Invention, Patent and Commercialization: The Case of IBM

Author: Mekuanint Awoke and Behailu Melketsadik

This paper focuses on evolution of Inventions in general, patent strategy and commercialization
experiences of International Business Machines, IBM.

Invention

An invention is a new product or process that solves a technical problem. From the beginning
of time, humans have been inventing. Many equipment’s, processes, methods and devices what
we are using now in our daily life was invented by someone in the past.1

Tens of thousands of inventions and discoveries have transformed humans’ life style. Before
Galileo Galilei, no one was able to look into the sky to see the mountains of the moon. From
that time on (after Galileo invented telescope), humans are able to look into the moon.2

Many inventions were invented thousands of years ago. For example, people in ancient Egypt
made boats by lashing reeds together.3 People in Mesopotamia made the first bricks from mud
by mixing the mud with straw to reinforce it, then shaped the bricks in wooden moulds and
dried them in the sun.4 Corn was traditionally or threshed with sticks to separate the grain from
its straw and outer covering.5 In 1788, Scottish millwright Andrew Meikle invented a threshing
machine.6 The binary system records numbers by using just two symbols, such as 0 and 1 which
is essential to modern computers, but it may go back more than 3,000 years.7 English scientist
Isaac Newton formulated three laws of motion, which he published in 1687.8 English engineer
Thomas Newcomen designed his steam engine in about 1710.9 DNA, the key to genetics and
life, was discovered in 1874 by Swiss scientist Johann Miescher.10 Electric generators were not
very effective until Belgian engineer Zénobe Gramme built his dynamo in 1870.11

1
‘Learn from the Past, Create the Future: Inventions and Patents’
<https://www.wipo.int/publications/en/details.jsp?id=133> accessed 14 December 2021.
2
Sandra May- MSFC, ‘NASA - Telescope History’ <https://www.nasa.gov/audience/forstudents/9-
12/features/telescope_feature_912.html> accessed 15 December 2021.
3
Bridgman, R. (2002). 1,000 Inventions & Discoveries. New York: DK Pub.
4
ibid.
5
ibid.
6
ibid.
7
ibid.
8
ibid.
9
ibid.
10
ibid.
11
ibid.
In 1877, US inventor Thomas Edison invented sound recording.12 In 1873, Levi Strauss and
Reno, Nevada, tailor Jacob Davis are given a patent to create work pants reinforced with metal
rivets, marking the birth of one of the world’s most famous garments blue jeans.13 The first car,
the Motorwagen, was built in 1885 by German engineer Karl Benz.14

In 1886, pharmacist John Pemberton of Atlanta, Georgia, invented a new drink. Its ingredients
included cocaine from coca plants and caffeine from kola nuts, so he called it Coca-Cola.15
Albert Einstein created the Special and General Theories of Relativity, he contributed greatly
to the quantum theory of matter.16

The jet engine was patented in 1930 by a young British Royal Air Force pilot, Frank Whittle.
The present GPS began in 1978 with the launch by the US Air Force of the first two NavStar
satellites.17 The first three computers for personal use appeared in 1977. The Commodore PET
and Tandy and the Apple II, a machine with its own monitor and plug-in expansion cards.18
Every person’s DNA is unique. DNA fingerprinting compares DNA found after a crime with
DNA from a suspect. It was invented in 1984 by British geneticist Alec Jeffreys.19

Smartphone In 2007 by Steve jobs, Windows operating system in 1985, World Wide Web In
1990 and so more to this day humans (inventors) are inventing high end technologies.20

Patent

Inventions are so important to all of us that we should encourage talented inventors to keep
inventing. One way to encourage inventors is by preventing people from stealing their
inventions. A patent is an official document given to an inventor by a government.21 In the 15th
Century, many inventors lived in Venice and the government invented the first law to protect
the rights of inventors in 1474.22

12
ibid.
13
‘Levi Strauss and Jacob Davis Patent Blue Jeans - HISTORY’ <https://www.history.com/this-day-in-
history/levi-strauss-and-jacob-davis-receive-patent-for-blue-jeans> accessed 15 December 2021.
14
Bridgman, R. (2002). 1,000 Inventions & Discoveries. New York: DK Pub. (n 3).
15
‘About - The History of Coca Cola’ (Heartland Coca-Cola) <https://www.heartlandcocacola.com/about-our-
history/> accessed 15 December 2021.
16
Bridgman, R. (2002). 1,000 Inventions & Discoveries. New York: DK Pub. (n 3).
17
ibid.
18
ibid.
19
ibid.
20
ibid.
21
‘Learn from the Past, Create the Future: Inventions and Patents’ (n 1).
22
‘March 19, 1474: Venice Enacts a Patently Original Idea | WIRED’ <https://www.wired.com/2012/03/march-
19-1474-venice-enacts-a-patently-original-idea/> accessed 15 December 2021.
Modern patent laws protect the inventor for a specific period of time (usually 20 years) during
which, in general, it is illegal for anyone else to copy, use, distribute or sell the invention
without the consent of the inventor. In return, inventors disclose the technical details of how
their inventions work, so that other people can learn from them. Inventors may prefer to license
their inventions. This license fee rewards inventors for their creations and allows licensees to
commercialize inventions so that consumers can benefit from them. Before patents existed,
some inventors kept their inventions secret for fear that they would be stolen or copied.

IBM

History of IBM

International Business Machines, or IBM, launched in 1911. Then they were called the
Computing-Tabulating-Recording Company. Founded by Charles Ranlett. the C-T-R
Company was formed by the merger of three companies; the Computing Scale Company, the
Tabulating Machine Company, and the Time Recording Company. In these early years the
Company focused on products such as accounting and calculating machines, time recorders for
businesses and mechanical punch card systems.

