Intellectual Property Issues and Management of Innovation: Nike, Inc - Case Study Example

Intellectual Property Issues and Management of Innovation: Nike, Inc (Nike) Table of Contents Introduction 2 References 15 Introduction Innovation is considered one of the key factors that drive businesses across the world. It is through innovation that business organisations are able to develop and build products and processes that are required for specific markets. Nike, a company that manufactures different types of sports apparel and equipment, has been identified as one of the most innovative companies in the industry for a considerable length of time (Akdeniz, 2015, p. 17). One of the products of Nike for which the company’s innovative abilities have been recognised is sporting shoes for men and women. The company decided to focus on the female and male athletes market by developing highly innovative products that are marketed as the perfect solutions to the issues that athletes faced (Stauble, 2008, p. 413). The development of these innovative products has been made possible by the use of different types of intellectual property assets by the company. The patents and trademarks that the company owns have been at the centre of the success of the business of the company, by extension. This report examines the manner in which Nike has managed its innovative practices over its history. It also examines specific issues that are related to intellectual property that the company has faced and how it has managed to deal with them. While examining these issues, reference is made to different theories and concepts of innovation management as well as practices of managing intellectual property rights. Background Information What is intellectual property? The concept of intellectual property can generally be defined as the set of different legal rights that exist as a result of intellectual activity carried out by individuals, organisations or other parties (World Intellectual Property Organisation, 2016). The legal intellectual rights that form intellectual property are recognised and used with reference to the intellectual activities that are carried out by individuals and organisations in different fields. The fields may be scientific, industrial or even artistic in nature. In practice, intellectual property rights exist in the form of laws. Different countries have varying legal provisions that are used to enforce intellectual rights. Trott (2015, p. 16) notes that there are two reasons as to why countries have legal provisions in their laws that are used to enforce intellectual property rights. The first one is that intellectual property rights exist to encourage creativity and development of other forms of innovation as way of fostering development. The second one is that the existence of intellectual property rights works to safeguards the interests of all stakeholders in the innovation process by protecting the rights of the owners of intellectual creations on one hand and ensuring that the public can access innovative creations on the other. Two types of intellectual property are of relevance to this essay. The first one is industrial property. Patents for trademarks, industrial designs and inventions make up this category of intellectual property. Industrial designs refer to the aesthetic attributes that organisations use to develop their products (Bosworth, 2014, p. 17). These attributes are usually protected by intellectual property rights. On the other hand, inventions are technical creations that are used to solve a particular set of problems. They are also protected by intellectual property rights. The second category of intellectual property is copyright which is used to cover artistic creations. What is innovation? In general, innovation can be defined as the entire process by which a new idea is conceptualised, the technical invention that is related to the new idea created and finally, the new idea and technical invention exploited using a commercial model (Trott, 2005, p. 15). From the definition, it can be seen that innovation is complex process that is made up of several activities. For example, invention, which is the actual development of a new device or process, is actually a subset of innovation (Jolly, 2012, p. 169). This means that the development of a technical device or process is only useful when the process if finally combined with other processes so that the entire combination can make economic sense. Also, it can be seen that innovation is linked to entrepreneurial activity and, by extension, the manner in which business organisations operate (Leifer, 2000, p. 2). This is the case because in practice, business organisations are required to constantly innovate as a way of remaining relevant in the industry. According to Christensen (2000, p. 10), all business organisations in any industry are required to not only improve on their existing products and processes, but also constantly develop new products and processes as a way of ensuring that they are not overtaken by innovative practices that are undertaken by their competitors (Baker & Hart, 2007, p. 33). Therefore, business organisations exploit innovation for purposes of achieving commercial success and remaining competitive in their industries. There are different types of innovative practices that can be carried out within business organisations. Christensen (2000, p. 11) developed a framework of innovation within organisations in which innovation is seen in terms of two main categories: disruptive and sustaining. Disruptive innovation is described as the type of development and commercialisation of new products and processes that changes the actual manner in which an industry operates. This type of innovative practice gives rise to entirely new products and processes that create new markets. On the other hand, sustaining innovations are described as the types of technical improvements that organisations add to their products and processes. The improvements only serve the main purpose of making the products and processes that are already in the market more useful and effective rather than contributing to the development of new products as it is the case with disruptive innovation. An example