Strategic Use of Intellectual Property Rights in Digital Economy — Case of Software Markets

Much of the value of firms in the digital economy is in the intellectual capital of their assets. Intellectual property rights (IPRs) provide tools to extract value from intellectual capital. Not surprisingly, we are seeing firms trying to secure more and more rights in their intellectual property. It has become common e.g. to file patents for firm’s business method. On the other hand, there is an increasing number of digital economy businesses, which have instead gained from the free use of intellectual property. Obviously, there are competing views in the operative use of IPRs in digital economy. This paper discusses these different strategies in the use of IPRs and applies them on software markets. First, the paper explains the rationale of proprietary product distribution mechanisms backed up with strict IPR protection. Second, the article analyses businesses flourishing from freely distributable products. Real world examples are firms that offer different Open Source software products. Finally, the article classifies discussed strategies, identifies overlaps and controversies, and helps to frame boundaries between them. It practically suggests criteria for the choice of right strategy in real word cases. “If we can make the enemy show his position while we are formless, We will be at full force while the enemy is divided.” Sun Tzu, The Art of War