Keith Bergelt: Trendspotting in 2010 and Beyond: The Future of IP in a Linux-Enabled World

In the coming decade, Linux and other open source implementations will continue their migration from back office transaction processing and mission critical applications to the mobile and desktop computing spaces. This will transform the nature of communications and computing devices from static and utilitarian to dynamic and intelligent. This change has already begun to show itself in the Google mobile operating system – and the proliferation of devices that have been built on it by HTC and Motorola , among others.

Man with wings
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Man with wings

Leveraging open source as a key building block for rapid innovation and reducing time-to-market is an irreversible trend.

Yet, as Linux and other open source initiatives usher in a new model for invention and value creation and further reinforces Linux as a permanent condition, longer term changes in the nature of the codification and management of the intellectual capital are prefigured by a set of observable trends in 2010.

These trends for 2010 include:

1) Intelligence Everywhere – Significant investment will be made in devices and systems as intelligence moves to both the edge and the core; as the cloud becomes increasingly prevalent in a Linux and open source-enabled world. Beyond Larry Ellison’s notion of ubiquitous thin client devices with an intelligent core, portable devices are imbued with sufficient intelligence and processing power to exploit available bandwidth in 2010. Applications and the underlying intellectual capital on which they rely proliferate to support new ways of working and sourcing information and entertainment;

2) Higher Bar on Patentability – The combination of legislative, judicial and regulatory patent reform will result in a higher standard of patentability in the US. The impending patent reform legislation that can be expected to be enacted by Congress in 2010, reforms being instituted by the newly appointed head of the USPTO and cases such as Bilski will all contribute to the creation of a high-standard of patentability and reduce the number of poor-quality patents issued in 2010 and beyond;

3) Change to a Distributed Global Invention Economy – Open Source creates engagement points for “Invention in Place” and a move away from talent migration from Brazil, Russia, India, China (BRIC) and other developing regions to Silicon Valley and other key world technology centers. Capital flows out over networks to the best and brightest regardless of location and allows for talented people and organizations to participate via open source platforms in a new distributed global invention economy;

4) Regionalization/Personalization of Communications and Computing Devices – The global engagement of developers around the world permits communications and computing devices to be rapidly regionalized and personalized to meet the unique needs of smaller and smaller communities of users with unique preferences. In 2010, there will be an accelerated movement away from ‘one size fits all’ devices and toward the development of devices that are highly susceptible to personalization, and therefore are more enabling for users;

5) Rise of Defensive Publications – Reduced emphasis on patents as the sole means of codifying intellectual capital and emergence of defensive publications as an efficacious and cost effective IP rights tool. Operating companies and open source begin to converge around the notion that only truly significant inventions should be patented with supporting ideas and incremental advances more properly made the subject of defensive publications;

6) Patent Trolling as a Business Model – Irrespective of the efforts being made to limit the issuance of poor quality patents, the legacy of the last twenty years will continue to provide feedstock in the form of relatively weak patents that are nonetheless sufficient to support litigation when placed in the hands of ‘patent trolls’ (i.e. ‘non-practicing entities’ seeking to assert and litigate against deep pocketed ‘practicing entities’ in an effort to encourage litigation cost-avoidance settlements);

7) IP as Collateral and a Source of Growth Capital for IP-Rich Companies – Patents, Trademarks and Copyrights will reemerge in 2010 as a source of collateral for IP-rich companies seeking to secure access to growth capital through asset-based loans. As an increasing percentage of a company’s market value has come to attributable to its IP over time, enlightened lenders will once again seek to collateralize these core assets as part of the overall restoration of the credit markets;

8) Open Source Antagonists Continue to Use Patents as a Tool to Advance Strategic Goals – Companies that support business models that are antagonistic to open source and thereby antithetical to true innovation will continue to use their patent portfolios to advance anti-competitive agendas. This will occur in 2010. But, as the decade progresses we can expect that these Antagonists, that now support proprietary platforms, will ultimately be forced to develop alternative market-driven approaches in an attempt to leverage their legacy businesses in the increasingly open source-driven world. Open source software partakes of an innovation modality that represents an irreversible social trend toward collaborative development, and as such, it is a more powerful driver than a purely technological trend;

9) Secondary Market for Patents – In the wake of the 2008-2009 recession, patent owners can be expected to continue to dispose of patents in the secondary market as a means of generating supplemental revenue. As the economy slowly rounds back into shape in 2010, pressure to cull existing patent portfolios will continue through the year, and establish a permanent revenue pipeline for many companies that had previously not been active as net sellers of patents;

10) IP is Increasingly Recognized as a Source of Value in M&A – As the credit markets return and more debt capital is available to support M&A activity in 2010, IP will increasingly be recognized as a viable asset class and complement to tangible assets in leveraged finance transactions. IP will thereby undergo increasing scrutiny and its valuation factored into the purchase price. No longer will it be acceptable for IP value to be buried in the ‘goodwill’ accounting of a company as shareholder transparency and accounting trends move inexorably toward a goal of ‘marking-to-market’ the value of IP.

Keith Bergelt is the chief executive officer of Open Invention Network (OIN), the collaborative enterprise that enables innovation in open source and an increasingly vibrant ecosystem around Linux. Prior to joining the OIN, Mr. Bergelt served as president and CEO of two intellectual property Hedge Funds – Paradox Capital and IPI . Previously, Mr. Bergelt served as a senior advisor to the technology investment division at Texas Pacific Group. He was as General Manager of the Strategic Intellectual Asset Management business unit at Motorola Corporation and served as Motorola’s director of Technology Strategy. Prior to his extensive private sector experience, Mr. Bergelt served for twelve years as a diplomat with postings at the United Nations in NYC and the American Embassy in Tokyo, Japan, where he was involved in the negotiation of IP rights protection in Asia.