Managing IP the IBM way

David Kappos, IBM’s vice-president and assistant general counsel for IP law, is at the centre of a global network of IP lawyers at a time when the rules of the IP game are being re-written. He explains to Edward Fennell how he is remoulding IBM’s IP strategy to meet these new challenges

There used to be a much-quoted claim back in the 1970s and early 1980s that ‘Nobody ever got fired for buying IBM’. It reflected, justifiably, IBM’s dominant position in the then-computer industry in terms of reputation and innovation. Since that time, of course, plenty has happened – not least the rise of Microsoft, the creation of the World Wide Web and the dot com boom and collapse. But, while a myriad of names have flashed across the IT firmament, IBM remains steady as the North Star.

Now celebrating its 110th anniversary, the secret of IBM’s survival has been its ability to reinvent itself. Over the last year or two, for example, it has undertaken a major transition process, shifting progressively away from Europe towards Asia. The result is that the company has reduced its selling costs by a quarter and generated a recent 11% jump in year-on-year second quarter net income.

The credit for this goes to chairman and chief executive Sam Palmisano who (in the tradition of IBM’s leaders) has grasped the implications of radical changes in its market and reacted boldly and imaginatively. But the same applies, says David Kappos, to the company’s worldwide patent policy. Right now, for example, IBM is embracing open systems and adopting a new, groundbreaking corporate policy towards the creation and management of patents.

This is a step of huge importance. Moreover, it turns on its head much of the traditional IBM way of doing things. As David points out, IBM has been an IP-based company ever since 1896, when it put technology to work for the census-takers. ‘Bluntly, if you are a technology company then you have to be an IP company – it’s just incredibly important for your business,’ he says. Historically, that meant battening down everything and sharing nothing. But that model is now changing.

A question of scale
IBM has a worldwide portfolio of 40,000 patents. About half are lodged in the USA and the remainder split between Europe and Asia (where, of course, China is increasingly featuring). So far this year, IBM has filed 3,000 patents and is on target, says David, to maintain its record for the past 14 years of consistently filing more patents than anyone else. At the front line of this massive endeavour are the 200 or so IBM patent attorneys around the world working closely with the R&D teams in the company’s high-powered research laboratories in places like Zurich and Hursley, near Southampton, in the UK.

They become involved right from the gestation stage of new products. ‘You want your IP lawyers to be where the action is,’ says David. Decisions on patenting are taken ultimately by business managers, but the IP lawyers are a key influence. ‘There is very strong support from the top of the company for the IP function and that makes it easier,’ he says. ‘Everyone becomes aligned with the policy and it makes it easier to get our work done.’

What’s happening at the moment is that IBM’s IP lawyers are being aligned along a new philosophical axis. Under the leadership of Palmisano and the direction of Dr John E Kelly III, IBM’s senior vice-president for technology and intellectual property, the approach to patent protection is shifting. After years of strenuously protecting all its patents the company is now backing the movement towards open standards. And this is changing everything.

If you're a technology company then you have to be an IP company – it's just incredibly important for your business

Getting technical
‘We are now the biggest supporters of the open source development project,’ explains David. ‘Admittedly this policy is not easily reconcilable with our traditional IP strategy, but we are convinced that it is the way to go for the future.’

In a nutshell, the open source movement aims to encourage the sharing of systems so as to maximise the accessibility and use of information technology. By breaking down protective attitudes and encouraging people to drop the legal barriers around their intellectual property the open source movement believes that, in the long run, it will enable the technology to fulfil its potential and best serve its customers.

David is able to speak confidently about these issues because, like many IBM lawyers, he is a ‘tekkie’ by origin. ‘IP lawyers at IBM need to have deep domain expertise – it’s a must-have,’ he explains. ‘In my case I gained a degree in Electrical and computer Engineering before switching across to law. It would frankly be very difficult to do my job without a technical background. You have to be able to speak the language of the technical experts with whom you are dealing.’

As well as occupying a key role in IBM, David has also held various leadership positions in IP law associations in Asia and the US. Indeed it is the drive for industry leadership which has inspired the company’s latest initiative, launched in autumn 2006, to introduce a new, groundbreaking corporate policy governing the creation and management of patents. Linked to IBM’s support for open source, the policy aims to ‘encourage others in the patent community to adopt similar policies and practices, more stringent than currently required by law’.

The purpose of this, as David explains, is to avoid using IP inappropriately and to manage its patents in a way that exceeds legal obligations. ‘It’s a fundamental strategic shift,’ says David, ‘meaning that we want patents to be used as a tool of inclusion. We want to show that patents can be used to facilitate the development of the open source environment.’

Being open
As a concrete demonstration of its commitment IBM has donated 500 specific patents to the Open Source Movement so that anyone can use them. ‘This would have been unthinkable a decade ago,’ says David, ‘but it is the way forward. Our intention is to continue to donate and to build more on top of the open source platform.’

The new tenets by which IBM intends to operate (see box, left) are designed, says the company, ‘to foster integrity, a healthier environment for. Innovation, and mutual respect for IP Rights’, and in terms of openness they go much further than the demands of US law. Indeed, David is largely critical of the American approach to patent policy.

‘The inventive step standard has got out of hand in the US,’ he says. ‘Trivial patents are being granted. By contrast, the system is better in Europe. I’m particularly impressed by the good work done by the German and UK Patent Offices. Moreover, the European Patent Office’s “inventive step” is the gold standard. It’s where I believe that the US should be heading.’

Not that IBM is planning to give everything away. As David admits, specialist areas – such as software for the oil or airline industries, banking and finance – will never be opened up. Nonetheless, in the IBM tradition of the good corporate citizen, the company is fostering a common sense, socially responsible attitude while also ensuring that its business remains highly successful.

On that basis, what’s the betting that it will still be here in another 110 years?

The principles by which IBM will now manage its patent policy, wherever it
does business, include:

• Patent applicants are responsible for the quality and clarity of their patent applications.
  

• Patent applications should be available for public examination.

• Patent ownership should be transparent and easily discernable.

• Pure business methods without technical merit should not be patentable.

For more information, visit www.ibm.com/gio/IP


This article first appeared in IP Review, issue 17