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11/1/2002
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Protect And Serve

It's important to protect your company's intellectual property. But are some businesses going too far?

A six-person firm called Shortpath Inc. that develops and licenses a portal for managing office buildings recently applied for two patents -- the first involving a way to manage a building's infrastructure needs, the second a way to collaborate with the companies that service the building -- based on its unique method of combining a database with a Web application. CIO and executive VP Jeffrey Friedman holds no illusions about the social importance of Shortpath's pending patents, but he's steadfast in his belief that there's significant business value in the intellectual property behind his 2-year-old company's products. "Shortpath is no cure for cancer, but it can sure make life in a building better," he says.

Shortpath is one small soldier in the constant battle for companies to protect their intellectual property. A virtual arms race exists among technology vendors such as Hewlett-Packard, IBM, and Microsoft to patent as many technology inventions as they can. And high-profile lawsuits involving the ownership of computer-enabled processes, such as a recent patent suit brought against eBay Inc. over its online-auction process that's scheduled for trial early next year, are a reminder that the legal rules around IT and intellectual property haven't all been written.

Jeffrey Friedman, CIO and executive VP of Shortpath, Inc. Photo by Stephen Aviano.

It's not a cure for cancer, but there's significant business value in the intellectual property that's behind Shortpath's products, CIO Friedman says.
As the deft use of IT continues to drive business innovation, and companies look to protect their most valuable assets, business-technology managers at times must lead the way. "IT supervisors need to get educated about IP intellectual property," says James Kalyvas, chairman of the E-business and IT practice at law firm Foley & Lardner. "Because they are the translators of technology for the business people, they need to have the best understanding of IP. It's an asset of the company, it needs to be recognized, and it needs to be protected, whether it's coming in or going out."

Business-technology managers need to know how to recognize ideas and inventions for the potential intellectual property they are. They also must know how to keep key assets from walking out the door with vendors, third-party consultants, or ex-employees. And they must know the issues and potential liabilities concerning patented IT.

Are IT managers ready? "It's quite possible that IT professionals are unaware of the patent protection that's available to them," says Bruce Lagerman, a former patent attorney who's now president of DE Technologies, which was recently granted a controversial patent for automating the paperwork involved in international commerce. DE Technologies' patent, like the one owned by MercExchange LLC, which is suing eBay over the process of online auctions, is what's commonly referred to as a business-method patent. Business-method patents, which involve a process rather than a device or a formula, proliferated in the late 1990s along with the Internet business boom. Such patents protect obvious or vague descriptions of standard business processes, critics say, and they've pressed the U.S. Patent and Trademark Office to be more careful with its approvals. Partly as a result, it took DE Technologies five years and more than $200,000 to get its patent approved.

Applying for a patent is only one way companies can protect their intellectual property. There are also copyright, trademark, and trade-secret protections (see story, "Protection: Know The Methods"). But a patent, with its promise of a 20-year monopoly over an area of technology, is often the most potent weapon. "Applying for a patent is like buying a lottery ticket, only with a bigger payoff," says Bradley Wright, a patent attorney at Banner & Witcoff.

There are good reasons to pursue patents despite the difficulty involved, says John Ferrell, a patent attorney and head of the intellectual-property practice at Carr & Ferrell. Most obviously, they can become revenue generators: IBM got $1.2 billion in licensing fees last year from its patents and other intellectual property. Patents provide a tangible measure of return on investment for a company's research and development dollars, and they help prevent inventions from leaving the company. If a company has a large number of patents, it can use them as "defensive bargaining" in case of patent litigation by a competitor -- sue me, and I'll sue you.

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