Protect And ServeProtect And Serve

When Security Benefit Group, a retirement-services company, decided to apply for a patent two years ago on a methodology for offering an annuity feature, "it was more of a deterrent," CIO Dave Keith says, "something to give us a little bit of lead time" over competitors. Keith says the company's product-development group came to IT with the new feature and asked them to make it work. Keith had the methodology designed into the benefits-administration software it licenses from a third-party vendor, then made sure the vendor agreed to alert Security Benefit if another customer expressed interest in using that feature. None has yet, but "we believe it's leverage for us for the long run," Keith says.

Black & Veatch, a $2 billion-a-year privately held construction and engineering firm, brings ideas considered to be valuable intellectual property before its investment review board. The board, which acts like an internal venture-capital organization, nurtures the ideas, determines their value, and decides whether they're candidates for the patent process. The company invested $1 million in three ideas during 2000, and the pace of idea development has remained relatively consistent. Investments are expected to reach $1.5 million this year, chief knowledge officer John Voeller says.

While litigation around business-method patents has yet to play out, the lesson for business-technology managers is simple: expand the scope of what's considered patentable intellectual property. "They should look for things that give them a competitive advantage, a process that makes something more efficient, more cost-effective, more pleasing to an end consumer," says Banner & Witcoff attorney Wright. Amazon.com Inc.'s patented One-Click online-buying process is a good example of a customer-oriented invention. That patent was the subject of controversy when Amazon sued Barnes & Noble Inc. in 1999 to stop it from using a similar online process. The two companies recently settled out of court.

Companies should be able to protect the expertise they've built even if a patent isn't the appropriate tool, says Bob Jackson, director of product-development methodology and knowledge management at Montgomery Watson Harza, an $856 million-a-year environmental engineering firm. "The value any one company puts into systematizing a business process easily matches the product investment a product company would make," he says. Montgomery Watson Harza, which specializes in energy, infrastructure, water, and wastewater projects, has formed an asset-management startup group that will provide consulting services to utilities looking to deploy work- and maintenance-management systems. The company is beginning to look at how it develops intellectual property around that.

Montgomery Watson Harza has figured out that most of the costs utility companies incur deploying off-the-shelf software aren't licensing fees but rather the hours employees and consultants spend making the best use of those applications. In other words, the firm's extensive knowledge of the utility industry, the applications designed for it, and the market forces that influence it are its greatest assets. The company will probably use methods such as copyrights and trademarks to protect knowledge-based intellectual property, Jackson says.

Not all patent-worthy candidates should be acted on, Black & Veatch's Voeller says. His company isn't pursuing two business processes that might be considered patentable inventions because Voeller has serious objections to business-method patents. "I suspect that over time, the rest of the world will look at this as a comical patent form that's only possible in the United States," Voeller says. "We don't hold any business-method patents, and we probably never will."

And at least one executive cautions against equating intellectual property and IT. Paul Hoogenboom, CIO of RPM Inc., a $2 billion-a-year maker of specialty materials, says the value of his company's IT system isn't in intellectual property but in execution. "It's not about any special proprietary knowledge. It's about discipline," Hoogenboom says. "What we do better than anyone else is execute."

Illustration by David Plunkert
Photo of Friedman by Stephen Aviano
Photo of Voeller by David Strick