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.

Sunday Apr 13, 2008

Let me try that answer again.

Last month, I was invited to speak to the USF Law School Intellectual Property and Cyberlaw Association. A nice group of students all with a shared interest in intellectual property law. I'm not a big fan of presentations, so I spent a few minutes talking about Sun and then opened it up for questions. And, there were many ranging from "how do you monetize products that you give away" to "what is the Peer to Patent project" to "what's your job like"? It was a very fun session.

But as I drove back to the office, I reflected on one particular question and wished that I had handled it differently. It was asked by a 3L (third year law student graduating this year) who wanted to know whether I thought the current macro-economic conditions were going to impact employment opportunities for this year's graduates. My response was that I've seen several of these downturns in my career and that they are cyclical. I also pointed out that the current economic conditions will likely impact every industry - except perhaps the energy sector. All in all, not a very comforting response on my part.

Here's what I should have added.

Despite the present economic environment, I can't think of a better area for future legal career opportunities than intellectual property law. Consider for a moment a few of the recent and more interesting IP cases like Viacom v. Google, Eros v. John Doe, Fair Housing Council of San Fernando Valley v. Roomates.com and A.V. v. iParadigms. Then realize that the technologies and business models underlying each dispute haven't existed much longer than you have been in law school. The pace of innovation around us is accelerating - not declining. Each year the universities of the world graduate even more engineering and computer science students with the facility to manipulate 1s and 0s in inventive ways. Every day there are new businesses emerging based on the digital economy that will touch every aspect of our lives whether it be in health care, entertainment, politics or consumerism.

And, there's something else to consider. What I have described here are U.S. examples. Current estimates are that only about 20% of the world's population is connected to the internet. Without doubt, when the rest of the world is fully able to participate in the digital community, even more innovation will result.

So, Mr. 3L. Take a deep breath. Spend the next few months preparing for finals and the Bar Exam. And, take comfort in the fact that even during this short period the intellectual property landscape will have changed - creating opportunities that you haven't imagined.

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