of this type of innovation is seen in the manner that business organisations develop newer and improved versions of their products that are meant to address the concerns that customers had when using earlier versions of the products. Apart from this framework, it is noted that innovation can be categorised into many other distinct types (Riederer, Baier & Graefe, 2005, p. 6). For example, the development of products that are entirely new or are markedly improved from the previous ones is regarded as product innovation. Similarly, innovation can occur in the form of new models for financing a business venture and marketing its products. This form of innovation can be described as commercial or marketing innovation. Lastly, the development of new processes that can be used to change the manner in which organisations carry out their operations can be described as process innovation. Theories of innovation management One of the theories of innovation management is that innovation occurs as a result of the manner in which knowledge of manufacturing, marketing and research and development within an organisation interact with each other (Dodgson & Phillips, 2014, p. 166). Under this model of innovation, it is argued that the point at which the actual process of innovation commences cannot be ascertained but what is important is that innovation is actually a result of a complex coupling of knowledge among the three aspects of an organisation: research and development, manufacturing and marketing. Another theory of innovation management arises from the brokerage model of innovation (Chesbrough, 2011, p. 128). Under this model, innovation within the context of an organisation is considered as a process that occurs at three levels: the organisational, the individual and the institutional or field (Dodgson & Phillips, 2014, p. 167). Essentially, the origin and eventual impact that an innovative process has within the context of an organisation is seen as a result of the manner in which particular conditions, factors and actions are aligned within the three levels that have been identified. Nike and Innovation Background information on Nike As a company, Nike was started back in 1968 when it was officially incorporated in the United States. Currently, the company has several categories of products in the market, some of the most prominent ones being running, basketball, soccer, training for women and training for men (Nike, 2013, p. 49). The company designs, manufactures and markets different types of footwear. The footwear products of the company are made for specific uses. This means that every type of footwear is marketed for a specific use and to a specific market segment. For example, the company has in the market different brands of female and male running shoes, training shoes, among others (Nike, 2013). The company also designs, manufactures and sells different types of sports apparel and accessories. The apparels and accessories are tailored to specific market segments. Similarly, the different types of performance equipment that are sold by the company are fashioned on the specific needs of the market segments that they are made for. How innovation fits into the business model of Nike Innovation is one of the key factors that form the business model of Nike. In the recent past, the company has undergone a major structural change that sought to align its operations to the needs of an increasingly competitive business environment. To achieve this, a new unit within the company was formed. The unit, named Sustainable Business and Innovation, was formed by merging the team that was initially tasked with handling the corporate social responsibility issues of the organisation and the other one that was handling the innovation issues for the organisation (Nike, 2010, p. 25). The company seeks to use innovation as the main tool that will help it to thrive in the current business environment. To achieve this objective, the company, through the activities of the Sustainable Business and Innovation team, seeks to do three important things. The first one is to use innovative practices to design the different products that the company markets (Nike, 2010, p. 25). The company seeks to develop products that are fully closed-loop in nature. It seeks to design products that can be manufactured using the least number of steps possible and whose constituent materials can be recycled easily. Through this approach, the company intends to be a pioneer in developing innovation standards that shall be used throughout the industry. The second practice that has been adopted by the company as a way of improving the role of innovation in its overall business model is related to the manner that the company seeks to integrate sustainability and innovation in its operations. Basically, the new Sustainability and Business Innovation unit seeks to make the employees of the organisation to think about sustainability when carrying out their duties. It is expected that the sustainable business practices of individuals within the company will play an important role in ensuring that the entire organisation embraces innovative and sustainable business practices (Nike, 2010, p. 25). Thirdly, the company, through the activities of the unit, works to make sure that innovation is at the centre of its business model by advocating for collaboration among different stakeholders to the innovation process (Nike, 2010, p. 26). Investing in collaborations among business partners, consumers and other stakeholders is expected to help the company to build and scale its innovative developments. Therefore, it can be seen that throughout its history, Nike has heavily relied on innovation. It is through investing in research and development that the company has managed to develop and market its products to specific market segments successfully (Ferrell & Hartline, 2012, p. 165). Currently, the company seeks to increase the role of innovation in its business practices by linking it to its sustainability issues. By doing so, it is hoped that the company will continue to base is model and success on innovative and sustainable products and business practices. Key activities and practices related to innovation at Nike There