If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.



Technology: Open Innovation Still Worthwhile Despite Challenges

by Marc S. Reisch
March 11, 2013 | A version of this story appeared in Volume 91, Issue 10

Intellectual property theft by employees continues to be a concern among R&D managers at U.S. chemical firms. But although many firms also expose their intellectual property to customers and research partners through open innovation arrangements, the R&D managers say these efforts are worthwhile, and they are confident in the strategies they have developed to safeguard proprietary knowledge.

Reports of companies stealing from partners are rare, but such incidents do occur. In 2008, Invista charged Rhodia with stealing its butadiene-to-adiponitrile manufacturing process through a joint venture the two firms operate in France. More recently, a former employee of Chinese contract research firm WuXi PharmaTech was convicted of stealing samples of several proprietary compounds from Merck & Co., a research partner, and offering them for sale over the Internet.

A recent White House report on the dangers of industrial espionage underscores the value of intellectual property and cites a number of instances in which employees stole proprietary information on behalf of foreign governments and corporations.

Industrial espionage “is outright stealing,” says Douglas W. Muzyka, chief technology officer at DuPont. Open innovation is about sharing with customers. “You need a strategy around managing the richness of intellectual property,” he says.

DuPont has had its share of problems with intellectual property theft. In one case, DuPont employee Hong Meng was convicted of stealing a process to make organic light-emitting diode displays and giving it to a Chinese university. In another case, a former employee was convicted of stealing DuPont’s process to make the pigment titanium dioxide at the behest of Chinese-government-controlled companies.

The firm has shored up its information systems and policies to deal with the theft problem. “But we don’t believe in closing down innovation efforts with partners,” Muzyka says. To do so, “would be counterproductive in the long term.” And besides, he adds, the theft was by rogue individuals and not through the innovation framework.

“Industrial espionage is not new,” says William F. Banholzer, chief technology officer of Dow Chemical. Several years ago Dow introduced digital rights management technology to track use of its documents to limit employee abuse, Banholzer says. Dow, like other firms, also has defenses against hackers, he points out.

With customers, Dow “always works under a legal framework,” Banholzer notes. It would be imprudent not to protect the company with a clear agreement, he says.

Yakov Kutsovsky, Cabot’s chief technology officer, says his firm also relies on agreements to keep partners honest. But he doesn’t necessarily rush to the lawyers as soon as he starts collaborating with a partner. “If you put an agreement into place too early, you could stifle innovation,” he says. “You need to build trust.”

Eastman Chemical’s chief technology officer, Gregory W. Nelson, underscores the importance of protecting intellectual property. “We have a strong intellectual property and trade-secret protection program,” he says. Most intellectual property is patented, Nelson says, because of the legal protections it affords.

Unpatented trade secrets are also a tool for protecting the firm’s know-how. Eastman makes decisions on how to protect intellectual property on a case-by-case basis, Nelson says, but the firm feels patenting is often the best course of action.

“Stealing is the dark side of open innovation,” says Tamara St. Claire, vice president of business development for the Xerox Innovation Group, an organization within the document management technology company charged with fostering innovation at its global research centers. “But the return on the research investment outweighs the risk,” she says.

For example, PARC, a Xerox research firm, helped energy company SolFocus develop its solar concentrator technology. Using its optical systems design capabilities, PARC helped the start-up firm create a more efficient panel to convert sunlight into electricity.

When it collaborates with a partner like SolFocus, Xerox starts by putting confidentiality agreements in place, St. Claire says. Subsequent royalty and licensing agreements help ensure that both parties share the fruits of their labors.

Intellectual property owned jointly with a partner “is a mark of success,” St. Claire says.


This article has been sent to the following recipient:

Chemistry matters. Join us to get the news you need.