To illustrate the tight link between competition and cooperation, consider Michael Jordan of basketball fame, thought by many to the one of the greatest athletes of all time. His capacity for independent action on the court depended on the mutual cooperation of at least four other competent basketball players on his team. It also depended on having five other competent basketball players as competitors on the court. Opponents on the basketball court cooperated in the sense that they played and abided by the same set of rules, and through their efforts, Jordan could then showcase his superior prowess.

Jordan could not have been as successful if not for the interaction of both his teammates and his competition, and the patent strategist is just as unlikely to succeed without both. In business, the assessment of whether to cooperate or compete is rather straightforward; managing both to your advantage is more of a challenge. In short,

1. Cooperate when the benefits of cooperation exceed the constraints imposed by cooperation, and seek to do so on your terms.
2. Compete when the benefits of independence exceed the constraints imposed by independence, and seek to use the competitor to improve your performance.
3. Do not look at cooperation and competition as a black-and-white issue; you will often cooperate and compete with the same entity at the same time.

Marshall Phelps, who heads Microsoft’s IP effort, states that, “Companies are partners, customers, and competitors at the same time.” This statement encapsulates the shades of gray we discussed earlier, because while some companies may lean more toward cooperation or competition than others, any attempt to make a black-and-white distinction between the two can lead to problems. For example, viewing a relationship as purely cooperative could cause you to relax your protocols for sharing ideas that you have not yet properly protected through a nondisclosure agreement. This could lead to a loss of a trade secret or lost patentability for disclosed inventions. Viewing relationships as purely competitive could cause you to shun a potential customer for your own products. So these three axioms bring forward questions about constraints that make any given relationship cooperative or competitive, and they are situation-specific more than they are organization-specific.

What are the constraints associated with cooperation? What are the constraints associated with independence?

Restrictions on independence that foster competition usually involve the scarcity of needed resources. It takes money to invent and protect inventions in the patent legal system. Money alone is a key driver of many relationships, and the glue that keeps them together even when parties may prefer to go their own way. So abundant or alternative resources that offer less restrictions to independence can foster completion since entities do not need the other entities to access those resources. If you have superior research and development resources, then you may also decide you can do best by competing in order to get a greater share of the wealth that develops. While setting up a joint venture, along with the possible sharing of intellectual property that goes into and comes out of the joint venture, often proves to the best option, retaining your freedom of action can be worth more than the resources a partner could deliver. It all depends. Business is ultimately about gaining and retaining good customers. Competitive decisions, even in patent strategy, ultimately need to take measure of the customers for which either or all would like to do business.

How have you cooperated regarding patents with other organizations, including competitors, to improve your capacity for independent action? When and why have your chosen to compete rather than cooperate? What precipitated a change from competition to cooperation or from cooperation to competition?

This blog post is excerpted from my new book, Outpacing the Competition: Patent-Based Business Strategy. Marshall Phelps, Corporate Vice President for IP Policy & Strategy, Microsoft, who peer-reviewed the first draft of the final manuscript, was kind enough to comment, for the dust jacket of the book, "Outpacing the Competition provides a useful IP management framework for rapidly evolving and inherently unpredictablee R&D environments where companies are partners, customers, and competitors at the same time."

A recommendation to overly focus efforts in business could be akin to recommending that a person quit his or her job, fly to Hollywood, and start a career in acting. Successful movie stars certainly make much more than the average person, but considering the high failure rate among movie star hopefuls, is this truly a wise recommendation? Raynor's idea carries over into patents, considering that while focused companies may score big-time with a hit product in their chosen field, they will also have diminished flexibility to address changing environments. The focused companies have less diversity in their patent portfolio to draw from should the environment change. In a world of opposites, between being completely focused or totally diverse, a healthy in-between position needs to exist in most organizations.

This blog post is excerpted from my new book, Outpacing the Competition: Patent-Based Business Strategy.

