Patent tidbits

A few quick tidbits from the patent wars:

First, on Monday, the Center for America Progress had an event which included a panel on patent reform (see second panel of the event video Enabling Economic Recovery Through Innovation -- more on the first panel on innovation later). The panel was an expansion of a series of articles on Patent Reform 101 in the Centers' new publication Science Progress. Worth reading the papers and listening to the video to get a good idea of where patent reform may be going in the new Congress and Administration.

Second, today's Wall Street Journal has an interesting take on the latest patenting data - Two Patent Paths for Tech Giants:

A report being released Wednesday shows that when it comes to intellectual property, two of the world's largest technology companies are on diverging paths.

In 2008, International Business Machines Corp. generated more U.S. patents than any other company, according to data from the U.S. Patent and Trademark Office compiled by research firm IFI Patent Intelligence. IBM was granted 4,186 patents last year, IFI said, up from 3,125 in 2007. It was the 16th consecutive year that IBM led the patent pack.

Hewlett-Packard Co., in contrast, produced 1,424 patents last year, down from 1,466 in 2007. That put H-P, which continues a strategy of limiting its patent activity, tenth on the 2008 list after finishing ninth in 2007.

H-P was once trying to compete with IBM as the most prolific patent producer. In 2005, for instance, H-P was the third-biggest producer of patents behind IBM's number one spot. But after Chief Executive Mark Hurd arrived at H-P in 2005, the Palo Alto, Calif., company spent less time and money filing new patents as the CEO strove to make the H-P more efficient, said Kevin Light, a deputy general counsel and vice president for intellectual property at H-P.

H-P has been focusing on "the quality of the patents that we seek, as opposed to the quantity," Mr. Light said. As a result, he added, H-P is seeking broad patents that relate directly to its main businesses, avoiding the costs of filing patents that may relate to more specific processes.

H-P's current strategy is a departure from the approach under former CEO Carly Fiorina, who tried to boost the company's profile as an innovator, said Rich Doherty, an analyst the The Envisioneering Group who follows patent filings. Mr. Hurd, in contrast, seems more focused on shorter-term financial results, he said. He also said H-P seems to be keeping secret certain innovations, especially in its services division, rather than filing patents. "They've turned the ratio of public patents to private proprietary advantage," he said.

In part, this divergence in strategies may have to do with how the two companies view their patent portfolio. IBM has an aggressive licensing strategy to monetize their patents (which, interestingly includes moving certain patents into the commons/open source). They see patents as a revenue generator. HP may be looking more to a patents-as-protection strategy. Just a guess.

Third, on the subject of monetization of patents, there is this story on Cash-Strapped Technology Small-Caps Hold Patent Sales: "Small-cap technology companies from Silicon Valley to Israel, struggling to raise enough money to survive amid the credit crisis, are selling prized patents to stay in business."

In some cases, this is a forced monetization -- needing the cash and not being able to raise it through the credit markets. But, as the story points out, this method of raising funds is not necessarily bad:

“They can essentially raise cash without diluting existing investors,” said Andrew Ramer, managing director of the transaction practice at Ocean Tomo LLC, a Chicago-based merchant bank that auctions intellectual property collections for smaller businesses and individuals. “Selling their patents and keeping a license back allows companies to have their cake and eat it, too.”

That strategy will, I believe, only grow in the future due to the combination of continued closed credit markets, greater awareness of the benefits of the strategy and lower transaction costs as such activities become more commonplace.