IBM and Software Patents

Peace-Loving Promoter of the Arms Race

IBM’s patent department is actively lobbying Europe to legalise software patents. They have invested millions in fighting example cases to leading European lawcourts such as the EPO’s Technical Boards of Appeal and the German Federal Court in order to soften and eventually remove European restrictions on patenting software.

IBM has threatened European politicians that IBM might close down local facilities if software patents are not legalised in Europe. IBM has also prevented the US government from conducting studies on the value of software patents for the national economy.

In the wake of the Opensource hype, IBM has touted “Peace, Love, Linux” and thereby given an impression of détente with respect to its nuclear arsenal of mutually assured destruction.

IBM has acquired several 1000 European software patents whose legal value is unclear. Given the great number of software patents in IBM’s hands, IBM is one of the few software companies who may have a genuine interest in software patentability. Once software patents become assertable in Europe, an IBM tax of several billion EUR per year may be levied on European software companies.

In 2010 IBM attacked a European opensource startup with 106 patents.

In 2010 IBM attacked a European opensource startup with 106 patents.

Richard Chapman says: “Having IBM at your side in the land of Open Source is sort of like having a large carnivore as a pet. They may play and cuddle with you but you never know if or when they will revert to their natural ways and have you for lunch.”

IBM's patent lawyers have fought most of the landmark cases through the European Patent Office (EPO) and the German courts in order to make software patentable in Europe. In 2000, IBM's chief lawyer, Fritz Teufel, pressed a spellcheck patent all the way to the highest court and obtained a (somewhat ambiguous) legalisation of computer program claims. In 1998 IBM obtained the same from the EPO.

Moreover IBM representatives were active in various organisations and lobbied governments to permit software patents. In Sep 2000 The German Informatics Society (Gesellschaft für Informatik) published pro software patent press releases that received authoritative commenting by the association's vice president, Andrea Grimm, who was at the time an IBM manager. When questioned by some critical members of GI, Ms Grimm stated that IBM is against trivial software patents and that software patents can harmoniously coexist with opensource software.

IBM patent department representatives gave strong statements in favor of software patentability at several meetings at EU and national levels. In private meetings with government officials in 1997/98 they have pressure governments to push the European patent legislation toward official recognition of software patetents and announce that IBM will make its investments in a specific country dependent on that country's government's favorable behavior.

IBM has for many years sponsored the Software Patents Institute, which failed to solve the problem of software prior art while consuming a lot of state and industry money. In 1998, IBM exerted pressure on the Clinton administration to prevent one of the president's advisers from ordering a thourough survey of patent quality and of the effects of the recent expansion of patentability.

see Aborted Whitehouse Study on Software Patents 1998

Around 1990, IBM was not aggressively asserting its software patents but rather using them to gain access to key innovations of competitors, as IBM manager Roger Smith explained at the time.

Business Week had an article about how IBM uses its patents to press money out of the American software industry. This amount is enough to build many IBM business centers throughout Europe. The question is only, whether Europe should accept the IBM tax or not rather do something on its own to foster the development of software.


Business Week: March 17, 1997


Big Blue holds more software patents than any other company in the world. That's great for bragging rights, but it does little for the bottom line. Now, however, IBM sees money in that trove of intellectual property--and its efforts to collect are making other software companies hopping mad. Lawyers for Big Blue are searching for software companies that it says should be paying royalties but aren't. Over the past several months, IBM has been quietly pursuing patent claims against such well-known software companies as Oracle, Computer Associates, Adobe Systems, Autodesk, Intuit, and Informix. IBM is also pressing a software claim against computer maker Sequent Computer Systems Inc.


Now, Reback is hurling charges against IBM similar to those he leveled at Microsoft. "IBM shows up the same way someone might demand protection money," he says. Officials at the companies confirm that IBM has contacted them, but most refuse to talk publicly. Collecting the patent royalties could add millions to IBM's net profits. In 1995--the last year IBM released figures--the company took in $650 million from royalties on all patents, software and hardware alike. Insiders say that senior managers believe IBM could collect $1 billion a year from its patents.

