Monday May 26, 2008

The Patent Arms Race

There's quite a bit in the press these days about companies (surprisingly, some very large ones) aggressively investing to expand their IP portfolios by purchasing patents or filing for patents on anything that can be imagined - often without stopping to consider whether the "innovation" has utility and is truly novel and non-obvious. Sun is often approached by companies looking to purchase patents (a reflection of the value of our IP) and at times we do sell patents under the right terms, conditions and circumstances.

To some degree, this topic has a very Cold War feel to it with companies growing patent stockpiles to use if attacked or as a form of "mutual deterrence". But, at some point, a company needs to ask how many patents it really needs. And, that's exactly what we did about three years ago. Up to that time Sun was filing well over 1,000 patent applications per year. But, in 2005, we made the decision to reduce our patent filings to the point that we had about 700 patents issued last year. And this number may decline in the future. While this is still a sizable number for most companies, it is a significant decline for Sun and occurs during a period in which we have more innovation than at any point in Sun's history.

Why the change? Part of the reason is financial. On average, it costs more than $20,000 to obtain a U.S. patent and this figure grows significantly when you file around the world. Also, this amount does not include annual annuities required to keep a patent in effect. Being selective in what you patent can result in significant savings. However, the bigger reason for the change is that our focus has shifted from quantity to quality. To this end, we have completely re-architected the manner in which we determine the innovations we will patent. As part of this process, inventions are reviewed by a panel of the chief technology officers from across our different lines of businesses with input from distinguished engineers and other experienced innovators. We apply a significant amount of scrutiny to determine whether something is truly innovative before we submit it to the PTO. For us, it doesn't make sense to patent everything. Rather, our focus is on patents that represent significant technological innovation. (In this regard, we were happy to see that the Federal Circuit will reconsider the patentability of business methods. )

Aside from our focus on patent quality, there is another reason we are filing fewer patents. It has to do with our business model. Unlike some companies, we don't have a corporate goal for revenue derived from patents (and patent litigation). Instead, we invest in patents to support our customers and the communities in which we participate. This support can be in the form of a defensive response to an attack on a community or in the form of the assurance provided by the patent licensing provisions of the CDDL or GPLv3. In the end, it's about delivering innovation to our customers and communities.

If they succeed, we succeed.

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