Information Communication Technology Law ...

Information Communication Technology Law, Protection and Access Rights: Global Approaches and Issues Irene Maria Portela Polytechnic Institute of Cávado and Ave, Portugal Maria Manuela Cruz-Cunha Polytechnic Institute of Cávado and Ave, Portugal

InformatIon scIence reference Hershey • New York

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Published in the United States of America by Information Science Reference (an imprint of IGI Global) 701 E. Chocolate Avenue Hershey PA 17033 Tel: 717-533-8845 Fax: 717-533-8661 E-mail: [email protected] Web site: http://www.igi-global.com Copyright © 2010 by IGI Global. All rights reserved. No part of this publication may be reproduced, stored or distributed in any form or by any means, electronic or mechanical, including photocopying, without written permission from the publisher. Product or company names used in this set are for identification purposes only. Inclusion of the names of the products or companies does not indicate a claim of ownership by IGI Global of the trademark or registered trademark. Library of Congress Cataloging-in-Publication Data Information communication technology law, protection, and access rights : global approaches and issues / Irene Maria Portela and Maria Manuela Cruz-Cunha, editors. p. cm. Includes bibliographical references and index. Summary: "This book identifies key issues in the relationship between ICT and law, ethics, politics and social policy, drawing attention to diverse global approaches to the challenges posed by ICT to access rights"--Provided by publisher. ISBN 978-1-61520-975-0 (hardcover) -- ISBN 978-1-61520-976-7 (ebook) 1. Information superhighway--Law and legislation. 2. Information superhighway-- Moral and ethical aspects. 3. Information superhighway--Social aspects. 4. Information superhighway--Political aspects. 5. Internet--Law and legislation. 6. Electronic records--Access control. 7. Data protection--Law and legislation. 8. Privacy, Right of. 9. Intellectual property. I. Portela, Irene Maria, 1965- II. Cruz-Cunha, Maria Manuela, 1964K564.C6I543 2010 343.09'944--dc22 2010016304 British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library. All work contributed to this book is new, previously-unpublished material. The views expressed in this book are those of the authors, but not necessarily of the publisher.

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Chapter 10

Intellectual Property Protection and Process Modeling in Small Knowledge Intensive Enterprises Riikka Kulmala Turku University of Applied Sciences, Finland Juha Kettunen Turku University of Applied Sciences, Finland

AbStrAct Knowledge-based assets, intellectual property, and capital play a fundamental role in an enterprise’s competitiveness, especially in small knowledge intensive enterprises. Small knowledge intensive enterprises need to create new ways of operating in order to manage the intellectual and knowledge-based assets in their organizations more efficiently. Organizational knowledge and intellectual property can be protected, either formally via IPR, or informally via efficient knowledge management. Successful IP protection requires systematic intellectual property and knowledge management. Intellectual property protection via efficient knowledge management affects the entire organization rather than being just a separate task. It needs to be embedded in organizational work routines, practices, and processes as an overall operational strategy. When embedded in organizational work processes, IP protection and knowledge management become a continuous part of work routines and tasks in the enterprise, not a separate action.

introduction Technological know-how alone is not enough to ensure success in competitive, rapid growth markets. Companies have to find other approaches to improve their performance and position in the markets and to remain competitive. Knowledgebased assets, intellectual property, and capital DOI: 10.4018/978-1-61520-975-0.ch010

play a fundamental role in an enterprise’s competitiveness, especially in knowledge intensive enterprises. In the 1990s enterprise managers began to notice the importance of these assets. Knowledge-based assets are intangible and are often present only in employees’ heads. This fact has led to two concerns: First, the risk of losing that key organizational knowledge (e.g., through employee mobility) and secondly, the need to develop that knowledge (Coleman & Fishlock,

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Intellectual Property Protection and Process Modeling in Small Knowledge Intensive Enterprises

1999; Kalpic & Bernus, 2006; Randeree, 2006). The attention focused on this subject has created the need to manage organizational knowledge more efficiently and hence, to create new ways of operating in order to manage an organization’s intellectual and knowledge-based assets. Small enterprises have certain advantages over larger corporate entities: they are able to respond quickly to changing market demand, they are organizationally flexible, and they often have efficient internal communications (Cordes et al., 1999; Mogee, 2003). As a result, small enterprises can more easily incorporate new working practices and processes into their operations. The aim of this article is to examine the ways in which knowledge and intellectual capital is managed in small knowledge intensive enterprises and to discuss the factors that influence a small enterprise’s propensity to adopt processes and practices1 to secure their intellectual property and knowledge. Furthermore, the focus of this article is to make recommendations as to why and how small enterprises can secure their intellectual property and knowledge. The study emphasises knowledge protection and the development of knowledge management systems and processes that support knowledge sharing and creation, innovativeness, and knowledge protection. The analysis will focus on intra-organizational activity. In order to understand the phenomenon as a dynamic, tactical, and operational process; the phenomenon is investigated from two perspectives: Intellectual capital management and knowledge management (Wiig, 1997). The article starts with a short introduction on the theoretical background of intellectual capital management and knowledge management; focusing on intellectual asset management strategy, intellectual property protection, knowledge creation, and transfer strategy. The main definitions and concepts are presented in this section. The first section also includes a brief description of the study sample and the methods used in the data collection and analysis. The second section dis-

