Intellectual Property Innovation and IP Infrastructure IP Solutions to Transform Innovation Into Advantage Saif Aziz – Director of Technology Alliance.

Intellectual Property Innovation and IP Infrastructure IP Solutions to Transform Innovation Into Advantage Saif Aziz – Director of Technology Alliance BM Greater China Group 1

Agenda What is IP Service Infrastructure Introduction
“The Optimized Growth of IP Marketplace” Service Infrastructure for the IP Marketplace What is IP Service Infrastructure Introduction Motivations IP Management Innovation and IP Infrastructure Capabilities

What is IP Service Infrastructure
A tactical infrastructure consisting of processes and tools to help companies unlock the power of global innovation networks and maximize IP value Delivers comprehensive view of the IP portfolio to decision makers Empowers employees to participate in the invention process A Services Infrastructure typically provides the know how and tools companies can use to define and implement their IP strategy Help business leaders assess their existing IP portfolio including patents, trademarks, service marks, trade secrets, copyrights, domain names, and publications Help companies identify gaps and exposures to align future inventing activities Improve the quality and value of a company’s IP portfolio A combination of tools, process and procedures to integrate best practices and manage the entire IP life-cycle

Introduction - The Changing Business Landscape
Top CEO business priority: “Growth driven by innovation” A new IP marketplace and economy is emerging The idea has become the product Increased competition for ideas Strong, global intellectual property systems encourage innovation Knowledge-based Economy IP Innovation Knowledge-based Economy relies on Innovation and Creation of IP 4

Introduction - IP Central to Economic Growth & Markets
US investment in intangible assets (>$1T/year) surpasses investment in tangibles “Intellectual property is the backbone of America's economy” U.S. Commerce Secretary Carlos Gutierrez Tangibles Japan intends to “bring about a nation founded on intellectual property” Japanese Prime Minister Junichiro Koizumi GDP Percentage Intangibles “The competition of the future world is a competition for Intellectual Property Rights” Chinese Premier Wen Jiabao New industries like financial services Universities: how do I manage International R&D ~80% of the value of modern companies comes from intangible assets Sources: US Federal Reserve – Nakamura, Ned Davis Research 5 5

External Innovation Sources Internal Innovation Sources
Introduction - New Sources of Ideas Innovation now comes as much from external sources as internal – complicating IP management and leverage External Innovation Sources Internal Innovation Sources Business partners Employees Customers Sales or service units Consultants R&D (internal) Competitors Other P&G…connect and develop Assns, trade orgs, conf boards Think tanks Academia Internet, blogs, bulletin boards 45% 35% 25% 15% 5% 5% 15% 25% 35% 45% Source: IBM Global CEO Study 2006 6

Introduction - Innovation Model
A Shared Foundation of Proprietary and Open Proprietary Innovation Advantages: Product uniqueness Speed-to-Market Open Innovation Advantages: Reduces cost Vendor choice Differentiation Standardization Company X

Introduction - Leveraging Intellectual Property
Revenue/ Business Value Income/Cost Savings Building on Standards X-Licensing Products Licensing M&A Pruning Solutions Divestiture Competitive Advantage Assignment Services Intellectual Property Alliance/JD Influence Freedom of Action Technology Leadership IP Policy Goodwill Regulatory Influence Quality Initiatives Open Innovation Litigation Open Standards Protection Community 8

Innovation and IP Infrastructure Capabilities
Unite inventor, legal and business teams Manage IP across geographies Innovation and IP Infrastructure Capture IP from global resources Analyze patent value Innovation and IP Infrastructure Capabilities It is a central source that unites the key stakeholders in the invention process – the inventors, the legal team and the business leaders. IBM operates in 170 countries and we’ve been using WPST to manage the IP we generate in all those countries, as well as where we file for patent protection. It has built in capabilities to analyze the value of patents. Our team constantly tracks all elements of the IP portfolio – from the pipeline of new incoming disclosures to the productivity of different divisions to the active portfolio for a particular technology area to potential monetization opportunities. Track monetization opportunities Monitor innovation performance 9

