How to protect your invention against your alliance

How to protect your invention against your alliance
partner while working in an alliance
An exploratory case study of startup inventors in the Netherlands
Name: Max Kranendijk
Student number: 334556
E-mail: [email protected]
Master program: Management of Innovation (Business Administration)
Coach: Jan van den Ende
Co-reader: Helen Gubby
Date: 15-03-2012
Master Thesis
Max Kranendijk
Declaration of the author
The copyright of this Master thesis rests with the author. The author is responsible for its
contents. RSM is only responsible for the educational coaching and cannot be held liable for the
Max Kranendijk
List of keywords
startup, invention, innovation, alliance, intellectual property protection
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This Master thesis is my final contribution to my study Business Administration at RSM Erasmus
University Rotterdam. In the beginning of my thesis trajectory, I faced some difficulties in finding
a research topic which would benefit a certain organization. One of my thesis demands was to
conduct a research that would have a practical contribution to a certain organization. I had
several interviews with companies about conducting a research for them. Unfortunately, this did
not lead to any concrete research topic. During my internship at the ABN AMRO Dialogues House
I worked together with technical inventors. I experienced them struggling with commercializing
their invention and especially being worried of losing their invention due to imitation by a
competitor or (potential) partner. My goal was to contribute knowledge and recommendations
for methods which inventors can use to protect their inventions. Eventually, this observation led
to my research topic.
This thesis could never have been accomplished without the help of several people. Therefore, I
would like to mention the ones who supported me during my thesis trajectory.
I would like to express my thanks to Jan van den Ende for his supervision and valuable advice,
especially in defining my research topic. I would also like to thank Helen Gubby for providing me
her guidance in a completely new topic for me and her in-depth feedback concerning my English
Without the help from Wouter Pijzel and Desirée Gerritsen, I would not have been able to
conduct my research and therefore I am grateful for sharing their contacts and expertise in
order to arrange my interviews.
Furthermore, I would like to thank ABN AMRO Dialogues House for introducing and guiding me
in the entrepreneurial and innovative environment of startups. Especially, I would like to thank
Karin Lems for her feedback on the structure of my thesis.
Last but not least, I would like to thank my girlfriend, Jana Zarembová, for her endless patience,
support and feedback in order to successfully finish my thesis and my family for the support
during my study period.
Utrecht, 2012
Max Kranendijk
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Executive Summary
Technical startup inventors often face the problem of commercializing their invention due to the
lack of (financial) resources. Therefore, they frequently join an alliance to obtain the missing
resources and/or knowledge. A lot of research has been done about protection mechanism for
inventions. However, research does not focus on protection within an alliance against an own
alliance partner. Hence, the aim of this thesis is to answer the following research question: How
should you control the protection of an invention (knowledge) in an alliance against an own
alliance partner in order to maximize performance while commercializing an invention as a
startup SME (small and medium enterprise) innovator?
Discussions in the literature hardly make a distinction between protection against competitors
or own alliance partners. In most papers, the same protection mechanisms are used for normal
competitors and own alliance partners. Based on the literary resources and case studies, several
protection mechanisms were deliberated. The following protection mechanisms, suitable for
startup SMEs had been discussed: patents, secrecy, lead time, contracts, non-disclosure
agreements, trust and complementary knowledge.
For the case study, six inventors were interviewed who (un)successfully commercialized their
invention. The goal was to find out what their experience was with the different protection
mechanisms and which one was favorable in their situation. In addition, the researcher attended
events and interviewed several experts, who had a lot of experience in commercializing
The case studies showed that all inventors struggled finding a (promising) alliance partner. One
of the reasons for this was that the inventions were often applicable for a niche market which
decreased the availability of potential partners. The inventions were mostly patented by the
inventors themselves, before approaching partners and resulted in a secure protection against
imitation. According to the case study results, the biggest problem was to negotiate about a
lucrative deal with a partner or keep in control of the invention when the partnership had
started. Several cases showed that inexperience led to less promising deals. Therefore, it is
advised to be coached when one is not experienced with commercializing an invention.
After comparing the literature review with the empirical results, it can be concluded that the
most important method to protect an invention as a startup SME is to keep part of the invention
(knowledge) in own control. In other words, the alliance partner is always (partly) dependent on
the inventor in order to successfully commercialize the invention. For instance, the inventor
should not share in what way the invention should enter the market or for which (extra)
possible purposes the invention can be used. In this manner, the startup SME maintains
bargaining power in the partnership.
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Table of contents
Declaration of the author ....................................................................................................................... I
Preface .................................................................................................................................................... II
Executive Summary .............................................................................................................................. III
Introduction ................................................................................................................................... 1
Background ............................................................................................................................ 1
Research question.................................................................................................................. 1
Research framework ............................................................................................................. 2
Significance............................................................................................................................. 3
Delimitations .......................................................................................................................... 4
Definitions .............................................................................................................................. 4
Protection mechanisms ................................................................................................................. 6
Innovation versus invention defined ................................................................................... 6
Introduction in protection mechanisms .............................................................................. 6
Patents .................................................................................................................................... 7
Copyrights ............................................................................................................................ 10
Trademarks .......................................................................................................................... 11
Secrecy .................................................................................................................................. 11
Lead Time ............................................................................................................................. 12
Protection differences per industry ................................................................................... 12
Protection within SMEs / startups ..................................................................................... 13
Conclusion ............................................................................................................................ 15
Alliances........................................................................................................................................ 16
Introduction ......................................................................................................................... 16
(startup) SME alliances ....................................................................................................... 17
Leakage within alliances ..................................................................................................... 18
Conclusion ............................................................................................................................ 19
Protection in alliances ................................................................................................................. 20
Knowledge sharing/protection issues in alliances ........................................................... 20
Protection mechanisms used by startup SMEs in alliances.............................................. 22
Expected protection mechanisms used by SMEs in alliances .......................................... 24
Conclusion ............................................................................................................................ 25
Methodology................................................................................................................................. 26
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Qualitative research strategy .............................................................................................. 26
Case study ............................................................................................................................. 26
Role of the researcher ......................................................................................................... 27
Selection of the cases ........................................................................................................... 28
Data collection procedures ................................................................................................. 28
The quality of the study ....................................................................................................... 29
Data analysis procedures .................................................................................................... 30
Empirical results .......................................................................................................................... 31
Interviews with technical startup inventors ..................................................................... 31
Corporate Inventor (Rutger Beekhuizen) .................................................................. 31
Long-Life Inventor (Kees Woensel) ........................................................................... 32
Lazy Partner (Peter Jong) ............................................................................................ 34
Niche Market Inventor (Evert Goud) ......................................................................... 35
Intrapreneur Becomes Entrepreneur (Fons Derks) ................................................. 37
Continuous Inventor (Jorg Leers)............................................................................... 38
Conclusions .................................................................................................................. 40
Interview with an alliance partner ..................................................................................... 42
Max Kranendijk
Fast Engineering .......................................................................................................... 42
Additional findings .............................................................................................................. 43
Conclusions .................................................................................................................................. 45
Conclusion ............................................................................................................................ 45
Additional findings .............................................................................................................. 47
Limitations and suggestions for further research ............................................................. 47
References ............................................................................................................................................ 49
Appendices ........................................................................................................................................... 56
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1 Introduction
The first chapter describes the background of this thesis. In addition, it formulates the research
questions and the research framework. Moreover, the significance and delimitations of the
research are discussed. Finally, some important used definitions are explained.
1.1 Background
In recent years, there has been a shift from a closed innovation approach towards a more open
innovation approach (Chesbrough, 2003). This resulted in new initiatives, such as
crowdsourcing (Surowiecki, 2004), increased the amount and willingness to start alliance
partnerships and encouraged companies to work more together. Currently, companies ask
themselves how to deal with these upcoming changes and for which products and services it
A lot of companies struggle with the question: “How should you protect an innovation while
cooperating with third parties?” In general, most of the technological innovations are patented
because they can be well defined in a patent. Service orientated innovations are more difficult to
patent because they cannot be precisely described in such a way that a patent would secure
against imitation. As a result, service orientated innovations are difficult to protect. Therefore,
companies do not use only patents but also other methods to prevent from stealing an idea, such
as secrecy, lead time and human resources. A lot of research has been done on how to deal with
innovations in order to commercialize them and effectively cooperate with partners when the
inventor does not have the resources him/herself. The literature sources lack the specific
question; how protect an invention while working in an alliance against an own alliance partner
and how does this affect the result or performance? Especially, the combination of an alliance
with a startup small and medium enterprise (SME) inventor has not been researched. This thesis
conducted an exploratory research on this subject.
1.2 Research question
As mentioned above, a lot of companies, especially startup SMEs struggle with protecting their
invention while cooperating in an alliance with other parties. Therefore, this research will
emphasis on the decision of controlling and protecting an invention during cooperation with an
alliance partner in a way to successfully commercialize a new invention without losing invention
(knowledge) and suffering financial injury. The focus in this thesis is on startup SMEs (very
small firms, <10 employees), innovators with a technical invention and in general, a group with
limited resources who is often dependent on an alliance partner.
The issue mentioned above led to the following main research question (MRQ):
MRQ: How should you control the protection of an invention (knowledge) in an alliance
against an own alliance partner in order to maximize performance while commercializing
an invention as a startup SME innovator?
In order to answer this research question, four separate sub-research questions (SRQs) have
been formulated:
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SRQ1: How should you control the protection of an invention?
What is the definition of a patentable invention?
Which protection mechanisms can a startup SME use to control its invention?
SRQ2: How should you proceed managing an invention as a startup SME?
What alliance options are available as a startup SME and which ones are favorable?
What knowledge is required in order to start a successful alliance and which negotiations
are necessary?
SRQ3: How can an invention in an alliance be protected against an own alliance partner?
Which protection mechanisms can a startup SME use to control its invention against an
own alliance partner in an alliance?
How effective are these control mechanisms?
SRQ4: How can performance while commercializing your invention be maximized?
How does the effectiveness depend on contextual factors, such as type of technology,
industry, aim of the alliance, etc.?
1.3 Research framework
The research is built up out of four main parts; literature review, methodology, case study
(empirical findings) and conclusions and recommendations, which is shown in figure 1.
Input from experts / Case
Input from different
Input case study
Case study
Chapter 6
Chapter 5
Literature review
Chapters 2,3,4
literature findings
Preliminary case
study results
Conclusions and recommendations
Chapter 7
Figure 1: Research framework
Firstly, in chapter two, the literature review describes different protection mechanisms used to
protect an invention and which one to use in which situation and for what kind of invention.
Then, in chapter three, different types of alliances are discussed including their (dis)advantages.
Furthermore, chapter four elaborates what methods can be used by (especially) startup SMEs to
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protect an invention in an alliance partnership. Secondly, in chapter five, the methodology
approach is described of the conducted research. Based on the research questions from this
introduction chapter and the preliminary literature findings, a semi-structured interview
questionnaire is formed. Thirdly, in chapter six, case studies (empirical findings) are conducted
on real life inventors/entrepreneurs who have (un)successfully commercialized an invention
with the use of an alliance. The selection of the cases is based on theoretical literature and
practical experience of experts. The experts can be divided in three categories; governmental
(Agentschap NL1), semi-governmental (NOVU; Dutch Association of Inventors2) and private
(ABN AMRO Dialogues Incubator3) which are experts in the field such as intermediaries for
inventors and patent consultants. A more detailed description of the research design can be
found in the methodology section, which is described in chapter five. Finally, in chapter seven,
the outcomes are discussed and followed by a comparison between the literature review and
case study results.
1.4 Significance
It is widely acknowledged that innovation is fundamental to economic success. Especially, SMEs
are important for economic growth (Kitching and Blackburn, 1998). Often, SMEs lack resources
themselves which forces them to form an alliance with a partner or themselves, are the source of
knowledge for larger incumbents. How can these startup SMEs commercialize inventions
without losing their idea to their alliance partner?
A lot of research has been done on commercialization of an invention with the help of alliances.
These days, collaborative R&D partnerships among asymmetric partners are becoming
increasingly common (Blomqvist et al., 2005). Unfortunately, every invention is different and
deals with a lot of uncertainties resulting in a customized approach instead of a “one size fits all”.
Especially, little research has been done on focusing on Intellectual Property (IP) strategies of
small firms (Arundel, 2001). Even more rare is the focus on protecting an invention against an
own partner in an alliance (Rivera-Santor et al., 2008).
A lot of startup SMEs lack (financial) resources in order to effectively commercialize their
inventions. They are forced to cooperate with third parties in order to overcome lacking
resources and to be able to commercialize the invention. Particularly, the way to protect and
control the invention while working together within the alliance is essential.
In this thesis, the research has both a theoretical and practical contribution. In the literature
review, the theoretical part will be discussed with the focus on the discussion about which
protection mechanism to use within the alliance. The practical contribution is about learning
from experiences from inventors (case study) who had to struggle during commercializing the
invention with an alliance partner. These results can be linked and be helpful for iDexpress, a
joint venture of consultancy firm Dutch, Dutch Association of Inventors (NOVU) and ABN AMRO
Dialogues Incubator, which is a venture linking inventors with investors and other third
partners and is powered by the Province of Utrecht. iDexpress works as an intermediary
between inventors and investors. Learning more about how inventors can become successful
NL Agency is the number one contact point for businesses, knowledge institutions and government bodies, focusing on
sustainability, innovation, international business and cooperation. NL Agency falls under the Dutch Ministry of Economic Affairs,
Agriculture and Innovation.
NOVU is a Dutch organization of inventors, product developers and researchers and based in Utrecht in the center of the
Netherlands. The organization looks after the interests of its members in the widest possible sense.
A R&D department of ABN AMRO Bank which facilitates innovation and entrepreneurship in Financial Services.
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can help iDexpress finding successful inventors and convince them to commercialize their
invention with the help of an alliance and how to protect their invention within this alliance.
Besides inventors, SMEs and entrepreneurs can be supported to successfully cooperate in an
alliance without losing their invention and control the power difference between the two
parties. The outcomes of this research will also be shared with the members of the NOVU.
1.5 Delimitations
In order to narrow down the research scope, the following delimitations have been made:
The invention is technically orientated and patent eligible.
The invention cannot be commercialized without the set-up of an alliance.
The alliance partnership is between a startup SME and a (dominant) incumbent.
The research is primarily focused on the point of view of the startup SME.
1.6 Definitions
This thesis will often refer to the following three terms, idea, invention and innovation. The
main purpose is to research someone’s idea, invention or innovation and possibilities in
protecting it from their alliance partner while commercializing. The literature review will
portray the differences in the definition between them and which one is leading in this thesis in
detail. In addition, the following terms are widely used in this research.
