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Unformatted text preview: rm o f a patent f o r tho se inno vatio ns
deemed to be usef ul, no vel, and no no bvio us. In the United States, techno lo gy and (mo re
co ntro versially) even business mo dels can be patented, typically f o r perio ds o f twenty years f ro m
the date o f patent applicatio n. Firms that receive patents have so me degree o f pro tectio n f ro m
co pycats that try to identically mimic their pro ducts and metho ds. The patent system is o f ten co nsidered to be unf airly stacked against start-ups. U.S. litigatio n co sts
in a single patent case average abo ut $ 5 millio n,B. Feld, “Why the Decks Are Stacked against
So f tware Startups in P atent Litigatio n,” Techno lo gy Rev iew , April 12, 2009. and a f ew mo nths o f
patent litigatio n can be eno ugh to sink an early stage f irm. Large f irms can also be victims. So -called
patent tro lls ho ld intellectual pro perty no t with the go al o f bringing no vel inno vatio ns to market
but instead in ho pes that they can sue o r exto rt large settlements f ro m o thers. BlackBerry maker
Research in Mo tio n’s $ 612 millio n settlement with the little-kno wn ho lding co mpany NTP is o f ten
highlighted as an example o f the pain tro lls can inf lict.T. Wu, “Weapo ns o f Business Destructio n,”
Slate, February 6, 2006; R. Kelley, “BlackBerry Maker, NTP Ink $ 612 Millio n Settlement,” CNN
Mo ney, March 3, 2006. Litigatio n threats are pushing rivals to co o perate in patent po rtf o lio
acquisitio n. Apple, EMC, Ericsso n, Micro so f t, RIM, and So ny po o led reso urces f o r a $ 4.5 billio n
purchase o f so me 6,000 patents f o rmally held by the bankrupt teleco m equipment f irm No rtel.E.
Mills, “DOJ Clears Apple-Micro so f t-RIM Deal to buy No rtel P atents,” CNet, February 13, 2012. Even if an inno vatio n is patentable, that do esn’t mean that a f irm has bulletpro o f pro tectio n. So me
patents have been nullif ied by the co urts upo n later review (usually because o f a successf ul challenge to the uniqueness o f the inno vatio n). So f tware patents are also widely granted, but
no to rio usly dif f icult to def end. In many cases, co ders at co mpeting f irms can write substitute
algo rithms that aren’t the same, but acco mplish similar tasks. Fo r example, altho ugh Go o gle’s
P ageRank search algo rithms are f ast and ef f icient, Micro so f t, Yaho o ! and o thers no w o f f er their
o wn no ninf ringing search that presents results with an accuracy that many wo uld co nsider o n par
with P ageRank. P atents do pro tect tech-enabled o peratio ns inno vatio ns at f irms like Netf lix and
Caesars Entertainment Co rpo ratio n (f o rmerly kno wn as Harrah’s), and design inno vatio ns like the
iP o d click wheel. But in a study o f the f acto rs that were critical in enabling f irms to pro f it f ro m their
inno vatio ns, Carnegie Mello n pro f esso r Wes Co hen f o und that patents were o nly the f if th mo st
impo rtant f acto r. Secrecy, lead time, sales skills, and manuf acturing all ranked higher.T. Mullaney
and S. Ante, “Inf o Wars,” BusinessWeek, June 5, 2000. K E Y TAK E AWAYS
Technology can play a key role in creating and reinforcing assets for sustainable advantage by
enabling an imitation‐resistant value chain; strengthening a firm’s brand; collecting useful data
and establishing switching costs; creating a network effect; creating or enhancing a firm’s scale
advantage; enabling product or service differentiation; and offering an opportunity to leverage
unique distribution channels.
The value chain can be used to map a firm’s efficiency and to benchmark it against rivals,
revealing opportunities to use technology to improve processes and procedures. When a firm is
resistant to imitation, a superior value chain may yield sustainable competitive advantage.
Firms may consider adopting packaged software or outsourcing value chain tasks that are not
critical to a firm’s competitive advantage. A firm should be wary of adopting software packages
or outsourcing portions of its value chain that are proprietary and a source of competitive
Patents are not necessarily a sure‐fire path to exploiting an innovation. Many technologies and
business methods can be copied, so managers should think about creating assets like the ones
previously discussed if they wish to create truly sustainable advantage.
Nothing lasts forever, and shifting technologies and market conditions can render once strong
assets as obsolete. QU E S TI ONS AND E XE RC I S E S 1. Define and diagram the value chain.
2. Discuss the elements of FreshDirect’s value chain and the technologies that FreshDirect uses to
give the firm a competitive advantage. Why is FreshDirect resistant to imitation from incumbent
firms? What advantages does FreshDirect have that insulate the firm from serious competition
from start‐ups copying its model?
3. Which firm should adopt third‐party software to automate its supply chain—Dell or Apple? Why?
I dentify another firm that might be at risk if it adopted generic enterprise software. Why d...
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This document was uploaded on 01/31/2014.
- Winter '14