IP Management Framework
Not just managing a collection of patents Considers all Facets of Intellectual Property Lifecycle Informed by corporate objectives What does the company need from its patent portfolio? Why and how are inventions generated? What industries are most relevant? What is the market strategy? Who are the competitors? A team sport Requires active participation from all parts of the company A moving target Requires constant refinement and evolution Invention Management is key to creation and leveraging IP for business. This requires a Strategy, Plan and an Infrastructure to support the initiative

IP Management Framework
IP Strategy: Establish framework to align and integrate strategic organizational goals with technical community’s IP generating activities Focus R&D efforts toward under-served, high potential market opportunities Patent Landscape Analysis: Evaluate landscape and provide insight and methodologies to intelligently manage limited resources Identify new arenas of patentable subject matter Educate technical community on non-traditional patentable subject matter and methods to capture it IP Assessment: Identify gaps and risks in patent portfolio Outline best practices to close gaps IP Flight: Minimize flight within a dispersed R&D environment Identify methodologies to capture and retain IP International Expansion: Determine IP risks and opportunities for expansion into global markets Identify best practices to protect IP in foreign markets

Process for Designing a Strategy that Leverages IP
Plan Create Leverage Organizational/ IP assessment Develop IP strategy Change Management Enable a Culture of innovation Develop IP policies Drive and sustain innovation IP lifecycle management IP evaluation Protection mechanisms Monitor performance Market share expansion Competitive advantage IP Valuation and licensing Influence and goodwill Standards and open innovation 12

Sample Plan of Action – Education and Services
Lay the Foundation Create Build the Capability Leverage Mature the Capability Execute IP Strategy IP Enforcement IP Valuation IP assessment and Audit Utilize IP Tools IP commercialization Licensing IP landscape / SWOT Analysis Build IP portfolio Invention review board IP Business Models IP Promotion and Marketing Establishing an IP organization IP portfolio mgmt Invention evaluation Risk Mitigation Maximizing ROI Component Business Model Best practices from our own business… This is a methodology developed by IBM which has proven to be effective in: designing/re-designing organizations, making important management decisions, and guiding reengineering processes. It has been successfully deployed both within IBM and with our clients. The CBM will help us operationalize and build modules around each component. A CBM represents the architecture of a business. The columns divide the business by Capability (e.g. They answer the question: “What do we need to be good at?) and the rows divide the business by Operational Level: Direct = the strategic level, Control = the management level, Execute = the processing level At the intersection of the columns and rows are the Components- the building blocks of the business. Each component represents a set of activities that deliver a service within the overall business. Within each component, critical information about operationalizing that business competency are captured including: Business Purpose, Activities, Resources, Key Performance Indicators Performance Metrics Walk through CBM columns…. Develop IP Strategy Inventor Incentives Comms program Open Innovation Competitive Advantage IP Policies Quarterly invention mining / brain storming sessions IP Awareness and Training Targets & Metrics: Measure, Monitor, Adjust 13

IBM’s Best Practices for Effective IP Leverage: Complete Business and Cultural Integration
Centralized IP Management Offensive and defensive IP strategies Pro-active vs. reactive Continuous performance measurement and adjustments as necessary Targets with accountability Special IP Budget Data and analysis tools Documented Policies and Procedures IP Expertise Continuous education and communication Incentives – intrinsic and extrinsic IBM Global Business Units IP R&D and Business Partners Corporate and Legal Corporate and Legal comprises: Portfolio Managers IP Law HR Finance Executives – all the way up to the CEO and the board of directors Contracts Extended teams including: virtual law firm, outside counsel, admins andparalegals. Research and business partners includes: R&D Inventors DE’s and fellows IDTs Master Inventors JDAs and alliances Partnerships with others The Business: Products and services SWG, STG, RES, S&D, T&P, GBS