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cusses the methods, practices, and processes used by small enterprise managers in order to protect their embodied knowledge. Also, the value of these mechanisms in the process of intellectual property protection will be evaluated. Factors that might have an influence on an enterprise’s propensity to manage and protect their knowledge will be discussed. The section will end with a discussion of the different knowledge categories; in addition to examining the knowledge process cycle and its relation to intellectual property protection. The final section of the article summarizes the results of the study.

bAckground The importance of capturing and managing intellectual capital (intangible assets) has been acknowledged in several research studies (e.g., Coleman & Fishlock 1999; Kitching & Blackburn 1998; Miles et al. 1999). However, the protection of knowledge has attracted very little attention among information systems and management researchers. The focus of the existing studies has been mainly on knowledge creation, knowledge acquisition, and knowledge sharing (Bloodgood & Salisbury, 2001; Liebeskind, 1996; Randeree, 2006). Small business and innovation researchers have investigated knowledge and intellectual property protection in small- and medium-sized enterprises (SMEs); focusing mainly on legal forms of intellectual property protection (IPRs) such as patents, trademarks, and copyrights. A central finding in previous research studies was the importance of the skills embodied in human capital: skills that cannot be protected through traditional, formal intellectual property protection (protection granted by national Intellectual Property Rights – IPRs). This intellectual capital is often only in employees’ heads and it is not externalized or formalized in any particular way. Since the mobility of qualified employees is rather high, the need to capture and protect embodied


knowledge is important. A strong dependence on employees is perceived as a problem, especially in small enterprises which have not developed an overlap in knowledge base. (Kuusisto, Kulmala, Päällysaho, 2005.) According to Teece (2000), the central role of knowledge management is to develop, capitalize on, and take advantage of intellectual capital – of which knowledge and intellectual property are the most important. Organizations are increasingly competing on the basis of their knowledge. Knowledge is a key asset for the knowledge intensive enterprise. Technology and new products can be copied and replicated fairly quickly, but knowledge has to be created by an individual. Consequently, knowledge is more difficult to replicate than technology and products, or even processes (Bender & Fish, 2000; Davenport & Prusak 1998). The discussion on the subject of knowledge management is still quite unorganized (Lämsä, 2008) and there is still a lack of well-defined concepts. As this article focuses on the management of knowledge and intellectual property; knowledge, intellectual capital, and intellectual property are the key concepts. Table 1 presents the conceptual definitions of the study. A great deal of organizational knowledge is embedded in practice (Lämsä, 2008). The value and importance of knowledge has been investigated in the strategic management field; for example, from a resource-based view (RBV). According to the resource-based approach, easily tradable knowledge is not as valuable to a company as a source of competitive advantage as knowledge that can be secured and not readily accessed by the markets (Kalpic & Bernus, 2006). As knowledge is a key asset for the knowledge intensive firm2, enterprises have adopted various ways to protect that knowledge. Intellectual property is broader in scope and comprises a wider range of intangible assets than knowledge; in addition to being fundamental for knowledge intensive enterprises. In specific, intellectual property (IP) comprises the knowledge, skills, and other intangible assets

which a business can convert into usable resources to generate a competitive advantage (Teece, 2000). IP can be embodied or embedded in individuals, organizational products, systems, routines and practices, and processes or services. Because intellectual property can take diverse forms, small enterprises adopt both formal and informal ways to protect it (Kitching, J. & Blackburn, R. 1998). By protecting intellectual property (including knowledge) either formally via IPRs and contracts, or informally via efficient knowledge management, enterprises can attempt to protect various tangible and intangible assets. Even though intellectual property itself is intangible, the object of protection can be either tangible (e.g., a product or machine) or intangible such as a service, a system, or knowledge (Kuusisto, Kulmala & Päällysaho 2005).

Ways to protect knowledge and intellectual property The intellectual property right (IPR) system offers a way to protect intellectual property from misuse; whether in the form of theft, imitation, or modification. In other words, intellectual property rights allow people to own their intangible creativity and innovation in the same way that they can own their physical property. Intellectual property rights (IPRs) consist of two categories: industrial property and copyrights. Industrial property includes inventions (patents), trademarks, industrial designs, and geographic indications of source. Copyrights include literary and artistic works and architectural designs. As a result, IPRs are mainly based on patents (and utility models) for technical inventions, trademarks for brand identity, design rights for product appearance, and copyrights for artistic works. Besides, IPRs can be extended to include trade secrets, plant varieties, geographical indications, and performers’ rights (World Intellectual Property Organization, Wipo). Contracts and contractual agreements are treated in this study as formal protection methods. They

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Table 1. Definitions of key concepts of the study Concept Knowledge

Knowledge originates in the head of an individual. Knowledge can be related to skills, know-how, processes, practises, products, customers and culture. Person is not always aware of the knowledge she/he posses or/and can’t externalize (explain) it. This is noteworthy to consider when an enterprise is aiming to transfer/share/capture the knowledge that is embodied in employees. (Bender & Fish 2000; Choo,1996; Kalpic & Bernus, 2006.)

Knowledge management

Contains a range of practises that organisations use to identify, provide, share, store, create and transfer, and enable adoption and exploitation of knowledge (Choo, 1996). To be efficient, this process requires externalization of knowledge (converting tacit knowledge into explicit form).

Explicit knowledge

That part of knowledge that is externalised and formal and is easy to transmit between individuals and groups Through externalisation process tacit knowledge is converted into explicit form. (Nonaka & Takeuchi, 1995.)

Tacit knowledge

Part of knowledge that is personal and contextual. Contains technical and cognitive dimensions (Smith, 2001). Part of the tacit knowledge can be converted into explicit form.