(startup) SME:4 The category of micro, small and medium-sized enterprises (SMEs) is made up
of enterprises which employ fewer than 250 persons and which have an annual turnover not
exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.
Dominant incumbent:5 A business that holds a particular position in an industry at the present
Technical invention:6 The solution needs to pertain to a construction, a device, a method of
production or a process which is set to achieve a certain technical result.
Idea:7 A thought or collection of thoughts that generate in the mind. An idea is usually generated
with intent, but can also be created unintentionally. Ideas often form during brainstorming
sessions or through discussions.
Invention:8 New scientific or technical idea, and the means of its embodiment or
accomplishment. To be patentable, an invention must be novel, have utility, and be non-obvious.
To be called an invention, an idea only needs to be proven as workable. But to be called an
innovation, it must also be replicable at an economical cost, and must satisfy a specific need.
That's why only a few inventions lead to innovations because not all of them are economically
S. Grzybowski, Prawo wynalazcze, Law on inventions, 1965 p. 21.
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Innovation:9 The process by which an idea or invention is translated into a good or service for
which people will pay, or something that results from this process.
Alliance:10 Coming together of two or more firms to create a unique organizational entity (such
as a joint venture), in which each firm retains its individual identity and internal control.
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2 Protection mechanisms
This chapter discusses the relevant theory supporting the answer of SRQ1. The focus is on what
is an invention and which protection mechanisms can a startup SME use to protect the
invention. The following main topics are described; innovation versus invention, protection
mechanisms, patent, trademarks, copyrights, secrecy and lead time.
2.1 Innovation versus invention defined
This section describes the differences between innovation and invention. In addition, it explains
which term is applicable in which situation and which one is used in this study.
Previous research argues that the ability of commercializing technological inventions are an
important driver for success (Cohen and Levinthal, 1990; Eisenhardt and Martin, 2000; Zahra
and Nielsen, 2002). In academic papers, the terms innovation and invention are often used for
similar meanings. Therefore, it is important to state an exact definition for both of the terms and
describe which one is used in this research.
According to Roberts (2007), innovation can be best defined as:
The generation of an idea or invention and the conversion of that invention into a
business or other useful application.
The generally accepted (broad) definition of innovation is all the stages from the technical
invention to final commercialization (the technical contribution does not have a dominant
According to Marchetti (1980), invention can be best defined as:
The discoveries that are the bases of the innovations.
Concluding from the above definitions innovation and invention can be explained in short as:
Innovation = Invention + Exploitation (Roberts, 2007).
In this research, the term invention is used because the focus is on startup SME inventors who
invented a technological invention. The trajectory is studied, in what way an inventor can turn
its invention into an innovation with the support of an alliance partner and in what way to
protect its invention against their partner.
The literature lists several different types of innovations, such as radical and incremental
innovations in addition to product and service innovations. This research focusses on technical
(product) innovations in general and does therefore not describe different types of innovation in
2.2 Introduction in protection mechanisms
It is widely acknowledged that IP is important for innovation and technical growth (Lanjouw
and Schankerman, 2001). In addition, the protection and enforcement of IP rights promote
competition and it is commonly accepted that it is in the nature of intellectual property rights
(IPRs) to convey monopoly power (Carvalho, 2010). Already in the 1960s, Arrow (1962)
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recognized the importance of appropriability of the results of innovations for the allocation of
resources in innovative activities. In summary, protection of IP has the following objective:
The protection and enforcement of IPR should contribute to the promotion of
technological innovation and to the transfer and dissemination of technology, to the
mutual advantage of producers and users of technological knowledge and in a
manner conducive to social and economic welfare, and to a balance of rights and
obligations (Carvalho, 2010).
Within the literature, there are many different methods of categorizing protection mechanisms.
One of the main reasons is the difference in IP protection law between countries. Many
academics (e.g. Auerbach 2006 and Hertzfeld et al., 2006) divide IPR mechanisms in four
categories; patents, copyrights, trademarks and secrecy (trade secrets). This division is based on
the American law.11 Within the European law, there is a different distinction. Patents are
additionally divided in patents and registered designs.12 Nevertheless, the division of the
American law is used in this thesis because it is in line with other literature papers in which the
research was conducted within the European law, such as in a paper by Leiponen and Byma
(2009). In this study by Leiponen and Byma (2009) research was conducted in European Law
but the division of American Law was used. Which protection mechanism to use depends on
many factors, such as the type of knowledge to be protected, the kind of competition in the
specific industry and the nature and purpose of the partnership (Hertzfeld et al., 2006).
According to Harabi (1995), there are six mechanisms for protecting intellectual assets; patents
to prevent duplication, patents to secure royalty income, secrecy, lead time, moving quickly down
the learning curve and superior sales or service efforts. He contributes “informal mechanisms”,
such as lead time, moving quickly down the learning curve and superior sales or service efforts.
Nevertheless, this thesis will follow the main division; patents, copyrights, trademarks and
secrecy, but will also add lead time, because it is widely used by startup SMEs and becoming
more important as a (informal) protection mechanism for technical companies because of the
decreasing life cycle of (technical) products (Leiponen and Byma, 2009).
In general, there is a main separation made between protection mechanisms, formal methods,
such as utility patents and informal methods, such as lead time and secrecy (eg. Harabi 1995 and
Leiponen and Byma, 2009). Table 1 presents the division.
Table 1: Formal and informal protection mechanisms
Formal protection mechanisms
Informal protection mechanisms
Patents (including design patents)
Secrecy (trade secrets)
Lead time
2.3 Patents
As mentioned in the introduction about protection mechanisms, patents are one of the most
used methods of IP protection for technical inventions. According to the American law, a patent
may be granted on any new and useful process, machine, manufacture, composition of matter,
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improvement and plant as well as to new, original and ornamental design for an article of
manufacture (Besen and Raskind, 1991). In order to apply for a patent in the Netherlands, one
has to meet certain requirements, which are later in this chapter described.
Based on anecdotal and empirical research, it can be concluded that the importance of patents
has increases since the early 1980s (eg., Arundel, 2001; Thurow, 1997 and Granstrand, 1999).
According to Oxley (1999), patents are the most widely used instrument of protecting IP. Three
main reasons for the importance of patents are: the increasing number of patents, the move
towards an economic importance of proprietary knowledge; a shift from competition on price
towards competition based on technical innovation and the rise of new technologies (Arundel,
2001). In general, patents have been and still are frequently used as an indicator for innovation
(Brouwer and Kleinknecht, 1999).
According to Brouwer and Kleinknecht (1999), there are four factors influencing a firm’s
propensity to start patenting: industrial differences; affecting the speed and costs of imitation vs.
innovation, firm size; because of differences in resources capabilities; formalization of technology
exchange; seek for protecting knowledge when entering a partnership and R&D intensity;
companies with more “new to sector” products are likely to be more innovative.
On the other hand, currently, there is a shift in a way protection mechanisms are used. Recent
years showed a change in the opinion about patenting, such as the upcoming trend of open
innovation (Hanneman et al., 2010). This resulted in the increased speed of product life cycles
and the time of benefiting from an investment in R&D has decreased significantly. For example,
it took ten years to develop the technology for car navigation, but acceptance in the market
happened in a few years. As a result, firms may need more and faster new technologies but may
not have it available and not have the time to develop the technology. Companies, which lack
such new technologies find their technologies in firms which are specialized in developing
particular expertise and provide them sales with their established sales channels. As a result,
firms tend to start more alliances, as portrayed in section 3.3. Moreover, many companies highly
active in research and development have a reputation of patenting everything they created.
Often this generates huge costs and process waste. For instance, Procter & Gamble and Siemens
Aktiengesellschaft only receive royalty fees for 10% of their patents. For the other 90% they pay
annual fees without any financial benefits (Alexy et al., 2009). Consequently, companies with too
much focus on IP, can “miss the boat” in finding collaborators. Due to restrictions and hindering
researchers to talk outside the company, one can isolate him/herself.
The main reason for organizations or people to patent is to reward innovation by temporarily
restricting competition in the production of the resulting goods and services (Aoki and Schiff,
2008). In order to apply for a patent (in the Netherlands) an inventor has to meet three
requirements (Hanneman et al., 2010):
Under the act, a patent can only be granted in respect of an invention (1) where that
invention is deemed to be “novel” (2) and where the invention is likely to lead to
tangible benefit to industry or commerce (3).
If none of the three terms is met, the patent application will be rejected. Conversely, where all
three conditions are fulfilled, a patent will almost certainly be granted. In addition, inventions
need to meet the legislation stated by the Patent Act 1995 and the amendments which effect of
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5th of June 2008.13 On the 5th of October, the European Patent Convention (EPC) provided a legal
framework for the granting of European patents via a single, harmonized procedure before the
European Patent Office.14 In this way, it was made possible to file a single patent application in
one language.15
A lot of (smaller) firms struggle with the high costs involved with patents (MacDonald, 2004).
Even when the decision is made to apply for a patent, a second decision has to be made
concerning the countries a patent is applicable. Additionally, it is important to consider the
period for which the patent should apply. To give an example, applying for a patent which is
applicable in the Netherlands, Germany, United Kingdom, Belgium and France for a period of ten
years it will approximately cost 7000 euro. For a period of in total twenty years it would cost
roughly 40.000 euro.16 Prices differ a lot per country. Exact differences about applying for a
patent and differences per regime are omitted in this thesis because these details are out of the
scope of this research.
IP litigation is part of the patenting environment. Firms competing in research and development
and production often infringe each other’s patent right in order to return (extra) incomes or to
defend their market. Especially, patents that form the base of a cumulative chain, or
technological trajectory are more likely to go to court to protect patents (Lanjouw and
Schankerman, 2001). In this case, “improvement innovations” are always dependent on the
control of the initial invention which is confirmed by Scotchmer (1991) and Green and
Scotchmer (1995). In addition, reputation building plays an important role in the decision to
litigate. Companies competing in the same market are more likely to prosecute the infringement
of a patented innovation. Therefore, for some types of patents there is a larger chance of
infringement. Nevertheless, the litigation rate of all patents is about 1% (Jaffe, 2000). For the
valuable drugs and health patents it is 25% and around 10% in the technology fields (Lanjouw
and Schankerman, 2001). Not only the small percentage of success is the reason not to litigate
but mainly the high costs and the time to start and finish such a procedure (Lanjouw and
Schankerman, 2001). This thesis will not focus in detail on infringing procedures itself because it
is beyond the scope of this study.
Most of the research on patent protection has been focused on incumbent firms. Only a few have
examined small firms. Arundel (2001) found that small companies find patents to be less
efficient than trade secrets. Only large firms are likely to find patents to be of greater value than
secrecy for product innovations. On the other hand, Gans et al. (2002) and Gans and Stern
(2003) found that patents are very beneficial for science-based or venture capital-financed small
companies. Although research on all types of firms suggests that the nature of innovative activity
along with firm and industry characteristics influence firms’ choices of how to protect IP
(Leiponen and Byma, 2009). In addition, external factors influence the use of patents such as the
position of the company within the market and regulations set down by the government
(Hanneman et al., 2010).
According to Anton and Yao (1994), patents deal with two problems: they are sometimes
unenforceable, and they sometimes reveal underlying knowledge, which might be useful for
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future inventions. For these reasons, some companies rather rely on secrecy than on patent
protection (Lederman, 1989). Section 2.6 portrays secrecy in more detail.
This section showed that there are many claims about when to use patents. In general, it can be
concluded that patents are most favorable in the high-tech industry, due to the complex product
or production details which can be patented. In addition, large firms have better capabilities to
apply for a patent and to defend it when infringing takes place.
2.4 Copyrights
As described in the introduction, copyrights is one of the forms of IP protection mechanism. The
following definition is widely used:17
Original work of authorship is fixed in any tangible medium of expression.
This means that all one needs for a copyright is an original work, involving some minimal degree
of creativity, embodied in some tangible means of expression (DuBoff and King, 2009). For
example, copyright protection extends to creative work such as art, music, literature and
software. Words, symbols and logos are not tangible and therefore protected by trademark laws,
which will be discussed in the following section.
Copyrights provide, after the 1st of January 1978, the author a protection period of their life and
another 70 years if the work was created by an identified human being (DuBoff and King, 2009).
Before the 1st of January 1978, there was a general protection period of 75 years. For exact
determination a precise expiration date needs to be calculated. These rules apply to the
American law. As discussed in the previous section with patents, copyright rules also differ per
country. Again, the details about differences between countries are omitted. The main purpose is
to explain the background of copyrights and present the issues involved with it.
The limits of copyrights are that not every copy of the copyright is an infringement. There are
two types of non-infringing use: fair use and exempted use (DuBoff and King, 2009). According to
the American Copyright Act of 1976 (DuBoff and King, 2009), copies of a protected work “for
purposes such as criticism, comment, news reporting, teaching (including multiple copies for
classroom use), scholarship, or research” can be considered fair use and therefore not an
infringement (DuBoff and King, 2009). In addition, copyrights in a fact work (such as news
stories or a database) does not extend to the names, places and events but is only based on the
authors interpretation (Besen and Raskind, 1991). Another copyright issue is the existence of
multiple valid copyrights to identical versions of a certain book or poem but only as long as each
owner has the evidence to support the validity of the copyrights. Moreover, copyright law has no
system process of application and definition of claims such as patents, therefore, copyright
protection is ultimately defined by litigation. The (American) Copyright Office does not make
any independent reviews of articles and therefore the copyright owner needs to produce
evidence in order to support the validity of the copyright.
The above mentioned reasons make copyrights not suitable for technical inventions and
therefore will not be described further as it is not applicable for IP protection in this research.
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2.5 Trademarks
Trademark protection differs from other regimes of IP protection in both its legal basis and its
economic function. There is no constitutional foundation for trademark protection. There is only
a system where marks can be registered. The primary function of trademarks is to provide rules
of orderly marketing by identifying products and their sources. Words, symbols and logos
(design and image) used to identify products or services are protectable under the trademark
laws (DuBoff and King, 2009). Trademarks may be designated by the following symbols:18
™ (for an unregistered trade mark, that is, a mark used to promote or brand goods).
℠ (for an unregistered service mark, that is, a mark used to promote or brand services).
® (for a registered trademark).
By registering a trademark with the American Patent and Trademark Office, the registrant gains
access to the federal courts. However, in some countries unregistered rights may also be
enforced. The rules concerning trademarks differ per country. Unregistered trademarks are
usually only applicable in their geographical region (DuBoff and King, 2009).
Trademarks are used to identify and differentiate products by adding a trade-name, surname,
service mark, descriptive word or a collective mark. Also packaging or product features may be a
reason for a trademark on a certain product.