IP Innovation and Solutions
Set of Strategic IP Services, education and software tools customized to address bsuiness needs IP Software Tools IP Experts Services Experts At IBM IP experts work with clients and business partners to deliver first hand knowledge of IBM’s best practices Services experts work with clients to implement the IP solutions and execute IP strategy Range of 3rd party and proprietary software and tools to build and sustain and build IP capabilities 'IBM is now offering tools and services to assist clients/partners in managing IP for competitive advantage by enabling both offensive and defensive strategies that align with your business initiatives. Among other things we can help with promoting freedom to operate, the generation of new income streams, sales enablement, and disciplined R&D programs. In short, IBM can help you extend the role of IP management from the Chief Counsel's office to the rest of the C-suite. ' Helped a government research organization go from 2 patent applications to 20 and create a pipeline of over 50 inventions in less than 2 years Brought IP management and strategy expertise to start-up companies in a developing country so they could begin to effectively compete in the global market and begin to build portfolios desired by potential acquirers Built an Innovation Center of Excellence within an Eastern European country to create a venue for commercializing its high-tech capabilities and support partnerships with global companies and organizations Enabled a fortune 100 company to save hundreds of thousands of dollars by teaching them to better assess their portfolio by aligning it with their true business needs and establish internal processes for ensuring quality portfolio management 15

IP Business Cycle & Lifecycle Audiences
Innovate and Capture Manage and Monetize Analyze and Adjust Inventors IP Professionals Executives IBM IP Business Cycle When you decompose the lifecycle of the intellectual property business, it breaks down into three main categories: Innovate and Capture where you are harvesting the best ideas from your employees and ensuring the pipeline of new invention disclosures will meet your long-term business needs. Manage and Monetize, which focuses on taking all the IP from the entire organization and extracting the maximum value from it and finally Analyze and Adjust, this is a constant process and you have to have enough agility in your infrastructure to adjust to changing market dynamics and ensure your inventor community knows where to focus their efforts. We continue to refine this process and apply best practices from individual groups to the broader system. The tools we use have become much more sophisticated as they incorporate analytic capabilities and competitive insight and link more tightly with the business strategy to give us headlights into the future so we can proactively adjust before something becomes a problem. Additional details on each phase, probably don’t need to elaborate here… Innovate and Capture IBM obviously has a large infrastructure devoted to capturing our inventions. And by infrastructure I mean both the teams that manage the invention process as well as the tools they use. The core team for invention is our employees. We have 250,000 technical people around the world and an additional 150,000 non-technical employees who also participate in the invention process. This is an important point, it’s not just people in the labs doing the inventing – we encourage all employees to invent or to work with their technical counterparts to convert their idea into a patent. You never know where the next great idea will originate. We have several levels of distinction amongst our technical community to recognize prolific inventors. But we don’t passively wait for the inventions. We have a team of IP experts that identify a “needs list” and work with the inventors to generate new IP in specific technology areas. If we need additional IP in nanotubes for example, this team will assemble the various domain experts we have across the company and brainstorm with them until we have the ideas we need. The gatekeepers to the entire invention process are the folks on the invention review boards, and we have hundreds of IRBs across our divisions and sites. These teams review all incoming invention disclosures and decide which ones we pursue as patents vs. trade secrets vs. publish. Getting the right mix of people on these teams is very important since they are often the point of contact for the inventors. Part of their job is mentoring their local inventor community and encouraging them to invent. Most of these IRBs have at least one representative from IP Law to reality check that an idea meets the legal requirements for patentability. IBM is granted ~5,000 patents every year, and that means we sift through two to three to four times that many disclosures to get the best, most valuable, highest quality ideas. The tool we use to manage that volume is called the Innovation and IP Infrastructure. It includes both a front-end interface for the inventors to submit and track their disclosures, as well as the back-end infrastructure to manage all the disclosures and issued patents. Our inventors are very vocal about what they want it to include and it has been refined over the years. Conversely, management is also rather opinionated about the detail, the analysis, and the headlights they want so it includes the best thinking from the management perspective as well. This has been a Lotus Notes-based product used internally for years and we’re in the process now of porting it to a Web platform so we can share it with certain clients. Manage and Monetize That back-end management component is also used by the teams responsible for managing and monetizing our portfolio. As Kevin said, there are many ways to extract value from your IP portfolio in terms of superior products and freedom of action and industry influence. Focusing on the pure IP income aspects, we’re really talking about three key teams that work in tandem with the broader invention ecosystem. The first is the portfolio manager, they ensure we have the right mix of patents in each geography. They have to balance budget realities with the local IP and competitive environment in each patent jurisdiction. The business development executives are basically the sales team for IP. They’re really selling a mix of our patents, or access to our know how and our domain experts. As Kevin showed, the mix of our IP income is sifting to more joint development so we aren’t assigning as many patents today as we are allowing them to work alongside our experts and licensing companies to our portfolio. The BDEs work very closely with the patent engineering team. Together, they identify the licensing targets. Which companies are infringing on IBM’s IP and which ones make the most sense to pursue. There are many different ways we can engage with these other companies. If a company doesn’t accept that they need to take a license, the patent engineers essentially provide the BDEs the leverage they need to close the deal. They outline how the competitor’s product infringes on IBM’s IP and the extent of the infringement. IBM very very rarely goes to court over patent infringement, it’s simply not our strategy, not really our culture. A key reason we don’t HAVE to is because the depth of evidence the patent engineers provide is sufficient to get a fair license. We have developed several tools in addition to 3i to support these teams. PPKI and the Patent Engineering Portal focus on systematic analysis of our portfolio to make educated decisions on which patents to assign, to let lapse and stop paying the maintenance fee, and which ones have the most value for licensing. We call these ‘hero’ patents. Part of that knowledge comes from understanding the competitive landscape. What IP holes exist in the market where we should develop additional IP or license the IP we have? Who is exposed and needs the protection a license to IBM’s IP can provide? Competitive insight is also critical for the next phase of the lifecycle, analyze and adjust. Analyze and Adjust This phase is driven by IBM’s management team to ensure the IP portfolio meets our long-range goals. Corporate strategy is a key component of this as they set that long-range direction. They work with the product lines to determine where the technology is headed, where client expectations are headed, and how IBM can best meet those needs. Organizationally, the IPAC owns the overall IP program. It is comprised of the senior vice presidents representing the IBM divisions and they approve the overarching direction of the program, the budget, the allocations – which technology areas will have the most patents, etc. The CIL is the integration point between the inventor community and the business needs. As a company, we have been lowering the center of gravity and empowering the people on the front lines to make the decisions. The CIL is a group of technical leaders from across the company that develops and implements the IP strategy. They are embedded in the inventor communities and are focused on energizing the inventors and providing them the knowledge they need to be successful. And this is where the adjustment aspect comes into play. Inventors fundamentally want to patent in areas that are important to the company. They want to invent products that will be successful in the market and solve a problem for our clients. But that can change at any moment. A crisis can shift clients priorities to safety and security, a recession can shift their focus to cost savings, new regulations can change product requirements. We can’t predict the future, but a systematic approach to IP management can empower you to rapidly respond to and capitalize on whatever the future does bring. 16

