&D, Patents, and Productivity, ed. Z. Griliches (Chicago:\nUniversity of Chicago Press for the National Bureau of Economic Research, 1984).\nChapter 9 Protecting Innovation 221\n18. W. B. Arthur, Increasing Returns and Path Dependency in the Economy (Ann Arbor: The\nUniversity of Michigan Press, 1994).\n19. C. H. Ferguson and C. R. Morris, Computer Wars (New York: Random House, 1993); and\nR. Henderson and K. Clark, “Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms,” Administrative Science Quarterly\n35 (1990), pp. 9–30.\n20. S. Brooks, M. A. Schilling, and J. Scrofani, “Monsanto: Better Living through Genetic Engineering?” in Strategic Management, Competitiveness and Globalization, 5th ed., eds. M. Hitt,\nR. Hoskisson, and R. D. Ireland (Minneapolis/St. Paul: West Publishing, 2001).\n21. M. A. Schilling, “Toward a General Modular Systems Theory and Its Application to Interfirm\nProduct Modularity,” Academy of Management Review 25 (2000), pp. 312–34.\n22. C. W. L. Hill, “Establishing a Standard: Competitive Strategy and Technological Standards in\nWinner-Take-All Industries,” Academy of Management Executive 11, no. 2 (1997), pp. 7–25;\nand M. A. Schilling, “Winning the Standards Race: Building Installed Base and the Availability\nof Complementary Goods,” European Management Journal 17 (1999), pp. 265–74.\n23. R. Garud, S. Jain, and A. Kumaraswamy, “Institutional Entrepreneurship in the Sponsorship\nof Common Technological Standards: The Case of Sun Microsystems and Java,” Academy of\nManagement Journal 45 (2002), pp. 196–214.\n24. D. Essner, P. Liao, and M. A. Schilling, “Sun Microsystems: Establishing the Java Standard,”\nBoston University teaching case no. 2001–02, 2001.\n25. J. Kittner, M. A. Schilling, and S. Karl, “Microsoft’s Xbox,” New York University teaching\ncase, 2002. 45.\n26. J. Brinkley, “Disk versus Disk: The Fight for the Ears of America,” New York Times,\nAugust 8, 1999.\nPart Three\nImplementing\nTechnological\nInnovation Strategy\nIn this section, we will cover the key aspects of implementing a technological\ninnovation strategy, including:\n∙ Structuring the firm to improve its likelihood of innovating, its effectiveness at\nnew product development, and its speed of new product development.\n∙ Managing new product development processes to maximize fit with customer\nneeds, while simultaneously minimizing development cycle time and controlling development costs.\n∙ Composing, structuring, and managing new product development teams to\nmaximize new product development effectiveness.\n∙ Crafting a strategy for effectively deploying the innovation into the marketplace, including timing, licensing strategies, pricing strategies, distribution,\nand marketing.\nImplementing Technological Innovation Strategy\n\nPurchase answer to see full\nattachment
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