Individual knowledge

Type of knowledge that is bound on an individual and owned by an individual.

Collective knowledge

Knowledge that exists rather between the members of an organization than in the members of an organization. Collectice knowledge is owned by an organization. (Lamm, 2000; Parsons, 2008.)

Components of knowledge Embodied knowledge

Knowledge and skills that are embodied in individuals (Blackler et al. 1998). Embodied knowledge is derived from an employee’s experiences and the action-based processes of the organization (Tacitindividual.) (Lamm 2000; Parsons 2008).

Embedded knowledge

Collective form of tacit knowledge that is embedded in organisational working practises, routines and shared norms. This part of knowledge is relation-specific, contextual and dispersed (Lamm, 2000). Embedded knowledge is held within the knowledge management systems and documented processes of the organization (Parsons, 2008). Madhavan and Grover (1996) define embedded knowledge as a “potential knowledge resulting from the combination of the individual team members’ stores of tacit knowledge” (Tacit-collective).

Encoded knowledge

Knowledge that is explicit and formalised and shown as a form of signs and symbols (books, manuals, databases). According to Parsons’ (2008) typology, encoded knowledge is that part of embedded knowledge that is accessible for those who are familiar with the codification strategy of knowledge. (Explicit-collective.)

Embrained knowledge

Formal, abstract and theoretical knowledge of the individuals. Embrained knowledge is dependent on the skills of how individuals can conceptualize and articulate their knowledge. (Explicit-individual.) (Lamm, 2000.)

Encultured knowledge

The part of knowledge that is shared in an organization throughout organizations’ social structure. (Parsons, 2008.) This part of knowledge is tacit on its nature and highly contextual (Tacit-collective).

Intellectual property (IP)

IP comprises the knowledge, skills and other intangible assets which business can convert into usable resources to generate a competitive advantage (Teece, 2000). IP can be embedded in individuals, organisational products, systems, routines or services. Whether this asset is service, system or know-how, it is owned, produced and protected (formally or informally) by the company or/and in the company.

Intellectual property protection (formal)

Formal IP protection methods include legal forms of protection and it consists of intellectual property rights (IPRs) and contracts. IPRs are assets that are protected by legal mechanism (Andersen, B. & Striukova, L. 2001; world Intellectual property Organization, WIPO). In other words, they provide protection that is granted by (traditional) national Intellectual Property Rights legislation. They can be protected, exploited, modified and transferred through contracts.

Intellectual property protection (informal)

Methods of knowledge management that do not entail legal rights.

are similar to IPRs in the sense that they do entail legal rights. However, while IPRs are targeted to protect products of the intellect, contracts are

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used to formalize and legalise the relationships between the enterprise and its employees or clients. In addition, the type of intellectual outputs that


IPRs protect is strictly defined, while a contract can be written to cover almost anything (Wipo). In addition to formal IP protection, intellectual property can also be protected through informal protection methods that do not directly entail an attempt to create legal rights (Kitching, J. & Blackburn, R. 1998). As noted earlier, informal IP protection methods are extremely heterogeneous. They may take as their focus, for example, technical characteristics of products or relationships that are internal or external to the enterprise (Kitching, J. & Blackburn, R. 1998). As Blackburn (1999) concluded in his study of intellectual property and small and medium sized enterprises (SMEs), there are a substantial range of informal strategies available to, and used by owner-managers in their management of intellectual property. The principal informal methods of protecting IP and maintaining confidentiality are through working with customers, suppliers, and employees who can be trusted (Blackburn, R. 1998). Miles (2003) perceived that in IP protection informal methods are central for knowledge intensive business services KIBS. Professionalisation3, employment relations, and relations with other organisations were the most common methods used. Miles, Andersen, Boden, and Howell (1999) mentioned six informal methods in their study that can be used by an enterprise to protect the key knowledge they have: Agreements with partners, suppliers and users; working with trusted partners; internal working practices; lead-time advantage; embodying knowledge in products; and membership in professional associations. As the literature demonstrates, it has been noted in several research studies that informal methods of IP protection play a critical role for many small enterprises; particularly in certain business sectors. However, there exists a lack of research concerning informal intellectual property protection. This article examines how knowledge intensive small enterprises protect and manage their intellectual property via efficient knowledge management

and intellectual property protection. The enterprises that were examined in this particular study represent small knowledge intensive enterprises from three industry sectors: Mechanical engineering, software, and knowledge intensive business services (KIBS). These enterprises were ownermanaged and independent; and were located in the capitals of London, UK and Helsinki, Finland. Altogether 57 owner-managers were interviewed for the study. To obtain information rich data a snowball sampling technique was used. To avoid variation in responses and to facilitate the comparability of the information, the chosen design for interviews was a semi-structured open-ended format. The methodology chosen was a qualitative approach and the research design of the study incorporates a theory building focus.

MAin focuS of the ArticLe: inteLLectuAL propertY protection prActiceS And proceSSeS, And their reLAtion to the knoWLedge MAnAgeMent frAMeWork The research results offer a good overview of the intellectual property (IP) protection practices and processes, formal and informal, adopted by small enterprises. Enterprises adopted various practices and processes to protect their IP. The rationale for the different practices and processes related to IP protection varied remarkably, and the practices often had a multi-dimensional function. While for one company the rationale for the adopted practice was to protect IP via efficient knowledge management; for another company it was just a way to support business operations and IP protection was of minor importance. Therefore, the motives behind the use of certain practices varied remarkably between business sectors and even between enterprises.