The fear of catastrophic loss is another strategic element that needs to be managed and employed well, because as much as it can work for you, it can also work against you if your competitor does not have a suitable orientation. A capable adversary that does not fear catastrophic loss--either from ignorance, overconfidence, or a mental framework that allows him or her to accept catastrophic consequences that may happen--becomes a danger that must be addressed in as efficient a manner as possible. This is especially so when the collateral costs of your adversary's catastrophic result, or the means from which it is created, put your own position in jeopardy. Many lawsuits, for example, create two losers. This adversary needs to be combated, avoided, or in some other way educated to appreciate and respect the gravity of the situation.

This blog post is excerpted from my new book, Outpacing the Competition: Patent-Based Business Strategy.

Gordon Gekko, the master strategist investor who mentors the movie's protagonist, Bud Fox, said, "I don't throw darts at a board. I bet on sure things. Read Sun Tzu, The Art of War. Every battle is won before it is ever fought." Interpretations of this quote are wide and varied. Hollywood's Gordon Gekko interpreted it as having inside information, legal issues aside, so as to know which way a security will go before he invested.

Our real life patent strategists could emulate this ideal through thorough legal research. For example, I've heard on many occasions, and have seen more than enough evidence to believe in its truth, that 90% of patents can be invalidated, in whole or in part, if someone is willing to invest in finding the prior art.

Armed with convincing invalidating prior art, a patent strategist could effectively win a patent litigation case before it is actually tried in court if his or her opponent has anchored that case on the now invalidated art.

This blog post is excerpted from my new book, Outpacing the Competition: Patent-Based Business Strategy. And Understanding Sun Tzu on the Art of War was my first book.

I realized that everything around me on that dive, including my own behavior, had been shaped by these tiger sharks, and more importantly, everything around me was healthier as a result. The sharks had eaten anything that was not healthy long ago. Just as sharks have shaped their underwater environment, there is no doubt that Microsoft has shaped the hi-tech world. It holds a dominant place in critical software markets, and the rest of the hi-tech world has found a way to be compatible with Microsoft, compete with Microsoft, or both. Any company not healthy enough to do so – remember Netscape, for example – has fundamentally died off if not been outright “eaten.” This result has not actually stifled competition, as some people would contend. Like all the other species that have evolved to succeed in a shark shaped ocean, it has actually required people to be highly innovative to thrive and survive in a Microsoft shaped world where consumers, to all of our benefit, can share their software produced data and creations across IT platforms more often than not.

What would happen if Microsoft went away, as many people I have talked to, from programmers to politicians, seem to wish would happen? Our tiger sharks offer an answer to that too. Whenever fishermen wipe out shark populations, an unfortunately all too frequent occurrence this decade in a rush to fill Asian soup bowls, fish populations have plummeted and other fisheries have collapsed. Without the top predators shaping the seas, chaos ensues, and the fish further down on the food chain eat their way into starvation and out of existence. The oceans become barren. Such would be the case with hi-tech innovation if Microsoft suddenly went away. Without this powerful influence of Microsoft to shape the IT markets, the legions of programmers set free to do as they wish would innovate themselves into a chaos of non-compatibility. True business-improving innovation would plummet, and an innovation desert would develop. This would be so even with Linux as an open alternative, because the whole foundation of how Linux exists as an open software platform is shaped by the presence of Microsoft. Without Microsoft, that foundation would fall apart.

So while you may individually rue the day that your enterprise finds itself at the business end of a competitive Microsoft effort, Microsoft’s presence is a natural and important part of the health of the IT space as a whole. Should Microsoft falter or be legislated out of its role some day, innovation in the IT space will experience chaos and decline until some other giant evolves to fill Microsoft’s necessary role. If you are not Microsoft, then your innovation, and the way you protect and market that innovation, will need to be healthy and creative enough to survive and thrive in the presence of Microsoft. The odds are that the innovation and the business model you create, provided you survive, will be stronger and healthier than it would be if no Microsoft was around to put you to the test.