When IBM strikes a royalty agreement, it collects 1% to 5% of the retail price of a product using the covered technology. That's a sliding scale depending on the number of patents involved. If IBM can collect royalties from those companies using its approximately 2,500 U.S. software patents, it could reap almost as much from software as the $200 million in royalties it gets from PC makers. Reback says he was told IBM asked one software maker to pay $30 million to $40 million a year.

Indeed, some folks in the computer and software businesses fear that the whole industry could wind up paying a 1% to 5% tax to IBM. "It's hard to be in the computing business--hardware or software--and not infringe on a couple of dozen IBM patents, if not more," says Greg Aharonian, a patent consultant. Meanwhile, other technology companies are following IBM's lead. Says Richard A. McGinn, president of Lucent Technologies Inc.: "We've seen IBM become much more aggressive, and we are, too."

IBM has patented everything from the software to automatically return the cursor to the start of the next line on a computer screen to a state-of-the-art virus-detection program. So far, it has made claims against companies by invoking patents including a spell-check function and techniques for how a database program handles queries and runs on so-called parallel-processing computers.

Software companies aren't eager to settle. Intuit Inc., for one, rejected a patent license deal that IBM offered. Some companies are afraid that paying now will set a precedent, making it harder to say no later. "If we sign up with IBM today, then what happens in three or five years, when the patent agreement expires?" asks Oracle Corp. patent attorney Allen Wagner. With all the skirmishing that lies ahead, this dispute is still in Version 1.0.

IBM is one of the few companies in the software area that speak independently and with a certain degree of coherence between the departments about their patent policy.

The speeches by IBM patent law experts such as David Kappos can be astonishing. On 2001-10-20 at a hearing in London, Kappos incurred the wrath of european patent lawyers by criticising the effects of business method patents and trivial patents on the economy and asking the people from the European Commission not to follow the USA but rather to apply stricter standards of "technical contribution" and non-obviousness. When vocal patent lawyers such as Jürgen Betten protested, saying that IBM was profiting most of all from this system and now apparently "once again, as in the 70s" turning its back on their allies, Kappos responded along the lines of:

For us as a company adjusting to whatever system there is is a question of survival. If the mayor hands out guns to everybody in town, you can bet IBM is going to get some of the best guns. That doesn't mean that we are necessarily in favor of a liberal gun policy.

This did not prevent IBM from factually doing everything to push software patentability in Europe. They merely took a more cautious rhetoric, and it seems that they are, unlike GE and some other american companies, not doing this merely because the patent department follows a patent movement agenda, but also because they do not want their server market to be blocked by business method patents, of which IBM does not have so many yet. This is indeed similar to their motivation to oppose software patents in the 1970s.

Perhaps IBM is not quite united on this issue. In its upcoming UK Patent Orifice rally in Brussels, the British patent movement invited Fritz Teufel instead of David Kappos. As a pure lawyer, Teufel is unlikely to change the hardline views which were the keys of his successes in european courts until now.

Although IBM may be earning substantial revenues from its large collection of trivial software patents, it is not sure that unlimited patentability is in the best interest even of IBM. Patent managment generates costs that were not considered in the above calculations. Specialised litigation companies acquire patents in order to go after giants. IBM could perhaps be even more profitable if it didn't dedicate so much of its ressources to this type of warfare. Building the business strategy on patents is increasingly appearing incoherent with IBM's strong support for opensource software and the significant business it has generated therefrom.
In an interview from 2002/02, a leading developper working for IBM explained some aspects of IBM's patent policy and its conflict with the policy of supporting GNU/Linux.

Dr. Karl-Heinz Strassemeyer basically said:

  • IBM does not ship any free software that infringes on patents.[1]
  • IBM only submits patches to the Linux kernel after a formal procedure of patent clearance
  • IBM does not do distributions because the risk of infringing a patent that way is too high.
  • IBM does not deploy Linux in embedded systems of devices which it sells because someone might find that the kernel infringes on a patent and then sue IBM.

As explained above, IBM has become a favorite target of specialised patent litigation companies. IBM attracts such companies more than any small Linux distributor at present.

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