Technology clusters – it’s good to share!
I am sure that most of us can remember our parents telling us to share our toys or sweets with another child, writes Andrew Priest, a partner in the Corporate and Commercial team at law firm Birketts LLP. It was not an easy lesson to learn, especially if young Johnny did not reciprocate the offer.
However, later in life we learn that sharing is good because it helps to build and strengthen relationships and it demonstrates friendship and kindness. So are technology companies able to learn a similar lesson and recognise that sharing can be a good thing?
The idea of sharing anything is not an easy concept for many companies. They are told by their consultants and advisers to look for sustainable competitive advantages for their products and services, to protect their intellectual property and to restrict their senior executives from departing with any trade secrets. Whilst all of this advice makes good business sense, it does little to encourage a culture of sharing.
So why should technology companies consider sharing anything, whether that is information, data, IP or resources? When I was at business school I remember reading Michael Porter’s book ‘The Competitive Advantage of Nations’ and learning about how a business or industry cluster helps to increase the productivity of companies in the cluster, encourages technology innovation and investment and provides a suitable environment for new entry businesses.
Porter’s ideas are still applicable today and companies in many clusters, particularly technology clusters, have benefited from the competitive advantages that flow from being an active member of the cluster.
Technology companies often rely on IP, and in particular patents, to protect their products and to act as a barrier for new companies wishing to work in the same field or area of business.
Within a cluster environment, the sharing of IP between like-minded companies can help to reduce R & D costs and, through collaboration arrangements, build bridges towards higher levels of innovation and product development.
The idea is that the value of the whole IP becomes greater than the sum of the parts, enabling those companies in the cluster to ‘punch above their weight’ and compete in new markets and across additional countries.
The sharing of IP is often achieved through technology transfer agreements. These involve the IP owner or developer licensing its patents, know-how or trade secrets for exploitation by others in return for royalties and other payments.
Universities use these agreements to generate income and grant rights for the commercial exploitation of the IP. It is not a coincidence that many technology clusters include universities and other research institutions at their core – where, for example, would the science and technology companies in and around Cambridge be without the university, or Silicon Valley in the US without Stanford University?
Technology transfer agreements that involve the licensing of IP between parties in different European countries can give rise to competition law concerns especially where they seek to impose certain restrictions on competitive behaviour or they involve the cross-licensing of IP.
The regulatory authorities tend to look favourably on the licensing of IP because it helps to disseminate technical knowledge and promote the manufacture of technically more sophisticated products, but any proposed agreement should be looked at carefully to ensure that its terms do not breach established anti-trust laws.
The sharing of IP can also involve jointly owned IP. This is where both parties (or there could be more) wish to retain ownership and control of the same IP rights.
That can often be the case when the IP is developed jointly by more than one party. There is nothing wrong with having IP that is jointly owned, but the relevant agreement will need to be very clear about what each of the joint owners can and cannot do with the IP and the extent to which the consent of the other party (or notice to the other party) is required.
For technology companies, having access to innovative ideas is a key component for product development and sustaining competitive advantage. Industry clusters offer opportunities to achieve those goals through the sharing of knowledge and expertise, the transfer of technology and collaboration on joint projects.
The financial and economic benefits of doing this seem to be clear, but companies do need to remember that there should always be controls and limitations in place, and that is where well-drafted legal agreements also have an important role to play.
It’s good to share; we just need to do it more often. Even young Johnny can learn that lesson.
• You can call Andrew Priest on 07557 161 211 or email andrew-priest [at] birketts.co.uk