The value of a trademark depends on its public familiarity and the quality of the product. For
example, Coca Cola is still the most valuable brand, most popular on Facebook and famous in
every single country.1920 A strong (brand) trademark may limit competition by the ability of
competitors to copy a successful brand or certain package.
In order to acquire a trademark, “distinctiveness” is required, so requires a patent novelty and a
copyright requires originality. This means that a brand cannot claim the color orange or a
descriptive term like pasteurized which is applied to milk. A good example of another trademark
is “Kodak” which applies to a photographic film. When a certain trademark is infringed then it is
necessary to prove the actual confusion which occurred to specific customers (DuBoff and King,
Trademarks are mostly applicable for big firms and strong brands in order to defend their
products and services (DuBoff and King, 2009). This research is focused on startup SMEs with a
technical invention and therefore the use of trademarks is not a very suitable protection
mechanism. As a result, this research will not focus on more details about trademarks.
2.6 Secrecy
Secrecy is mainly found beneficial by firms that invest little in R&D and do not engage in
cooperative relationships (Leiponen and Byma, 2009). Moreover, generally, most companies do
not find it an appropriate strategy when cooperating closely with third parties because it is
difficult to maintain the secrecy while coopering effectively.
Many companies find secrecy slightly more important than patenting (Brouwer and Kleinknecht,
1999) with lead time rated the highest. According to Arundel (2001), secrecy is mainly used by
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service orientated firms in order to keep the knowledge hidden as long as possible from its
competitors because of the easiness of being copied when seen. For products on the market this
is not evident because of the ability of reverse-engineering by competitors. However, Arundel
(2001) claims that all R&D performing firms in all size classes find secrecy to be a more effective
means of appropriation than patents. Especially, SMEs tend to rely more on secrecy than patents
compared with large firms. The reason for this might be the lack of resources to apply for and
defend the patents. In addition, it might be easier to maintain secrecy in smaller firms than
bigger ones.
Most research is aimed at protecting knowledge from competitors and not from alliance
partners. This study will make the link with protecting knowledge in an alliance agreement. It
can be assumed that secrecy in an alliance is difficult because there is a high chance that it will
hinder the cooperation. On the other hand, if it is a distribution or marketing agreement it would
not necessarily be a disadvantage for the other party if one is not aware of the details of the
invention. According to Takalo (1998), secrecy is in most cases used in addition to other
protection mechanisms to strengthening the IP protection.
2.7 Lead Time
Lead time is an outcome of the technology race, rather than an exogenous condition of it
according to Levin et al. (1987). By continuing to develop your own technology, competitors
cannot keep up and you gain a competitive advantage. Levin et al. (1987) found that in most
industries the advantage of lead time, secrecy and learning advantages are sufficient to make
R&D profitable for firms that undertake it.
According to Brouwer and Kleinknecht (1999), lead time is the most important protection
mechanism for defending IP and earning financial returns. Harabi (1995), confirms this but
indicates that lead time is more favorable for process innovations than product innovations but
generally still is one of the most favorable protection mechanisms.
Studies of the aircraft and semiconductor industries have shown that gaining lead time and
exploiting learning curve advantages are the primary methods of appropriating return (Levin et
al., 1987). This could indicate the more complex the innovation, the more difficult it is to imitate
an invention. As a result, it costs more time to imitate the invention which provides the inventor
more time to develop or redesign its original invention.
Another aspect of lead time is the creation of complementary assets. According to Teece (1988)
and Gans and Stern (2003), lead time can be an advantage by the creation of additional
complementary assets. When being the first in establishing or extending a market, lead time will
be a benefit. For instance, when building new relations with suppliers and distributors, being the
first will increase bargaining power.
In general, Levin et al. (1987) concluded that lead time was to be regarded as substantially more
effective than patents in protecting products. Especially, in industries where patents are
considered as an insufficient protection mechanism, lead time is highly rated in its effectiveness.
2.8 Protection differences per industry
According to Leiponen and Byma (2009), small and innovative Finnish manufacturing and
service firms can use patents effectively when they cooperate with universities and firms which
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actively invest in R&D. Harabi (1995) claims that product innovations are more likely to be
patented than process innovations. Process innovations are mostly protected with trade secrets.
Additionally, according to Brouwer and Kleinknecht (1999), firms’ propensity to patent is higher
in high-technology industries than in other technologies. This can be related to the newness of
the technology which is more difficult to imitate without harming the patent. According to Gans
et al. (2002), high-technology companies are likely to commercialize their innovations through
licensing. Cohen et al. (2000) come up with another distinction, dividing two types of industry;
discrete and complex product, such as electronics products and machinery and discrete products,
such as chemicals and food. Furthermore, they mention that innovations involving in high-tech
are more complex to commercialize because more knowledge is needed from different firms
(which is often acquired via licensing).
The assumption that manufacturing firms prefer patents over secrecy is doubtable, based on
earlier research shown below in table 2. Only Japan rated patents higher than secrecy.
Table 2: Overview of differences between patents and secrecy
United States
Secrecy > Patents
Levin et al.1987; Rausch, 1995; Cohen et al., 1998
Secrecy > Patents
Arundel et al., 1995; Harabi, 1995
Secrecy > Patents
McLennan, 1995
Patents > Secrecy
Cohen et al., 1998
According to Tether (2005), firms in services innovate differently from firms in products.
Companies in services focus more on employees’ skills and external partnerships than on formal
R&D. This is confirmed by Leiponen (2005), which he extends with suggesting that knowledgeintensive business service firms have knowledge boundaries which are more porous than those
from manufacturing companies. This results in different protection mechanism which are used
by service firms. Thether and Massini (2007) show that British service firms use formal methods
of appropriation, such as patents, trademarks and copyrights less frequently than manufacturing
firms. In addition, they found that service firms also use less informal methods of appropriation,
such as lead time and secrecy. However, there are differences between companies within the
service sector.
It can be concluded that the type of industry and its market decides which choices are made to
protect IP. Besides, the firm size is an important aspect of which protection mechanism to use.
The following section will focus on protection mechanisms used by startup SMEs.
2.9 Protection within SMEs / startups
Kitching and Blackburn (1998) categorized four options SMEs have to protect their practices; do
nothing, informal protection practices, non-registrable legal rights and registrable IPR. Their
research did not find a clear answer to what option of protection mechanism was preferred.
Nevertheless, “Most owners studied here perceived their IP to be essential to the firms’ survival and
prosperity” (Kitching and Blackburn ,1998). According to Moore (1996), SME owners manage
their IP mostly with informal protection mechanism because of the high costs and amount of
time involved with formal protection mechanisms.
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Alexy et al. (2009) found startup SMEs with a solid patent have an improved basis for
negotiations with venture capitalist, potential collaborators or large companies interested in
buying the invention. On the other hand, Cassiman and Veugelers (2002) found that for smaller
firms patenting is not the best option because of the resource constraint as mentioned before.
Large companies may use their bargaining power and as a result claim the intellectual assets
from the joint innovation.
Leiponen and Byma (2009) claim that small firms tend to rely on speed to market rather than
patents in order to protect their innovations. This is especially the case for R&D intensive firms
which are engaged in horizontal cooperation or have vertical business dependencies. They found
that only SMEs which closely cooperate with universities tend to find patenting more important.
Gans and Stern (2003) found that patents are mainly beneficial for science-based or venture
capital-financed small firms. This is especially the case when high-technology firms license their
innovations (Gans et al., 2002).
Leiponen and Byma (2009) and Arundel (2001) mention SMEs lack of resources to apply for and
defend patents as the main reason for not choosing to patent. Cohen et al. (2000) confirmed this
finding by especially stating that SMEs lack the resources to legally defend their patents. Besides,
patenting costs relatively a lot of time and money. Furthermore, SMEs often lack bargaining
power to claim ownership of intellectual assets that result from a partnership or joint venture
(Leiponen and Byma, 2009). According to Cassiman and Veugelers (2002), the cooperation with
customers and suppliers even has negative effects on all appropriations mechanisms.
Leiponen and Byma (2009) argue that innovative small firms that have close cooperative
arrangements may be at disadvantage in protecting their innovation returns. In general, SME
tend not to choose for secrecy in partnerships due to the close relationship knowledge might
more easily leak towards its alliance partner. Olander et al. (2009) confirm this claim but find
that copyrights are also not suitable as a protection mechanism for SMEs. Furthermore, Olander
et al. (2009) state that only patents are a suitable protection mechanism for startup SMEs. This
is controversial, Arundel (2001) claims that according to European data a higher percentage of
R&D performing firms in all size classes find secrecy to be a more effective means of
appropriation than patents.
SMEs usually do not have extensive patent portfolios to cross-license, which makes it difficult for
them to operate in complex-product industries. Therefore, SMEs tend to focus on product areas
where they can effectively compete by getting quickly to the market (lead time) by providing
superior marketing and complementary assets (Leiponen and Byma, 2009).
Additionally, SMEs often build up on existing technologies and processes with their inventions
rather than start from scratch. SMEs focus (more) on engineering-based complex-product
industries than on discrete-product industries.
In addition to protected inventions, there are also inventions which are easy to imitate for which
no property rights exist. These startup SMEs face the tradeoff to negotiate about a contingent
contract (with a buyer) prior to revealing the invention or revealing the invention and then
negotiate with the buyer, facing the risk of the invention being imitated (Anton and Yao, 1994).
This section showed that there is a lot of discussion which protection mechanism is most
suitable for startup SMEs which is confirmed by Olander’s et al. (2009) recent study. In addition,
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research has been done within different countries and regions. Unfortunately, a lot of research
does not make any distinction between the influence of contextual factors which might have an
effect on the preferred protection mechanism. Table 3 portrays an overview of the used
protection mechanisms by startup SMEs.
Table 3: Overview of used protection mechanisms for startup SMEs
Protection mechanism
Expensive to apply for but offers solid protection. For startup SMEs difficult to defend
due to limited (financial) legal support. Mainly used in high-tech industries,
cooperation with science-based, venture capital-financed firms and universities.
Lead time
Lead time is often used as replacement or extension for patents. In addition, it is often
used to acquire complementary assets by being the first one to enter or extend a new
Secrecy is mostly used in service orientated firms. Furthermore, it is easier to use
secrecy in small firms. Moreover, it is often used as a substitute instead of expensive
2.10 Conclusion
This chapter described the difference between invention and innovation. It stated that the term
invention is used because there is no commercial purpose yet and the inventors studied are in
the trajectory of turning their invention into an innovation.
According to the discussions within the literature, there are several different ways of dividing
protection mechanisms. In this research for formal protection mechanisms have been chosen;
patents, copyrights and trademarks and informal protection mechanisms; secrecy and lead time
(e.g. Auerbach 2006; Harabi 1995; Hertzfeld et al., 2006; Leiponen and Byma, 2009).
Patents still remain the most used IP protection mechanism, nevertheless, this is changing due to
the rise of open innovation aspects, such as crowdsourcing (Hanneman et al., 2010). Because of
the decrease of product life cycles, companies need to increase their R&D activities and
therefore companies tend to look for other protection mechanisms than patents. Several studies
showed that firms tend to favorite lead time over patents and in the past sometimes secrecy
over patents (e.g. Brouwer and Kleinknecht, 1999; Leiponen and Byma, 2009; Levin et al.,1987),
although, secrecy is not favorable when working closely in a cooperation (Leiponen and Byma,
2009). The literature study also showed that companies tend to cooperate more with each other
which requires more openness to each other. Furthermore, the use of copyrights and
trademarks are rarely suitable for technical invention protection. Secrecy is mostly used by
startup SME inventors and companies use it in addition to patent protection. Lead time is a
result of the fast changing technological developments and companies use this “method” in
order to keep ahead of their competitors and imitators. In addition, it is often used to acquire
complementary assets in an earlier stage (Teece, 1988 and Gans and Stern, 2003).
Patents are mainly used in high-tech industries but secrecy is in most cases rated higher than
patents. Startup SMEs tend to prefer informal protection mechanisms over formal ones (e.g.
Arundel, 2001; Cohen et al., 2000; Gans and Stern, 2003). The main reason is that SMEs lack the
(financial) resources to apply for and defend the patents. Only in the high-tech sector patents are
widely rated as favorable.
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3 Alliances
Chapter three explains motives for firms to join alliances. In more detail, the focus is on startup
SMEs alliances with (large) incumbents. Hereby, it answers SRQ2 and it forms the basis of
answering SRQ3, which is answered in chapter four.
3.1 Introduction
Today’s knowledge-based global competitive climate changed the way companies do business.
Both large and small firms attempt to leverage external knowledge with the use of
(international) alliances (Blomqvist et al., 2005). In order to better understand why startup
SMEs join these alliances, this section examines the benefits and disadvantages of alliances.
Besides, it describes the risks which can be a part of an alliance and the way startup SMEs can
deal with such situations.
Alliances became more and more popular in the last thirty years. In 1990, alliances have been
more announced since 1981 than in all prior years combined (Anderson, 1990). Currently,
alliances are still very popular. Both in general and in corporate technological entrepreneurship
alliances are used in particular to acquire new knowledge or competences (e.g. Doz, 1988;
Eisenhardt and Schoonhoven, 1996; Baum et al., 2000; Kale et al., 2000; Rothaermel and Deeds,
2006). Alliances are especially relevant for manufacturing firms which support fostering
corporate entrepreneurial activities (Antoncic and Prodan, 2008).
According to the used literature sources, there are many definitions used for strategic alliances.
In this research, the following definition is used:
Strategic alliances are the "relatively enduring interfirm cooperative arrangements,
involving flows and linkages that utilize resources and/or governance structures
from autonomous organization, for the joint accomplishment of individual goals
linked to the corporate mission of each sponsoring firm" (Parkhe, 1991).
There are many variations of alliances. Koza and Lewin (2000) categorize three types: learning
alliances, business alliances and hybrid alliances. Startup SMEs have the intent of starting
business alliances in order to typically seek a position in a geographic or product market or
market segment (Koza and Lewin, 2000). Moreover, there is a broad variety of the types of
strategic alliances, such as joint ventures, equity strategic alliance, non-equity strategic alliance
and global strategic alliances. This research is not aimed at identifying the differences and
approaches of them. Thus, no further details will be explained about these types.
Firms use alliances for a variety of reasons; to gain competitive advantage in the marketplace, to
access or internalize new technologies and know-how beyond firm boundaries, to exploit
economies of scale and scope, or to share risk uncertainty with their partners (Kale et al., 2000).
Another reason is the importance of decreasing innovation cycle times in order to increase “time
to market” (Sorli et al., 2006). Companies try to partner up by forming alliances to acquire
lacking resources and specialized knowledge in order to optimize their innovation process.