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intellectual property protection practices and processes Adopted by Small enterprises A heavy dependence on employees was perceived as a problem across the board. Since the mobility of qualified employees is rather high, the need to capture and protect embodied IP was seen as important. Enterprise managers in both countries had adopted various methods to protect and capture embodied IP and to decrease employee dependence. Contrary to the common belief that small enterprises do not formally protect their IP and apply patents due to a lack of knowledge and time (Kitching & Blackburn, 1999), many of the interviewed managers were well aware of the different types of IP protection practices. They were even able to comprehensively evaluate4 their rationale for IP protection and for other business operations. Even the managers (especially in the software industry) whose enterprise did not have patentable technology, were familiar with the patent system. However, the research sample does not allow for the generalization of the research results in a statistical manner and sample firms were selected with strict criteria to ensure the richness of the data. However, there were differences between the business sectors in the level of awareness of formal protection methods. Knowledge intensive business service (KIBS) managers who relied mainly on informal practices in IP protection were not very familiar with patents because they did not have patentable technology. Over half of the sample firms which had patentable technology used patent protection and had valid patents. However, patenting was mainly seen as a defensive method against other patents. In other words, the companies were patenting to make sure that the company itself was not infringing on other enterprises’ patents. In addition to the case of possible patent infringement or when a company needed already patented technology, proprietary patents would have improved the enterprise’s negotiating

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position and also made cross licensing possible. In addition, the other motive behind patenting was the objective of an enterprise to secure financing from venture capital markets. Venture capitalists often demand that the enterprise they are investing in has patented technology. The entrepreneurs felt that patents were not giving sufficient protection to their inventions, and in small enterprises the rationale for IP protection was seen as limited. Many of the business managers saw patenting as a threat because, when applying for a patent, they were forced to reveal their invention. In addition, they considered patenting to be unnecessary in cases where their products/processes included complex solutions. They felt that complexity, combined with a quick innovation cycle, secrecy, and efficient knowledge sharing; offered them a far better level of protection than patents. Contracts were widely used in all sample enterprises. The majority of Finnish, and one third of UK enterprises, used only simple employment contracts and collaboration agreements whose purpose was not to protect IP but rather to establish the working routines. Consequently, both employee and collaborator contracts were signed ‘automatically’. The most used contracts, which aimed to protect intellectual property, were non-disclosure agreements, non-competition clauses5, agreements about IPRs, and agreements which prohibited reverse engineering and product-modifying. Informal IP protection practices in small enterprises can be characterized as having a broad variety. These practices are very heterogeneous in nature and, as already mentioned, they may have multi-dimensional functions. The primary aim of informal practices in the context of human resources was to capture or share the information and knowledge throughout the organization and, at the same time, decrease dependence on employees. Informal practices that aimed to protect an enterprise’s products, services, and systems in many cases focused on technical characteristics. In order to identify the protection methods used, the respondents were asked which intellectual prop-


Table 2. Protection practices adopted by small enterprises according to business sector Protection practice/ Business sector

Formal

Informal

Mechanical engineering

Patents Contracts

Secrecy Technical protection Lead-time Documentation

Software

Patents Contracts

Technical protection Efficient knowledge and information sharing via databases and teamwork

KIBS

Copyrights Contracts

Confidentiality Client relationship management Task rotation

erty protection methods their enterprise is making use of and whether they are able to describe other possible methods for protecting IP than formal ones. Respondents were also asked to evaluate how important role informal protection practices are in their enterprise’s IP protection. There was lot of variation between the responses. Some business managers employed informal IP methods systematically and these protection practices were built into the enterprise’s IP strategy, including working routines and processes. As a result, they were using informal protection consciously and with consideration. In addition, they were able to evaluate the strengths and weaknesses in both formal and informal methods, and were able to employ both protection practices efficiently. However, some managers were not familiar with informal protection methods and, even while they were employing them, they were not able to ‘identify’ them. After a lengthy discussion it was revealed that many managers, who had initially responded that they were not protecting their IP at all because they were not able to utilize patent protection, actually employed several different forms of internally built practices. These practices aimed to protect IP by, for example, decreasing employee dependence. Many of the managers, especially in the UK, had a narrow definition of IP protection as being purely patent protection. Consequently, if they were not able or did not want to use patents, they considered that they

were not protecting their IP at all. That is why a qualitative research design was the only suitable method to approach this research problem. Indepth interviews allowed respondents to speak freely and describe in their own words which IP protection problems their company had faced and how they had addressed those problems. However, the important role of informal IP protection was recognized by the majority of respondents. Table 2 summarizes and defines the main practices, formal and informal, used by the sample firms. According to the interview findings, confidential information, or key-knowledge, can simply be kept secret; either inside the enterprise (e.g. from particular employees) and/or from external collaborators such as competitors and clients. Most respondents expressed that they carefully evaluate which information they are giving out and, in many companies, secrecy played an important role in the firm’s IP protection strategy. In the sample enterprises, a major element of this strategy involved preventing employee access, either virtually or physically, to certain defined pieces of information. According to the interview findings, the strict application of secrecy inside a company may result in limiting motivation and innovation because of insufficient knowledge sharing (Kulmala & Kettunen, 2007). In addition, failure to share knowledge makes small enterprises more vulnerable to a sudden loss of IP, for example through a key employee leaving. Nevertheless,