are several activities and decisions at Nike that have underscored its innovative practice. First of all, the company was started based on an innovative idea. Its founders wanted to develop a new type of running shoes that would professional athletes would find more effective to run in (Hill & Jones, 2009, p. 200). This led the founders to develop their new product using a technology that was referred to as waffle tread (Hill & Jones, 2009, p. 200). It was based on this approach that the company developed it new business model that has proven to be effective ever since. The business model of the company is based on the need to design and develop highly unique and sophisticated products for specific market segments (Stauble, 2008, p. 414). Therefore, the success of the company so far can be ascribed to its business model which makes use of a highly effective differentiation strategy in which the company uses its core competency of design to develop unique products for specific segments of the market. One of the most recognised innovations of the company is the Nike Air brand. Nike Air is a type of running shoes that was developed and marketed by the company during the 1970s. The development of the shoe was largely based on a groundbreaking technology that the company managed to patent and commercialise. According to Holt and Cameron (2010, n.pag) the technology behind the Nike Air brand of the 1970s and 1980s was developed an engineer working for the National Aeronautics and Space Administration (NASA). The technology composed of a special type of bags made from polyurethane. The bags had the capacity to be compressed when pressure was applied to them and then suddenly return to their normal sise and shape the moment the pressure was released. Nike then licensed this technology and acquired intellectual property rights over it. The company then took advantage of the technology to develop what then was a completely new type of running shoes whose heels could quickly absorb pressure exerted by the feet of the athlete and then spring back to their normal shape almost immediately (Holt & Cameron, 2010, n.pag). In the recent past, the company has developed several innovations that have contributed to its success. What is important to note is that the recent innovations of the company has been based on technologies that the company licensed some time back as well as newly developed technologies (Carbasho, 2010, p. 75). For example, back in 2002, the company developed the Flyknit technology (Nike, 2015). This form of technology enabled the company to develop completely new designs of professional running shoes. The new running shoes that were developed using this technology were revolutionary in design and performance. Athletes using the shoes were not required to use socks at all. Furthermore, the shoes were designed in such a manner that made them light and highly flexible to users. Apart from the use of the Flyknit technology to develop unique and highly effective professional running shoes, Nike has also developed a highly innovative professional bra for female athletes (Nike, 2015). The bra is said have been developed using innovative technology and materials that make it fit perfectly onto a woman’s body, thus enabling female athletes to perform better (Nike, 2015). It is important to note that Nike has used its customers as the main source of information that the company uses to develop its innovations (Godfrey, 2015, n.pag). As a way of fostering the exchange of information between the company and its consumers, the company developed a brand community. This was composed of users of the different Nike products in the market. It is by use of this approach that the company is able to enhance its consumer-to-consumer communication. Using the information that is gathered from its brand community, together with other data collected from different sources, the company is able to identify specific needs with regard to its products and develop the most appropriate innovations to meet the needs. Nike and Management of Intellectual Property Techniques used to manage IP Issues at Nike and how the company manages them Nike uses different techniques and strategies to manage its intellectual property. One of the techniques involves careful and effective utilisation of trademarks, patents and other forms of intellectual property that the company possesses. Currently, the company has carefully developed trademarks for all its products. The company uses trademarks on all its products as a way of not only distinguishing the products from those of rival organisations, but also as a way of making them easily identifiable in the market (Nike, 2013, p. 53). Some of the most distinguishable intellectual properties of the company are registered under the NIKE and Swoosh Design trademarks. Similarly, the company has duly registered all its trademarks and patents in over 170 jurisdictions (Nike, 2013, p. 53). This strategy works to safeguard the commercial interests of the company by preventing rival companies from infringing on its patents and trademarks. Second, the company defends its intellectual property vigorously. Throughout its history, the company has utilised the established legal procedures to protect its trademarks and patents against any form of infringement by competitors. This has taken the form of lawsuits in which the company has used the courts of law to seek redress with regard to issues in which the company has considered that its patents and trademarks have been infringed upon. One of the most common examples of this approach was seen in the case that Nike brought to the United States District Court for the Southern District of New York back in 2009. In the case, Nike argued that Already, a small company that also manufactures sports shoes and other equipment, had infringed on its patents (Cowen & Park, 2016). In the lawsuit, Nike argued that it held patents based on the nature of the stitching designs and exterior panels of the Air Force 1 running shoes that it developed back in 1982. It argued that Already was developing and marketing running shoes that were similar to its Air Force 1. Therefore, the company claimed that its patents and trademark rights related