Monday, March 16, 2015

Rep. Dana Rohrabacher Warns Against the Loss of IP Rights with Misguided Patent Reform

Many IP experts are growing concerned about the weakening of the IP system in the United States. Some are so concerned that they are wondering what steps can be taken to save it from the steady erosion of IP rights that has been occurring, often in the name of solving the "fake" problem of so-called "patent trolls."

One man who wants to prevent further harm to our IP system is Rep. Dana Rohrabacher (R) from California’s 48th District, who is a member of the House Science and Technology Committee. He recently wrote an op-ed article for the Washington Times called "Patent ‘reform’ is killing the right to invent: How a congressional misstep could imperil creativity" (March 1, 2015). I agree with much of what he says.

He warns that Congress's zeal to stop "patent trolls" will actually result in them simply doing the bidding of powerful companies who are annoyed by little guys able to defend themselves with patents. In effect, Congress is being manipulated into apparently "reforming" the US patent system but in reality they will be weakening it for small inventors and making it more friendly to the big empires that see patents as unpleasant sources of cost and annoyance. Here is some of what Rohrabacher has to say:
With the best intentions, and naively going along with the corporate world’s hugely financed publicity machine, Congress is about to stomp on America’s most creative citizens, its inventors.
The target is not the much-hyped “patent trolls.” They are a minuscule matter. What’s at stake is average Americans’ constitutional right to own what they’ve created. We’re really up against corporate lawyers acting like ogres, devouring the little guy’s innovative accomplishments.
Many of my colleagues, without understanding the legislation’s impact, will soon vote on “HR 9,” a misnamed “patent reform,” also dubbed “pro-innovation,” that is anything but. In reality, it deforms our patent system beyond recognition.
This legislation — pushed by my Republican colleague, House Judiciary Committee Chairman Bob Goodlatte, and deep-pocketed multinational corporations — appears on its way, again through the House, to the Senate, thence to an eager President Obama for signing.
When that happens, America’s exceptional system of invention will be shoveled into the depths of mediocrity, there to seep into the murk in which less scrupulous global competitors spend their resources.
In the last session, a bipartisan band of my Republican friends (some of whom made their pre-political marks as patent-holding inventors); members of the Black Caucus; and a heroic Ohio congresswoman, Democrat Marcy Kaptur, failed to dissuade our House colleagues that the bill was not the litigation-curbing effort as advertised.
The bill went to the Senate where, fortunately, it stalled. It’s back, this time resurfacing in the House with just one hearing. A whole class of small inventors, among the many who will be injured, is being kissed off as scarcely deserving a voice. All in a day’s work for the corporate influencers who shaped HR 9 from start to finish.
Just because a measure holds itself up as “tort reform” should not mean it escapes the scrutiny of free-market Republicans. It should instead call for a skeptical second look, and then more throughout its progress. Guaranteed: Such close-eyed analyses of this bill will encourage deep suspicion.
Fair-minded members will find themselves aghast at how this leaves defenseless our individual inventors, small and midsized companies, researchers, even universities who depend financially on their patent portfolios. It is a coup in the making by the biggest and best protected operators....
Legislative reform efforts invariably build on a narrative of great injustice. This one moves wildly beyond the need to fix real abuses, wherein at considerable cost companies must defend their legitimately acquired patents against unscrupulous claimants.
But the term “patent troll,” directed against such bad actors, has been transmogrified by corporate marketers to include legitimate small inventors — many of them minorities, which is why my Black Caucus friends sized up the issue astutely — who are outgunned and outspent when they try to protect their intellectual property.
Almost all infringement cases are brought by people who own a patent legitimately. If not, such cases should be decided in court. There is nothing wrong with bringing such matters to court — a cornerstone, not of crony capitalism, but of the free market itself.
Our economy and culture depend on the disruptive nature of innovation. Our Constitution deliberately made all people equal, giving no advantage to those of social status, wealth or position. The founders, even before they added the Bill of Rights, secured the right to hold patents in the Article I of the Constitution itself, the only right mentioned prior to the amendments.
We all know our country’s history of innovation. Large companies reject new ideas. It is the innovator who challenges the status quo, not the corporation.
Under the proposed bill, the pretrial discovery process — just one part of many dubious sections — tilts heavily against the small inventor, who of course must share his or her secrets with an opposing corporation’s well-armed legal team. In another era, I might have considered this an innocent, unintended consequence of ill-considered drafting. Not now.
I implore my colleagues in both the House and Senate to stop this monster aborning.