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this strategy was widely used within the service enterprises (excluding software enterprises that were included in the KIBS sector) metal enterprises, and electronics enterprises; especially in the UK. However, business managers from different business sectors approached the issue in different ways. While mechanical engineering managers were the most vigilant about keeping information secret from outsiders, software managers had the most negative attitude towards secrecy. In fact, many software managers felt that an open and cooperative approach, both internally and externally, was the most productive and beneficial way to do business. An open attitude allowed information and knowledge diffusion between the parties, and was therefore seen as supporting innovation within the company6. By a formation of contracts between the firm and its employees and collaborators, the firm can, by judicial means, prevent the transfer of confidential information. For example, many of the sample enterprises insisted that personnel and external collaborators sign a non-disclosure (NDA) or confidentiality agreement. By seeking to create a short innovation cycle, enterprises can achieve ‘lead time’advantages over competitors. By moving quickly and by bringing new products to market swiftly, the enterprise can reduce the risk of copying and imitation. A short innovation cycle played a significant role in the sample enterprises’ business strategies, especially in rapid growth businesses such as software and mobile technology. In addition, a quick innovation cycle protected an enterprise’s IP by reducing the risk of copying, and it was also seen as a considerable competitive advantage. Small enterprises are able to be more flexible and responsive than large enterprises. 7 The business managers who were interviewed had adopted various ways to use technical protection to prevent the illegal use or copying of software codes or data. Copying software products is commonplace and the legal protection in relation to software is rather weak. This was why the software managers took copying seriously.

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Since software is incorporated into many physical products, technical protection also played an important role in the mechanical engineering sector. The most commonly used methods for software protection were encryption8 and obfuscation,9 using specified keys called ‘dongles’ that have to be available for the program to run, and adding ‘fake codes’ in software. Most managers preferred to use protection methods which were aimed to prevent unauthorized use and duplication of their software, or at least to make it difficult and time-consuming. Software products were also sold as a ‘black box’. This means that the company sells the product without releasing the software code along with it. Enterprises can protect their products by building in specialist know-how, which means that the products are so complex that they are very difficult and time-consuming to reverse engineer and copy. Complex product design, together with a quick innovation cycle, was seen as a very powerful protection strategy. Because of this, complexity may be linked to the niche market sector. When an enterprise’s product is hard to reverse engineer and copy, and when the enterprise is operating in a niche market sector; it is more beneficial for competitors to buy a product from the enterprise, rather than copy it and develop their own product. Embodied knowledge is formalized by embedding documentation into work processes. By using documentation, enterprises seek to transfer embodied tacit knowledge into an explicit form. Explicit knowledge is retained in written documents, tapes, and databases. These common methods used by enterprises to store explicit knowledge were seen as critical for an enterprise’s operations and strategy. Documentation had two dimensions: First, it contributed to the efficiency and effectiveness of the organization by knowledge codification and knowledge sharing. When intellectual property is in the form of codified knowledge, it is fairly easy to replicate and distribute throughout the organization and hence, it is easy to restore. Secondly, by using documentation an enterprise can reduce


the risk of losing IP through a key employee leaving10. The knowledge capture process should be as unobtrusive as possible, and also be easy and quick to administer. If possible, the documentation should be done at the time the experience happens. Efficient documentation can only be sustained if it is systematically incorporated into the work process. The big challenge for managers was how to identify and locate tacit knowledge and transfer it to explicit form. British metals and electronics companies had most formal documentation methodologies integrated into their processes and work practices. For example, in three UK metals and electronics companies documentation was made compulsory in the employment contract. As a result, employees had to produce formal written reports for their employer on a weekly or monthly basis. The documents were saved and secured both inside and outside the company. The reason for this was that the company needed a historical record of how things were done. In addition, documentation worked as ‘an idea bank’; even assisting in the patenting process. Formally updated and signed documents worked as physical proof about inventions and, more importantly, they recorded the time when an invention or an innovation was created. This was viewed as being important in the case of possible patent infringement or dispute. The role of documentation in internal IP protection was central among metals and electronics companies: Documentation was formally organized and it was part of the working processes. In order to diminish employee-dependence, a few service enterprises were rotating tasks between their employees and had established deputies for their key employees. Although only a few companies were using task rotation, it was seen as problematic in small enterprises which had not developed an overlap in knowledge structure. In small enterprises employees are often specialists in their own narrow field. However, some service managers were rotating tasks in order to diminish employee-dependence and to prevent both clients

and the enterprise from becoming too committed to one or two key employees. Business managers perceived that working with trusted partners and employees protected IP more efficiently than formalizing the relationship through collaboration agreements. They put a great deal of effort into developing high-trust relationships with collaborators, employees, suppliers, and customers. While confidential relationships were seen to protect IP, managers perceived that they also supported innovative and fruitful cooperation by allowing a certain degree of open discussion and information transfer between the parties. Also, efficient client relationship management was seen to be important; especially in the service sector. Service innovations are often born out of the client-supplier relationship,11and consequently both the client and the supplier share a lot of confidential information. In addition, innovations are often intangible, thus the ideas are easy to transfer to other enterprises once they are created. Client mobility can cause knowledge leaks to other enterprises. As a result, pragmatic client relationship management and client ‘commitment’ was seen as very important. The commitment of personnel is viewed as being especially important in businesses where the culture does not support formality and where the mobility of labor is high. For example, in the service sector, especially in marketing and advertising agencies, the role of contracts was seen as being mostly irrelevant, and infringements against the contracts were common. In these types of business the importance of positive methods of protection and different forms of incentives, are even more crucial than in other business sectors. It seems that, for these companies, the success of personnel management is critical for success. Consequently, these enterprises made a real effort to protect IP by retaining key members of staff. Efficient knowledge sharing and transfer was seen as one way to support innovativeness, and also to protect IP. The sample enterprises promoted information and knowledge sharing,

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mainly through regular meetings and by setting up informal ‘discussions’. The aim of efficient knowledge sharing, besides promoting efficiency, was to prevent the development of exclusive pools of knowledge in the enterprise.

