Big Blue Discovers New Way To Leverage Patents

April 8, 2005 10:15 AM by Stephan Kinsella | Other posts by Stephan Kinsella | Comments (2)

A recent article in Corporate Legal Times, Big Blue Discovers New Way To Leverage Patents: Open-Source Revolution Keeps IBM In The Black, reports that IBM has made 500 of its patents available to the public. Valued at more than $10 million, the patents cover a broad spectrum of software technology, including dynamic link libraries, interfaces, multiprocessing and databases. IBM made the patents "freely available only to those who want to use it in open-source software (which is software that lets users see, copy and modify the code). Developers can't use it in proprietary software, such as Microsoft Windows."

What I found interesting in this mainstream article are doubts about the patent system expressed by mainstream patent attorneys and others:

The company's action was spurred, in part, by a December 2004 report issued by The Council on Competitiveness, "The National Innovation Initiative." The report's authors argued that traditional methods for exploiting IP are no longer enough to promote innovation.

Some experts say that open-source development helps large and small developers avoid a growing threat to innovation: the proliferation of exclusive patent rights. Eben Moglen, an expert in intellectual property law who teaches at Columbia Law School, describes this as the anti-commons problem: "When there are too many exclusive rights in an area, you have to negotiate with an unmanageable number of people to do research, and the transaction costs become too high," he argues. "This happened in the biotech area during the 1990s. It was hard to do research because one had to buy rights from 20 to 30 different inventors."

This same problem now may be interfering with software development. "Patent lawyers are telling me software patents are more trouble than they are worth," he says. "They create a whole series of problems with companies taking in each others' laundry."

Big companies can leverage their patent portfolios to negotiate necessary cross-licenses. However, small- and medium-sized software businesses usually don't own enough patents to press for similar deals. They must either pay hard-earned cash for patent licenses, spend time and money trying to design around patents, or simply give up on innovating in patent-infested areas.

Because of this, many smaller tech companies look askance on software patents. It also is the reason many companies in Europe have actively opposed a proposal to legalize software patents in the European Union. Open source advocates also have joined the chorus against the proposed EU software patents, claiming that such patents would hinder innovation and thus harm society.

These quotes indicate that there is growing skepticism, even among patent practitioners and owners, that patents--at least in the field of IT and software--promote innovation. But of course, there are dissenters:

Many other companies are firmly opposed to open-source. Microsoft, for example, has been waging a PR campaign to convince businesses that open-source software is not as safe, less powerful and more expensive than products such as Windows.

Rivette sees only one thing that can stop the eventual success of open-source software: companies that make their living not by selling products, but enforcing their software patents against others. These companies may have key patents essential to open-source software, and no financial incentive to make their patents available to the open-source community.

Acacia Research, for example, produces no IT goods or services, but makes lots of money from its patents on methods for sending compressed audio and video over the Internet. Acacia has sued many companies for allegedly violating these patents, and the patent owner has reached remunerative settlements with more than 227 firms.