Nowadays, this is often done according to the open innovation philosophy (Gassmann and Enkel,
2004). For (technical) startup SMEs, alliances offer an easy access to sell their products via the
stable infrastructure of their alliance partner (Doz, 1988).
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Another incentive for partnerships is that a firm can benefit from specialized knowledge of their
partners and interactive learning that takes place (Sobrero and Roberts, 2002). For technical
startup SMEs, this is especially useful to gain knowledge about commercialization, such as
Startups SMEs lack most of the time several essential resources, such as production facilities,
distribution channels etc. Via the setup of an alliance they can acquire such missing resources.
On the other hand, for example, incumbents in the high-tech industries rely on R&D alliances
with startups to develop new products (Garrette et al., 2009). According to Blomqvist et al.
(2005), smaller companies offer dynamic capabilities, increased organizational flexibility and
innovative products and services to complement the large partner’s R&D or product range. The
following section will focus in more detail on startup SME alliances.
3.2 (startup) SME alliances
This section focusses on the formation of alliances from the point of view of startup SMEs.
Startup SMEs can decide between two approaches. Either they focus on the technology itself and
sell it via license agreements or other agreements or they partner up with a company to build,
market and sell the invention together (Arora et al., 2001). The trade-off between these two
choices is described in detail in this section.
According to Gans and Stern (2003), startup SMEs cope with the challenge of translating
promising technologies into a stream of economic returns for their founders, investors and
employees. In short, they lack the knowledge of commercialization. In many cases, this is the
main reason for a startup SME to start an alliance (confirmed by Anton and Yao, 1994; Baum et
al., 2000; Dickson et al. 2006). Consequently, startup SMEs face, in general, two options when
commercializing an innovation. These options are building an own value chain or join an existing
one via an incumbent. Gans and Stern (2003) claim that it depends on the existence or absence
of the “market for ideas”, which they build upon the two core elements from Teece (1986),
appropriability environment and complementary assets. As a result, startup SME strategies often
present a tradeoff between building their own value chain and joining an existing value chain.
Entering the product market and launching own product offers sometimes an opportunity.
Technology startup SMEs may be able to develop competences more precisely because
incumbents may be ineffective in organizing and marketing new technological opportunities
(Foster, 1986; Henderson and Clark, 1990; Christensen, 1997). After all, this research is focused
on startup alliances which partner up with an incumbent to join their partners’ value chain to
sell their product.
As described above, startup SMEs have several disadvantages, the main ones are the inability to
spread risk over a portfolio of new products, difficulties in entering markets or in market startup
abroad and problems in funding longer-term R&D and innovation activities (Rothwell and
Dodgson, 1991). In general, the environmental conditions and (market) uncertainties are the
main issues. Due to these limited resources startup SMEs are likely to start alliances to
complement their activities, including innovation creation and commercialization (Olander et al.,
2009). The main issue startup SMEs face is to convince other organizations of their capabilities
and to attract potential partners by offering their expertise and innovations to others (Blomqvist
et al., 2008). In the end, startup SMEs have a weaker lobbying and bargaining power (Olander et
al., 2009). Therefore, it is also more difficult for a startup SME to setup an interesting alliance for
them. Thus, startup SMEs should realize that the real danger of partnering with a larger and
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more powerful partner is that the startup SME can become overly dependent and lose control of
their own business decisions (Street and Cameron, 2007).
Startup SMEs can only make its launching decision once. As switching its commercializing
approach will involve costs, constraints and finally consumer value, which requires a finegrained ex ante analysis of the costs and benefits, which can be acquired with each option
(Bhide, 2000; Gans and Stern, 2003; Veugelers and Cassiman, 1999). This shows the importance
of making a good decision at the beginning to make the invention successful.
When a startup SME chooses to launch its invention via a cooperation strategy as explained
above they identify and execute agreements with other firms, which are in most cases
incumbents (Gans and Stern, 2003). For startup SMEs the negotiation about the “price” is
essential because it determines the value of the invention. Another option for commercializing
an invention for a startup SME is through acquisition by an established firm. However, the
strategy for this approach is beyond the scope of this research.
In general, technical startup SMEs choose to cooperate with (large) incumbents because they
have the financial, management and organizational resources to commercialize (Bhide, 2000;
Gans and Stern, 2003; Veugelers and Cassiman, 1999). Besides, it confers several benefits,
allowing buyers and sellers of technology to soften downstream product market competition, avoid
duplicative investment and engage in complementary technology development (Gans and Stern,
In addition, Parkhe (1993) mentioned an essential aspect of an alliance. “Alliances fundamentally
possess the shared feature of ongoing mutual interdependence, a condition in which one party is
vulnerable to another whose behavior is not under the control of the first” (Parkhe, 1993). Mostly,
alliances are formed between two larger incumbents in order to fulfill each other’s lacking
resources. Partnerships between startups and incumbents are relatively scarce. Especially the
protection of the smaller party in such a partnership has not been researched a lot. Parkhe
(1993) mentioned an interesting aspect in a case when a startup is in a partnership with an
incumbent that both parties need to be free from power and control from the other one. On
“paper” both parties have the intention of mutual interests but in practice one party often
benefits more than the other one. In this study the need for an alliance is more forced by the
smaller party because of the limitations from the startup SME inventor and therefore has a more
protective approach in order to not lose their knowledge about their invention.
Nevertheless, companies should not be too optimistic about alliances. Both scientific and
anecdotal reports suggest that the failure rate is rather high between all sorts of alliances, the
main reason being one of the two parties which has too optimistic behavior (Dickson et al.,
3.3 Leakage within alliances
One of the main concerns about alliances is that one party benefits more from the alliance than
the other. “Even if a firm’s products or processes are covered by patents or copyrights, it may face
damaging “leakage” of insufficiently protected innovation or knowhow” (Baughn et al., 1997).
Hamel (1991) and Williamson (1991) mention the same issue by claiming that collaborators risk
opportunistic exploitation by their partners, including leaking proprietary knowledge to
partners or losing control of important assets. Furthermore, according to Baum et al. (2000), it is
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likely that alliances are fiercest and most damaging within collaborations among potential rivals.
On the other hand, rivals offer tacit knowledge about strategy, technology and operations, which
are essential for startup SMEs in order to be successful (Baum et al., 2000). Therefore,
cooperation with rivals depends from partner to partner due to the contextual factors.
Theories presented so far in this literature study focus in most cases on knowledge, idea and
learning leakage which will support the research on protecting knowledge in an alliance
agreement. In addition, this study also emphasizes the financial returns acquired via an alliance
in terms of negotiated royalties and percentage of the sold products. According to Baughn et al.
(1997), (financial) injury can occur when one party leaks uncontrolled information to its partner
resulting in the “partner” gaining increased bargaining power in the relationship or possibly
help to create a future competitor. Alvarez and Barney (2001) mention two ways in which
startup SMEs can be hurt in an alliance. First, the large firm takes away organizational resources
and starts to underinvest in the relationship. Second, it places unreasonable demands on the
startup SME in such a way it hinders the creation of economic value. The latter mentioned is in
line with the lack of bargaining power by startup SMEs which has been earlier discussed.
After all, companies deal with a dilemma in trying to balance the openness and information
sharing needed to successfully carry out the joint activities for which the alliance was created
(Baughn et al., 1997). In general, firms should be aware of protecting their knowledge and skills,
if not its ability to create unique value for (potential) customers is diminished. Furthermore, the
attractiveness as an alliance partner decreases (Norman, 2002). Thus, the balance between
sharing and protecting knowledge in an alliance is crucial.
A lot of research has been done on knowledge leaking within alliances, but not (a lot of) research
has been done on protection mechanisms within alliances, in order to manage the flow of
knowledge and learning within partnerships (Rivera-Santor et al., 2008). Moreover, the focus of
discussions within the literature is often on alliances between two large firms. This research is
focused on the combination of a startup SME inventor with a large incumbent. The following
chapter will discuss which protection mechanisms are utilized in order to protect a startup
SME’s invention (knowledge) in an alliance.
3.4 Conclusion
This chapter described why companies start an alliance partnership. It defined the benefits that
companies can achieve, such as allowing buyers and sellers of technology to soften downstream
product market competition, avoid duplicative investment and engage in complementary
technology development (Gans and Stern, 2003). This is especially useful for SMEs because they
often lack financial, management and organizational resources to commercialize (Bhide, 2000;
Gans and Stern, 2003; Veugelers and Cassiman, 1999).
One of the biggest disadvantages of partnerships is the leakage of knowledge/idea and learning
(Baughn et al., 1997). Especially, leakage to potential rivals is of most concern (Baum et al.,
2000). Therefore, the main challenges firms face is the balance between knowledge sharing and
protecting (Baughn et al., 1997). So far, most research has been done on partnerships between
incumbents. Research on protection mechanisms in alliances between (startup) SMEs and
incumbents is scarce (Rivera-Santor et al., 2008). However, this research focusses on that
specific aspect and it is discussed in the following chapter.
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4 Protection in alliances
This chapter is concerned with the discussion about protecting an invention in an alliance
against an own alliance partner. In this manner, it will combine chapter two where methods
were discussed to protect an invention in general and chapter three, which focused on alliances.
This combination will contribute to the answer of SRQ3 and SRQ4.
4.1 Knowledge sharing/protection issues in alliances
This section portrays the discussion how to overcome the dilemma of knowledge sharing versus
protection in order to generate value creation. In sum, most startup SMEs face the knowledge
sharing/protection dilemma. Startup SMEs try to benefit from using protection mechanisms that
allow them to disclose their ideas and innovations safely, without having to worry about losing
their core knowledge assets. On the other hand, they try to get their share of the generated
benefits and innovation outputs (Olander et al., 2009). This often leads to a situation where a
startup SME shares its new invention in detail, in order for a large firm to be able to
manufacture, market, and distribute a startup SME’s new invention. Although, it is usually easy
for a large company to learn about a startup SME’s invention, it is often very difficult to learn or
imitate the large firm’s organizational resources and capabilities (Alvarez and Barney, 2001). In
addition, most of the time, the capabilities of the large company are very complex and the
startup SMEs do not have the resources to capture this knowledge. Another important factor
within alliances is trust. According to Krishnan et al. (2006), trust is the most mentioned
parameter in order to achieve successful alliances. The general view is that trust has a positive
effect on the alliance performance. However, trust can be extremely harmful for the success of
an alliance because one party relies too much on promises made by the other one which are not
executed in the end.
During a collaborative process, different legal agreements build on one another as the
collaboration moves various phases. Most of the time a non-disclosure agreement (NDA) is the
first one in the series (Slowinski et al., 2006). In a NDA is usually information shared about
technical capabilities, application requirements and business models. In most cases the
information in a NDA is very valuable because it describes and explains the invention. With this
information a (potential) partner should just know enough to decide if he wants to cooperate. In
addition, it is important that both parties know what is part of the NDA and what not.
Startup SMEs enjoy a number of benefits over incumbents on their innovation activities, such as
a rapid response to external threats and opportunities, efficient internal communication, and an
interactive management style (Olander et al., 2009). On the other hand, they suffer a number of
disadvantages which are mainly (material and financial) resources. Another big issue is the
inability to spread risk over a portfolio of new products (Olander et al., 2009).
Startup SMEs deal with big challenges deciding which knowledge to share and which knowledge
to protect. According to Olander et al. (2009), innovative firms need to create value through
combining existing knowledge in innovative ways. In order to obtain new knowledge, a company
should also share knowledge itself by acquiring access to new information networks. When
knowledge is shared, it is important that the company’s invention remains protected. Two things
need to be protected; unwanted knowledge flows and the possibility of imitation of the invention.
Table 4 provides an overview of the knowledge sharing versus knowledge protection dilemma
in innovation.
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Table 4: Overview of knowledge sharing versus knowledge protection dilemma in innovation (Olander et al.,
Knowledge sharing
Knowledge protection
Value capturing/
Profiting from innovation
Needed for creating new
Needed for getting access to
innovative combinations and
ideas; may cause losing core
may cause losing competitive
knowledge assets to rivals.
Needed for safe disclosure of
Needed for protecting the
existing knowledge;
investments in innovation,
may prevent adequate
needed for safe disclosure;
knowledge flows.
may cause slower diffusion.
Due to new trends, such as open innovation, the idea is to make use of external ideas in firm’s
businesses and to let ideas generate within the firm to be used by others (Chesbrough, 2006).
This is also the case within alliances. However, even while using open innovation activities,
protection mechanisms are relevant; the methods used and goals of using protection
mechanisms will only be applied in a different way. Protection mechanisms are not only for
preventing others from copying knowledge assets or imitating products but also about making
them more transferable in such a way that transaction costs are lowered and that the
innovations are turned into more controllable assets (Cohen et al., 2000). According to Olander
et al. (2009), it is easier and safer to trade or license when the innovation has certain boundaries
and definable features. This could also be used within alliances. Moreover, Olander et al. (2009)
finds licensing a good option to start an alliance.
On the other hand, Olander et al. (2009) mentions that formal IP protection can hinder the
collaboration because of the bureaucratic procedures and the creation of distrust between
collaborating partners.
Another aspect which startup SMEs should take into account is the risk of the larger partner
eventually trying to take over the startup SME and thus having a different purpose of an alliance
(Street and Cameron, 2007). Nevertheless, larger players that have integrity and are trustworthy
are associated with long-term survival of the startup SME (Meyer et al., 1997). Additionally,
overdependence on any single relationship can weaken overall performance (Miles et al., 1999).
The above discussion shows the importance of having a neutral alliance partnership in order to
maximize performance. It is still difficult for firms to find out beforehand what the real intention
of a potential alliance partner is.
One of the main conclusions is that there is no straight forward answer as to which protection
mechanism is best used to defend IP, both in general as well as in an alliance. This is confirmed
by Olander et al. (2009), who claims the ways to protect ideas and innovations differ depending
on the chosen model of innovating and the economic and legal environment the firm operates in.
Another important factor is that the company should align its protection mechanisms with the
company’s goals.
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4.2 Protection mechanisms used by startup SMEs in alliances
The previous section described the challenges startup SMEs face while balancing their IP to
decide what to share and what to protect. This section will focus on the protection of an
invention against a (potential) alliance partner.
“Alliance formation is arguably one of the most utilized strategies for resource acquisition and
leveraging by SMEs” (Dickson et al., 2006). Thus, effective protection mechanism within alliances
are very important for SMEs. According to Street and Cameron (2007), startup SMEs should take
into account that the resources used to attract the larger partner are protectable. In other words,
the larger partner should not be able to simply take the resources but is dependent on the
startup SME in order to leverage the resources most effectively. Therefore, Alvarez and Barney
(2001) propose that startup SMEs should develop a process rather than a single product in
order to protect their resources.
