Opening the door to open innovation

Companies were once reliant on developing strong in-house research and development capabilities in order to generate innovation and fill their product pipelines. Increasingly, larger companies and big Pharma are looking to build their pipelines by looking outside their organisation for other opportunities to pursue. This is consistent with the growing movement of "open innovation" to find solutions to problems. In this article, we look at what is open innovation and some of the ways it is being adopted in the life sciences sector.

What is "Open Innovation?"

Open innovation is a business paradigm that the in-flow and out-flow of research is not confined by organisational boundaries. Professor Henry Chesbrough of the Haas School of Business at the University of California, Berkeley, was one of the first academics to describe the movement:

"Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. [This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology."1

The benefit of adopting such a model is that it increases the pool of possible research opportunities, and draws on a wider range of skills and experiences than possible when limiting R&D to within organisational boundaries. It also allows smaller organisations to find ways of exploiting and commercialising their research output in another setting.

pointing to global networkIn many respects, this has been an approach in the life sciences sector for some time. Establishing joint ventures and collaborations between industry and academia have existed for some time and have yielded successful products. However, technology has changed how potential collaborators can be identified meaning the net can be cast far wider than ever before. The mobility of our modern day work force also means that inventors may be less likely to remain working in one organisation for their research career or may be more interested in collaborating with an organisation outside the traditional framework of a standard employment contract. The role of venture capital in funding smaller organisations has meant there is also growth in R&D output outside of the traditional larger players in the sector.

Novartis recently announced its "Crowdshaping COPD" event, aimed at bringing together designers, strategists, psychologists, digital technologists, engineers and business leaders to come up with solutions for engaging patients with chronic obstructive pulmonary disease (COPD). While the event itself is not aimed at designing new products, the principle of open innovation is acknowledged:

"in a world where we can fall into the trap of thinking we have all the answers, crowdshaping is more important than ever. And we know that it will take more than one person, or one company, to come up with solutions to such challenging problems."2

Brokering a solution

In a commercial setting, the principles of open innovation can be seen in the establishment of various online brokerage services, such as InnoCentive, NineSigma and Your Encore. The platform allows companies to post a problem, and connect with users with the capability to provide a solution. The remuneration for a submission or "successful" solution are set out by the problem poster. Furthermore, the poster sets out terms on which the solution is provided and the ownership or licensing arrangements that are agreed when submitting a possible solution.

There are some drawbacks on using these platforms. For example, in the competitive life sciences sector, sensitive R&D is closely guarded. Posting problems on an open and transparent platform may inadvertently disclose an approach or strategy in a product area that would otherwise have been kept confidential. In such businesses, the problem posted would need to be fairly discrete in nature. An alternative is that the brokerage platform is used as a gateway to identify promising collaborators from which further work can be considered (and the context of such work can be protected by a confidentiality agreement).  Some third party platforms offer services to provide specialist support to companies on a consultancy basis, enabling access to particular skill sets a company may not have had visibility of or the ability to access through traditional consultancy avenues.

woman whisperingIt may also be difficult to assess the credibility of the solution poster. Even if warranties are obtained from the poster, there could still be a risk that the poster is using third party proprietary information (e.g. from a current or former employer) or trade secrets in the response to the problem. On the other side of the coin, employers need to be aware of the risk that their own employees or former employees could contribute solutions to such platforms in the future and therefore should ensure that robust protection is incorporated into their own employment contracts.

Innovative Medicines Initiative

The Innovative Medicines Initiative (IMI) is a partnership between the European Commission and the European pharmaceutical industry (represented by EFPIA, the European Federation of Pharmaceutical Industries and Associations) and is a form of brokerage service bespoke to the pharma sector. The IMI was established in 2008, with the aim of improving the efficiency and effectiveness of the drug development process with a focus on areas of unmet need. Unlike collaborations where one partner funds the other(s), the IMI provides financial support to enable the participation of academia, SMEs and non-governmental organisations in projects. Participating EFPIA members receive no financial support, but contribute "in kind" to projects through researcher time and the use of facilities. Between 2007 and 2013, the IMI saw the investment of nearly €2 billion in a variety of areas such as antimicrobial resistance, neurological diseases and diabetes. The budget for 2014 to 2024 is now €3.3 billion, half of which is from Horizon 2020, the EU's framework programme for research and innovation.

As a first step, the IMI engages with stakeholders to determine upcoming priorities for investment. The IMI then advertises the particular problems and calls for submissions. From these submissions, a team is assembled to take the project forward. The IMI has guidelines in place regarding the ownership and licensing of IP developed by project participants. The general approach is that project participants retain ownership of their background IP and the IP generated by them in the project, subject to the grant of cross-licences to the other participants to use such IP rights in connection with the project or for research purposes. Alternatively, ownership and licensing can be determined on a project-by-project basis. This allows a degree of flexibility and as the IMI funds the participation of academia or NGOs (rather than the larger commercial participants), in principle this places such organisations in a stronger position to exploit their IP than if the commercial partner was funding their research in the area. The model grant agreement also sets out that beneficiaries of IMI funding are obliged to disseminate their results and ensure open access to peer-reviewed publications that publish the results.

people putting together puzzle piecesIn a recent example, the IMI has responded to the Ebola crisis by establishing eight projects directed at the development of a vaccine, vaccine manufacture and improved rapid diagnostic tests. The projects have a combined budget of €215 million and have brought together over 40 partners from the pharmaceutical & diagnostics industries, academia, small biotech companies and non-governmental organisations from Europe, Africa and the United States. The call for proposals was made in November 2014 and the selected projects launched two months later, demonstrating that the IMI is able to fast track proposals where needed and attract a range of participants from different geographies and areas of expertise.

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open door

Amanda Rowell

Amanda is a senior associate in the Intellectual Property department based in our London office.