•

Level of tangibility and internalization related to ip protection Activity

•

Enterprises that were included in this research study not only differ from business sector to business sector, but they vary inside their sectors as well. In order to find reasons to explain the behavior of the enterprises and their actions from the point of view of IP protection and knowledge management, the sample enterprises were analyzed carefully one by one. The research sample is large enough to provide some insight into the reasons that determine ‘why enterprises operate the way they do’. In order to find reasons that explain the behavior of the enterprises, the interviews were once again carefully read through. Enterprise specific factors which might have an influence on an enterprise’s IP protection and knowledge management behavior were underlined. As a result, the following factors were identified for further analysis: • • •

•

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Business sector. Is the business sector mature or immature? Are there standards for IP protection? Age of the enterprise. Does the age of an enterprise have an influence on IP protection activity in an enterprise? Level of networking. Does the enterprise co-operate mainly with its clients or does it also co-operate with other enterprises; for example, with universities? Is the nature of the co-operation horizontal, vertical, or both? Competition. Does the enterprise face competition? Is the enterprise operating in niche or mass markets?

•

International operations. Does the enterprise operate in international markets or is it operating mainly in national or local markets? R&D. Does an enterprise engage in internal research and development work? Manager. How does the manager’s education, experience, and competence influence IP protection in the enterprise? What kind of understanding does the manager have of IP protection? Does the manager consider IP protection important and if so, why?

To make sense of the massive amount of data, each interview was organized in table form by focusing on the issues presented above. On the basis of the organized data, a simple causal network was formed from each interview in order to understand the relationships between important variables. It must be pointed out that the relationships here are deterministic rather than being solely correlational. However, a simple causal network provides a visual rendering of the important variables in the study and of the relationships between them (Miles, B. & Hubermann, M.A.1984). This approach assisted in generating more qualitative insights into the reasons why some of the enterprises are behaving the way they are and, more importantly, why some outwardly similar enterprises are behaving differently. Based on the analysis, it seems that, in mature business sectors where there is a tradition of protecting IP, the IP protection seems to be fairly well organized12. It also appears that, in business sectors like metals and electronics, where enterprises are active in patenting, enterprises are ‘forced’ to patent in order to avoid infringements. Also, it seems that those enterprises (in the mature business sector) that are using patents are active in protecting them in other IP areas as well. In comparison to the metals and electronics sectors, the software sector is fairly immature: standards for IP protection are still evolving, and general practices for IP protection have not yet been


formed. Also, entrepreneurs have often a negative attitude towards IP protection in general. Even if entrepreneurs have a sufficient understanding of IP protection and the protection methods available, they are not necessarily utilizing them. In addition, if a software enterprise is using patent protection it is not necessarily using other IP protection methods in order to protect IP. Often, for this type of enterprise, patent protection was a ‘separate’ or ‘disconnected’ issue, and done purely for external reasons. However, the software sector is a rapid growth sector and new innovations go out of date quickly. Therefore, there is not the same pressing need for systematic IP protection as with business sectors where the lifecycle of innovations and the R&D cycles are longer. Efficient internal communications, the ability to respond quickly to market demands, and organizational flexibility are crucial; especially for enterprises in rapid growth business sectors. It is likely that these are the reasons why software managers often see IP protection as a negative, irrelevant issue; and are not willing to integrate IP protection practices and processes into their enterprise’s daily routines. In regards to product protection they prefer to rely on technical methods, rather than patenting, which is seen to be a time-consuming process. Based on these analyses, three different kinds of groups were identified. The groups are differentiated from each other on the grounds of the following interconnected issues: Level of internationalization, level of tangibility of final products, and nature of business sector. Group 1 consists mainly of service enterprises (14) that were operating mostly in local or national markets. The majority of the managers in this group had little understanding of IP protection. Most of the managers, especially in the KIBS sector, perceived IP protection as important; although they have not developed a protection strategy for the company. Many of the managers had also problems in describing different protection methods. In general, the understanding of IP

protection was typically low amongst managers in this group. However, there were a few exceptions. One software and one metals and electronics manager had a good understanding of IP protection, but they did not consider it to be important. They had made a conscious decision not to protect their IP. Both enterprises were operating nationally and venture capital was not involved in the enterprise. KIBS managers in this group evaluated IP protection as being important, but they perceived that there were not sufficient protection methods available. Enterprises did not use external assistance with IP issues. Contracts with personnel were simple and often out of date. NDAs and non-competition clauses were signed at the request of the clients’, if at all. Typically, in the enterprises in the group there was not a tradition of IP protection. The common belief amongst KIBS managers was that they were not able to protect their IP because of the intangible nature of their intellectual property. Many of the managers had faced problems in IP protection when working with personnel and with the clients of the enterprise. Even so, the enterprises had not organized their operations in a way that they would have been able to diminish the employee dependence that was perceived as a big problem. IP protection in these enterprises was reactive or passive in nature. Enterprises in group 1 were relying on policies aimed at retaining key employees in the enterprise’s customer relationship management, in addition to confidentiality. Although these enterprises did not have an IP protection strategy, protection was organized occasionally on an ad hoc basis, if at all. This indicates that many companies in the service sector recognize the importance of IP protection, but have not spent much time in thinking how to implement it. Metals and electronics companies that were included in this group were operating either nationally or through an export agency. Three of the firms were subcontractors and they conducted their own research and development (R&D) work

