7. HENKEL, J., BALDWIN, C.Y., AND SHIH, W. (2013), IP MODULARITY PROFITING FROM INNOVATION BY ALIGNING PRODUCT ARCHITECTURE WITH INTELLECTUAL PROPERTY.pdf Flashcards
(12 cards)
What is IP modularity?
IP modularity is the alignment of product architecture with intellectual property (IP) boundaries to manage value creation and capture in distributed innovation systems.
Example: M-Systems split its flash memory driver into two parts—one open-source and one proprietary—to protect IP while enabling customer integration.
Why is IP modularity important in distributed innovation?
It allows firms to share parts of their system for collaboration while protecting critical IP, balancing openness with value capture.
Example: An automaker kept its stability control system separate from a supplier’s ABS to avoid IP entanglement.
What is IP incompatibility?
IP incompatibility occurs when two system components have conflicting IP statuses, making integration problematic.
Example: A proprietary module can’t be combined with an open-source one without risking IP leakage or legal issues.
What are the four strategic rationales for IP modularity?
1) Enable distributed innovation,
2) Manage shared IP,
3) Address uncertainty,
4) Extend control over weak IP.
Example: A firm might modularize to allow future changes in IP strategy without redesigning the whole system.
How does IP modularity support open innovation ecosystems?
By separating open and closed modules, firms can invite external contributions while protecting core IP.
Example: Nvidia offers open reference designs while keeping core IP proprietary.
How can IP modularity prevent IP leakage?
By assigning different modules to different suppliers or employees, no single party has full knowledge of the system.
Example: Michelin separated tire and steel belt production to prevent employees from knowing the full process.
How does IP modularity reduce the risk of hold-up?
By isolating external IP in separate modules, firms can replace or renegotiate without affecting the whole system.
Example: A software firm rewrote its platform to separate licensed code, reducing dependency on the licensor.
What is the benefit of “overly modular” design under uncertainty?
It creates flexibility to change IP status or respond to legal threats without major redesigns.
Example: Apple’s Darwin OS was modular enough to later open-source parts of it.
How can modularity help avoid patent infringement issues?
Modular systems allow firms to redesign or remove infringing parts without affecting the rest.
Example: MPEG-4’s modular design lets firms exclude components with uncertain IP status.
When is it beneficial to combine weak and strong IP in one module?
To extend the protection of strong IP to weak IP, increasing control and value capture.
Example: HP integrated the printhead with the ink cartridge to prevent third-party cartridge production.
What is the “embrace, extend, extinguish” strategy?
A firm adopts an open standard, adds proprietary features, and uses market power to dominate or replace the original.
Example: Microsoft was accused of modifying Java to make it incompatible with non-Windows platforms.
What are the three sectors in the IP modularity framework?
1) Open IP (broad innovation),
2) Shared IP (collaborative innovation),
3) Uncertain IP (future unknowns).
Example: A firm might open APIs (open IP), work with suppliers (shared IP), and modularize for future legal flexibility (uncertain IP).