Inventor Interface Customizable Snapshot of Inventor Activities
Empower all employees to participate in IP process Submit new inventions via disclosure form Monitor progress of submitted disclosures Track existing patents and publications Tally received incentives and milestones Catalog IP history Inventors Inventor Interface This front end for the inventors is designed to engage inventors directly in the IP development and protection process. The platform helps inventors create at their own pace, for example, they can quickly create draft invention disclosures, catalog ideas, and collaborate with peers on the most promising ideas. This flexible platform was designed to support multiple document formats, so inventors can draft their ideas in their preferred word processing format, or the standard template specified by the company. Once inventions disclosures are submitted, inventors can monitor their progress throughout the review and prosecution process. Enhancements planned for future 3i versions include allowing inventors to monitor their overall invention profile – including their existing patents and publications, pending applications, awards, milestones, and other inventor incentives provided by the company. They will also be able to search other disclosures to identify other inventors working on similar technologies. 17

Inventor Interface Incentive and Awards
Pre-filing Post Issuance Divisional and Corporate Awards Inventors Inventor Interface This front end for the inventors is designed to engage inventors directly in the IP development and protection process. The platform helps inventors create at their own pace, for example, they can quickly create draft invention disclosures, catalog ideas, and collaborate with peers on the most promising ideas. This flexible platform was designed to support multiple document formats, so inventors can draft their ideas in their preferred word processing format, or the standard template specified by the company. Once inventions disclosures are submitted, inventors can monitor their progress throughout the review and prosecution process. Enhancements planned for future 3i versions include allowing inventors to monitor their overall invention profile – including their existing patents and publications, pending applications, awards, milestones, and other inventor incentives provided by the company. They will also be able to search other disclosures to identify other inventors working on similar technologies. 18