Levin et al. (1987) and Hurmelinna-Laukkanen et al. (2008) recognize that startup SMEs should
have inventions which fundamentally involve new ideas such that they are relatively easy to be
protected. According to Simon et al. (2002), startup SMEs need to have incentives to protect
their inventions; a unique invention and keep them from competitors’ reach in order to maintain
survival. Baum et al. (2000) found that variation in the startup composition showed significant
differences in the performance of startup SMEs, supporting that the size and age of a firm affects
the performance of collaboration. Therefore, it is very hard to forecast an optimum for alliance
performance in a certain setting.
Previous chapters already described the difficulties startup SMEs face while using patents.
Patents involve high costs for application and maintaining. In addition, in the USA, patents are
mostly used in biotechnology, pharmaceutics and software (MacDonald, 2004). Patents on
software differ a lot per country’s legislation. Moreover, software is out of the scope of this
Many startup SMEs use contracts as a protection mechanism but this involves a big disadvantage
due to the weak bargaining power compared to larger players (Olander et al., 2009). Startup
SMEs often face take-it or leave-it offers by large firms. The bargaining power from a firm
depends on its capabilities and on the range of alternatives it has available to meets its goals
(Baughn et al., 1997). As discussed in section 3.1, startup SMEs have relatively fewer alternatives
which means startup SMEs have in most cases relatively low bargaining power. Furthermore,
most startup SMEs fear the possibility of the large party capturing their invention. If so, the basis
for an alliance is dissolved (Baughn et al., 1997). Another problem is that contracts in addition to
patents are costly in matters of time because of the acquisition and high cost involved while
maintaining them. Especially, defending IP against accusations and violations by others would
be too costly for startup SMEs (Byma and Leiponen, 2007).
Blomqvist et al. (2005) claims that contracts form a good basis to defend partners know-how.
Nevertheless, investing in a detailed contract cannot guarantee successful collaboration. In
addition, contracting is extra difficult between firms with different backgrounds. Managers
should also be aware that the setup of a contract is part of the relation building between the
companies. Buckley and Chapman (1998) mention the importance of arranging the terms when
an alliance might fail. Blomqvist et al. (2005) adds that the collaboration and trust are already
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tested during the contracting process. In this period, both parties can test already if the culture,
goals and working methods are in line with the expectations of the final collaboration contact.
Due to the limited resources, startup SMEs are forced to look for cost-effective forms in order to
protect their inventions. These include lead time, tacitness of knowledge and human resource
management (Olander et al., 2009). Unfortunately, these methods refer to “normal” protection
against competitors and not directly to an alliance partner.
Alvarez and Barney (2001) categorized five approaches which startup SMEs can incorporate
while commercializing their invention. Table 5 shows a summary of these five approaches; Going
it alone, Slowing the large firm’s rate of learning, Use detailed and elaborate contracts to define the
alliance relationship, Build a relationship of trust and Bring other resources to the alliance besides
a single technology. Based on the five approaches it can be concluded that “trust”, “contracts” and
“complementary knowledge” are mentioned again. Alvarez and Barney (2001) suggest not to
join an alliance and commercialize yourself (going it alone). However, this approach is out of the
scope of this research. Additionally, they recommend to slow down the rate of learning from the
large firm’s partner, in a way it cannot take over the invention in a short amount of time and is
dependent on the startup SME to gain optimal benefit from the invention.
Table 5: Five approaches of protecting your invention in an alliance as a startup SME (Alvarez and Barney,
Theories presented in the literature hardly addresses the issue of “How to protect an invention
(knowledge) against an own alliance partner?” Some articles add the protection issues which
startup SMEs face with (potential) alliance partners and the possibility to overcome them, such
as Olander et al. (2009). Furthermore, the five approaches are mentioned by Alvarez and Barney
(2001). Nevertheless, there is no straight forward answer as to which protection mechanisms is
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most preferable. Moreover, the issue of invention leaking to an own alliance partner is not
explicitly researched. Discussions within the literature mainly emphasizes on “general
knowledge leakage” as described in section 3.2. The main conclusion from this section is that
startup SMEs tend to use more informal protection mechanisms (Kitching and Blackburn, 1998;
Hall et al., 1999; Byma and Leiponen 2007). However, not all startup SMEs follow the same
pattern, it still depends on environmental factors, such as the industry, firm size, market
uncertainty and innovation activity. Nevertheless, the following chapter examines the expected
protection mechanisms used by startup SMEs to protect their invention against their own
alliance partner.
4.3 Expected protection mechanisms used by SMEs in alliances
The previous section explained the protection mechanism used by SMEs in alliances, still there is
no straight forward answer as for which method to choose and in which situation.
It is hard to identify which protection mechanism will be used within alliances against their own
partner. As written in the introduction of this study, there has not been research done on this
aspect. However, it has become more of interest in recent academic papers. For example,
Olander et al. (2009) adds protection against alliances in addition to the normal protection
against competitors. But still there is no answer in what way to protect effectively against your
own partner.
Bonte and Keilbach (2005) claim that if a firm can effectively protect the rents from its product
and process innovations through secrecy, complexity and lead time, it is significantly more likely
that this firm is engaged in cooperative arrangements with its customers and suppliers. Since
startup SMEs lack generally (financial) resources to protect themselves via formal protection
mechanism, it can be expected that startup SMEs will use the same protection mechanisms
within alliances as well as to protect themselves against their own alliance partner. This means
that more informal protection mechanisms, such as lead time, secrecy and trust are used. Table
6 presents an overview of the mentioned protection mechanism by SMEs in alliances.
Consequently, it can be expected that the same methods are used by the inventors in the case
study of this research.
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Table 6: Expected used protection mechanisms by startup SMEs in an alliance against their alliance partner
Protection mechanism
Especially expected in (high)technical inventions.
Used in a phase before obtaining a patent or contract with an
alliance partner.
Lead time
Improving the current invention in order to be ahead of
(possible) imitators.
Negotiation about fixed incomes or other returns before entering
an alliance.
In a first phase NDAs can be used in order to negotiate with
potential partners.
Not directly a protection mechanism but it has a strong influence
on the alliance performance and can affect the relationship.
Complementary knowledge
Beside the specifications of the invention, also contribute
knowledge which is essential to make the invention successful.
4.4 Conclusion
This chapter focused on protection mechanisms within alliances. Unfortunately, there has been
little research done on this topic. Most research is in line with parts of the protection mechanism
of invention (knowledge) issue. In addition, there is no clear distinction made between
protecting against competitors or own (alliance) partners.
The main conclusion which can be drawn is that external factors, such as size, industry and type
of innovation are decisive for selecting the type(s) of protection mechanism because each option
interrelates with the others in a way that responses to the characteristics of the networks. In
other words, every invention is surrounded by different variables and the situation itself decides
which method is favorable. However, SMEs tend to be forced to use more informal protection
mechanisms, such as secrecy and lead time, because of their limited (financial) resources.
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5 Methodology
The literature review forms the basis of this thesis in which the integration is made between
protecting an invention in an alliance. The discussion and findings from the literature sources
are tested with several cases. The methodology used for conducting the case study is described
in this chapter.
5.1 Qualitative research strategy
According to Yin (2011), every research study has a design in order to strengthen the validity of
the study and insure that the data is collected properly and address the research topic being
studied. Furthermore, this study is based on the qualitative research design by Creswell (2003,
2007). This section describes how the research study has been build.
There are two ways to conduct an academic study, those being the qualitative and the
quantitative approach (Yin, 2009). In quantitative approach, questions are formulated with a
closed approach and the information is processed in a structured way resulting in narrowed
possible outcomes. A qualitative approach handles people, objects, and specific situations in
their real-life context in order to gain a deeper understanding of a specific phenomenon.
Qualitative studies are built upon people’s attitudes, preferences and associations concerning
the whole situation and therefore, it is possible to create a better understanding of the social
processes. A qualitative research method has been chosen for this research due to the study’s
complexity because the studied inventors commercialized their inventions in different situations
in such a way that research questions needed to be adapted to each of their specific situation.
The interviewees varied too much from each other to conduct a quantitative approach.
Therefore, a flexible approach is required in order to ask relevant questions for each of the
studied cases.
Yin (2011) mentions two approaches for conducting a qualitative research. Starting with
“questions first”, in order to exactly define what to ask and receive from the conducted study or
“fieldwork first” option, where the researcher first acquires data and later defines the questions
about what exactly will be researched. This study is a combination of above mentioned
approaches. First, research question were formulated in order to select data and suitable people
to interview. After conducting the interviews the research question were adapted to the output
of the data. This approach is described by Maxwell (1996) as a qualitative research design that
characterizes the process as an “interactive approach”, whereby a qualitative study’s purpose,
research questions, conceptual context, methods, and concern for validity all continually
interact. Concluding, it demands an “interactive approach” (Maxwell 1996) with open questions
in order to better understand the situation. In addition, the research is explorative as not a lot of
research has been done on this topic.
5.2 Case study
In the previous section an explanation was given of why a qualitative approach has been chosen.
In order to conduct the empirical case study, according to Yin (2011), the following steps were
made to conduct this study:
Defining something to investigate;
Collecting relevant data;
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Analyzing and interpreting the results;
Drawing conclusions based on the empirical findings.
According to Yin (2009), a case study is defined as the following:
“empirical inquiry that investigates a contemporary phenomenon within its real-life
context; when the boundaries between phenomenon and context are not clearly
evident; and in which multiple sources of evidence are used.”
The purpose of a case study is to develop detailed intensive knowledge about a single case or a
small number of related cases (Yin, 2009). A case study research is appropriate when the
questions addressed are “why” and “how” individuals or organizations have acted in a certain
way to establish a better understanding of the situation studied (Yin, 2009). In addition, he
argues that case studies are more suitable for situations where the researcher has little control
over the studied phenomenon. There are two types of case studies; single or multiple (collective)
case studies. According to Stake (1995), there is a third, intrinsic case study, in which the focus is
on the case itself (e.g. evaluating a program or studying a student with difficulties). This research
is conducted as a multiple case study because of the possibility of a “replication logic” in the
conducted cases (Yin, 2009). Hereby the researcher tries to find contrasting results for
predictable reasons. Another reason for the multiple case study approach is that the study builds
on a stronger analytical substance (Yin, 2009). With a single case, a researcher tries to study a
unique phenomenon or one, which is unique in its sort, which is not the case in this research.
The case study contains multiple cases from different product inventions. In this way, there can
be made a comparison between similar factors and also differences and similarities are
questioned. The findings are structured in a table format in order to find patterns.
Triangulation is applied in order to get more appropriate results. Outcomes from the several
cases are reviewed with the help of “pattern matching” in order to find similarities of the cases
and learn from certain phenomena.
5.3 Role of the researcher
According to Creswell (2003), it is important to share the background of the researcher and the
study with the participants in order to receive better quality of data. In addition, it is important
to keep strategic, ethical, and personal issues in mind to identify bias and personal values from
the interviewees.
The researcher conducting the case study has basic experience with inventors seeking for
partnership possibilities in order to successfully commercialize their invention. Besides, the
researcher has experience with the parties who are seeking inventors for investment or
partnership opportunities giving the advantage of having a point of view from both sides.
Additionally, this point of view will support conducting the interviews and asking additional
questions in order to successfully perform this research. Moreover, it is essential for the
researcher to have a neutral position while conducting the interviews. Most of the inventors
spend many years of their lives struggling with their invention and trying to commercialize this.
Especially, in the case of failures during the partnership or commercializing, the researcher
should be aware of asking for the exact reason and not being led by the interviewee’s emotions.
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5.4 Selection of the cases
The cases are selected with the assistance of experts from the Dutch Association of Inventors
(NOVU). Based on their expertise of commercializing inventions, a selection of interesting
inventors was made. Both successful cases and failures were selected in order to learn from
different experiences. Moreover, some of the inventors had more than one invention and were
asked about their learning experiences from different cases. A list of six cases was selected
which would contain the input for the empirical research. All the cases were inventors who had
invented one or more technical inventions and experienced working together with a partner to
commercialize their invention.
According to Yin (2009) and Creswell (2003), a good case study includes as many sources as
possible because it allows the researcher to concentrate on a broader range of historical,
attitudinal and behavioral issues. Furthermore, Creswell (2003) emphasizes the importance of
indicating the type(s) of data which will be collected. This allows the researcher to neutralize the
data and to process the data after being collected. In addition to the in-depth interviews, other
information was gathered via several sources. Table 7 presents the data input of the conducted
case study.
Table 7: Overview of data input for the conducted study
Data collection method
Data coverage
Ten interviews with experts in the field of inventors seeking to
commercialize their invention.
In-depth interviewing
Six inventors who successfully commercialized an invention
interviewed at their homes or work.
Telephone interview
One telephone interview with a (larger) party which
cooperates with inventors in order to commercialize their
Two event about inventing and defending IP; iDexpress mini
symposium and Agentschap NL symposium.
Documents and presentations
Research documents and presentations based on IP protection
while commercializing (e.g. KIVI NIRIA and Agentschap NL).
The use of different sources makes sure triangulation takes place and increases the construct
validity (Yin, 2009).
5.5 Data collection procedures
This part explains the method of collecting data. In this research, the following definition of data
is used:
Collection of organized information, usually the result of experience, observation,
experiment. This may consist of numbers, words, or images, particularly as
measurements or observations of a set of variables (Yin, 2011).
There are two types of data within the academic literature. Primary data are so-called first hand
data which the researcher collects him/herself, while secondary data are data that have been
collected and processed by other researchers for different purposes (Yin, 2011).
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The main source for “collecting relevant data” is the source of primary data. In this research, this
is acquired from the in-depth interviews with inventors, experts and other experienced people
in the field. Besides, additional data, secondary data is acquired via short interviews with
experts and documents about the researched topic.
The interviews were created, held and processed according to the seven stages by Kvale (1996):
1. Thematizing; formulate the purpose of an investigation and describe the concept of the
investigated topic.
2. Designing; plan the design of the study.
3. Interviewing; conduct the interviews.
4. Transcribing; prepare the interviews for analysis.
5. Analyzing; decide which methods of analysis are appropriate.
6. Verifying; determine the generalization, reliability and validity of the interview findings.
7. Reporting; communicate the findings and take the scientific criteria in mind.
The semi-structured interview questionnaire (Appendix A) for the in-depth interviews is based
on the literature review and input from experts in the field who closely work or worked together
with inventors and/or commercialization parties. As indicated in section 1.4, the questionnaire
was formed and tested with the input and feedback from three parties (Agentschap NL, NOVU
and ABN AMRO Dialogues Incubator). The interviews were held in person at the inventors’
homes, lasted between one and two hours and were digitally recorded. Due to the fact that all
interviewees are native Dutch speakers, the interviews were held in Dutch. In this manner a
neutral and “safe situation” was created for the interviewees, which is important to gain the
qualitative data from an interview (Kvale, 1996). All interviews started with an introduction
about the researcher and followed by working through the questionnaire. At the end of each
interview, there was room for discussing relevant topics in relation to the questionnaire which
had not been shared. Finally, all the interviewees received a transcript of the interview to add or
change misinterpretations of the interview. In the thesis, all interviewees are anonymized
because of the “sensitive information” which is in some cases shared. The transcripts of the
interviews are available in Dutch but are only available for the (co)readers when requested.
