Why Western Companies Need Not "Dread" the Sucessful Monetization of Intellectual Property by Indian Firms

In his Harvard Business School blog posting entitled "How Indian Firms Convert Intellectual Property into Intellectual Profit," Navi Rajou of Forrester Research contrasts the intellectual property ("IP") activities of Indian corporate strategists with those of their Western counterparts. In this post, Mr. Rajou identifies several aspects of Indian corporate strategy that allow Indian firms to effectively monetize their IP.

Mr. Rajou's examples of the successful IP strategy-related activities of Indian firms can be summarized as follows:

• Tata Motors, which is introducing a $2500 car in India this year, has obtained 40 patents. However, Tata's CEO recognizes that these patents are worthless unless the company also makes money from these inventions. Tata's innovation metrics therefore also include "time to value" and "time to volume".
• Some Indian firms do not even bother filing for patents on new inventions because doing so would distract them from the task of earning profits from these inventions. For these firms, first-mover advantage does not center on who files first on new inventions; instead, the true measure of profitability is from rapidly transforming those inventions into strategic market differentiation.
• Indian firms are successfully avoiding the "Not Invented Here" syndrome that permeates many Western companies. Indian firms recognize that a closed R&D structure significantly limits the ability to innovate at the highest levels. Accordingly, these firms have developed robust programs to externally source and license innovations from academia, start-ups and other idea generating organizations.

Mr. Rajou closes his post by saying that Western firms: "must dread Indian firms’ uncanny ability to swiftly monetize IP, whether its invented internally or sourced externally from their innovation network partners."

As an IP Business Strategist and consultant (more info here www.jackiehutter.com), I agree wholeheartedly with Mr. Rajou that these Indian firms are implementing best practices in monetizing IP and, therefore, are successfully generating profit from their firms' IP. However, by seeming to say that Indian firms are uniquely able to monetizing their IP as compared to Western companies, Mr. Rajou sends an inaccurate signal that Indian firms are inherently better at extracting value from IP than are Western firms.

In fact, the best IP practices in monetizing IP described by Mr. Rajou are alive and thriving at many Western companies. Moreover, each of the activities described as exemplary of Indian firms were actually developed in large measure by companies such as Proctor & Gamble, Dow and BellSouth (now AT&T). Such best practices are illustrated in the 2001 book Edison in the Boardroom: How Leading Companies Realize Value from their Intellectual Assets (more info here: http://www.wiley.com/WileyCDA/WileyTitle/productCd-0471397369.html). Further, as discussed in the article in MIT Sloan Management Review entitled "How Executives Can Enhance IP Strategy and Performance" (abstracted here: http://sloanreview.mit.edu/smr/issue/2007/fall/11/), in just the past few years, many European firms have been successfully creating IP-centric organizations where the focus is increasingly directed toward profiting from inventions, not just obtaining patents. xxxMr. Rajou is correct to applaud the successful efforts of Indian firms in developing and executing on profitable IP strategies. These Indian firms are properly looking to the successes and failures of their corporate counterparts in the stable legal environments enabled by Western governments. (Indeed, some may argue that the immaturity of Indian IP law actually disincentivizes Indian firms from obtaining patents and drives them to seek other strategies for their IP. However, this post is not about how governmental action or inaction affects corporate IP strategy, so I will leave further discussion of this topic to the legal theorists.)

These Indian firms are also fortunate not to operate with entrenched structures where the existing corporate stakeholders may have a vested interest in not adopting these best practices. For example, I expect that Indian firms do not operate in established corporate IP and R&D infrastructures where adoption of best practices in IP strategy, such as not obtaining patents and externally sourcing R&D, would upset the status quo for corporate patent lawyers and researchers, respectively. The absence of these entrenched corporate interests no doubt enables Indian firms to more efficiently select and implement corporate best practices, whether IP-related or otherwise. But it is a mistake to believe that Indian firms have a monopoly on the ability to execute on such best practices.

Unlike Mr. Rajou, I believe that Western firms need not "dread" the IP strategy-related actions of their Indian counterparts. Rather, they need merely recognize that "imitation is the sincerest form of flattery" and look to the successes of their Indian counterparts in the monetization of IP. When more Western firms, both large and small, recognize the value the of the IP strategies developed by their own Western counterparts and adopt such best practices in their own companies, the actions of Mr. Rajou's Indian firms will not appear to be so "uncanny" after all.