SpaceX Patents: Elon Musk Is Unconcerned With Patents. Should You?
Friday, November 26, 2021 | Chimniii Desk
Key Highlights
- These successful businesses are adept at ownership engineering, which we define as the process of creating value via the management of how products and services are owned.
- We discuss three of the most successful — and little-known — methodologies for ownership engineering in this article.
- Tolerating theft can even profit luxury goods manufacturers.
- Many believe that clear ownership regulations are necessary for market entry.
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Starlink phased array patent – US – figures (7)
In business, ownership appears straightforward: When you produce something, obtain a patent or copyright. Assess a fee for its use. Avoid any confusion over who owns what.
However, much of this wisdom is incorrect.
The world's most astute corporations are already aware of this. HBO tolerates product theft. SpaceX foregoes patent protection. Airbnb began operations before cities ruled on the legality of short-term rentals.
These successful businesses are adept at ownership engineering, which we define as the process of creating value via the management of how products and services are owned. Businesses spend tens of thousands of dollars on traditional engineering, fine-tuning each button and knob. However, they disregard ownership engineering, thinking it is immutable. This omission is an expensive oversight.
We discuss three of the most successful — and little-known — methodologies for ownership engineering in this article. These strategies are not taught in business schools, and they are not taught by corporate lawyers. However, individuals who understand how true ownership works are already benefiting from these techniques.
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1. Tolerance for Theft
When we poll audiences, the majority openly admit to illegally streaming HBO's hit shows using other people's credentials. What's astonishing is that HBO accepted this thievery for years.
The corporation could readily identify who is copying their content but opted not to due to a potential for consumer acquisition. As HBO's previous chairman and CEO Richard Plepler bluntly stated in 2014, unlawful password sharing "exposes the brand to an increasing number of individuals and provides them with the potential to get addicted."
Microsoft used the same method to establish a foothold in China, despite the fact that its software would be pirated. Bill Gates stated in 1998, "As long as they're going to take it, we want them to steal ours."
He added, echoing Plepler. "They become somewhat addicted, and then we'll find out a way to collect in the next decade." Indeed, China currently accounts for up to 10% of Microsoft's $125 billion yearly revenue.
Disney, on the other hand, strategically tolerates stealing. For decades, the corporation was well-known for its zealous defence of its copyright and trademark rights.
However, Disney has frequently averted its gaze, tolerating super-fan pirates who manufacture creative items. For instance, when online retailer "Bibbidi Bobbidi Brooke" launched a massively successful line of rose-gold sequined Mickey ears in 2016, Disney did not take legal action to shut her down. Rather than that, it just replicated her design.
Following the release of Disney's official version, the new Mickey ears quickly sold out. Brooke was cordial in her response, writing that she is "always thrilled to see new merchandise items."
Brooke continues to operate, and Disney benefits from low-cost product creation.
Tolerating theft can even profit luxury goods manufacturers. Tourists purchasing counterfeit Rolex watches in Times Square have little effect on actual sales.
Fakes might be the most effective kind of free promotion, instructing people on what they should strive for. According to one survey, 40% of consumers who purchased counterfeit luxury products ultimately purchased the genuine version.
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2. Giving Up Ownership
Business leaders and their attorneys have an ingrained belief — an unreasonable trust, in fact — that legal ownership is significant. Surprisingly frequently, it does not, and several organisations now choose to forego ownership entirely, even where the law provides protection.
The critical factor is to understand when and how to use appropriate replacements for formal ownership. For instance, some cutting-edge entrepreneurs place a premium on confidentiality over patents.
Elon Musk, SpaceX's creator, states, "We have virtually no patents." China is our key long-term competitor. It would be absurd if we disclosed patents, as the Chinese would just use them as a recipe book."
Another method is to build on top of an already-existing platform, which economists refer to as "network externalities." IBM, the world's largest patent holder, currently receives more cash from Linux than it does from licencing its patent portfolio. Linux is a "open source" software language created and maintained by volunteers.
Anyone can use the software for free, even IBM, which offers hardware and services based on the Linux platform. IBM deemed Linux to be so useful that it contributed $1 billion in engineering services to aid in the development of the free platform.
Another advantageous tactic is "first-mover advantage." Coaches, for example, feel it worthwhile to develop new plays each season, even in the absence of ownership. Chris Ault of UNLV led his Nevada team to the top of the conference with his revolutionary "pistol offence" - a shotgun formation with a running back set up behind the quarterback.
Nobody saw it coming, and many others, including NFL teams, later emulated it. In the sports industry, innovators can earn a bigger compensation by being hired by another team. Or they are compensated more to remain put. Being first is frequently sufficient compensation, even in the absence of extra ownership incentives.
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3. Embracing Ambiguity
When the ownership situation for their product or service is uncertain, business executives may be hesitant to invest. Many believe that clear ownership regulations are necessary for market entry. However, legal clarity is not always critical.
Millions of people own cars and apartments; but, are they permitted to charge for short-term rides or stays? Until recently, the law remained ambiguous on the scope of property owners' rights. This ambiguity has not deterred Uber and Airbnb from expanding into other markets.
Nor does it dissuade the hundreds of firms founded on the tech industry's credo, "It is preferable to seek for forgiveness than permission."
This phrase is categorically not an invitation to violate the law. Quite the contrary. It is a recognition that ownership rules are never completely clear — and that ownership ambiguity can present legal and profitable economic opportunities.
This is not a novel concept. Ownership uncertainty persisted throughout the nineteenth century as homesteaders settled the American West. This is how Oklahoma Sooners claimed land in Oklahoma and California 49ers staked gold mining claims. The statute was not enacted until later, and when it was, states frequently acknowledged early-bird claims.
Today, information is at the forefront of arguments over jump-the-gun ownership. Facebook asserts ownership of our clicks; 23andMe asserts ownership of our genetics.
These records are valued in the billions of dollars. However, who owns them? The law is not quite clear at the moment. However, by getting ahead of the game and asserting their claim early, astute corporations are able to shape who owns what.
Ownership may appear to be natural and undisputed. However, nothing could be further from the truth. Who gets what is perpetually up for grabs. And this means that firms may always gain a competitive edge by developing unique approaches to ownership — just as they do with every other aspect of their goods and services.
Tolerating theft, waiving ownership, and leaning into uncertainty are three of the most effective methods that the world's most successful corporations are already employing to influence who gets what.
In our work with corporate leaders, we've discovered that the most difficult step is simply asking the initial question: "Can I truly profit from engineering ownership?" Yes, categorically. Once you've seen how true ownership operates, you cannot un-see it.
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