Open Innovation～ Alliance Strategies for New Value Creation～
１. Significance of Open Innovation
1) According to Henry Chesbrough, the father of open innovation, open innovation refers toinnovation that combines technologies, ideas, services, know-how, data, and knowledge not only
from the company itself but also from other companies, universities, local governments, social
entrepreneurs, and other industries and fields to create innovative business models, research results,
product development, service development, organizational reform, administrative reform, regional
revitalization, and solutions to social issues. 12) In recent years, there has been a growing interest in open innovation (especially withstartups). While there may be a wide variety of factors contributing to this trend, for example, thelimitations of closed innovation may be the reason why business firms are engaging in openinnovation.
In other words, in the past, the development of products and services using only thecompany's own technology (i.e., the "self-supporting" principle) was widely adopted, but in recentyears, it has been pointed out that closed innovation alone has limitations due to the faster pace oftechnological innovation and the increase in products and services that cross over existing industries(e.g., IoT).
Open innovation is gaining attention as one of the ways to overcome this situation.
3) In addition, operating companies have the dilemma that they cannot easily engage in new
businesses that would disrupt their existing leading businesses (innovation dilemma). On the otherai
hand, it has become easier for startups to create new businesses without large amounts of capitaland manpower due to the development of ecosystems surrounding startups and other factors. In
such an environment, there is no doubt that one of the most effective ways for business companies tomaintain and grow their existing businesses while making the "next move" for further future growth isto collaborate with startups that are taking on new business challenges.

２. Model Contracts and Business Partnership Guidelines
1) In the case of open innovation between established companies and startups, the government
has released “Model Contracts Ver.1.0 for Promoting Open Innovation between R&D-based Startups
and Business Entities” 2 and “Guidelines on Business Partnership Contracts with Startups” 3, and theissues pointed out in these documents are mainly as follows.
1. Non-disclosure Agreements (NDAs)
i) Enforcing disclosure of trade secrets without an NDAii) Unilateral NDAs and NDAs with short contract termsiii) Use of trade secrets for other purposes in violation of NDA
2. Proof of Concept (PoC) Agreementsi) Forced to perform
3. Joint Research and Development Agreementsi) Unilateral attribution of intellectual property rights to the collaboratorii) Joint research in name only (where the startup is responsible for the majority of the R&D,
but the intellectual property of the deliverables is shared or attributed only to the operatingcompany)iii) Restrictions on use of deliverables
4. License Agreementi) Provision of license free of chargeii) Restrictions on patent applicationsiii) Restriction of sales destination
5. Othersi) Provision of customer informationii) Reduction of remuneration or delay in paymentiii) Unilateral assumption of liability for damagesiv) Restriction of business partners
Ⅴ) Most Favored Treatment Conditions

2) As these model contracts and guidelines for business alliances with startups are basedon the value axis of "maximizing the sum of the profits of both parties arising from open
innovation," we have been able to draw on our experience in supporting both major businesscorporations and startups to provide support from the perspective of what framework should beused to maximize the profits arising from such open innovation, and how to design anagreement that embodies such a framework. We support our clients from the aspect of whatkind of framework is desirable for alliances in order to maximize profits from such open
innovation, and how to design contracts that embody such a framework.

３. Open Innovation between Universities and Startups
1) For universities, open innovation with startups can be one effective way to secure
research funding and other resources. For example, when a university start-up receives a patent
license from a university, the university may require the university start-up to pay a certain
amount of licensing fee because the university pays a certain amount of money not only for the
research and development of the target technology but also for the acquisition and maintenanceof the patent rights. In the case of a license agreement with a large company, the license fee ispaid in cash. However, in the case of a startup that is relatively weak financially and has thepotential to grow significantly, the license fee may be paid in the form of shares or stockacquisition rights. (In fact, there are examples in Japan and the U.S. where this approach has
resulted in universities earning large licensing fees.)
2) With our experience in supporting both universities and startups, we provide support froman IP and legal perspective to ensure that license agreements and joint R&D agreements
proceed smoothly and that the sum of the benefits generated from open innovation is maximized
while taking into account the value of the university's technology and intellectual property andthe startup's business model.
1 Henry Chesbrough and Sabine Brunswicker, "Managing Open Innovation in large firms", 2013.
2 “Model Contracts Ver.1.0 for Promoting Open Innovation between R&D-based Startups and Business Entities” Compiled (meti.go.jp)
3 https://www.meti.go.jp/press/2020/03/20210329004/20210329004-1.pdf
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WriterKei IIDA
Attorney at Law[k_iida☆nakapat.gr.jp]

Akira WATANABE
Attorney at Law[a_watanabe☆nakapat.gr.jp]

Yasumasa SASAKI
Patent Attorney[pat☆nakapat.gr.jp]

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