5.6 The quality of the study
One of the key aspects of research is the validity of the study and its findings. “A valid study is one
that has properly collected and interpreted its data, so that the conclusions accurately reflect and
represent the real world that was studied” (Yin, 2011). Besides, the quality of a study is based on
its reliability and the generalization. As this is a qualitative approach, validity and reliability
need to be taken into account when collecting the data (Yin, 2009). The reliability refers to how
consistent the results are and the validity means whether an interview study investigates what
was intended to study (Kvale, 1996). To ensure the quality of this qualitative case study, the
design was tested according to the checklist by Creswell (2007), which can be found in appendix
The internal validity is realized via pattern matching and explanation building while the external
validity is realized via replication logic by the use of multiple cases (Yin, 2009). The construct
validity is ensured since all the interviewees were selected and approved by experts within the
field. In Addition, multiple sources were used to compare and draw the conclusions.
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The reliability was tested by sending all the interviewees a transcript of the results in order to
give feedback and make sure that there were no misinterpretations of their self-reported
behaviors and view. A semi-structured interview approach was chosen because of the
differences of technical inventions leaving the interviewees to provide their own thoughts about
protecting their invention in an alliance. Besides, the interviewees used different protection
mechanisms and worked with different partners which required a more flexible interview
“Qualitative case study is characterized by the main researcher spending substantial time, on site,
personally in contact with activities and operations of the case, reflecting, revising meanings of
what is going on” (Kvale, 1996). In this manner, the researcher can generalize the findings about
the cases. The possibility of “generalizability” is based on a trade of the number of selected cases
(Creswell, 2007). A larger number of cases results in a bigger picture of the situation(s), but
usually decreases the depth in any single case. The researcher will decide when enough cases
are conducted in order to generalize its data. In order to overcome the selection of sample size
and depth of the interviews, it is important to set the “boundaries” of the cases (Creswell, 2007).
According to Schofield (1990), there are three types of generalization; what is, what may be and
what could be. These types classify the certainty of the outcomes from the case and its
5.7 Data analysis procedures
The results from the case studies were compared with the literature with the use of pattern
matching to identify (new) factors which were important and were decisive to choose a certain
protection mechanism. First, the detailed interview reports were reviewed in order to highlight
and identify similarities and differences between the interviewees. Second, the outcomes from
the categorized interviews were compared with the literature review in order to draw
conclusions. Key quotes from the interviewers were used to increase the validity and reliability
of this research (Yin, 2009).
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6 Empirical results
This chapter presents the results from the interviews with inventors and other data received
from meetings with experts and seminars. Furthermore, it includes some practical information
from non-academic papers and websites which address the latest trends concerning protection
6.1 Interviews with technical startup inventors
This section summarizes the information gathered from the interviews with startup inventors.
In order to keep the interviews anonymous, details about the invention are not exposed.
Furthermore, the real names of the interviewees are replaced by randomly chosen names.
6.1.1 Corporate Inventor (Rutger Beekhuizen)
Rutger Beekhuizen has a technical background and studied mechanical engineering. His
invention skills and passion were created after the invention of a game for children. Due to a
partnership, the game was commercialized. This was at the same time his first experience with
partnership negotiations and commercialization activities. One of the key learnings was in what
way to successfully negotiate with partners about the share of earnings. He advises colleague
inventors to always ask for guidance during the commercializing trajectory when you are “new
to the game”.
After this success, he was asked to join several brainstorm sessions for several companies. In
one of these brainstorm sessions he took a “no cure no pay” offer for a certain problem. During
this “alliance agreement”, he received the resources in order to build a prototype for solving the
problem. His partner paid for the patent cost and resources for building the prototype.
Beekhuizen received his earnings via royalties. In this manner, he decreased the risk in case the
invention would fail.
According to Beekhuizen, he succeeded in the way the partnership was executed as he is aware
of some other inventor colleagues who suffered from losing their invention against their partner
or competitor. The basis for the successful cooperation was trust. Beekhuizen had already
worked together for a couple of times with his (potential) partner and from both sides this had
been a pleasant partnership. In addition to trust, Beekhuizen made sure that all his knowledge
shared about his invention was controlled with the use of NDAs. Additionally, he made sure that
he never revealed 100% of his knowledge, which resulted in keeping the power over the
invention. Moreover, Beekhuizen claims that it is important to constantly update your invention,
in this way, the inventor will be essential for his partner and the initial invention stays ahead of
(potential) imitators. Most favorable in Beekhuizens case, the modification led to an application
of a new (improved) patent. Due to the proved success of the invention, he could negotiate about
better financial rewards. An issue in almost every collaboration as a (startup) inventor is the
difficulty to forecast the (possible) success of a certain invention and to find a suitable alliance
In his case, the main protection mechanisms used against his partner were mutual trust, the use
of NDAs, partial disclosure and lead time. Furthermore, his partner paid for the patent for
protection against imitators.
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In general, Beekhuizen was satisfied with the cooperation. However, he would negotiate about a
fixed salary during his working hours on the invention. Now, he was depending on the sale
numbers of the invention. In the end, it took two to three years to actually sell the first products,
till that time Beekhuizen did not receive any earnings. With the help of a contract with, for
instance, a minimum amount of sold products or a maximum period of developing time before
launching the product you can put more pressure on your partner to commercialize the
invention. Finally, an additional recommendation from Beekhuizen was to always make a
physical prototype of an invention in order to convince (potential) partners. Table 8 portrays a
summary of the main findings about the Corporate Inventor case.
Table 8: Summary of the main findings of the Corporate Inventor case
Learning points
Never share 100% of your
Protection mechanism used
against partner
Negotiate about a fixed salary when
invention with your partner in
working on an invention in an
order to keep power over your
Partial disclosure.
Negotiate about a fixed income,
Lead time (also for
Recommendations for future
Ask advice from people with
when sale numbers do not meet
protection against
experience before taking
expectations in order to put
commercial decisions about your
pressure on the partner to
commercialize the invention.
“Improving your invention and getting a new patent for the improvements is the best way of protection your invention
against imitation.”
“You should always have a physical prototype to show to your (potential) partners in order to convince them about the
benefits of your invention.”
“Potential partners for commercialization are difficult to convince because of the ‘not invented here’ syndrome.”
Case conclusion
The case showed a successful collaboration between an inventor and a (larger) partner.
Beekhuizen relied mostly on trust within the collaboration which was generated by earlier
positive experience. In addition, he used an NDA which was more a standard formality than an
actual protection mechanism. In addition, he realized the importance of not fully disclosing the
invention to his alliance partner. In this manner, he remained a key player in (further)
development of the invention. This gave him stronger negotiation power. Moreover,
continuously developing his invention (lead time) provided him a step ahead of competitors and
imitators strengthened his position in the alliance partnership.
Long-Life Inventor (Kees Woensel)
Kees Woensel has already been inventing products for 30 years. He started with repairing
technical and electronic devices and vehicles. Later, he started his own company in this field. His
first experience with a partnership failed due to a misunderstanding in mutual goals. A subsidy
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got involved and the focus was put on research and paper work instead of the actual invention.
Therefore, Woensel cancelled that partnership.
A couple of years later, Woensel introduced another invention which he designed, built and
patented himself (with help of a family member). In order to commercialize his invention, he
was in need of a company with a distribution channel. Once a partner with an international
distribution channel was found, the cooperation flourished. There were only a few initial issues
with the inventory and therefore he could not sell products for three months. During his
commercialization period, there was no threat of losing his invention to competitors or his
partner. His invention was patented and contains all three claims (see section 2.3 for more
information) and in case of infringing his patent, he was willing to prosecute.
During the development period of his invention, he explained his invention several times to
trusted experts to verify his product and the commercial potential. Before attending fairs and
publication, he applied for a patent. After the publicity, several parties contacted Woensel to
provide consults and partnerships in order to try to benefit from his potential invention. In that
period, it was important to identify which parties were seeking for mutual benefits instead of
exploiting somebody, as Woensel confirms
According to Woensel, the alliance partnership was successful. He had a good relationship with
his partner. Nevertheless, he experienced the difference of urgency and focus of commercializing
his invention. In his opinion, the partner should be capable of selling more products according to
the amount of leads generated from fairs and publication. Therefore, he started to support the
marketing activities of his partner. Table 9 presents a summary of the main findings about the
Long-Life Inventor case.
Table 9: Summary of the main findings of the Long-Life Inventor case
Learning points
Marketing of the product in such a
Recommendations for future
Protection mechanism used
against partner
way that customers understand
the benefits of the invention.
Put more effort in the marketing
of the product.
Express the benefits of the
invention in such a way that
potential buyers and users
understand the invention.
“You need to be able to sell (and preferable build) an invention yourself to test the price and willingness from customers
to buy it. Due to sales of your invention, potential buyers and partners will contact you automatically and you do not need
to convince others about the success of your invention.”
“The focus should lie on the invention and the end consumer, all things in between, such as partners, are not relevant.
Certainly, you should be aware of input from others but it should not lead you in a certain direction.”
“Apply as late as possible for a patent because the timer starts when your application is pending.”
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Case conclusion
This case presented a situation in which an inventor successfully developed a product by
himself. With the help of an alliance partner he gained access to the market. Before contacting
different parties for cooperation possibilities, a patent was arranged. The patent was applied as
main protection mechanism against partners and other imitators or competitors. During the
development phase, NDAs and trust were used to gain feedback from a trusted group of friends
and partners. According to Woensel, his approach and chosen protection mechanisms were
reliable and successful. In order to convince potential partners of the success of the invention, he
addresses the importance of a tangible prototype of the invention. Moreover, he recommends to
start only applying for a patent when you are ready to contact (potential) alliance partners or
customers, otherwise you waste time and money when your invention does not need it.
Lazy Partner (Peter Jong)
Peter Jong has been working at the same company since he left school. Within the building
industry, he invented a solution for making his work easier.
During a trial and error process, he managed to improve his invention and made it market ready
with the help of a friend. The first products were sold by himself due to publicity gained at a fair.
After that, he was approached by a large player which had a distribution channel throughout
Europe. The partner took over the production, marketing and distribution. Jong was paid via
During the development and market launch, Jong did not suffer from any protection problems.
He applied for a patent himself with guidance from a third party. The patent provided him
protection from imitation by other companies or (potential) partners.
Jong had no fear of being copied by his alliance partner or any other company. However, he
would select a different partner next time and demand higher requirements from the
cooperation because he felt his partner neglected the willingness to actually sell and promote his
invention. In addition, he faced difficult negotiations in order to earn revenues and
commercialize the invention via his partners’ network. Moreover, he experienced a big
difference in bargaining power between his large partner and himself. In the future, he would
make a deal with stronger terms in order to prevent a low number of sales caused by the low
interest from the partner to actual sell his invention. In the end, Jong was not satisfied with the
cooperation because of the low number of sales gained via his partner. In his opinion, the
partner did not do enough (effective) marketing to sell his product. Table 10 portrays a
summary of the main findings about the Lazy Partner case.
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Table 10: Summary of the main findings of the Lazy Partner case
Learning points
Knowledge of the whole
Protection mechanism used
against partner
Start an alliance with strong
production is essential in order to
terms in order to put pressure on
successfully commercialize your
the partner to sell his invention.
Recommendations for future
Keep marketing and production
Do not apply for a patent too early
in own control because the
otherwise the patent needs to be
inventor has more enthusiasm
extended (again) without having it
and incentives to sell his
on the market.
“If I look back I would have been more selective when choosing my alliance partner.”
Case conclusion
The Lazy Partner case described a situation where an inventor developed the invention himself
and used an alliance partner to gain access to the market as in the Long-Life Inventor case.
Similarly as in the previous case, Jong used a patent to protect his invention. Due to a fair, he
gained publicity which eventually led to a cooperation partner to sell his invention via his
distribution channels. According to Jong, the sales figures were very disappointing, he reflects
that it would have been better to sell the products himself. In his case he was not afraid of being
imitated by his partner or other parties. The patent was well defined and the market was not
interesting enough to expect other parties to compete with him. Concluding, Jong was satisfied
with his protection mechanism, although if he had the possibility, he would have applied the
patent in a later stage because he paid for a period when the invention was not on the market
Niche Market Inventor (Evert Goud)
Evert Goud started working in the building industry at a young age and later started his own
company in this field. Unfortunately, he spent a long time in a revalidation center where he
started solving problems for his fellow patients. He invented several technical solutions within
the medical industry.
Gouds first experience with commercializing an invention was with a technical device which was
applicable for a leisure activity. Eventually , this invention failed to enter the market because of
technical issues and a foreseen problem of convincing the customer to purchase his product.
Nevertheless, he experienced the procedures of commercializing an invention already at that
Goud worked mainly together with investors for commercializing his inventions. He never
feared that his invention would be copied by his own cooperation partners or potential
customers. According to Goud, the main reason for this was that his inventions were applicable
in a niche market and it is quite complicated to know how to efficiently market a product in this
field. During his inventions, he used a standard procedure. First, he showed and interacted with
a select group of trusted people in order to test his invention and to receive feedback for
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improvements. Second, he organized group interventions with the potential end consumer to
see what their reactions were. In all these phases, he used NDAs which could later be used to
prove that he was the first one with the invention. He applied for patents before going public via
fairs and/or media. By using this approach, Goud did not pay for his patents until the products
were on the market. The above mentioned procedure was a result of experience he has with
commercializing inventions.
Goud worked together with several different partners. He experienced that knowledge is more
important than financial resources. For instance, if the money is available but the invention is
not working properly, the invention is very likely to fail in the end. Furthermore, he confirmed
the importance of a working prototype. When people can observe a new product and see how it
functions, the product will eventually sell itself. Additionally, the best way to persuade investors
or potential partners of the success of an invention is to show videotapes of the positive
feedback from the end consumers while using your new product for which the invention is
applicable. Furthermore, it is important to distinguish the end users, the actual person who
purchases the product or service and the specific regulations which are involved in the
invention. In general, Goud did not fear being copied by partners because of the niche market in
which he was active in. Besides, the trusted “test panel” in combination with NDAs worked fine
for him. After going public, he fully relied on his patent. Table 11 shows a summary of the main
findings about the Niche Market Inventor case.