IP Professional Interface Evaluator Interface Streamlines Operations
Automate workflows to guide and accelerate disclosure evaluation process Automatic disclosure assignment Action item alerts Deadline reminders Access full disclosures for review and evaluation Systematic invention valuation scoring Consistent decision-making across multiple review teams Rapid adjustments to ‘file’ score cut-off as budget changes Downstream use for licensing and foreign filing decisions IP Professionals Evaluator Interface Several customizable interfaces are available for the various IP teams, including reviewers, IP administrators, portfolio managers, internal legal teams, and outside counsel and technical writers – the specific information these specialized contributors need is available at a glance. And automated workflows help the IP team streamline the prosecution process. The prosecution process begins with disclosure evaluations. 3i routes new disclosures to the appropriate review team, as determined by the company. The evaluator interface helps the review teams manage their incoming disclosures, and offers the relevant information associated with the disclosure. It Incorporates practices developed at IBM with an evaluation questionnaire and scoring system that allows review teams dispersed throughout the organization to consistently assess the quality and value of invention disclosures. 19

IP Professional Interface Portfolio Managers’ Interface Tracks IP Lifecycle
Manage all aspects of prosecution Patents Copyright and trademark registration Trade secrets Defensive publications Follow through to end of life – assignment, expiration, etc. Streamline process flow with risk management tools Alert all necessary parties of action items, deadlines Manage all IP-related contracts and paperwork Monitor existing IP for rapid portfolio analysis Administrators Portfolio Manager Interface Additional interfaces help other members of the IP team manage the various aspects of the IP lifecycle, including docketing, patent preparation, filing, maintenance, contracts, assignment, licensing, expiration, and managing the overall IP budget. Suggested milestones for each of these functions are outlined, assigned, and given due dates to help maximize efficiency throughout the entire process. 20

Executive Dashboard Flexible Reporting of Key Business Metrics
Pipeline strength Business unit Technology Location Ratio converted to applications / patents Portfolio health IP in necessary countries / patent jurisdictions Appropriately protecting all products Alignment with business goals IP business strength Budget alignment Licensing pipeline and income Executives Executive Dashboard 3i provides decision makers the information they need to analyze the overall health of the IP portfolio, and determine how well it aligns with the company’s goals. Snapshots of the IP portfolio help executives maintain appropriate levels of IP protection for products and services, identify possible exposures, balance the international portfolio, maximize emerging opportunities, optimize licensing and other income potential, and mitigate competitive threats. Future versions of 3i will advance its strategic capabilities. Additional functionality will help research and development leaders identify optimal collaboration teams, minimize IP leakage, track competitor IP activities, and map internal development efforts to the most valuable product areas. 3i provides executives a high level view of their company’s entire intellectual property lifecycle. It provides the data which facilitates them making fact-based decisions that improve the business value of their innovations and maximize their return on investment. 21

IBM IP Leadership IBM - 100 years of innovation leadership
One of the world’s top ranked brands – 2010 Revenue $99.9B 18 consecutive years of US patent leadership – 5,896 in 2010 More than $1B in annual IP income Model culture of innovation throughout global technical community of 250,000 US IP policy leader Comprehensive processes and tools streamline IP management 22

IBM US Patent Leadership
And we have protected our innovations throughout the decades with a strong patent portfolio. I mentioned our patent leadership earlier, this demonstrates our continued growth in terms of patents. We continue to break records year after year. 23

Thank You 24

Intellectual Property Innovation and IP Infrastructure IP Solutions to Transform Innovation Into Advantage Saif Aziz – Director of Technology Alliance.

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Intellectual Property Innovation and IP Infrastructure IP Solutions to Transform Innovation Into Advantage Saif Aziz – Director of Technology Alliance.

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