Sunday, March 15, 2015

Open Innovation and Intellectual Property Trends in China

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China is undergoing a revolution in the realm of IP and innovation. In just 3 decades, China has gone from no IP law to leading the world in patents filed and litigation to enforce patents. The level of innovation in China may well be the next big surprise for many in the West.
“Open innovation” is often used to describe collaboration with outside partners to accelerate innovation. Dialog about open innovation frequently assumes that it is recent and Western, but successful open innovation is not unique to the West. Innovation via cooperation between unlikely partners has been a characteristic of China for centuries. Relevant terms are guanxi (often translated as “relationships”) and yuanfen (fate that brings partners together). In China, guanxi and yuanfen have allowed proximity and chance to bring business partners together when there was a basis of trust, resulting in innovative alliances. The fusion of skillsets in China’s manufacturing economy often stems from collaborative innovation, though the results are often decried as merely the machinery of copying.
Accelerated innovation in China, including advanced systems for responding to market feedback, is the subject of a report from the MIT Sloan Management Review, where Peter Williamson and Eden Yin survey China’s innovation in rapid manufacturing and parallel engineering. A key element is obtaining feedback and innovation concepts from outside partners or customers. The cited example of Mindray Medical International, China’s largest medical equipment maker, shows how R&D fueled by rapid response to outside feedback enables advanced new products to launch four times as fast as foreign competitors. This is not old-school copying, but the impressive fruit of aggressive open innovation.
Many more examples could be cited, such as Lenovo’s rapid acquisition of foreign patents to fuel entry into new areas, or Wuxi Pharma Tech (NYSE: WX) and their collaboration with Germany’s Targos Molecular Pathology to support WuXi's bioanalytical work for pharmaceutical customers.
The global IP community was surprised in 2014 to learn that a Chinese paper company had secured 8 billion RMB in funding (over US$1 billion) backed by its intellectual property. The story was reported in a Chinese paper-industry publication in March 2014, and a few days later we had the privilege of reporting this story to the Western world on the Innovation Fatigue blog, which was in turn quickly picked up by Intellectual Asset Management (IAM) magazine. IAM’s blog noted that this deal is one of the biggest IP-backed loans in history.
The company, Tralin Paper (Quanlin in Chinese, or Tranlin in recent US stories), has a modest portfolio with around 100 Chinese patents, several internationally-filed patents and a few trademarks. Their technical strength is in creating paper with natural characteristics from waste paper and straw. Even if guanxi rather than IP was behind the financing, the fact that IP was used as publicized basis for the deal underscores the increasing importance of IP in China and the diverse ways in which Chinese IP can generate value. For Tralin, even if the IP were window dressing, its role even as a prop at a minimum provided PR value and strengthened Tralin’s position as thought leader in its niche. The most reasonable assumption is that IP also provided direct financial benefits, not just window dressing.
In the US, where Chinese innovation and IP is often deprecated, the impact of this deal is being felt strongly as Tralin/Tranlin is investing $2 billion in Virginia and creating 2,000 jobs with the technology they are bringing to US shores. News stories so far have missed the connection between US jobs and Tranlin’s ability to get capital based on Chinese IP, but we hope that Americans might recognize that innovation and IP from China is at least partly responsible for this welcome job growth.
Tralin/Tranlin’s story is part of a landscape in China where entrepreneurs and creative leaders are discovering the many positive uses of IP, including its ability to secure capital and build partnerships. But many Western companies wishing to build partnerships with their technology fear China and the risk of misappropriated IP. This lack of trust is being addressed gradually as China strengthens its IP laws and IP enforcement systems. Lawsuits, no matter how fair, are a last resort. Successful joint innovation requires trust directly between parties, and both sides need more successful examples for inspiration. Fortunately, a powerful role model of the technical, cultural, and political bridge-building that can occur in a healthy relationship rooted in carefully-maintained trust can be seen in a remarkable experiment in technology transfer and international cooperation: the Utah-Qinghai EcoPartnership, a unique collaborative effort that is using IP from the United States to solve major environmental problems in China.
To read more about the Utah-Qinghai EcoPartnership, with some interesting photos showing the fruits of this unique collaboration based on respect for IP rights and mutual trust, see the article I published with two co-authors (Edgar Gomez, and Alan Smurthwaite) in the Diplomatic Courier, "Open Innovation and IP Trends in China: Insights from the Utah-Qinghai EcoPartnership."