Table 11: Summary of the main findings of the Niche Market Inventor case
Learning points
Selection of your partner is
Recommendations for future
Protection mechanism used
against partner
Receive feedback of the invention
from (potential) users without
Strong negotiations in an alliance
spending too much on prototypes.
are important.
Try to figure out what the
potential is of your invention as
early as possible.
“A partner with knowledge is more important than a partner with money, a lot of money without suitable knowledge will
fail anyway.”
“Videotaping the (positive) experience of the end consumers will easier convince potential partners/buyers of the success
of your invention.”
“Prototyping is essential in order to convince the partners/buyers of your invention.”
Case conclusion
The Niche Market Inventor case portrays a fine example of a customized commercializing
trajectory developed by the inventor himself due to an own trial and error process. It is
important to notice that the specific approach might only be suitable for the medical industry.
Goud made primarily use of NDAs as protection mechanism in order to receive feedback from
people out of the field but first he always tested his inventions with a trusted group of people. In
this way, he was able to receive feedback from the end consumers to test the potential from his
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invention. He relied on his patent before actually launching the product and contacting partners
for distributing the invention. Goud was not afraid that his invention would be copied. First,
there were not a lot companies which understood the niche market. Second, it was too difficult
to exactly copy his invention due to his patent.
Intrapreneur Becomes Entrepreneur (Fons Derks)
Derks has a technical background in mechanical and electrical engineering. He had several
different jobs within the same company and was responsible for maintenance, quality control
and product development.
He developed several solutions for technical machines which were all used internally at the
company. Eventually, one invention was applicable for more purposes than within his
employer’s firm. This resulted in a fight over the ownership of invention. The solution was to
start a new venture, partly owned by Derks and two colleagues while the rest of the shares were
owned by Derks’ partner (employer). Derks acknowledges the convenience of working with
partners on an invention. “Together you can support each other when someone has motivation
The new venture was a perfect solution for Derks because his partner paid for the patent and
development costs in return for discounts on the products developed by the new private
According to Derks, his invention could never have been successful without his partner
(employer) because of the connections within the market. An investor would not have been
enough, since his invention needed certification and allowance from third parties in order to be
able to enter the market. His employer had a strong and reliable name within the market which
supported to gain trust and acceptance to overcome these issues. In addition, it was essential
that he has been working for a long time in the same company and knew the bureaucratic issues
he had to overcome.
Derks feared leaking of his new invention to his company (and other parties). He experienced
before that one of his inventions leaked towards a potential partner (buyer) because of sharing
too many details during the sales pitch about the solution created by his invention, resulting in
an imitation by his partner. Therefore, he kept his invention secret and arranged an agreement
(new venture) about the development and commercialization beforehand with the management
of his employer. In this manner, he “earned” profits and acceptance of his invention before
revealing the actual invention. Only a few colleagues knew about his invention but he was
convinced he could trust them because of the long mutual relationship.
In the end, Derks admits that this was a unique situation and could have only taken place
because of the long and satisfying relationship between him and his employer. After the support
from the management, he applied for a patent which was arranged with help from third parties.
Concluding, Derks was and still is satisfied with the cooperation. While having his employer as a
partner, he did not have to take the investment risks. Furthermore, he could have relied on the
strong connections from his employer. Table 12 presents a summary of the main findings about
the Intrapreneur Becomes Entrepreneur case.
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Table 12: Summary of the main findings of the Intrapreneur Becomes Entrepreneur case
Learning points
Work on an invention with one or
Recommendations for future
Protection mechanism used
against partner
Ask advice from specialized
two more colleagues. This helps to
parties before applying for a
overcome difficult periods and
patent and/or starting to
prevents the occurrence of “tunnel
negotiate with alliance partners.
New venture.
Do not share too many details
about your invention towards
partners and distributors to
prevent the risk of copying.
“Do not share your invention in detail with potential partners or other people because you never know exactly what you
have shared afterward.”
“Never share what your invention actually solves or mention the cause of the problem as this can help a potential partner
to come up with a solution himself. Instead, focus on the core benefits which the invention creates.”
“As an inventor it is preferable to cooperate with a partner who is eager to generate market share and who is not able to
duplicate your invention and does not have interest in doing so.”
Case conclusion
The Intrapreneur Becomes Entrepreneur case described a situation in which an inventor
developed a new product which was not only applicable for the employer’s business purposes
but also interesting for other companies and/or markets. Therefore, Derks wanted to obtain the
ownership of the invention himself. Due to the long relationship, almost 40 years, he could gain
an agreement to start a new venture partly owned by himself, two colleagues and his employer.
This way, he was able to keep the ownership of the invention because he had shares in the
patent. Firstly, he used trust to discuss the invention with his close colleagues. Secondly, he kept
his invention secret for the top management of his company before closing a deal. Finally, he
managed to start a new venture with the help of his employer. The meetings to create the new
venture were all held with people who signed NDAs. During the development of his invention, he
was careful with sharing his progress and knowledge because he lost an invention once before.
In that case, he shared too much of the invention details which led in an imitation by his
potential partner.
Continuous Inventor (Jorg Leers)
Jorg Leers has a technical background with a focus on logistics. His first invention was applicable
for the packaging industry during his previous employment at a company which could benefit
from it. Discussions about the ownership of the invention resulted in a breakup between Leers
and his employer.
Leers commercialized his invention in the cooperation with an investor group which led to a
small company. This company became successful and gradually gained market share and
acquired several big players. Unfortunately, the company went bankrupt because of debts from
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the investors. The success of the invention encouraged several big clients, who wanted to take
over the bankrupt company. After a while, Leers found a partner to cooperate with and
continued his company. At the same time, he was approached by a large player in the industry to
sell his invention. After refusing this offer, he was confronted with the power difference and
intimidation of the company. In the end, unfortunately, he experienced his invention being
copied and displayed on several international fairs which even resulted in winning an
international price by the imitator. Leers did not have the (financial) resources and time to
defend his patent. In addition, there were no parties which could support him in this case and he
accepted his loss. Eventually, he could sell his original invention to a smaller party which
compensated his financial investments.
Currently, he is working on a new invention, which he is still improving. There are several
parties interested but all of them do not want to cooperate because of the unstable financial
situation at the moment.
During his invention period and commercialization activities, he learned some essential lessons.
An (technical) inventor can choose two different approaches of commercialization. First, with
minimal investment costs, one develops the invention himself and tries to sell it himself as well
or via a partnership. Second, if the investments costs are too high or minimal risks want to be
taken, an investor tries to find a partner in an early stage to share development costs and/or find
expertise. This decision needs to be made in an early stage. Furthermore, to avoid risks, one
could choose to license/sell the invention to minimize risks.
According to Leers, the best way to prevent stealing and copying an invention is to keep on
developing and optimizing it to the current market demands. This leads to an improved
bargaining power to potential partners and/or a current partner. Hereby, an imitated version of
an invention will always be behind the latest invention (re)developed by the original inventor
(lead time). In addition, it is useful to license the invention to a partner and split it in smaller
parts, hence, the partner pays license fees per part of the region where he is allowed to sell the
certain invention. Moreover, it is important to include a clause in the contract which states that a
minimum amount needs to be sold which increases the pressure on a partner to sell an
invention. Furthermore, if negotiations are difficult and companies doubt about the potential
success, threaten your (potential) partners with commercializing the invention by your own and
prove that there are customers willing to buy it. Additionally, make sure you have a prototype
which supports the negotiations. Table 13 presents a summary of the main findings about the
Continuous Inventor case.
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Table 13: Summary of the main findings of the Continuous Inventor case
Learning points
Make sure the patent is well
Recommendations for future
Protection mechanism used
against partner
Only cooperate/talk with
defined, otherwise it is only a
partners who are interested in
motivation for competitors to find
your invention without being able
Lead time (also for
a way to copy it.
to intimidate it.
Make sure your invention is new
protection against
and verify it.
Speed and improving your
invention is a better protection
mechanism than just a patent.
A working prototype is essential
for convincing partners of the
success of your invention.
“In order to overcome doubt of your partner of the success of your invention, first sell the invention yourself.”
“Inventors often forget to take breaks and verify their invention in order to adapt it to the latest market changes.”
“Patents are more a tool of scaring your competitors than prevention. The best method is to continuously improve your
current invention to be one step ahead and use speed to be faster than your competitor.”
Case conclusion
The Continuous Inventor case portrays an example of an inventor who experienced losing his
invention to his partner. Leers lost his first invention to a large partner. He could not fight
against his imitator due to the lack of financial resources and time, even though, he had a patent
for his invention. Leers learned that negotiations are essential when approaching partner. As an
inventor, you should convince interesting partners of the potential success of your invention and
“threaten” with partnering up with competitors or even start producing and selling the
invention by your own. According to Leers, companies are afraid to miss a new business
opportunity and that is the point an inventor should focus on. Moreover, Leers used NDAs to
discuss new inventions and applied for a patent when commercialization opportunities were
possible. However, Leers perceives a patent more as a method to scare off imitators than to
defend an invention. In addition, he emphasizes the importance of lead time by continuously
improving the original invention. According to Leers, this is the best method to stay ahead of
potential imitators.
This section categorizes and summarizes the findings from the interviews with the inventors.
Table 14 portrays an overview of the used protection mechanisms by the interviewees.
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Table 14: Overview of the used protection mechanisms per case
Lead time
From table 14 it can be concluded that the use of NDAs (5 times) and trust (5 times) were most
favorable as protection mechanism against alliance partners. Moreover, patents were relatively
often used (4 times), only Beekhuizen and Derks did not use patents as protection mechanism
against their partners. Both of them were in a partnership where the partner paid for the patent
and the development itself. This way the patent was not used against their own partners.
Additionally, there were two other methods mentioned. Beekhuizen suggested to only partially
disclose the invention and Derks emphasizes the solution of starting a new venture in
cooperation with your partner. Beekhuizen and Derks had the same goal which was to keep
control of the invention by making sure they would play an important role in development of the
invention or its ownership rights. NDAs were mostly used as a formality and the studied
inventors generally did not indicate it as a suitable protection mechanism.
Furthermore, most of the interviewees faced difficulties in negotiating about the (potential)
revenues. They did not find a suitable method for improving this issue. Partners often used the
reason that they had to take (financial) risks in order to cooperate and commercialize the
invention. Therefore, Beekhuizen, Goud and Leers explicitly mentioned the value of physical
(working) prototypes. According to their experiences, this had a positive effect on gaining trust
from the (potential) partner and overcome the anxious behavior for investing in the invention.
The case studies showed that the most successful protection mechanism was to have additional
knowledge next to the invention itself or to know about the commercialization strategy of the
invention. In other words, an alliance partner should not be able to copy an invention and
commercialize it him/herself without the help of the inventor. Beekhuizen achieved this by only
partially disclosing his invention (partial disclosure) and continuous development of the original
invention (lead time). Derks started a new venture in order to keep (enough) shares in the
company to stay in control. Leers showed a similar approach as Beekhuizen and focused on lead
time by continuously developing the invention in order to become the key person to be involved
in the commercialization of the invention, such as (re)developing and implementing the product
in the market. For Woensel and Goud, patents served their purpose very well but in both cases
the risk of being copied was relatively low due to the niche market. Additionally, in case of
patents, it is often one of the most used protection mechanisms for technical products because
the invention is generally very well protected against imitators and an own alliance partner.
Then, there is still the issue of finding a lucrative alliance partner in order to commercialize the
invention. The cases showed that several inventors struggled with this issue. In particular,
inventors without any experience of commercializing an invention received low returns for their
inventions. They feared the difference in bargaining power and felt intimidated. Therefore, it is
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recommended to ask for advice from parties which have experience in commercializing
(technical) inventions, which is confirmed by Beekhuizen and Derks.
6.2 Interview with an alliance partner
In this section, a company was interviewed concerning their experience with startup SMEs.
Again, the real name of the studied company is replaced and randomly chosen.
6.2.1 Fast Engineering
Fast Engineering is fully focused on metal technology for the business to business market. They
produce their own products and cooperate with inventors for extending their product portfolio.
In addition, they have their own (worldwide) distribution channel.
Robbert Groeneveld, sales manager Fast Engineering obtained experience from several
cooperation projects with inventors. A lot of new inventions by inventors are refused because
they are not in line with the company’s business. Many inventors approach Fast Engineering
with NDAs which contain clauses about fines when information about the invention leaks.
According to Groeneveld, Fast Engineering never agrees on such terms because they do not want
to risk financial injury when it happens beyond their responsibility and have to prove it.
Inventors are often careful in sharing their inventions because of stories and rumors of
colleagues who lost their invention. Groeneveld claims they would never steal an invention, also
because they would not have the capabilities and incentives for it to imitate a certain product.
In general, Groeneveld is satisfied with experiences of cooperating with inventors. In most cases,
inventors obtain a percentage of the revenues. The (re)development of the invention and
production is executed by Fast Engineering. Moreover, they are responsible for the marketing
and sales. Ideally, the inventor is still involved in marketing activities, such as promotion at fairs.
In case of infringement of the patent from the inventor, Fast Engineering supports the case
because it also involves the revenues of them according to Groeneveld. Nevertheless, this is not
likely to happen due to the type of industry they are active in. Groeneveld expects imitation and
infringing to happen more in consumer products.
Experiences from Fast Engineering show that inventors often contact them for cooperation
opportunities but many cases will not lead to an alliance agreement. Two main reasons are the
limited market potential of the invention and/or the misfit with the current business of the
company. Moreover, Fast Engineering faces demands which cannot be granted, such as
information leakage fines and negotiations about minimum sales. Eventually, once an alliance
agreement is started, the relationships are, in general, pleasant to both sides, according to Fast
Engineering. In most favorable situation, the inventor attends promotion activities, such as fairs,
in order to stimulate the marketing of the product. It is important to realize that both parties of
the alliance need to put effort in sales of the invention. A lot of inventors think that their
invention will sell automatically due to the partnership.
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6.3 Additional findings
This section portrays the findings from additional sources, such as information and cases
provided by Agentschap NL1, NOVU2, KIVI NIRIA21, information from interviews and events and
some latest discussions from magazines and websites concerning IP management.
Agentschap NL explains the shift of IP management towards a more open approach due to
trends, such as open innovation in which IP is shared instead of protected. Companies tend to
cooperate more often and create shared IP, such as IP on enabling technologies, production or
test equipment. In this way, separate companies leverage specific parts of a new product or
service. In addition, open innovation will support firms to be more willing to license their patent
rights to others, even immediate competitors to exploit their patent rights to a larger extent.
