IBM's Patently Good Idea

IBM (NYSE: IBM  ) , the nation's largest patentholder, announced this week that it's opening up its entire portfolio of patent applications for public review.

On the face of it, the idea sounds crazy. After all, companies fight to keep their patents secret so they can hide their processes and their intentions about future products from competitors. And Big Blue is indeed taking a huge gamble, because what it is doing will allow competitors to get just such a sneak peak at its intellectual property.

From a broader perspective, however, one can argue that IBM's management is demonstrating something rarely seen in today's hypercompetitive business environment -- genuine leadership.

Today, patents often take three to four years to work their through the U.S. Patent and Trade Office (USPTO), and the growing number of new patents being churned out as a result of advances in biotechnology, nanotechnology, and software is placing additional strain on the system. As a result, intellectual property now often hinders, rather than promotes, economic growth.

IBM's move seeks to reverse this unhealthy process by putting the power of the open-source movement to work on patents. The idea is that interested parties -- most likely academics and corporate technologists -- will receive emails or RSS alerts about various patent applications that meet specific criteria. These individuals can then review the content of the patents and provide feedback to the patent examiners.

The process is expected to be especially beneficial in the area of reviewing "prior art" -- broadly defined as information previously available to the public and related to the patent. It should help patent examiners spot information, otherwise easily overlooked, that could be helpful in rendering a wise decision on a patent.

It's also hoped that this open-source environment will reduce the number of patent submissions of dubious merit by allowing the patent community to essentially rank applications. And by freeing up USPTO patent examiners to concentrate their time and effort only on the most legitimate patents, the hope is that the most worthy patents will be approved sooner.

That's one advantage of this system. A second one is that by cutting down on the number of patent applications, the time and resources currently being expended on application reviews by corporate lawyers should fall. And third, by reducing the number of questionable and bogus patents, the number of patent disputes and amount of patent litigation should decline as well. These latter two benefits, by the way, may have the added benefit of allowing otherwise bright and able lawyers to become more productive members of the global economy.

As part of its announcement, IBM also put out a plea for two additional changes to the traditional system. First, it called for all patents to be clearly and honestly labeled, given that corporations currently often hide behind dummy fronts to mask their involvement. Second, IBM is asking that patents no longer be granted on the basis of a broad description of business ideas and methods -- such as the infamous patent Amazon.com (Nasdaq: AMZN  ) applied for a few years ago on the "one-click" shopping method.

IBM's proposals are wonderful ideas. The New York Times reports the welcome news that Microsoft (Nasdaq: MSFT  ) , General Electric (NYSE: GE  ) , Hewlett-Packard (NYSE: HPQ  ) , and Intel (Nasdaq: INTC  ) have now also agreed to open some of their patents to an open-source, peer-review process.

These companies -- as well as scores of other global corporations, such as Matsushita, Samsung, Toshiba, and Sony -- would be wise to follow IBM's lead and jump all the way in. The patent system as it currently stands is threatening to bog down economic growth, and if the federal government can't fix the mess, it's up to those with the most skin in the game to do so themselves.

Interested in other Foolishness about IBM? Check out these articles:

Microsoft and Intel areMotley Fool Inside Valuerecommendations, and Amazon.com is aMotley Fool Stock Advisorpick. All of our newsletters come with a free 30-day trial.

Fool contributor Jack Uldrich holds no patents. He does, however, own stock in IBM, Microsoft, GE, and Intel. The Fool has a strict disclosure policy.


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