In 1924, Thomas Watson took charge of the company and renamed it International Business
Machines, or IBM. in 1928 it invented the first calculator that could directly subtract. In 1943
the company developed the first completely electronic computing machine, the Vacuum Tube
Multiplier. This led to the 1944 Automatic Sequence Controlled Calculator.

In the 1950s and 1960s, IBM invented many of the core technologies such as the hard drive. It
also developed FORTRAN, the precursor to most modern computer coding languages. In 1981,
the Personal Computer was one of the first computers intended for consumer use. IBM
partnered with Microsoft to run MS-DOS as the operating system on these machines. then IBM
invented the architecture for “local area networks”, LAN. This would become first the office
networks that connect users on the internet, and finally the home networks that most households
use today. In 1996/97, IBM developed artificial intelligence machine called Deep Blue, AI
plays world chess champion Garry Kasparov. Kasparov wins the first match, but loses the
second—the first time a computer has ever beaten a world champion in a traditional match.
In 2005, The company’s supercomputer research arm continues to produce some of the most
powerful machines in the world, and IBM continues to license new designs to businesses,
government and the military to this day.23

Research and Development

IBM Research constitutes the largest industrial research organization in the world, with 12 labs
on 6 continents.

IBM's R&D expenditure totals several billion dollars each year. In 2012, that expenditure was
approximately $6.9 billion. in 2014, IBM spends $1 billion to create a business unit for Watson,
and $3 billion to create a next-gen semiconductor.

Famous inventions Such as Automated teller machine (ATM), Dynamic random-access

memory (DRAM), floppy disk, hard disk drive, SQL, the Universal Product Code (UPC) bar
code, and the virtual machine are developed by IBM.

Five IBM Research Employees have received the Nobel Prize: Leo Esaki, for work in
semiconductors; Gerd Binnig and Heinrich Rohrer, of for the scanning tunnelling microscope;
and Georg Bednorz and Alex Müller, for research in superconductivity.24

Commercialization

Patent Portfolios

IBM has been one of the biggest names in the patent world. IBM manages one of the largest
intellectual property portfolios in the world. IBM has a team of 250,000 scientists, researchers,
engineers, developers and technologists who built one of the world's largest IP portfolios. This
team invents new technologies every year.

IBM has a license agreement called IBM License Agreement, IBM maintenance agreement,
the IBM International Program Licensing Agreement (IPLA), equivalent license agreement
and others

IBM licenses machine code under the IBM License Agreement. IBM only provides copies,
fixes machine code under IBM maintenance agreement. IBM licenses z Systems operating

23
Eric Reed, ‘History of IBM: Timeline and Facts’ (TheStreet) <https://www.thestreet.com/personal-
finance/history-of-ibm> accessed 14 December 2021.
24
‘IBM - Wikipedia’ <https://en.wikipedia.org/wiki/IBM#Research> accessed 14 December 2021.
system code under the IBM International Program Licensing Agreement (IPLA) and Licensed
Information (LI) document, or an equivalent license agreement.

IBM inventors were granted more than 2,500 patents in cloud technology and over 1,800
artificial intelligence (AI) patents.25 IBM inventors have been granted more than 150,000
patents globally for technological creations.26 IBM held its long time place as the top recipient
of U.S. patents in 2020 with 9,130 inventions, followed by Samsung, Canon, and Microsoft.27

Technology Licensing

IBM generates more than $1bn annually from its vast patent portfolio. Most of the biggest
companies in America pay a license to IBM for IBM patents, including Amazon, Google,
Facebook, Twitter and LinkedIn.28

A major part of IBM research is the generation of patents. As of 2020, the company holds the record
for most patents generated by a business for 28 consecutive years in US. For most years since 1996,
IBM generated $1 billion or more in intellectual property revenue, $27 billion in total. IBM
has sold groups of patents to ready-to-go public companies, including AirBnB,
Facebook and Twitter.29

Patent infringement

IBM awarded 82.5 million dollars in a patent infringement suit against Groupon for infringing
four of IBM’s e-commerce patents. and also, Twitter has paid IBM $36 million for 900 patents
in order to avoid a lawsuit.30

25
Charles King, ‘IBM Lays Out Patent Successes and Strategies’ (eWEEK, 17 January 2020)
<https://www.eweek.com/development/ibm-lays-out-patent-successes-and-strategies/> accessed 14
December 2021.
26
‘IBM - Intellectual Property Licensing’ (7 February 2020) <https://www.ibm.com/legal/licensing> accessed
14 December 2021.
27
‘IBM Received the Most Patents in 2020. Here’s the Rest of the Top 20’ (Fortune)
<https://fortune.com/2021/01/12/ibm-most-patents-2020-full-rankings/> accessed 14 December 2021.
28
Arthur, ‘IBM Patents Add 1.2B to Revenue’ (Intellectual Property Center, LLC, 3 August 2018)
<https://theipcenter.com/2018/08/patents-add-to-ibm-revenue/> accessed 14 December 2021.
29
Bruce Berman, ‘IBM’s Drop in Direct IP Licensing Revenue May Be a Reflection of Secular Changes in Tech,
Law’ (4 May 2021) <https://ipcloseup.com/2021/05/04/ibms-drop-in-direct-ip-licensing-revenue-may-be-a-
reflection-of-secular-changes-in-tech-law/> accessed 14 December 2021.
30
Condé Nast, ‘Twitter Pays $36 Million to Avoid IBM Patent Suit’ (Wired, 7 March 2014)
<https://www.wired.com/2014/03/twitter-ibm/> accessed 14 December 2021.
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