Therefore, according to the European Commission, exploitation of innovation and IPRs is indeed
a key role to future economic success. Unfortunately, Agentschap NL does not describe how to
“play this collaboration game” in detail and defend its IP and resources in such partnership
agreements. It only mentions the right to defend its patent when infringement takes place
(Hanneman et al., 2010).
Technisch Weekblad22 (50th edition) focused on patents and their vision for 2012 in one of their
latest editions. Nowadays, there are more companies only applying for patents to litigate others,
typically startup SMEs when they make use of their patents because they are easier to
intimidate. Often, the firm which is using the patent is not aware of its existence. These types of
firms are so called “Patent Trolls”; companies which buy and enforce patents against one or
more alleged infringers in a manner considered by the target or observers as unduly aggressive
or opportunistic, often with no intention to further develop, manufacture or market the patented
invention (Poltorak, 2006). More and more startup SMEs face problems with these Patent Trolls,
especially software firms. In addition, it also happens to large firms. A recent example is Apple’s
new Ipad infringes 4G patents.23 Hence, people would like to see a change in the ownership of
patents, which is usually a company where the invention was created instead of the inventor
itself. According to Wouter Pijzel, Director of the NOVU this could prevent the above mentioned
issue. Another problem are the high fees involved with patents which hinders startup SMEs to
defend their invention. Kees Capel, lawyer at Kneppelhout & Korthals therefore suggests setting
a fixed price for legal costs, for example, ten to twenty thousand euro. Entrepreneur, Robert Gaal
(Wakoopa) proposes online application forms for patents in order to reduce the costs.
Additionally, he claims that still the best option for startup SMEs is speed to market in order to
keep ahead of (potential) competitors.
Several experts, such as lawyers and senior managers within IP management shared their vision
on patent use by startup SMEs during a seminar24 organized by Agentschap NL. A senior
manager from KPN explained that they never cooperate with startup inventors when they do not
have a patent for their invention. In that way, they avoid the risk that information leaks and
someone within KPN would commercialize the original invention. A legal employee from Philips
explained that within 20 years he only experienced infringement of a patent from a smaller
party two times. Nevertheless, several people from the seminar acknowledged the issue of
KIVI NIRIA is the Dutch association for engineers and engineering students. With 23.000 members KIVI NIRIA is the largest
engineering association in the Netherlands.
Weekly magazine from KIVI NIRIA about subjects within the technological field.
Autumn event "Samen innoveren, samen octrooieren?”, 22nd of November 2011.
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inventions being stolen by alliance parties. During a mini symposium25, organized by iDexpress,
several attendees shared their fear of losing their invention to potential collaborators and their
careful approach in commercialization activities. In addition, they addressed the lack of
knowledge which most technical inventors need in order to commercialize their invention.
Based on both events, it can be concluded that the fear of losing an invention still remains with
startup SME inventors.
Symposium “Valorization in practice”, 22nd of June 2001.
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7 Conclusions
This chapter portrays the conclusions of this research and especially aims to answer the
research question: “How can startup SMEs protect their invention against their alliance partners
while commercializing their invention?”
Furthermore, it discusses additional interesting findings from the literature review and the case
study. Finally, limitations and elements for further research are mentioned.
7.1 Conclusion
In chapter one, the main research question (MRQ) was formulated: “How should you control the
protection of an invention (knowledge) in an alliance against an own alliance partner in order to
maximize performance while commercializing an invention as a startup SME innovator?” In order
to answer this question, several sub-research questions (SRQs) were formulated. In this chapter,
these questions will be answered step by step leading to the final answer of this research.
The first sub-research question (SRQ1), “How should you control the protection of your
invention?” was discussed in the second chapter. There were two types of protection
mechanisms distinguished, formal mechanisms; patents, copyrights and trademarks and informal
mechanisms; secrecy and lead time (Auerbach 2006; Harabi 1995; Hertzfeld, et al., 2006;
Leiponen and Byma, 2009). Patents still remain the most used IP protection mechanism,
nevertheless, this is changing due to the rise of open innovation aspects, such as crowdsourcing
(Hanneman et al., 2010). As a results, lead time and secrecy are increasing in terms of usage and
popularity (Brouwer and Kleinknecht, 1999; Leiponen and Byma, 2009; Levin et al.,1987).
However, secrecy is not favorable when working closely in a cooperation (Leiponen and Byma,
2009). Patents are mostly used in high-tech industries but secrecy is in most cases rated higher
than patents. Startup SMEs tend to prefer informal protection mechanisms over formal ones
(Arundel, 2001; Cohen et al., 2000; Gans and Stern, 2003). The cases confirmed that the use of
patents was favorable as a protection mechanism but was principally used in combination with
other protection mechanisms, mainly with secrecy and, in the starting phase, with NDAs.
Nevertheless, patents were used to protect the technical invention in all cases. In general, it can
be concluded that startup SMEs tend to use a combination of protection mechanisms and do not
favor one.
Sub-research question two (SRQ2), “How should you proceed managing your invention as a
(startup) small size innovator?” was discussed in chapter three. First, startup SMEs face, in
general, two options when commercializing an innovation. These options are building an own
value chain or join an existing one via an incumbent. This issue of correct decision-making is
confirmed by Leers who emphasizes the importance of the right choice which needs to be made
in an early stage. Second, startup SMEs have to choose one or several protection mechanisms.
The literature study explained that the contextual factors influence which protection mechanism
to prefer, for instance, technical inventions were mostly protected with a patent. Results from
the case study showed the influence of the type of market in which the invention was applicable
for. According to Woensel and Goud, in a niche market there is a smaller chance of an invention
being copied. There are fewer players (able) to imitate the invention. In addition, there is a great
deal of effort required for companies to compete in, usually, such a small niche market. Startup
SMEs with (high)tech inventions protect their inventions in most cases with patents, both
against imitators and their (potential) partners, which is confirmed by the case studies. When
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the patent is applied in cooperation with an employer or alliance partner, it is crucial to only
partially disclose the invention (partial disclosure). The inventor should ensure that the
invention knowledge or additional knowledge to commercialize the invention is kept secret for
his/her partner in order to remain of great importance for the partner.
Sub-research question three (SRQ3), “How can an invention in an alliance be protected against an
own alliance partner?” was discussed in chapter three and four. Firms join alliances in order to
gain several benefits, such as allowing buyers and sellers of technology to soften downstream
product market competition, avoid duplicative investment and engage in complementary
technology development (Gans and Stern, 2003). This is especially useful for startup SMEs
because they often lack financial, management and organizational resources to commercialize
(Bhide, 2000; Gans and Stern, 2003; Veugelers and Cassiman, 1999). According to Street and
Cameron (2007), startup SMEs should take into account that the resources used to attract the
larger partner are protectable. In other words, the larger partner should not be able to simply
take the resources but remains dependent on the startup SME in order to leverage the resources
most effectively. Therefore, Alvarez and Barney (2001) propose that startup SMEs should
develop a process rather than a single product in order to protect their resources. In the
Corporate Inventor case study this was mentioned by Beekhuizen as to only partially disclose
the invention (knowledge) in such a way that the invention cannot be copied easily. Derks used a
different method to be in control of his invention and started a new venture partly owned by
himself and his employer. The main conclusion of protecting an invention in an alliance is to
keep essential information for yourself or generate a method in order to be of great value for
your partner to leverage the invention successfully. This can be achieved with the following
methods according to the literary study and the case study results; partial disclosure, lead time
and/or a new venture.
The fourth sub-research question (SRQ4) “How can performance while commercializing your
invention be maximized?” was discussed in chapter four. According to Krishnan et al. (2006),
trust is the most mentioned parameter in order to achieve successful alliances. In general, trust
has a positive effect on the alliance performance. Contradictory, trust can be extremely harmful
for the success of an alliance. Overdependence on any single relationship can weaken overall
performance (Miles et al., 1999). It is of the utmost importance to have a neutral alliance
partnership in order to maximize performance. Firms find it challenging to figure out
beforehand what the real intention of a potential alliance partner is. The case studies showed
that the majority of the inventors used trust as a protection mechanism but in most cases it was
used to test the potential of an invention and receive feedback. Additionally, trust was vital for
choosing an alliance partner for most of the studied inventors and affected the relationships a
lot. In the case of Woensel and especially Jong, both inventors trusted their partners too much in
the effort taken in sales and marketing activities. Woensel and Jong were relying on earlier
promises which were finally not executed by the partner. The cases of Woensel and Jong
underline how important it is to monitor an alliance when it actually starts and that it is not only
about the (pre)negotiations beforehand.
Finally, the main research question (MRQ) can be answered, “How control the protection of your
invention (knowledge) in an alliance against your alliance partner in order to maximize
performance while commercializing your invention as a (startup) small size innovator?” There is
no straight forward answer which protection mechanism is most favorable to defend IP, both in
general and in an alliance. This is confirmed by the literature study (e.g. Olander et al., 2009) and
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by findings of the case study. Methods to protect ideas and innovations differ depending on the
chosen model of innovating and the economic and legal environment a firm operates in. What
can be concluded from the case studies is the importance of not sharing 100% of the invention
(knowledge) which is confirmed by Street and Cameron (2007). Always make sure that part of
the (implementation) knowledge of the invention remains with the inventor. In this way, the
startup inventor will always be essential for the alliance partner and as a result increases
bargaining power for the startup SME inventor which is confirmed by Beekhuizen and Derks in
the case study. Additionally, it is significant to find a partner who is seeking mutual benefits and
does not have the capabilities to imitate the invention. Derks mentioned the following, “as an
inventor it is preferable to cooperate with a partner who is eager to generate market share and
who is not able to duplicate your invention and does not have interest in doing so”. Furthermore, in
the case studies, the most successful protection mechanisms were lead time, partial disclosure
and/or a start of a new venture with your alliance partner in which the inventor has (enough)
shares to be in control.
7.2 Additional findings
A lot of startup SMEs face the challenge of finding a good alliance partner and convince them of
starting a cooperation in order to commercialize their invention. Therefore, Beekhuizen, Goud
and Leers explicitly mention the value of a physical (working) prototype. According to
Beekhuizen, “you should always have a physical prototype to show to your (potential) partners in
order to convince them about the benefits of your invention.” When people can see, feel and touch
a certain product or service, it is easier to convince potential partners of the success of the
invention than “selling” your invention by graphs, tables and forecasts. Goud videotaped
potential customers using the product and showed the experiences to potential investors and
partners which was an efficient way to convince them of the success of the invention.
Startup SME inventors often lack the knowledge about commercializing an invention. When the
invention has potential to become financially successful, parties start approaching the inventors
with cooperation offers. It is essential to ask advice from successful inventors or other people
who have experience with such a trajectory. The case studies showed that all inventors who
commercialized more inventions made mistakes due to lack of experience or knowledge which
could easily be overcome by asking advice from third parties which was confirmed by
Beekhuizen, Woensel, Goud and Leers.
7.3 Limitations and suggestions for further research
One of the limitations in this thesis was the broad scope of this explorative research. In order to
draw more precise conclusions, the focus of the case selection should be narrowed. In addition,
it would be interesting to further emphasize on the favorable protection mechanisms used;
partial disclosure, lead time and a new venture.
Two studied inventors, Derks and Leers developed their invention while working for an
employer. Both of them faced difficulties about the ownership of the invention. It would be
valuable to conduct a research on effectively commercializing an invention while working for an
employer and find out in what way to claim the ownership of the invention.
The conducted research was mainly focused on the perspective of startup inventors. It would be
interesting to research what the opinion is of large players concerning the alliance possibilities
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with startup SME inventors and what do startup SME inventors need to take into consideration
to be a promising partner for large firms.
There are several stories of startup SMEs which lost their invention to a large partner or
imitator, but no (legal) actions could be taken because of limited resources. Currently, there is a
big rise of social media which makes it possible to share negative publicity in case of invention
theft or imitation. In what way could social media, such as LinkedIn, Twitter, Facebook etc.
contribute to strengthen bargaining power for startup SMEs to threaten with bad publicity in
case of infringing or other financial harm by a large firm?
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Appendix A: Case study questions
Appendix B: A Checklist of Questions for Designing a Qualitative Procedure
Appendix C: Interview transcripts
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Appendix A
Case study questions
1. Background information of the invention and inventor
 Could you tell more about your background, education, job experience and the relation to
the invention?
 Could you describe the invention?
 Could you describe the industry in which the invention is for?
 What is the patent number (if applicable)?
 Do you have already experience with an earlier invention and/or the commercialization
process (how did it go and what was your experience).
Background information of the partner
How many employees are working at the partner company?
What is the turn over from the partner company?
In which industry is the partner operating?
Partnership questions
When you started to commercialize your invention what resources were lacking?
How did you make the selection of your partner?
How many (potential) parties did you contact?
How much did you know about the legal requirements of patenting before you attempted to
obtain a patent?
How did you experience the partnership with your partner?
To what extent did you keep your invention secret or protected against your alliance
partner and why?
Were you afraid of being copied by a competitor or your alliance partner (how and why)?
How long did the partnership trajectory take? Was this longer or shorter than expected and
Which step or decision concerning your protection mechanism was decisive for your success
and why?
What would you have done differently (how and why)?
Do you have any other elements according to the experience with partnership which we did
not discussed?
4. Closing Remarks
Are there elements of the questions you like to highlight or add to the items we discussed?
Thank you for sharing your experience and expertise.
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Appendix B
A Checklist of Questions for Designing a Qualitative Procedure (Creswell, 2007)
Are the basic characteristics of qualitative studies mentioned?
Is the specific type of qualitative strategy of inquiry to be used in the study mentioned?
Is the history of, a definition of, and applications for the strategy mentioned?
Does the reader gain an understanding of the researcher's role in the study (past
experiences, personal connections to sites and people, steps in gaining entry, and
sensitive ethical issues)?
Is the purposeful sampling strategy for sites and individuals identified?
Are the specific forms of data collection mentioned and a rationale given for their use?
Are the procedures for recording information (such as protocols) during the data
collection procedure mentioned?
Are the data analysis steps identified?
Is there evidence that the researcher has organized the data for analysis?
Has the researcher reviewed the data generally to obtain a sense of the information?
Has coding been used with the data?
Have the codes been developed to form a description or to identify themes?
Are the themes interrelated to show a higher level of analysis and abstraction?
Are the ways that the data will be represented—such as in tables, graphs, and figures—
Have the bases for interpreting the analysis (personal experiences, the literature,
questions, action agenda) been specified?
Has the researcher mentioned the outcome of the study? (develop a theory? provide a
complex picture of themes?)
Have multiple strategies been cited for validating the findings?
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Appendix C
Interview transcripts
As requested from the interviewees, it is decided to keep the transcripts of the interviews secret.
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