Innovation = creativity + business modelBy Kevin E. Houchin, Esq.
April 24, 2009
I'm an intellectual property lawyer and by many accounts I'm pretty good at it. Lately I've noticed a trend. I've been watching the pace of innovation increasing exponentially while the legal tools I can use to facilitate and protect innovation get left farther and farther behind.
Granted, IP law is built upon the solid foundations of the patent, trademark, copyright, trade secret and contract law regimes. But the exciting complexities of current business innovation require a more thoughtful approach to the multidisciplinary teamwork required to regain America's leadership position in global business.
What do you need to keep in mind as you endeavor to improve your business and our global economy through innovation? First, we need to understand the difference between creativity and innovation.
"Creativity" is coming up with something new, while "innovation" is applying creativity to improve something already established. Innovation cannot exist without creativity, but one can be creative without resulting innovation.
The distinction is important, because creativity is relatively easy to handle from a legal perspective, while innovation requires a multidisciplinary approach.
Protecting creativity is one-dimensional. Creativity usually falls nicely into one of the existing categories of IP. A specialist in copyright, trademark, trade secret, or patent law can handle a painting, song, brand name, recipe, or funky new gizmo without too much trouble.
Copyrights protect the artistic expression of creativity. Trademarks protect the marketing investment in your brand. Patents protect the inventive and useful manifestations of creativity. Trade secret laws protect the valuable ideas not protected by the other three. These areas can have some complexity, but when these expressions of creativity are applied to existing business models we cross over into the realm of innovation.
Protecting innovation multidimensional
First, let's look at a "simple" example of innovation. I have a client who is a nationally respected sculptor and arts educator. She recognized that without kilns, many small schools could not teach clay sculpture. So, rather than go on a crusade to buy kilns for every school in the country, she put on her thinking cap and came up with a new type of clay and process for working with clay that does not require firing. Very smart. Very cool. Very innovative.
Here's where innovation gets complex. The sculptures she creates are protected under copyright, the new clay is probably patentable, the non-fired clay sculpting process is probably patentable, the educational programs she's creating will be copyrightable, and the branding for the whole endeavor needs to be protected via trademark. As an artist, she'll probably keep a few trade secrets up her sleeve that are only applied to her personal work. Finally, she might end up certifying other sculptors to teach her new process to other students, which will require some contractual agreements.
Whew! Remember, that's just one lone sculptor working away in her studio.
Now let's move into the larger business world. Businesses are competitive almost exclusively due to innovation.
Business innovation takes the form of new products and services, improvements on existing products and services, or improved efficiencies in existing processes. Many times it's a combination of all of these at the same time that cause the greatest leaps forward. Those leaps are complex. Those leaps require teams, and whenever there is a team involved, we have more than money on the line - we move into the realm of emotions and relationships.
I don't care how big the enterprise becomes or how many millions of dollars are at stake, managing innovation comes down to managing the emotions of the people working together to bring the innovation from an idea to a reality. The question then becomes how to best manage the emotions of the people in the deal through the structure of the deal.
The innovation-based joint venture
When two or more people are involved in an innovation project, it's safe to classify the project as a "joint venture." As a lawyer, when faced with a joint venture, I have to decide if the project is best implemented by forming a new company, or through a subcontractor relationship.
The key deal points are:
ownership of the innovation (more specifically the intellectual property related to the innovation),
investment in the project before revenue,
management of the project,
operations/delivery/accounting for the project,
how and when any profits are split, and
how to terminate the relationship if it goes sour.
Obviously, there is no one-size-fits-all solution to bringing innovation from imagination to reality. Multiple individuals, companies, finance options and intellectual property regimes will require you and your team of advisers to be as innovative in creating the business plan as you were when crafting your initial idea.
Kevin Houchin is an attorney specializing in business development, intellectual property and marketing for entrepreneurs based in Fort Collins. He covers the legal world for the Business Report each quarter, and can be reached at