The global economy is on the cusp of a major transformation. Driven by regulatory pressures, consumer demand, significant economic benefits, and the urgent need for sustainable practices, businesses are increasingly closing the loop on their linear "take-make-waste" models. However, the shift to a circular business ecosystem requires a fundamental rethinking of intellectual property (IP) strategy.
Traditional IP approaches, designed for linear value chains and focused on protectionism, are proving inadequate for the collaborative, interconnected nature of the circular economy.
The friction of ecosystem transformations
The move to circularity isn't without its challenges. As companies jockey for position within emerging circular value chains, friction points are likely to arise.
In the chemical recycling sector, for example, chemical companies, sorting system providers, waste management firms, and plastics producers are all vying for a piece of the circular pie, leading to overlapping technology positions and competing business interests – both being prime catalysts for conflicts.
While some friction is inevitable, and even a healthy sign of a vibrant business landscape, the success of circularity hinges on coordinated action and open ecosystems. This necessitates a delicate balance between protecting one's own interests and fostering collaboration with key partners. A critical asset in crafting this balance, or completely ruining it, is IP.
From prevention to enablement
IP strategies in linear business models generally prioritise preventing competitors from accessing or utilising a company's innovations. Directly translating this strategy to circular business means using IP to prevent others from pursuing circular efforts around for example independent repairs, claiming infringement if parts are reused or refurbished. These tactics, while effective in a linear context, can stifle innovation and limit market growth in a circular economy. They also risk damaging a company's brand reputation.
Circularity demands a shift in your IP strategy from prevention to enablement. IP should be leveraged to foster collaboration, accelerate innovation within circular value chains, and catalyse market adoption of circular solutions. This requires a new IP playbook, one that embraces collaborative development in ecosystems, strategic partnerships, and a more nuanced approach to licensing and technology sharing.
Take for instance, a company holding a significant share in a stagnant product market. When confronted with a new entrant providing a refurbishment offering, their knee-jerk reaction, if a linear IP strategy is pursued, would be to put a swift end to this new business proposition to protect new product sales volumes. This approach may however no longer be viable. Instead, the company may find greater long-term profitability from partnering up and co-branding with the refurbishment player, even if it short-term means losing some market share in new product sales.
Circular IP strategies are already driving results for leading firms
Industry leaders are already demonstrating the power of circular IP strategies. BASF, recognising the need for collaborative innovation in chemical recycling, partnered with Quantafuel and Remondis to develop and implement advanced plastic pyrolysis technology. This joint effort not only led to more efficient recycling processes that could keep up with growing demand but also positioned BASF as a leader in plastics circularity.
Similarly, Plastic Energy, specialising in advanced chemical recycling, adopted a strategic IP licensing approach to accelerate the adoption of its innovative pyrolysis technology. By licensing its technology to partners like Axens, Plastic Energy expanded its market reach and fostered further innovation by enabling Axens to combine the licensed technology with their own IP, creating a more advanced recycling process. This collaborative approach contrasts sharply with traditional protectionist strategies and highlights the potential of open innovation in the circular economy.
Meanwhile, Michelin's tyre-as-a-service model exemplifies the shift from product ownership to service-based offerings, a key characteristic of circular business models. The company is building an IP portfolio around telematics and condition monitoring technology to protect its service offering while simultaneously partnering with Enviro, leveraging Enviro's patented tyre recycling technology to close the loop on end-of-life tyre management.
Making IP management fit for circular
By embracing a new IP mindset – one focused on enablement through collaboration, strategic partnerships and leveraging IP strategically to support expansion efforts and ecosystem plays – companies can unlock the full potential of circularity, driving both economic growth and environmental sustainability.
To succeed, businesses must ensure that their IP function to become strategic partner, actively participating in corporate strategy discussions and ensuring that IP strategy aligns with circular business ambitions.