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on a small scale. These enterprises only had a few main clients. One enterprise was a family business with three employees (all family members) and the business was built around one innovation that was created by the manager. That innovation was patented. The fifth enterprise was also operating nationally and it had only six employees. The manager of the fifth enterprise had a good understanding of IP protection, but he did not consider it important because the enterprise was small and it did not have any international operations. This enterprise was also operating in a niche market sector and was not facing competition in national markets. Group 2 consisted of fourteen software and five metals and electronics enterprises. Typically the managers in this group were technologically oriented. Most of the managers had a good understanding of IP protection and they regarded preventing copying and imitation as being important. These enterprises had an explicit IP strategy, but they focused on the technological protection of a product or process. The majority of the managers in this group were opposed to patents. In regards to IP protection the managers in this group relied mainly on technical protection and lead time. They were not willing to integrate formalities into their enterprise’s daily operations. These managers believed in open relations, confidentiality, and the exchange of knowledge. In the rapid growth software sector they did not see any reason for protection. They wanted to develop techniques and technology, and move the whole business sector forward. However, ten software enterprises in this group had patented technology, but the patenting was done for external reasons: because of the investors and to avoid infringements. The majority of the managers believed that patents are useless because they regarded them as being timeconsuming and expensive. The enterprises in this group were relatively active in networking: they had joint research and development projects with

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other similar enterprises. The nature of this cooperation was mainly horizontal. Even though the relationships between collaborative parties were not usually formally governed, these enterprises had not experienced problems in these relationships. Taken together, it seems that the enterprises in this group managed sufficiently well without systematic IP protection. Group 3 consisted of ten metals and electronics enterprises, four KIBS enterprises, and one software enterprise. Three of the KIBS were technology based content producers and one was a marketing and advertising agency. Each enterprise had an explicit IP strategy which was integrated into the enterprise’s work processes; and their employees were informed about these processes systematically. In addition, each enterprise used external professional help with IP issues. The managers had a comprehensive understanding of both formal and informal IP protection, and they were able to identify the strengths and weaknesses of different protection methods. They were able to use combinations of protection methods in different settings. Managers took employee mobility as a fact of business life, and precautions were taken to minimize employee dependence. The majority of the enterprises were operating internationally. Two KIBS were operating only in national markets, but they had a big international company as their client. The KIBS managers in this group were exceptional in the following ways: They had a comprehensive understanding of IP protection, and the managers had worked before in big international enterprises in a managerial position. One of the managers had a degree in law. Figure 1 illustrates how the tangibility of intellectual property, the level of internationalization, and IP protection activity are interconnected.


Figure 1. Interconnection of tangibility of intellectual property, level of internationalization and IP protection activity

future trendS: WAYS to protect inteLLectuAL propertY And their reLAtionShip to the knoWLedge MAnAgeMent frAMeWork Informal IP protection is closely linked to knowledge management practices and is applicable to the knowledge management (KM) framework represented by Nonaka and Takeuchi (1995) (Kettunen & Kulmala, 2007). Knowledge processes and categories, including the relationship of core knowledge processes to knowledge categories, are defined in a knowledge process model. The main knowledge processes are internalization, externalization, combination, and socialization. In their study Holsapple and Joshi (2004) present four major categories of knowledge manipulation activities. The aim of these knowledge manipulation activities is to promote the development and use of knowledge resources (KR) in a way that produces value for an organization. How well an organization can utilize the knowledge

resource depends on the quality and availability of knowledge resources (Holsapple & Joshi, 2004). Knowledge can be classified into two main categories: tacit and explicit (see Table 1). The embodied§, encultured, and embedded components of knowledge are tacit in nature. Embedded and encultured knowledge is collective, which means that they exist between the members of an organization. This type of knowledge is organizational knowledge and, thus, owned by the organization. Collective knowledge is stored in organizational rules, routines, and processes. This knowledge is distributed and shared among the members of the organization (Lamm, 2000). The embodied component of tacit knowledge is individual. Individual knowledge resides in the heads of individuals and, thus, is owned by the individuals. Parts of this individual knowledge can be transferred to organizational (collective) knowledge through, for example, discussions, pair work, and task rotation. Individual knowledge moves with the employees. The tranferability of individual knowledge depends on the amount of ‘embrained’ knowledge that an individual possesses; and on the person’s ability to conceptualize the knowledge that he/she possesses (Lamm, 2000). Encoded and embrained components of knowledge are explicit on their nature. Whereas the encoded knowledge that comprises written rules, documents etc. is collective, the embrained component of knowledge is individual. How well an organization can transform individual tacit knowledge depends on the amount of embrained knowledge in the organization and on the organization’s ability to create mechanisms and processes to support knowledge transfer, sharing, and storing. Tacit and explicit types of knowledge are complementary; explicit knowledge does not appear spontaneously, but it needs to be derived from tacit knowledge (Choo, 1996.). One of the main objectives of knowledge management is to explicate tacit knowledge (knowledge that is meaningful to an enterprise or an organization) in a way that it can be efficiently and meaningfully

