IBM, Patent Leadership: Balances Proprietary and Collaborative Innovation

By Athena Ma, China IP,[Copyright]

In recent years, intellectual property (IP) has become a dynamic force, which stimulates technical advancement, development and drives economic growth. To develop rapidly, enterprises from developed countries implement well-organized IP strategies and establish IP management systems.  The United States and Japan are the most successful in executing IP stratagem. As one of the founding nations of IP strategy, America has been applying IP policy for nearly a century. 

Established in 1911 in the U.S., International Business Machines Corp. (IBM) is the world's largest corporation of information technology and business solutions.  "Big Blue" has been extremely successful in implementing IP planning. An essential factor of the modern economy, IP plays a decisive role in the success of a company.  Beginning in the 1990s, income gained from intellectual property at IBM has skyrocketed from US $30 million to more than US $1 billion.  What is IBM's global IP strategy?  How does IBM use IP so powerfully? Moreover, how has IBM become a patent leader?  In search for answers, journalist of China IP interviewed Mr. Paik Saber, Assistant General Counsel of IP Law at IBM Asia Pacific. 

The setup and position of IP Law department of IBM

According to Mr. Saber, IBM has a legal department that includes an Intellectual Property ("IP") department. This group aligns, coordinates, supports, and leads the IP activities across the company. It helps ensure that these activities align with corporate strategies such as IBM's strategy for open collaboration and innovation, which runs the gamut from proprietary invention all the way to open source development.

"The IP Law department has led and coordinated activities to support IBM's patent leadership in the U.S. for the last fifteen years.  IBM also has one of the largest patent portfolios in the world, which requires significant global efforts, coordination, and management by this department. IBM also generates about US$1 billion in IP income each year, and the IP Law department is directly involved in negotiating virtually all IP income-generating agreements.

The IP Law department has a number of departments including a patent portfolio department. Members of this department have the responsibility of managing the size and content of IBM's worldwide patent portfolio. They are very familiar with the technology fields in which IBM holds patents and files patent applications, including those for semiconductors, servers, storage, and software." Mr. Saber said.

Mr. Saber also said, "IBM has also been a leader in supporting open source and collaborative innovation, IBM has pledged hundreds of patents in support of open source, healthcare and education initiatives.  In July 2007, IBM also announced granting access to its entire patent portfolio of 40,000 patents in support of more than 150 standards designed to make software interoperable under certain conditions.  This is a prime example of using our IP assets for the collective good. 

In summary, IBM's IP Law department has been leading the discussion worldwide in shaping the IP community's thinking about the business value of patents and by demonstrating that patents needn't be a blunt instrument of litigation, but an effective tool for supporting and encouraging collaboration, open standards and innovation."

Patent leadership and IBM's global strategy

1)  High-quality patent portfolio

Mr. Saber also said, "IBM employs some of the most innovative people in the world. IBM has about 170,000 technical professionals, and spends about US$6 billion each year in research and development (R&D). IBM's talented technical professionals have created thousands and thousands of new inventions for many years, thus helping IBM build a high quality patent portfolio. This collection not only helps IBM generate significant IP income but also more importantly, helps us grow our business."

Data collected from the United States Patent and Trademark Office (USPTO) website indicates that since 1993, IBM's number of patent applications in the U.S. occupies the number one position, although IBM says its goal is not to acquire a record number of patents each year.


2) IBM innovations in patent usage

In fact, IBM's patent leadership position gives it credibility not only in licensing negotiations but also in policy matters. The followings are examples China IP collected.

In January of 2005, IBM pledged 500 patents to the open source community. Nokia, Computer Associates, Novell, Sun, and others did likewise. Additionally, in October of 2005, IBM pledged royalty-free access to its entire patent portfolio for open healthcare and education software standards. In July of 2007, IBM also announced granting access to its entire patent portfolio of 40,000 patents in support of more than 150 standards designed to make software interoperable under certain conditions.

 3)The world's first corporate policy governing the creation and management of patents

According to Mr. Saber, because intellectual property is increasingly essential to the global economy, and because system abuses and poor patent quality have led to excessive litigation in the U.S., IBM is using its leadership position to influence the patent community to be more accountable, innovative, and cooperative in addressing these issues. For instance, in September of 2006, IBM announced the world's first corporate policy governing the creation and management of patents. The tenets of the new policy, which applies everywhere IBM does business, are:

   - 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。

4) IBM's global IP strategy

Mr. Saber also expressed, "As a global player, IBM has to navigate the diverse IP systems established by the countries in which it operates. At the same time, given its patent leadership and its worldwide operation and experience, IBM is in a unique position to offer balanced suggestions to help improve the quality of the IP systems worldwide.

For example, with regard to patent systems, there are many differences among them, but issues such as those affecting patent quality or pertaining to the backlog of patent examinations, tend to be common among a number of them. Recently IBM worked with the USPTO, academia and a number of other companies to launch a historic pilot program to open the U.S. patent examination process to public participation for the first time.  This pilot program, known as the ‘Peer-to-Patent', is managed by Beth Novak of New York Law School, with support from IBM and a number of other companies and foundations. The project for the first time opens up the examination process by allowing the public to comment on the patentability of claims in certain types of patent applications by forwarding relevant information to USPTO thus improving the quality and scope of issued patents. Akin to open source, this is a prime example of tapping the collective wisdom of the community. Given its presence in many countries around the world, IBM has introduced the concept of Peer-to-Patent in a number of countries including China, Japan, Korea, Taiwan, and UK."