Wednesday, July 30, 2014

The Tralin/Tranlin Paper Story from Shandong, China: An Example of Chinese Intellectual Property Creating Jobs--in the US!

In a previous post, I reported that a huge loan had been given to a Chinese paper company backed by its Chinese IP as collateral. The 8 billion RMB obtained by China's Tralin Paper (Quanlin Paper in Chinese, though they use www.tralin.com for their website), one of the biggest IP-backed loans in history, not only shows that Chinese intellectual property is coming of age, but is now being used to bring Chinese technology to the US where it will help create over 2,000 US jobs. Tralin Paper, renaming themselves as Tranlin Paper, has just signed a deal with the State of Virginia, obtaining state support as Tralin/Tranlin/Quanlin invests $2 billion to create a new environmentally friendly paper mill and create over 2,000 US jobs. Recent news  from the office of Governor Terry McAuliffe of Virginia proudly announces the plans of "Tranlin Paper." Also see reports at TAPPI.org and MFRTech.com.

As the West continues to decry Chinese IP and innovation, always viewing China as a source of IP theft and job loss for the US, this story may come as a pleasant surprise. Here is an innovative Chinese company that has created and protected their own IP in a green technology, used innovative financial tools (and plenty of solid Chinese guanxi) to obtain massive financing based on that IP, and then brought their money and their technology to the US to create many jobs. At least some parts of this story are going to be repeated in many ways in days to come. The old paradigm of China lacking IP or lacking valuable IP is fading.

After the announcement at ChinaPaper.net, the first report on this story to the English-speaking world, as far as I know, was my original March 6, 2014 report here at InnovationFatigue.com followed by an update here on the Shake Well blog that gave a translation of the Chinese story. It was picked up by Intellectual Asset Magazine and by World Trademark Review, but is still a generally unrecognized but important story.

China still has a long ways to go in overcoming its problems and strengthening innovation and IP, but the trends here are remarkable and should not be discounted. Meanwhile, we should welcome stories like Tranlin's, and watch for many more to come. But for some US companies, this will mean even tougher competition that won't be easily avoided with restrictive, protective tariffs or antidumping legislation.

(Similar account cross-posted on the Shake Well Blog.)