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shared, internalized, and used by an enterprise; in order to create and generate new knowledge. The better the enterprise can transform tacit knowledge in an externalized form, the better that knowledge can be internalized and used. Table 3 presents how, according to the research results of this study, tacit knowledge can be transferred into explicit form or, how an enterprise can share, and thus utilize, the type of tacit knowledge that can’t be formalized in formal processes or documents. Tacit knowledge that can be formalized (the person is aware of that knowledge (Kalpic & Bernus, 2006)) can be transferred through documentation, process modeling, formal discussions (e.g. meetings), and by embedding knowledge in products; for example, via formal IP protection methods or technical protection in products. The explicit knowledge that is derived from tacit knowledge can be stored in databases and can be easily shared among the members of the enterprise. Tacit knowledge that cannot be formalized, can be shared via face-to-face contact and by creating organizational working routines. By creating working routines that promote knowledge transfer and sharing (e.g., task rotation or team work), an enterprise can create expectations for sharing knowledge. According to Smith (2001) employees are likely to share only explicit knowledge, unless management clearly state their expectations regarding the sharing of tacit knowledge. Also, by creating an open and friendly organizational culture and “high-trust-relations” among employees, an enterprise can support the sharing and transfer of tacit knowledge (Smith, 2001).

concLuSion Knowledge-based assets play a fundamental role in the competitiveness of small knowledge intensive enterprises. To remain competitive and successful, small business managers are forced to find new approaches to maintain and develop their key organizational knowledge and intel-

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Table 3. Formalisability of tacit knowledge Tacit (formalisable)

Tacit (not formalisable)

Formal discussions e.g. meetings Process modeling Documentation Embedding knowledge in products (patenting, technical protection over products, copyrights, contracts,) Task rotation “learning by doing” Team work Informal discussions Confidentiality

lectual property. This article has discussed the practices and processes that small knowledge intensive enterprises have adopted in order to protect their intellectual property and knowledge. The aim of this article was to identify the processes and practices that small enterprises have applied to protect their IP in different situations and in the context of different types of knowledge. The goal was also to provide an understanding of why and how organizational IP and knowledge can be protected. The article has developed a better understanding of the practices and processes that can be used in intellectual property protection and knowledge management; and identified the strengths, weaknesses, and possibilities to improve existing practices. This article has also provided new information on the dynamics that characterize the different ways to protect IP and manage knowledge. The characteristics of intellectual property and its value for small knowledge intensive enterprises emphasize the significance of retaining employee embodied knowledge and expertise in the organization. Successful IP protection requires systematic intellectual property and knowledge management. Intellectual property protection via efficient knowledge management is a operational process rather than a separate task. It needs to be embedded in organizational work routines, practices, and processes as part of an overall operational strategy. When embedded in organizational work processes, IP protection and knowledge management are a continuous


part of work routines and tasks in the enterprise; not a separate action. Embedding IP protection and knowledge management in organizational work processes is not only important for knowledge and IP protection; but it also supports the transformation of tacit knowledge into explicit form, and hence, facilitates knowledge sharing, creation, and innovation in the enterprise (see also Kalpic & Bernus, 2006, s. 6). It seems that the most powerful IPprotection systems have a multi-dimensional function: These practices and processes protect employee embodied IP, which is a key-asset of most small knowledge intensive enterprises, and encourage knowledge acquisition and sharing.

Bloodgood, J. M., & Salisbury, W. D. (2001). Understanding the influence of organizational change strategies on information technology and knowledge management strategies. Decision Support Systems, 31(1), 55–69. doi:10.1016/S01679236(00)00119-6

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endnoteS 1

2

Practise is rather informal learning while process is strictly defined repeatable activity that can be measured. Starbuck (1992) and Swart & Kinney (2003) defines knowledge intensive firm (KIFs) as a firm that place most importance on human capital as opposed to physical or financial capital These firms gain their competitive advantage by converting the skills and knowledge of their people into intellectual capital such as software solutions, business advise, patents etc. Thus their main input is knowledge and expertise. Autio, Sapienza and Almeida (2000) follow this definition by defining knowledge intensity of a firm as “the extent to which a firm depends on the knowledge inherent in its activities and

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outputs as a source of competitive advantage” (p913). Professionalisation takes various forms; in general it means that firm or institution establish professional qualifications and accreditation systems to ensure that only certain people that meets the standards are able to get the certain information/ log in to service. Many of the managers included in their evaluation for example following matters: Level of protection that certain protection practice offers, resources used (in the matter of time and money) to get protection, and distinct protection or level of protection that protection practise offers over enterprise’s IP. A non-competition clause is an agreement for which an employee promises not to start a competing business or work for a competitor for a given period of time after departing from his or her employer. At the most basic level, non-competition clauses are drafted in order to prevent a covenantee from competing with a covenantor following termination of a contract (usually an employment contract, although they are also widely used in the merger or acquisition of a business). See also Miles et al. (1999). See also Cowan, R. & Harison, E. (2001) and Miles, I. (2003). An encryption means converting data from an understandable form to a non-understandable one in such a way that it can be converted back with no loss of information. An obfuscation means converting a program into an equivalent one that is more difficult to reverse engineer. See also Zack, 1999. See also Miles, 2003. Comparison is made between the business sectors that are included into this research.

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