Working smart: Protecting and exploiting innovation through patents.

• Author: GREEN, ED

According to the old adage, there are two ways to get ahead in business -- working hard and working smart. Globalization, and in particular the global labor market with its low-cost offshore manufacturing opportunities, makes gaining a business advantage by working harder an increasingly difficult prospect. That leaves working smart.

Federal Reserve Chairman Alan Greenspan, along with many economists, has attributed the recent unprecedented U.S. economic expansion to increased productivity, primarily brought about by technological innovation. By utilizing advanced technology, productivity continues to increase. Successful businesses also gain an edge by designing innovation into their products, manufacturing and distributing products more efficiently, marketing under brand names that connect with consumers and through innovation in the very way they conduct their business. Translating innovation to the bottom line is the realm of intellectual property law, and one of the most powerful tools of IP law is the utility patent.

What is a patent?

A U.S. patent is a property right that gives its owner exclusive right to make, use, sell, offer for sale or import the innovation or improvement that comprises the patented subject matter. The scope of subject matter that may be protected is extremely broad. The U.S. Supreme Court has defined patentable subject matter as "anything under the sun made by man."

Recent federal court decisions have confirmed that inventive concepts in software and innovative methods of doing business -- together, the coin of the realm in the global information economy -- are as fully protectable under the patent laws as steam engines or integrated-circuit electronics. What many businesses fail to appreciate is that a patent can protect a wide array of processes -- for manufacturing, marketing, sales and delivery of products -- as well as methods of using the products themselves.

Large corporations are well aware of the value of a patent portfolio. In 2000, for the eighth consecutive year, IBM was issued more U.S. patents than any other company. IBM's portfolio of nearly 34,000 patents generates in excess of $1 billion annually in patent licensing. This revenue, with little overhead and no cost of goods, flows straight to the bottom line.

Independent inventors and many startups also recognize the value of patent protection. Patents not only establish the credibility of ideas, but also are often vital to attracting and...