Wednesday, March 26, 2014

Chinese Paper Company Relies on IP to Gain 7.9 Billion RMB Loan

March 6, 2014: I recently learned of important news from the Province of Shandong in northern China. A Chinese paper company, Quanlin Paper (also known as "Tralin Paper") has used its portfolio of patents and trademarks to secure a loan of 7.9 billion RMB (about $1.3 billion). The story was reported on March 3, 2014 on the website for the Chinese magazine, China Paper. This deal may be a record for China in terms of how much value IP brought in seeking financing. To emphasize the significance of this development, the normally dry China Paper publication begins with a somewhat flowery statement based on an interview with the Chairman, who expresses surprise and delight at how much money they were able to obtain with their IP. Here's my loose translation, followed by the actual Chinese:
"I never thought that intellectual property could have such a big effect in obtaining this loan. IP was a big part of it," according to Quanlin Paper Company's Chairman of the Board, President Li Hongfa, speaking today to a reporter about the 7.9 billion yuan from bank lenders that began this week. He said that this money will help them rapidly expand and seize market opportunities. Money has been tight for business, and this new addition is welcomed just as the mist-covered earth rejoices in the spring rains from the night before. 
核心提示:“没想到知识产权能在这次贷款中起这么大作用,占这么大比重!”泉林纸业有限责任公司董事长、总经理李洪法今天对记者说,79亿元的银团贷款本周已开始放款,这笔资金对正在快速扩张、抢抓市场机遇但一直资金紧绷的企业来说,就像雾霾重重的大地喜迎昨夜的春雨。
That may be overly flowery for some tastes, but again, this is big news for China and things get flowery when big news is good. This development shows that IP in China can be valuable (though the portfolio includes some international patents, it is mostly Chinese IP). It also shows that Chinese companies, even in seemingly dull industries like the paper industry, can be innovative and create valuable IP. I haven't reviewed their IP to assess its value, but I understand they have over 100 Chinese patents in areas such as technology for using straw and other renewable or recycled materials for making paper, with alleged benefits of enhanced environmental friendliness and cost effectiveness. Shandong Province's IP Office has also created some publicity about Quanlin's IP estate (see the Chinese article here), though this was before the news of the massive loan secured with the help of IP. Expect more publicity from them shortly.

Further background comes from Baidu's wiki-like entry on Quanlin Paper.

When nations develop strong IP systems, companies can use their IP to protect their innovations. This also motivates them to take the risk and spend the money need to drive further innovation, and gives investors courage to fund growth and innovation. In this case, it helped give a lending partner (a Chinese financial organization) the courage to loan a giant sum of money to help Tralin grow. Tralin has been pursuing IP not just for tax breaks it seems but also for strategic purposes, and information coming out about this story shows that they have been developing expertise in their staff to develop their IP estate. Sure looks like that has paid off for them.

This is one of many signs that China is becoming serious about IP and innovation, and not just low quality IP, but IP that can provide significant value. For IP to apparently be a crucial part of such a large loan in this challenging economic times is a remarkably positive sign for China, in my opinion.
On the other hand, the loan may be due to politics and guanxi with officials, and the IP is just window dressing. That's possible. But to even choose IP as the window dressing for publicity and hype is a remarkable thing in it's own right, and still a sign of China's rapid transformation in valuing and pursuing intellectual property.

