IBM did some justifiable crowing recently when official government tallies confirmed that for the 10th consecutive year, it had garnered more U.S. patents than any other company on the planet, adding 3,288 patents to its collection in 2002. IBM says its massive patent portfolio has generated roughly $10 billion in licensing revenues over the past decade.The numbers are impressive, but even more noteworthy is IBM’s open licensing policy: Big Blue makes nonexclusive licensing deals with just about anyone willing to pay for access to its technology. The strategy has served the company well over the years. IBM won big, for instance, when it nonexclusively licensed its seminal patents on the personal computer and PC “clones” flooded the marketplace. Such PC powerhouses as Dell, Gateway, and Compaq-to name a few licensees-owe their very existence to this policy. And IBM has enjoyed a healthy stream of licensing revenues.
But let’s compare Big Blue’s record to that of another esteemed U.S. engine of innovation-one we might call Big Ivory.
I’m talking, of course, about the U.S. universities and nonprofit research institutions that make up the proverbial ivory tower. According to the most recent figures available from the Association of University Technology Managers, Big Ivory garnered 3,598 U.S. patents in fiscal year 2000 (compared with IBM’s 2,886 that calendar year). With those patents alone, Big Ivory generated $1.24 billion in licensing revenues-in the same ballpark as the “more than $1 billion” reported by IBM during that time. Here’s the rub: in stark contrast to IBM, roughly half of Big Ivory’s licenses are granted on an exclusive basis. In other words, universities regularly make deals in which a single company gains complete control over a patented technology.
Some technology-licensing managers at universities argue that exclusive arrangements are the only way to bring embryonic technologies to market. In theory, that’s a sound argument. It makes sense for a university to grant exclusivity to a startup that is founded specifically to bring a particular bit of research to market. (Some 90 percent of such arrangements with universities are exclusive deals.) But startups aren’t the only beneficiaries. Figures from the university technology managers show that more than one-third of the technology licenses academia grants to large, established companies are exclusive deals as well. This is bad technology policy.