The key subject in most of my presentations this year and a recurring theme in this blog has been the rapid rate of change taking place in technology and business, and how those changes relate to the focus on innovation all around us. And as has been true throughout history, major changes in technology and business are accompanied by major changes in society, including in education, the nature of work and government policies. While less tangible and harder to quantify, these societal changes require at least as high a degree of careful management as the changes taking place in technology and business.
Intellectual property (IP) is one of those areas undergoing rapid change and requiring the closest attention, especially in our increasingly knowledge-based society. Wikipedia defines IP in the following way: "The term intellectual property reflects the idea that this subject matter is the product of the mind or the intellect, and that IP rights may be protected at law in the same way as any other form of property." In its December 2004 report, the National Innovation Initiative explicitly calls for the creation of a 21st century IP regime as one of its top recommendations and it calls intellectual property "a cornerstone of the innovation economy."
How should we think of IP in the 21st century? In an opinion piece in Newsweek's issue on "The Knowledge Revolution," IBM Chairman and CEO Sam Palmisano observes: "More and more of the innovation that truly matters today functions not only as intellectual property (the brilliant work of individuals), but as intellectual capital (a deep well of knowledge created collaboratively)."
Looking at IP as capital to be invested and put to work on behalf of many, instead of solely as property that benefits only one, is the kind of major paradigm change that opens the mind to new possibilities. As we know, an idea or invention can have many potential benefits beyond those originally imagined by its creator. In an increasingly collaborative, interconnected global economy, there is a compelling and growing societal interest in bringing new intellectual property to the marketplace and maximizing the overall amount and quality of innovation.
Further, it's worth remembering that ownership of intellectual property is different from ownership of physical goods. Unlike physical goods, IP is not subject to limitations in supply. My use of an idea, invention or content does not diminish someone else's ability to make use of it as well. Such distinctions between IP and other forms of proprerty are the basis for key policy underpinnings of IP laws, namely that inventors are given a limited set of exclusive rights to their inventions for the purpose of promoting innovation.
So what happens if, in an effort to exact windfall profits, some IP owners actually reduce or block innovation? What if they tie it up in litigation, without an appropriate commercial justification, thereby making innovation very difficult and expensive. In particular, what happens if the owners of the IP are not the companies and/or individuals who created the IP to begin with, but have simply been established for the sole purpose of buying up IP, demanding hefty licenses from businesses and tying up those businesses in litigation if they do not acquiesce? Everyone has the right to profit from his or her inventions, but such profits should be realized through the proper functioning of the market in proportion to the idea's innovative contribution.
Businesses generally behave reasonably with each other when negotiating IP licenses, since otherwise their own brands and reputations will be hurt and they may lose customers in the marketplace. However, since IP-only companies do not have any products, services or customers of their own, they have no such checks and balances and may thus feel free to try to try to extract unreasonable license fees from other businesses. We run the risk of creating an asymmetrical situation where one side has little to lose from creating impediments to innovation.
When considering IP as capital, you start thinking of different ways of putting IP to work, not just for your own benefit but for those of society as a whole. It leads you to different kinds of actions. For example, just as businesses have supported open research and open relationships with the universities that conduct the bulk of such research, they are now increasingly supporting collaborative innovation with open communities, including patent pledges, because of the benefits we all get from such work. Early in 2005 IBM made a patent pledge that granted access to more than 500 software patents to individuals and groups working on open source software like Linux. More recently we pledged access to our full patent portfolio for the development of selected open healthcare and education software standards.
This week, we are taking another major step by announcing a new licensing program to promote collaborative innovation with venture capitalists (VCs) and start-up businesses, giving them access to IBM patents on affordable, simplified terms and letting start-ups partner with IBM's technical community to access the knowledge behind the patents. The IBM Ventures in Collaboration Program is a catalyst to accelerate young companies' innovative efforts and bring their new ideas to market faster.
These are early days, and the actions we have taken are just a first step -- intended in large part to spark a broader dialogue on this important topic. It is crucial that businesses and nations adopt IP practices appropriate to innovation in the 21st century. On the one hand, we need to have the right programs for universities, research labs and open communities where many new ideas originate. On the other, we need the right programs to make sure that businesses get these ideas to the marketplace quickly and at reasonable costs, especially small businesses and startups where most of the new jobs come from. Balancing all the alternatives in the IP spectrum, from open and collaborative to proprietary, is itself one of the key areas that requires our collective attention, wisdom, and . . . innovation.