Here is my loose translation of the China Paper article:
泉林纸业知识产权质押融资创国内最高
Quanlin Paper Crafts the Nation's Largest IP-Backed Financing 
泉林公司以110件专利、34件注册商标等质押获得的这笔贷款,2月21日在国家知识产权局完成备案。经省知识产权局核实,这是迄今为止国内融资金额最大的一笔知识产权质押贷款。 
On Feb. 21, 2014, Quanlin Paper secured a loan using a pledge of intellectual property. The pledge, recorded with the State Intellectual Property Office (SIPO), includes 110 patents and 34 registered trademarks. The Shandong Province Intellectual Property Office has verified that this is the largest amount ever financed in China using intellectual property. 
“这笔资金到位,我们的大项目就能加快推进,市场机遇不等人啊!”李洪法说的大项目,是一个年处理150万吨秸秆的制浆造纸综合利用项目。泉林公司总部位于聊城市高唐县,是一家以浆纸业为核心的大型企业,利用秸秆制造“本色”纸品,变废为宝、环保健康,改写了人们对造纸业的既有印象,也在改变着人们的消费习惯。企业提出这个大项目后,很快得到环保部、国家发改委认可、立项,是全国资源综合利用和循环经济示范工程,也是2013年省重点建设项目。目前,项目基本建设已经全面展开,计划年底前建成,投产后,预计年可实现销售收入81.65亿元,销售税金4.89亿元,利润12.4亿元。 
"With this funding obtained, we will be able to accelerate our large projects. Market opportunities wait for nobody!” said Chairman Li Hongfa. The primary project Li refers to is a straw-based pulp manufacturing complex for papermaking that will process 1.5 million tons per year of straw. Quanlin company is headquartered in Liaocheng City, Gaotang County (Shandong Province). Quanlin’s core business among their large-scale enterprises is pulp and paper manufacturing using straw to create “natural color” paper. Quanlin turns waste into treasure and promotes a healthy environment, transforming both the impression that people have (of the industry) and their habits of consumption. 
After the enterprise brought this large project forward, it rapidly gained approval from the Environmental Bureau and the National Development and Reform Commission. The project is an important program for the nationwide comprehensive utilization of resources and a model project for China’s recycling economy. It was also considered a provincial key construction project in 2013. Currently, capital construction is fully underway and should be complete by year-end. Once production begins, the expected annual sales revenue will be 8.165 billion RMB, with anticipated sales taxes of 489 million RMB and annual profit of 1.24 billion RMB. 
知识产权获资金市场高度认可,对科技型企业无疑是巨大的利好。尽管泉林公司本身的发展就是受益于在知识产权、核心技术上的不断投入——即使在企业资金最困难的时候,这上面也从来没有“短”过,李洪法这次还是被深深地触动了:在这次贷款中,企业拥有的专利评估价值达到了60亿元,对贷款顺利达成起到了关键作用。这意味着,专利等知识产权不仅能垄断市场、为企业创造长期利润;质押融来真金白银,更是能够解决科技型企业成长中最头疼的资金饥渴,释放发展潜力,及时把握市场机遇,让企业“长大”。 
For intellectual property to receive this high level of approval from the market is without doubt a giant benefit for technological enterprises in general. Although Quanlin company's own development has now benefited from their intellectual property, they continue to invest steadily in their core technology—continuing even during the times when investment is most difficult. This is an area where the company has never gone “short.” The result has made a deep impression on Li Hongfa: in the process of obtaining these loans, the appraised value of Quanlin’s patents reached 6 billion RMB and played a key role in successfully obtaining the financing. This means that patents and other IP rights are not just about obtaining a monopoly in the market, but can be used to creating long-term profit for the enterprise. They can be used as collateral for significant financing to resolve one the biggest headaches for high-tech businesses, the hunger for funds to grow, to capture hidden potential, grasp favorable market opportunities, and to let the company “grow up.” 
这一融资方式也让银行对科技型企业增添了兴趣。不仅国家开发银行牵头银团,为泉林公司发放了这笔79亿元的贷款,交通银行甚至还与省科技厅签署专门的战略合作文件,并推出了专门的知识产权融资产品。交行山东省分行零售信贷部总经理姜鲁荣说,知识产权看似无形,却体现了企业价值创造和持续经营的能力,银行业务风险没有增加,却有可能抢占一批优质客户,改善银行客户结构,“就像泉林公司这样”。 
This financing will stir the interest of banks other technology enterprises. Not only did the China Development Bank and their affiliates issue Quanlin a loan of 7.9 billion RMB, but the Bank of Communications also signed a strategic cooperation document with the Provincial Science and Technology Department, and launched a specialized intellectual property financing product. Jiang Lurong, General Manager of the Retail Credit Department of Shandong Branch Bank, said that while intellectual property seems invisible, it reflects value creation and the ability to continue operations without increasing banking risk, and can help obtain more high-quality customers, improve the system for customers of the bank such as companies like Quanlin.
Kudos, by the way, to Dr. Ian Feng of Goldeast Paper in Zhenjiang, China for alerting me to the story in China Paper.

