Companies Race to the Patent Office to Protect Their IT Breakthroughs

There's a patent gold rush under way as savvy companies seek to lock in the competitive advantage from their IT innovations

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One of the big factors in formulating patent strategy, says Adduci, is determining whether the competitive boost outweighs the burden. Adduci has considered seeking patents for recent software development work for an iPad project at Boston Scientific, a $7.6 billion medical device maker. The work, which he declines to detail, is innovative enough to patent, he speculates. But a patent would bring no payoff for Boston Scientific. "We're not a commercial software house, so I'm not going to bring it to market," he says. "We've thought about it, but honestly, the pain-gain ratio isn't there."

Homesteading the Future

A decade ago, the Web-based business methods that companies raced to patent eventually forced the patent office to create new rules for examining such inventions. But they remain controversial: New regulations that took effect in September now permit companies and people accused of infringement to challenge the validity of some patents without going to court. The regulations are narrow, affecting only patents for automated financial services. Still, challengers can request that the patent office take another look, hoping to have the patent revoked.

Today, many of the most interesting patents are not so much about business methods but about using technology to get ever-closer to the customer. Manipulating customer behavior is one popular goal of recently patented IT inventions, made possible by the union of mobile, social and analytics technologies. Often the manipulation is couched as a consumer benefit, but corporate profit is always kept in mind.

For example, in 2010 Bank of America submitted a patent application aptly named "Consumer Behavior Modification Tool." In one version of the technology, a consumer who wants to curb spending or increase savings would be assessed a fee when he buys something frivolous, such as fancy coffee or clothes. What constitutes unnecessary spending would be determined by the consumer in advance. As the bank says in its application: "Consumers can rationalize that they can afford to treat themselves...Unfortunately, these costs can have a grave effect on [their] financial health."

Humana, meanwhile, thinks games will induce customers to change unhealthy habits. Making an online game of eating better, exercising more and choosing other healthy actions will keep them coming back, LeClaire says. "Gamification can be a valuable differentiator."

Travelers, the $25.4 billion insurer, wants to improve people's risk management skills. It applied for patents for systems to measure how busy a road or building or transportation system is. The data would show a customer how she puts herself at risk in daily life--and Travelers would price her insurance policy accordingly.

Strategies for conditioning consumers to change their routines are also at the heart of a recent patent. The $48.1 billion e-commerce company created a system to lead users through customized link paths based on analysis of how other users have interacted with similar links in the past, "much as pheromones deposited by ants attract other ants."

It's hard to say whether any or all of these patented ideas will be made into products or services, says PARC's Lunt, but patenting ahead of the market is sound strategy. Patents like this put rivals on notice not to tread too close, she says. PARC, for example, patented optical laser technology for printing that became quite lucrative when optical media like CDs and DVDs took off, she says. More recently, PARC patented mobile technology for commuters that detects when ride-sharing partners deviate suspiciously off-course. "That will become valuable only if ride-sharing becomes a much bigger activity," she says. "We would love to license it."

Some patents might appear unrealistic as commercial products now, but could prove valuable in the future, Lunt says. "Sometimes they turn out to be used in ways you don't anticipate and turn out to be quite valuable."

We don't know yet how strenuously rivals may challenge the new crop of patents. Allstate's suit against Nationwide may establish how truly different insurance policies created by data analysis have to be. Perhaps Humana's online health game won't turn out to be appreciably different from any other healthcare company's. But as IT continues to permeate business models in so many industries, companies will feel pressured to protect any advantage they can gain, says Lanza, the intellectual property attorney. Companies with a vibrant and vigorous patent strategy--including both offensive and defensive moves--gain a reputation for innovation, he says. And innovation "is a fantastic barrier to competition."

Copyright © 2012 IDG Communications, Inc.

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