5)  Patents are an effective tool for supporting and encouraging collaboration, open standards, and innovation

From an intellectual property policy perspective, improving the integrity and quality of the world's patent systems will help ensure that all participants benefit from the protections these systems are designed to provide. In addition, actions such as patent pledges to stimulate innovation, such as those IBM has made to the open source software community and to support the health and education industries, can be especially beneficial to smaller companies by giving them access to intellectual property on a royalty-free basis.

Balancing proprietary and open  

As a global player, IBM has to navigate the diverse IP systems established by the countries in which it operates. However, the core of IBM's global IP strategy is balancing proprietary and collaborative innovation, which is also IBM's business strategy.

1) A shared foundation of proprietary and open

Some experts on IP said, "IBM's innovation model is a shared foundation of proprietary and open for the two both have advantages. The main advantages of Proprietary innovation are product uniqueness and speed-to-market. In addition, those of open innovation are reduces cost and to open vendor choice."

2) Balance both proprietary and open IP to gain maximum benefit from the mix

According to Mr. Saber, IBM's strategy will continue to balance both proprietary and open IP to gain maximum benefit from the mix. Proprietary IP brings distinction to new ideas, differentiation to enterprises and healthy competition to the marketplace. Open or shared IP fosters community problem solving and collaboration that spurs innovation. IBM invests about US$6 billion each year in R&D. Supporting proprietary innovation gives IBM freedom of action with respect to its own product offerings, and through licensing its IP, IBM ensures significant return on the US$6 billion investment. In supporting open and collaborative innovation – as IBM has done with patent pledges to the open source, healthcare, and education industries – IBM recognizes that selective investment of their IP can generate broad-based industry growth, from which IBM will gain its fair share of return from new or expanded customer engagements."


3) Collaborative innovation produces new IP and generates IP income

Much of IBM's IP income originates from licensing its patent portfolio and technology, but a growing percentage also comes from collaborative engagements. For example, IBM works with other companies jointly developing products and new IP, which could become a new source of generating IP income. Mr. Saber also gave us one instance:

By the end of 2003, IBM had invested US$5 billion into its chip business over the previous three years. These R&D costs were prohibitive, so IBM decided to create an R&D ecosystem with nine partners, who were also experiencing steep R&D costs, by opening its labs to its new partners including AMD, Sony, Toshiba, Freescale Semiconductor, and Albany Nanontech, an academic research powerhouse. The consortium would not only further revitalize IBM's chip fabrication plant, but also produce groundbreaking, new IP in semiconductor technology. Since then, IBM partners have invested more than US$1 billion to expand and develop new research facilities and products. Take IBM's 200,000-square-foot East Fishkill, New York factory refurbishment, for example.  Sharing the costs and pooling expertise have yielded advances in cutting-edge microprocessor technology, such as the Cell Broadband Engine (Cell/B.E.) platform, which powers Sony's PlayStation 3 game console. Mercury Computer Systems also uses Cell/B.E. for its servers, and IBM uses Cell/B.E. for its blade server.

"IBM and its partners have saved significant research costs by collaborating and innovating together. It is estimated that IBM and its partners will save an additional US$7 billion over the next three years in chip development and manufacturing expense, according to In-Stat. IBM is now expanding its collaborative innovation to chip material suppliers, chemical companies, and chip-design software firms." Mr. Saber said.

4) IBM's innovation principles

According to the presentation to Peking University Law School given, in May of 2006, by David J. Kappos, Vice President and Assistant General Counsel, IP Law, IBM, IBM's innovation principles are:

a. collaboration is key to innovation;

b. patents should be granted only for what is new and inventive;

c. open standards are essential to collaborative innovation; and

d. both proprietary and open source are important forms of software development.

 IP solution in China

1) Collaboration

The IBM business strategy that balances proprietary and collaborative innovation is a global strategy, and of which China is an important part. Mr. Saber also gave us the following examples:

"IBM's China Research Lab is working on many technologies, particularly database and messaging software. Dozens of IBM China computer scientists are taking the lead worldwide in developing IBM Lotus personal productivity software based on the Open Document Format, a universally compatible document standard.

Another example, in China, IBM believes the intersection of open standards and intellectual property is particularly important as evidenced by the Open Innovation Summit, on October 12, 2007 at Tsinghua University.

Another example, in December of 2005, IBM helped to launch a first-of-a-kind guiding principles (Open Collaboration Research Principles) to accelerate collaborative research for open source software and to help promote an open approach to overcome university/industry intellectual property challenges. Under these principles, the intellectual property arising from selected research collaborations will be made available free of charge for commercial and academic use. IBM would like to explore the idea of extending or replicating such a program with leading Chinese universities."

2) License technology to achieve IP protection

IBM works hard to protect its IP rights in the countries, which it operates, and respects the IP rights of others, and China is not an exception. Occasionally, this means legal action is necessary to protect IBM's legal interest.

In some experts' opinion on IP, there is little doubt lawsuits involve great risk and onerous cost, including fees for lawyers, experts and evidence. Besides, engaging in action is time lost in strengthening operation and other opportunities. Compared with legal action, a patent license is more rewarding, for the risk and cost are reduced, development of long-term partnerships and achieving win-win results. In addition, once the cost of the R&D is recouped, significant profits can be earned. Therefore, in their industry, it is very common to license technology between parties to achieve this protection, and IBM has thousands of such license agreements around the world.

Member Message

  • Only our members can leave a message,so please register or login.

International IP Firms
Inquiry and Assessment

Latest comments

Article Search


People watch

Online Survey

In your opinion, which is the most important factor that influences IP pledge loan evaluation?

Control over several core technologies for one product by different right owners
Stability of ownership of the pledge
Ownership and effectiveness of the pledge