Note: IAM Magazine issued a blog post on the use of IP in lending in China: "Chinese companies have secured over $10 billion in patent-backed loans since 2008" by Jeff Wild, March 4, 2014. The news I share below (cross-posted at InnovationFatigue.com) definitely supports their article. Great timing! Further, responding to the news that I first broke to English speakers on the Innovation Fatigue Blog, IAM Magazine has written a blog post about this story (kindly citing my announcement), wherein they observe just how big of a deal this is. I agree, though I also think it's fair to wonder how much of the transaction actually depended on IP and how much was due to guanxi and other factors. I have not yet evaluated the IP and if I do look at it in more detail, do not plan on sharing my analysis publicly, but may still offer further updates on this story here. IAM's post includes a translation of the Chinese article behind this story. My independent translation above was prepared before I saw the IAM translation. If there are significant differences in meaning, I'll defer to them since my Chinese is still rough.

Cross-posted on the Shake Well Blog.

Monday, January 13, 2014

Imitation Without Knowledge: A Problem for Innovation and Potato Peelers

Pictured to the right is my potato peeler/fruit peeler which I purchased in Shanghai. It is dutifully based on the design of typical peelers long sold by Western companies. But I suspect this imitation object was copied and manufactured by people unacquainted with the finer points of peeling potatoes. In peeling potatoes, one frequently encounters eyes or other bad spots that need to be gouged out. Good potato peelers have a curved metal end that can be used for gouging potatoes and fruit. My Shanghai peeler has dutifully copied the general shape of other peelers, with a somewhat pointed tip and a concave surface below it, but the tip is made of thick blunt plastic that is useless in gouging. It is a classic example of imitation without understanding the details of how something works. It can look the same, but the results are disappointing.
The innovation efforts of many companies are like my potato peeler: they imitate what they see others doing, but lack the knowledge and experience needed to make the systems actually work. So we get innovation rhetoric, a temporary budget and Big Program, with consultants sailing in and trying to change employees when the real barriers to innovation may be elsewhere. We get brainstorming sessions that lead to nowhere, momentary IP races that waste resources and leave inventors discourage, innovation funnels that become echo chambers, and improvised staged product launch systems that result in decisions made without adequate knowledge and little hope of success. In some cases it all comes down to instinct and gut feel from an omniscient leader imitating Steve Jobs or some other charismatic innovator, while overruling all logic and leaving a wake of confusion.
Innovation requires experience and deep knowledge. It requires systems and cultures designed with innovation expertise, not just a quick fix and temporary effort to imitate others. Innovation leaders need the support and attention of management at the very top, and systems tailored to enhance the innovation culture across the company. Innovation success is far more difficult that it looks when we are imitating someone who makes it look easy. It rarely is. Real knowledge and real patience are required.

Monday, December 30, 2013

Trade Secrets and Open Innovation

A culture that can protect trade secrets is vital for innovative companies. Such a culture becomes especially important in collaborative innovation efforts where failure to protect trade secrets can severely damage partners and the offending company’s reputation. 
Chinese companies are increasingly recognizing the value of what the West calls “open innovation.” In fact, forms of open innovation were the basis of a great deal of innovation in China long before the term was coined in the West. Innovation in China tends to be fueled by guanxi with trust between partners being far more important than the legal details drafter by lawyers for a joint venture or other collaborative effort. Innovation in China, though still largely overlooked by the West, frequently occurs as trusted friends or acquaintances discuss their needs and challenges and find new solutions by crossing disciplinary borders. The many partnerships and allies involved with leading innovators like Ten Cent, Alibaba, Foxconn, and Huawei testify to the fluidity and rapidity of innovation in China achieved via collaboration and shared vision among partners. 
However, when companies in China or anywhere collaborate to find innovation, the inevitable sharing of trade secrets between partners puts the players at risk should there be inappropriate disclosure. Two leaders may fully trust each other, but if one of them leads a company with a weak IP culture where individuals fail to respect trade secrets, the partnership can be destroyed and severe damage can be done. Those engaging in a collaborative venture should be aware of the risks and consider their own culture and processes, as well as the culture, processes, and track record of partners. Zealous efforts are needed to avoid harm, even when there is no intent to harm or defraud. Simple slips can disclose information inappropriately and hurt a partner and one’s own reputation. Those pursuing open innovation need to pay particular attention to trade secret protection and ensure that only a few well trained employees will be exposed to the trade secrets involved in the partnership. 
Unfortunately, university culture in China and throughout the world, generally speaking, is inherently geared toward sharing and publishing information, so partnerships with universities should be carefully pursued with the realistic expectation that information may be leaked. Containing the scope of the partnership and minimizing any sharing of corporate secrets can reduce risks, while still allowing a company to tap the many riches of knowledge and innovation in China’s academic community, where many companies are finding success in advancing innovation.

