Burning the Ships…Advice for Top Venture Capital Firms

Today I attended the GSU Corporate Intellectual Property Roundtable with guest speaker, Marshall Phelps.

Marshall oversaw Intellectual Property and Licensing at IBM for 28 years and then went on to work for Microsoft as Corporate VP of IP Policy and Strategy responsible for setting the global Intellectual Property Strategies and Policies for the company (comprising well over 60,000 patents and patent applications worldwide). He also co-authored a book entitled Burning the Ships: Intellectual Property and the Transformation of Microsoft which describes Microsoft’s radical overhauling of its intellectual property (IP) strategy.

This roundtable series is a partnership initiative with the Georgia State University College of Law and the J. Mack Robinson College of Business and provides the premier forum for the exchange of intellectual property ideas, best practices, information, and networking, exclusively for corporate attorneys and business people. 

The roundtable is organized by Kent Stier, Merchant & Gould, and Jackie Hutter, The Hutter Group, and is one of the initiatives of the GSU Intellectual Property Advisory Board.

Marshall opened his presentation by discussing his experience at IBM in building its $2 billion patent portfolio. He shared a story about his initial meeting with Lou Gerstner and how he convinced him that there is value in licensing intellectual property. In the first two years alone, Marshall achieved $1 billion at a cost of $28 million and signed 1,000+ cross license agreements resulting in no patent litigation over ten years. Not a bad return on investment.

The second half of Marshall’s presentation focused on his experience at Microsoft and how intellectual property changed the culture of the company from closed to open minded. As a result, Microsoft now has over 63,000 patents and considered one of the most strategic portfolios in the world.  He also spoke about the importance of an IP strategy fulfilling the company business needs vs. the other way around. 

One thing I found rather interesting is the idea of forward looking patents. Marshall described a process where he would gather Bill Gates and senior people within Microsoft four times a year to discuss where the industry would be in five years. This envisioning process allowed patent attorneys to begin the process of filing patents at a rate of 10-20 a year. An example is cloud computing. Bill discussed this several years ago, which is beginning to bear fruit five years later.

Marshall’s advice for top venture capital firms and early to expansion stage companies is to stress the importance of patents. He believes patents allow the small guys to create competitive advantage.  For example, Microsoft Windows has over 53 million lines of code and every line represents a potential for patent infringement.

Lastly, I hear that the United States Supreme Court will issue its much anticipated decision in Bilski v. Kappos sometime this week. This could have serious implications calling into question whether business methods are patentable.