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Should you get into the patent business?

Fred Kesinger

One of my CIO colleagues called me the other day. I’ll call him Jack. He said “Do you know anything about patents?”

“No. Why?” I answered.

He went on to explain that his company had developed some new software that provided a significant competitive advantage and the company wanted to patent the software.

“Why don’t you talk to your company’s legal counsel?” I asked, knowing full well that his Fortune 200 Company had scads of internal lawyers.

Jack said, “I did. They said they didn’t have the skills or the time, and it was an IT problem.”

“What makes your software so unique that you want to patent it?” I asked in my very professional manner.

Jack went on to explain that this new software package was so new and innovative that it could make or break his organization. He said it was so completely innovative that it would increase their competitive advantage. “Tenfold?” I asked. “More like a hundred or a thousand fold,” he responded. He said it would be “a market maker.”

So far in my illustrious career I have managed to avoid this subject with any lawyers. I was intrigued by Jack’s request so I started to dig a little on the Internet. I was surprised to find there is more activity a gold rush as it were in this area than I knew about.

In the Oct. 1 edition of CIO magazine, Kim Nash describes how a number of very successful companies have engaged in patenting new innovative solutions that help them lock in strategic advantage. The author notes that this current trend is particularly visible in the healthcare, automotive, retail, insurance, consulting and airlines industries. For example:

* Allstate Insurance has more than 100 patents pending and sees patenting as a powerful weapon.

* Bank of America has developed a “life calendar” to help guide financial decisions based upon events such as marriage, children and job loss.

* General Motors devised a safe way to text while driving.

* Wal-Mart invented a system to enable consumers to sign up for a Wal-Mart credit card while filling up your car’s gas tank.

* UPS has obtained over 300 such patents in the United States, 69 of them since 2010.

After getting my feet back on solid terra firma and recovering from the shock, I started wondering why these well-established companies were rushing to the lawyer’s office. Brian LeClaire, CIO and chief service officer at Humana, says “To remain competitive, intellectual property becomes an important differentiator.”

Teresa Lunt, vice president and lab director at Palo Alto Research Center, says CIOs should develop defensive and offensive patent strategies to create and keep competitive advantage.

As I recovered from the shock knowing as an IT consultant there were activities underway in the industry that I should know about and be aware of. So I started to learn how you went about patenting various IT components.

1. Obtain knowledgeable legal counsel. Someone either internal or external that is familiar with this nascent activity.

2. Determine if your company really wants to seek a patent, knowing full well that certain details of the product or service may become public information during the patent process.

3. Monitor other activities in the industry, including competitors, to see if they are using, copying or pilfering your intellectual property (IP).

4. Move as quickly as possible to protect the enterprise’s knowledge assets.

Not everyone is happy about the rush to the patent office. Rachael King writes in the Wall Street Journal that there are number of CIOs that think the rush to the patent office limits innovation and creativity. Daniel Stroot, CIO of Allianz Global Investors of America says “By any measure, patent litigation is reducing competition and its ruining innovation.” He feels, “We are headed in the wrong direction when it comes to innovation in the IT space.”

Stuart Kipplemen, CIO of Covanta Energy, a renewable energy company, wondered how Samsung and Apple could have gotten to this point. Filing a patent was such a complicated and expensive process that it’s hard to believe these companies could get to this point without knowing that something is or is not patented.” He feels that this attitude will discourage a lot of new startup company and slow the pace of innovation.

This was a real wake up call for me. It seems to me that we (the CIO world) have quickly realized that delivering value to the business means moving beyond the cost efficiencies and process optimization, speed to market, and putting customer information to strategic use. My take is that successful CIOs in the 21st century now have to proactively manage the convergence of social media, big data and analytics, mobile technology and security in addition to patenting new, innovation products and processes.

So I called my friend, Jack. “Jack, you need to take over leadership of this patent activity for your company working with legal counsel, and make sure patenting of innovative solutions is working for your company. Good luck.” And I hung up.

Fred Kesinger is a veteran CIO with significant experience in managing global IT in a fast-paced 21st century environment. Contact him at 775-284-4210 or email Fred.Kesinger@averillconsulting.com.