Inside the IBM patent machine

In 2016, technology company IBM patented the most inventions in the US, totalling 8,088 new granted patents over the year.

That’s more than 22 patents per day, and means that IBM became the first company to surpass 8,000 US patents in a single year.

It’s this high-volume filing that has kept the company top of the leader board for the 24th consecutive year.

Founded in 1911 in New York City, IBM began life as the Computing-Tabulating-Recording Company, a seller of clocks and scales. The company successfully navigated the early days of the computer business before becoming the global operator it is today.

“Billions and billions of dollars have been spent on research and development (R&D) to maintain that innovation edge,” explains Manny Schecter, chief patent counsel at IBM.

According to Schecter, IBM is such a prolific filer because it is “constantly innovating” and a company always looking towards the future.

He adds: “The patent system has served us well, helping to protect the innovations we create and defend ourselves from others.”

Coordinating the filing and securing of so many patents is not a simple task, and a number of challenges must be overcome.

Although litigation is a last resort for IBM, that doesn’t mean it’s not prepared to fight for its patents and other intellectual property.

Most of IBM’s litigation involves patent assertions against the tech company.

“Relative to other companies in our industry, we are not involved in that much patent litigation,” explains Schecter.

“However, we do bring litigation against others that take our IP and refuse to compensate us. Fortunately, this does not occur very frequently. Litigation is not our preferred mode of enforcing IP.”

It’s clear that IBM is prepared for battle: in March last year, it accused online deals website Groupon of infringing four patents.

Groupon bit back in May, suing IBM for patent infringement centring on technology that helps to attract customers based on their location. It claimed that IBM is a “relic” of a once-great 20th century technology firm which has “resorted to usurping the IP of companies born this millennium”.

However, it’s important to remember that owning a patent doesn’t mean third parties respect that patent and will come and pay royalties, warns Schecter.

He adds: “Instead, those third parties may well infringe your patent, unbeknown to you, so you need to monitor them to ensure that you get your just rewards for your patents.”

Back to basics

While this comes later in the patent process, Schecter takes us back to the beginning.

“Educating our development teams and identifying their innovations at an early stage so we can evaluate them and consider them for patent protection is key,” he explains.

For IBM, education consists of helping the teams understand why the patent system is important, why it matters to them, and why they need to work closely with the IP team at IBM to enable a joint evaluation of the work they’ve done to consider whether patenting is appropriate.

It’s vital to keep everybody coordinated and motivated which, Schecter admits, can be a challenge.

“We have to make sure that when inventors who may be working on some similar projects, perhaps in very different parts of the world, happen to solve similar problems, we can make a coordinated decision about what is worth protecting and what’s not.”

He adds: “We don’t want to file patent applications for the same invention on behalf of different sets of inventors in different places, all at the same time.”

Fortunately for IBM, being an IT company has its advantages. Over the years it has been able to develop a number of tools to help with much of its coordination.

One of these strategies, used in cross-border work, is having IP teams on the ground in numerous countries around the world.

In countries where IBM files a large amount of patent applications, such as the UK, Germany, Japan, China and Canada, these teams make coordination much easier.

Schecter adds: “Where our work is most similar and most frequent, it’s easier for us to get on the phone, to have common procedures and education that is more coordinated than would be possible if we had outside counsel.”

He says filing a patent application is a “significant endeavour”, which may cost a substantial amount of money (potentially tens of thousands of dollars) and a substantial amount of time (in terms of prosecuting the application before patent offices).

In the US, it’s not uncommon to wait a few years before hearing back from the US Patent and Trademark Office (USPTO) about the application for the first time, and in some other countries, it can be considerably longer.

"refusing to take a licence could actually promote more patent litigation because the refusal forces the patentee to bring a lawsuit in order to get justice."

The work doesn’t stop there though: IBM has to consider downstream maintenance on the patent, with most countries charging a periodic fee in order to keep a patent from expiring prematurely.

“Work also goes into monitoring your portfolio,” says Schecter, “not only to ensure we have the technologies and countries represented in the portfolio we want to have, but also to ensure we know when patents are due for maintenance.”

This allows the company to make informed decisions about whether to maintain particular patents, particularly if they have less value than originally thought.

What if the invention isn’t ‘patent-worthy’ from the very beginning, in IBM’s eyes? Essentially, the company considers publishing the invention for defensive reasons or whether trade secret protection is worthwhile.

Finally, IBM returns to the development process, funnelling the money the company generates from its IP back into its R&D teams.

“When you’re thinking about R&D and you’re going into a new area of development, you need to think whether you already have a strong patent portfolio based on previous innovations, or whether it is truly new and you need to perhaps ramp up your patent activity there,” says Schecter.

Licensing in the billions

IBM also looks at whether it has licences in place with likely competitors, in order to permit it to operate freely in the new technology areas.

“In most deals, licences flow in both directions, especially in the high-tech arena,” adds Schecter, explaining that if the parties can agree, they will attempt to ensure that all outstanding licensing matters are resolved in a single transaction.

The scale of licensing is astonishing, typically bringing in around $1 billion a year for IBM (although this figure does include the sale of IP, and covers all forms of IP)—and Schecter is not afraid to admit that the company also licenses from ‘patent trolls’.

“There are parties in the high-tech space in particular that are practising what has become known as ‘efficient infringement’,” he says.

Schecter adds: “This simply means that they refuse to negotiate a licence with a patentee unless that patentee sues them, and that’s not the way we do business at IBM.”

IBM evaluates patent assertions against itself on an individual basis. When it thinks assertions are without merit, the company is not inclined to take a licence, but sometimes the assertions do have merit.

“In our mind, simply refusing to take a licence could actually promote more patent litigation because the refusal forces the patentee to bring a lawsuit in order to get justice,” he says.

For IBM, it essentially boils down to evaluating what the patent covers and whether the patent is valid, meaning that the company doesn’t operate a “blanket refusal” policy on taking a licence from a third party.

Making a splash

Post-Alice v CLS Bank, it has arguably become harder to patent computer-implemented inventions, but Schecter believes that the US Supreme Court decision has not affected patenting efforts uniformly.

In terms of the examining corps at the USPTO—not the Patent Trial and Appeal Board or the courts—the greatest effect of Alice occurs when examining business method inventions.

IBM was ready for this: around ten years ago, the company observed rising concern centring on business method inventions in the US.

“We purposefully raised the bar with respect to which inventions we were willing to file patent applications for in that area,” explains Schecter.

This raising of the bar was announced in the form of IBM’s patent policy, which made a splash when it was revealed.

The net result, according to Schecter, was that IBM reduced both the volume and the percentage of US applications that the company files in that area.

“The good news is that we, to some significant extent, anticipated the change. Although that doesn’t mean we anticipated the Alice decision itself, when the decision came out we were perhaps better prepared than most in the IT world,” he says.

Alice has made it harder to enforce patents, creating a lot of uncertainty that goes beyond mere business methods.

The actual extent of the ruling’s impact is quite indistinct, according to Schecter, “because the decision is so unclear, and because the follow-on interpretations of the decision are so unclear and inconsistent with each other”.

Schecter believes one of the challenges of Alice is how to “fix” the decision, considering there’s “widespread agreement that the decision has created a great deal of uncertainty and inconsistency”.

There is currently no consensus from the patent community on the appropriate way to address the challenges of Alice, but Schecter is prepared to do his homework and consider the likelihood that a party against which IBM is enforcing a patent may challenge the patent in some way under the guise of the Alice ruling.