3 min read

How To Avoid The Patent Trap

IBM's lawsuit against Amazon highlights the need for patent reform and raises a question: Are big tech vendors using their massive patent portfolios to stifle innovation?

Like IBM, Microsoft has released internally developed technology, some of it patented. In September, Microsoft said developers were free to use its Web services specifications, and earlier this month it did the same with its virtual hard drive image format. "Every individual and organization in the world" can use the technology, Microsoft declared generously, adding that the offer stands "forever."

Last week, Microsoft added its Sender ID technology, which helps identify the source of e-mail, to the components available under its so-called Open Specification Promise. "There are some technologies that we think are critical for broad industry adoption," says Jason Matusow, senior director of IP and licensing. OSP is "an irrevocable promise" that developers can use these Microsoft technologies without fear of being sued or being forced to pay license fees, he says. At the same time, Microsoft has set a goal to cut its intellectual property "deficit." It paid about $1 billion in licensing fees last year but brought in just $100 million.

Not everyone buys the patent-reform agenda of the big tech companies. Hans Hxu, founder of online gift registry, says the industry's large players are more interested in the appearance of IP openness than in practicing what they preach. "IBM patents almost everything they do, then they sit on it. That doesn't do much to encourage innovation," says Hxu, a McKinsey consultant before launching Felicite.

Other critics suggest the vendors' moves are aimed at cementing their advantages at a time when they face rising competition from startups. In an August essay, Harvard Law School professor and tech entrepreneur James Moore argued that the collaborative patent review process proposed by IBM, Microsoft, and others will result in fewer patents being issued because it will give examiners more ammunition to shoot down applications. "If fewer patents are issued, but existing patents are not revoked, IBM and Microsoft win because they already possess vast existing portfolios," Moore writes.

Some Web 2.0 companies dismiss IBM's argument that business-method patents protect obvious ideas. "Everything is obvious after someone has done it," says a spokesman for online movie renter Netflix, which has patents on its queue-ordering system--and is suing Blockbuster for allegedly copying the system.

Small tech companies are taking matters into their own hands, forming patent cooperatives through which IP is shared. Search company Wink participates in Creative Commons, a group that encourages sharing of copyrights and GNU open source licenses. But there's a line between sharing and protecting intellectual property that creates competitive advantage, says Wink CEO Michael Tanne. "When companies have invested in the development of technologies, they really ought to be able to protect it," Tanne says.

How these issues are resolved will influence how tech innovations are developed and commercialized in the years ahead. Too many lengthy and expensive legal battles will persuade IT departments to stick with familiar technology. That's something tech vendors should consider as they take one another to court.

with Eric Chabrow

Illustration by Chris Windsor/Stone

Editor's Choice
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing
Jessica Davis, Senior Editor
Richard Pallardy, Freelance Writer
Carrie Pallardy, Contributing Reporter
John Edwards, Technology Journalist & Author
Carlo Massimo, Contributing Writer
Salvatore Salamone, Managing Editor, Network Computing