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2/1/2010
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Global CIO: Software Patents And The CIO

Patent attorney Stephen Glazier weighs in on two recent developments, which dictate a more hands-on IT organization approach to intellectual property.

If CIOs and other senior business technology executives don't have a software patent strategy, they need to develop one now, as two recent patent developments put them at the center of efforts to increase their companies' market capitalization.

The first centers on recent studies that measure a correlation between good corporate patent strategy and the performance of the company stock price. These studies, including one titled "The Intellectual Property Marketplace," in the February 2007 issue of The Licensing Journal, look at large publicly traded companies, in software and other tech-sensitive fields, as well as small venture capital-funded technology companies. While efforts have been underway for some time to measure the enterprise value of and competitively benchmark patent strategies, only recently have some of them proved effective. And it turns out that the ROIs on patent strategies can be surprisingly large.

The second development is that, as of 2008, the majority of all new patent applications are in the area of software, computer systems, and business methods, and that volume continues to grow. These patents can enable the owner to stop competitors from copying the patented improvements (i.e., the patent owner can use the patent monopoly to obtain market share and competitive advantage) and to obtain cash for damages, triple damages, and attorney fees.

There are several places where CIOs can be involved in the case-by-case exploitation of patent strategies, both offensive and defensive. They include:

  • Each new IT organization project, whether software development, a software purchase, a new Web site or Web function, or a new computer system, may be a candidate for a patent monopoly. Each project should be reviewed for opportunities to obtain a patent.
  • Likewise, each new project may be a candidate for infringement of a competitor's patent (whether the system is internally developed or purchased). Each project's patent-infringement liability risk should be evaluated and steps should be taken to reduce that risk.
  • Review all RFPs before release, for patent opportunities.
  • For existing patents, identify infringers as a means to gain market share, eliminate price competition, and seek cash payments for damages.
  • For existing patents, seek out possible non-infringing licensees. One such deal can put the entire corporate patent program, and the entire IT organization, in the black.
  • Understand that if a system or software product your organization buys infringes a patent, then your organization shares liability for infringement. When buying software, the CIO should commission a defensive non-infringement analysis of the purchase, in the same manner as for new internal product development.
  • Patent trolls are everywhere nowadays, and the CIO is often the first to get bitten when the trolls try to levy their "patent tax" on IT operations. Some of these threats are potentially fatal, and some are nuisances that are handled easily. However, it's not readily apparent which category applies until the patents in question are analyzed. In any case, don't ignore such threats.
  • Increasingly, interesting loose patents are available for purchase. This can be a fast and economical way to beef up a deterrent patent portfolio. Patent auction houses and acquisition middlemen are available to enable this strategy.

Later columns will delve into specific patent studies and strategies in more detail.

Stephen Glazier, a partner in the Washington, D.C., law firm K&L Gates LLP, specializes in patents, corporate transactions, and disputes. Write to Stephen at stephen.glazier@klgates.com.

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