IBM Corp. is deservedly proud of decade-long leadership in patent awards, but licensing revenue is the real reward. IBM's secret: Treat licensing as a significant part of business strategy.
Want a better bottom line without investing more in research or plants and equipment? Want to smooth cyclical earnings? Want to make your technology the dominant industry standard? IBM Corp. is not only demonstrating how to do that with intellectual property management, but the company now offers a consulting service for patents and technology licensing, says Jerry Rosenthal, vice president, intellectual property and licensing, Armonk, N.Y. As for credentials, consider the $10 billion in royalties that licensing has added to IBM's bottom line since 1993. At the very least IBM's performance dramatizes the business need for a strategic -- not tactical -- approach to technology licensing, says Louis Galambos, professor of economic and business history, Johns Hopkins University, Baltimore. "They have learned how to use licensing as a strong positioning factor in global markets." Intellectual property management at IBM is centralized at corporate. The mission: protect and maximize value, a responsibility that goes beyond licensing, says Rosenthal. "For example, increasing our patent portfolio increases our ability to trade intellectual property with others. Cross licensing gives our engineering community greater freedom of action and shortens our time to market." Tracking itself is a plus. "The system is designed to highlight patents that periodically become subject to government-levied maintenance fees. By identifying which patents continue to provide value, we can easily determine whether to drop the rest." The patent achievements parallel IBM's success in the last decade to rationalize R&D in terms of customer focus. "We decided to create a [company-wide] culture that truly values and stimulates innovation," says Nick Donofrio, IBM senior vice president, corporate technology and manufacturing. For example, the company's leading inventor, with 78 patents, is not a researcher at IBM's Thomas J. Watson Research Center in Yorktown Heights, N.Y. He is Ravi Arimilli, IBM fellow and chief architect, eServer Microprocessors and Systems, Austin, Texas. Patents awarded to IBM have grown steadily from 1,085 in 1993 to 3,411 in 2001 and 3,288 in 2002. In that decade, IBM inventors have received a record 22,357 patents, besting the next closest company, Canon, by nearly 7,000 patents. During the period, IBM generated more patents than 10 of the largest U.S. IT companies combined, including Hewlett-Packard/Compaq, Intel, Sun, Microsoft, Dell, Apple, EMC, Oracle and EDS.