to Air Force 1 had been diluted and infringed upon by Already. In another lawsuit, which is recent, Nike has sued Skechers for patent infringement. Skechers is a company that also makes different types of sporting shoes, apparel and equipment. In the suit, Nike argues that Skechers has infringed on 8 of its patents in the manner in which the design and appearance of the shoes that Skechers sells in the market (Kish, 2016). The patents that Nike claims that have been infringed upon by Skechers are related to the upper parts and sole of the running shoes that the company has developed and marketed for years under the Nike trademark. The company argues that since it has help the patents to the design features of the shoes for two years now, the infringement on this patents by Skechers bears a negative effect on its commercial interests. It, therefore, seeks redress in the form of an order that Skechers stops selling the shoes immediately and that the courts award it (Nike) part of the profit that Skechers has obtained from the sale of the shoes (Kish, 2016). It should be noted that in other cases, Nike has been the taken to court on claims of having infringed upon the trademarks and patents of other companies. In one of cases of this nature, Under Armour, a competitor company to Nike, sued Nike for trademark infringement. Under Armour alleged that Nike had infringed upon its trademark by using the phrase, “I Will” in its marketing campaign, yet it was fully aware that Under Armour had been using the phrase in its marketing campaigns some time back (CBS Interactive, 2013). In 2000, Under Armour registered the phrase and started using it in its marketing campaigns for its products that fall under the category of headgear, clothing and footwear (CBS Interactive, 2013). However, recently, Nike has been using the phrase on its website as well as on its other online platforms. This, according to the claim by Under Armour that was filed in 2013, is an infringement on its trademark and causes confusion among consumers. The third way in which Nike manages its intellectual property rights is through advocacy. The company runs and advocacy campaigns that seek to influence the manner in which policies and regulations that are related to intellectual property rights are formulated (Nike, 2010, p. 26). Currently, Nike’s lobbying campaign is based on five key objectives. These are outlined as follows. First, the company is campaigning for the creation of a legal framework against counterfeiting and other acts that infringe on intellectual property rights that will be consistent enough to be applied at the global level. Second, the company is partnering with other stakeholders to create a platform that can be used to share relevant intellectual property information. It is expected that this approach will foster the role that intellectual property rights play in enhancing innovation within organisations, which in turn, spurs social and economic development. Third, the company is campaigning for policy users to take a more holistic and inclusive view of intellectual property when developing policies and regulations that are used to manage intellectual property issues. To this end, the company is pushing for a global awareness of the issues that are related to intellectual property rights and the importance of intellectual property in the process of social and economic development. In conclusion, companies that are involved in the making of technology-based products rely heavily on patents (Miller & Cross, 2012, p. 218). This is so because cases of patent infringement usually translate into financial losses to the companies whose patents have been infringed by competitors. Second, it is relatively easy for the patents and other forms of intellectual property that are held such companies to be infringed upon by competitors. This is so because competitors seek to develop products that can effectively compete with those of other companies in the industry and in so doing, can easily make use of technologies, designs and other aspects that have been patented beforehand by others. Conclusion Intellectual property refers to the legal rights that individuals and organisations have as a result of their intellectual creations. Intellectual property takes the form of patents, trademarks and designs. The essence of the existence of intellectual property rights is to reward innovators and stimulate further innovation. Therefore, the existence of intellectual property rights fosters innovative practices within organisations. In turn, innovative practices enable business organisations to create new products for the market. Nike has based its business model on innovation. The company was started on the basis of developing products that made use of new technology at the time. Throughout its history, the company has pursued a differentiation strategy that has seen it develop highly innovative and unique products then market them to specific market segments. By focusing on innovation, the company acquires and owns different types of intellectual property. This takes the form of trademarks and design patents which are registered in different jurisdictions across the world. The company manages its intellectual property by vigorously defending against any form of infringement on its patents by any other party. This has seen the company sue different competitors for patent infringement. Lastly, the company uses advocacy to help create a global and local environment in which the importance of intellectual property rights us understood by all stakeholders. References Akdeniz, C. (2015). Innovation engines: Case studies of the most innovative companies. Baker, M. & Hart, S. (2007). Product strategy and management, London: FT Prentice Hall. Bosworth, D., L. (2014). Intellectual property rights. London: Elsevier. Carbasho, T. (2010). Nike. Melbourne: ABC-CLIO. CBS Interactive (2013). Under Armour sues Nike for trademark infringement. Retrieved from http://www.cbsnews.com/news/under-armour-sues-nike-for-trademark-infringement/ Chesbrough, H. (2011). Open services innovation: Rethinking your business to grow and compete in a new era. San Francisco: Jossey-Bass. 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