Elon Musk doesn’t care about patents. Should you?
Ownership seems simple in business: get a patent or a copyright when you create something. Charge for its use. Avoid any ambiguity as to who owns what.
But much of this wisdom is wrong.
The smartest companies in the world already know this. HBO tolerates the theft of its flagship product. SpaceX waives patents. Airbnb opened before cities decided whether short-term rentals were legal.
These successful businesses are qualified for property engineering – a term that we define as meaning the creation of value by managing the way in which products and services are held. Companies spend a fortune on traditional engineering, tweaking every button and button. But they ignore the engineering of the property, assuming it is fixed and immutable. This oversight is a costly mistake.
Here, we present three of the most successful – and least known – property engineering strategies.. These approaches are not taught in business schools and you will not learn them from corporate lawyers. But those who know how property actually works are already benefiting from these strategies.
1. Tolerate theft
When we poll the public, most readily admit to illegally using other people’s passwords to stream hit HBO shows. What is surprising is that for years HBO tolerated this theft. The company could easily identify who is stealing their content, but chose not to, seeing an opportunity to acquire consumers. As the former president and CEO of HBO, Richard Plepler frankly Explain in 2014, illegal password sharing “introduces the brand to more and more people and hopefully gives them the opportunity to become addicted to it.”
Knowing that its software would be pirated, Microsoft followed the same strategy to strengthen its presence in China. “As long as they are going to steal it, we want them to steal ours” mentionned Bill Gates, in 1998. Echoing Plepler, he added. “They kind of get hooked, and then we’ll figure out how to collect over the next decade.” And indeed, China now accounts up to 10% of Microsoft’s annual revenue of $ 125 billion.
Even Disney strategically tolerates theft. For decades, the company was known for aggressively defending its copyrights and brands. But now Disney often looks the other way, tolerating super fan pirates who create innovative products. For example, when online seller “Bibbidi Bobbidi Brooke” came out with a very popular line of rose gold sequined Mickey Mouse ears in 2016, Disney did not shut it down, as was their legal right. Instead, he simply copied his design. After the official Disney version hit stores, the new Mickey Mouse Ears sold out immediately. Brooke was kind, assignment “Always happy to see new merch offerings.”
Everyone wins: Brooke stays in business and Disney benefits from low-cost product development.
Tolerating theft may even benefit luxury goods manufacturers. Tourists buying fake Rolex watches in Times Square do not decrease legitimate sales. Counterfeits can be the best free advertisement, teaching consumers what to aspire to. A to study found that 40% of people who bought counterfeit luxury goods subsequently bought the genuine version.
2. Waiver of ownership
Business leaders and their lawyers have a bias – an unwarranted belief, in fact – that legal ownership matters. Surprisingly often this is not the case, and some companies voluntarily give up ownership, even when the law provides protection.
The key is knowing when and how to deploy effective substitutes for legal property. For example, some leading entrepreneurs attach importance to patent secrecy. Elon Musk, founder of SpaceX said, “We have virtually no patents. Our main long-term competitor is China. If we publish patents it would be ridiculous because the Chinese would just use them as a cookbook.
Another strategy is to rely on another platform that everyone is already using, what economists call “network externalities. IBM, considered the world’s largest patent holder, now earns less revenue from licensing its patent portfolio than revenue from Linux, an open source software language created and maintained by volunteers . The software is free to everyone, including IBM, which sells hardware and services running on a Linux platform. Linux has become so valuable to IBM that it contributed $ 1 billion in engineering services to support the development of the free platform.
“First-come advantageMaybe another interesting strategy. For example, coaches find it helpful to develop new pieces every season, even without any properties. UNLV football coach Chris Ault took his Nevada team to the top of their conference with his novel ‘pistol attack’ – a shotgun, but with a running back lined up behind the QB. No one saw it coming, and much later copy there, including the NFL teams. In the world of sports, in addition to winning matches, innovators can be hired by another team at a higher salary. Or they get paid more to stay put. Being the first is often a sufficient reward, even without any additional incentive to own ownership.
3. Address ambiguity
Business leaders may be reluctant to invest when the ownership environment for their product or service is unstable. Many believe that clear ownership rules are a prerequisite for entering the markets. But legal clarity is not always so important.
Millions of people own their cars and apartments, but can they charge people for short trips or stays? Until recently, the law was not clear on the scope of landlord rights. This ambiguity has not prevented Uber and Airbnb from entering new markets.
It also doesn’t stop the hundreds of startups built on the tech world. motto, “Better to ask for forgiveness than permission.”
This motto is absolutely not a call to break the law. Just the opposite. It is a recognition that property rules are always less comprehensive than people assume – and that ownership ambiguity can provide legitimate and valuable business opportunities.
This is nothing new. Equally prevalent was ownership ambiguity in the 19th century, when settlers settled in the American West. It shows Sooners claimed land in Oklahoma and 49ers staked gold mining claims in California. It was only later that the law arrived, and when it did, states often recognized early claims.
Today, information sits at the frontier of jump-the-gun property battles. Facebook claims our clicks; 23andMe claims our genome. This data is worth billions of dollars. But who really owns them? The law is not yet clear. By jumping ahead and claiming their rights first, savvy businesses determine who owns what.
Ownership can appear natural and unchallenged. But that couldn’t be further from the truth. Choose who gets what is always up for grabs. And that means that businesses can always gain a competitive advantage by finding new ways to design property, just as they design all of the other features of their products and services.
Tolerating theft, relinquishing ownership, and leaning into ambiguity are three of the main strategies that the world’s most successful businesses are already using to determine who gets what.
In our work with business leaders, we find that the most difficult step is to ask the first question: “Can I really profit from engineering ownership?” The answer is a definite yes. Once you see how the property really works, you can’t see it.