Patents and patent applications play obvious roles in the development of successful products and services. How so? Because original or unique intellectual properties (IP) are among the most powerful tools companies have for differentiating their solutions in markets that are often crowded with similar offerings.
But the tangible value of IP also has a downside—inspiring the parasitic business model of so-called patent assertions entities (PAEs) or “patent trolls.” These are individuals and groups that assemble collections of patent rights, then demand payments from or threaten litigation against companies that are supposedly infringing on those rights. SCO Group was notorious for doing this in the open source community against IBM, Red Hat, Novell and other companies about 15 years ago; it eventually went bankrupt and was litigated out of business.
Can organizations do anything to suppress or escape such IP predators? Absolutely. This week, IBM announced that along with its 8,500+ inventors and researchers receiving a record 9,262 U.S. patents in 2019 (marking the company’s 27th consecutive year of patent generation leadership), it has joined the LOT (License on Transfer) Network, a nonprofit organization that combats patent trolling by cross-licensing patents that fall into the hands of PAEs.
Let’s consider IBM’s patent success, its membership in the LOT Network and what that means for the company and IP development.
The LOT Network
So, what exactly is the LOT Network? In 2014, Red Hat, Google and Canon led an initiative to create ways for companies to address the growing threat of patent trolls. In short, LOT members pledge and ensure that their patents will not be used by PAEs to sue other LOT members.
That doesn’t prevent LOT members from selling patents or suing other members who they believe are infringing on their IP. For example, founder Google is currently preparing for an appearance in the U.S. Supreme Court to contest infringement claims by Oracle (a LOT Network member since 2017).
How successful is the organization? Since 2014, the LOT Network has grown from its founding trio to over 600 global members, including Alibaba, CBS, Dropbox, Ford, General Motors, Honda, JPMorgan Chase, Mazda, Microsoft, Netflix, SAP and Tesla. Together, members have contributed more than two million patents to the LOT Network’s protection.
Has the organization been entirely successful? That depends on who you ask. On the plus side, the cost of patent litigation and number of cases filed appears to be declining steadily, but at the same time the median damages awarded in successful cases is rising.
The LOT Network does have its critics and those who contend that the group doesn’t address fundamental problems with the patent system. The Electronic Frontier Foundation (EFF) noted that while the LOT Network is succeeding at reducing the number of patents available to worst offender PAEs, “it doesn’t stop problems with patent quality and with operating companies attacking each other.”
These issues aside, it seems fair to say that after a half decade of operation, the LOT Network continues to attract significant numbers of new members and can claim more overall wins than losses.
What IBM brings to the LOT Network
IBM’s decision to join the group has a number of interesting implications. For example, the company is placing more than 80,000 patents and patent applications under the organization’s protection—a significant number by any measure. Plus, with 27 years of patent leadership, IBM is bringing a load of experience that could be beneficial to the LOT Network and other members over time. Lastly, the company’s continuing research investments are likely to result in additional contributions of patents and applications to the group.
It’s also worth noting that IBM’s decision to join contradicts critics who the company’s acquisition of LOT Network founder Red Hat, claiming that it would erode and eventually end Red Hat’s long-standing commitments to open source and shared IP. Instead, IBM clearly shares its new business unit’s dedication to open innovation and patent stewardship. That should be good for IBM and Red Hat, as well as the other 600+ LOT Network members.
Some people claim that the IFI’s annual ranking of top patent assignees is empty braggadocio that has little to do with how patents and intellectual property assets impact business or are used in real world settings. While many of the organizations included try to make as much PR hay as possible out of the list, it’s also true that generating patents and applications without developing commercial products and services is a largely unsupportable business model.
In fact, the patents IBM generated in 2019 offer an insightful picture of the company’s business efforts during the past year. For example, IBM inventors were granted more than 2,500 patents in cloud technology (including one for a method to jointly manage cloud and non-cloud computing platforms) and over 1,800 artificial intelligence (AI) patents (such as a method for teaching AI systems how to understand and deduce the nuances and implications behind certain text or phrases of speech by analyzing related content). Other significant growth areas for IBM patents included blockchain, security and quantum computing.
It should come as no surprise that these numbers map closely to the five “strategic imperatives” announced in 2015—analytics, cloud computing, security, social and mobile—that IBM says provide the foundation for its future business. It’s entirely appropriate that the company funds development in these areas but it’s also worth noting that in 2019 those initiatives generated over half of all IBM revenues for the first time.
In other words, the company is not just putting its money where its mouth is. It is also using the patents and other intellectual property it creates to develop, differentiate and grow new products, services and businesses.
Like all successful organizations, IBM has a long history of supporting its customers’ existing needs while also preparing to address new and emerging trends. Continuing research funding and the work of thousands of inventors have led IBM to over a quarter century of patent leadership. But its research investments and efforts during the past year also point the way to IBM’s future.
Charles King is a principal analyst at PUND-IT and a regular contributor to eWEEK. © 2019 Pund-IT, Inc. All rights reserved.