Thursday, November 7, 2013

Tortoise Innovation: The Problem with Corporations (and Their Inventors) Hiding in a Shell


tortoise hiding in a shell
Many large companies take a tortoise approach to innovation and stay as hidden within their shells as possible, even some who advocate open innovation. Tortoise companies may have creative R&D staff, including many scientists doing good work, but they keep these inventors hidden in the shell rather than encouraging them to publish or present their work.

The hares, on the other hand, take greater risks as they frequently step out of their comfortable burrows. They let their inventors not just show up at conferences and other events, but take the podium and present. Or, when appropriate, publish their work in major journals. As a result, their inventors become known and get to know many others with related interests. It is that visibility that allows potential partners to find them, to learn about their work, and to come forward with proposals for partnership or further innovation. These visible minds become more highly connected and able to contribute more directly and effectively to the open innovation needs of the Corporation. They are connected to other industries and better connected to the market, and may be more likely to recognize ways to adapt their inventions for better success.

The extreme of tortoise innovator may well be the large body of government scientists that conducted high-tech R&D for decades in the old Soviet Union. One of my past open innovation activities at Innovationedge included traveling to Moscow to assist Russia (more specifically, ISTC: http://www.istc.ru/) in finding external partners for the huge body of invention that arose from government labs in past work (this public information: e.g., I am listed as a speaker on the published agenda of a biotech meeting in Moscow with a presentation entitled "Innovationedge Partnership to bring innovation from Russia to the U.S."). 

Unfortunately, much of that work in the Soviet Union, in my opinion, was dominated by deep drilling into highly isolated wells of expertise, with advanced technologies that were unconnected to real-world industry and markets. Creating connections and finding market opportunities after the fact (as in “answers in search of problems”) is much less efficient that developing inventions tailored to meet real market needs in the first place. The scientists were some of the best in the world, but they were working in isolation, often in great secrecy, with little ability to discuss their work with outsiders and obtain needed feedback and insights to make their work more useful outside their immediate focus. Looking back in time at the fruits of past Soviet era R&D to me looked like closed innovation to an extreme.

My observation of the isolation of Russian R&D relative to industry and markets is consistent with the detailed observation and analysis by Dina Williams in “Russia’s innovation system: reflection on the past, present and future” in The International Journal of Transitions and Innovation Systems, Vol. 1, No. 4, 2011, p. 394-412, available via Academia.edu at  http://www.academia.edu/1207385/Russias_innovation_system_reflection_on_the_past_present_and_future (free download with registration).

Success in open innovation and even in making conventional internal innovation more successful can be enhanced when innovators “get out more often” and increase their visibility in relevant communities. Innovation is frequently about crossing boundaries and making new connections, and open innovation almost by definition involves reaching past one’s own corporate boundaries to find solutions outside. What better way to do this than by having innovators physically or virtually stepping outside those boundaries and being visible to potential partners?

One of my favorite experiences during my days at Innovationedge involved seeing a technology go from an inventor’s garage to a multinational corporation where it is now being commercialized globally. A key event in that story involved speaking at technical conference where my presentation included some information about our client’s invention. Afterwards, I was approached by an R&D leader from a significant corporation who wanted to know more. There was much more work after this—open innovation success is rarely fast and easy—but that new connection took us on a path toward success. Related stories occur frequently when innovation is shared. But silent companies who rely on their tortoise shell eventually find that solid defense is irrelevant. Sometimes, the prizes go not to those who best hide behind their fortifications but to those who cross the finish line in the race for innovation.