I read a wonderful quote the other day. It was in an article about former lawyer, Bill Lerach, a name familiar to most corporate attorneys. Mr. Lerach plead guilty to fraud and was recently sentenced to 24 months in prison in connection with a scheme to pay kickbacks to plaintiffs in securities class action cases. At Lerach’s trial, the Assistant U.S. Attorney said of the defendant: “When you conclude no one else in the game has a moral compass, it’s easy to lose yours.”
With this in mind, let me say “thank you” to the employees of Sun Microsystems for having a strong sense of direction when it comes to corporate integrity. You’re the reason we received this recognition for the second year in a row.
There’s quite a bit in the press these days about companies (surprisingly, some very large ones) aggressively investing to expand their IP portfolios by purchasing patents or filing for patents on anything that can be imagined – often without stopping to consider whether the “innovation” has utility and is truly novel and non-obvious. Sun is often approached by companies looking to purchase patents (a reflection of the value of our IP) and at times we do sell patents under the right terms, conditions and circumstances.
To some degree, this topic has a very Cold War feel to it with companies growing patent stockpiles to use if attacked or as a form of “mutual deterrence”. But, at some point, a company needs to ask how many patents it really needs. And, that’s exactly what we did about three years ago. Up to that time Sun was filing well over 1,000 patent applications per year. But, in 2005, we made the decision to reduce our patent filings to the point that we had about 700 patents issued last year. And this number may decline in the future. While this is still a sizable number for most companies, it is a significant decline for Sun and occurs during a period in which we have more innovation than at any point in Sun’s history.
Why the change? Part of the reason is financial. On average, it costs more than $20,000 to obtain a U.S. patent and this figure grows significantly when you file around the world. Also, this amount does not include annual annuities required to keep a patent in effect. Being selective in what you patent can result in significant savings. However, the bigger reason for the change is that our focus has shifted from quantity to quality. To this end, we have completely re-architected the manner in which we determine the innovations we will patent. As part of this process, inventions are reviewed by a panel of the chief technology officers from across our different lines of businesses with input from distinguished engineers and other experienced innovators. We apply a significant amount of scrutiny to determine whether something is truly innovative before we submit it to the PTO. For us, it doesn’t make sense to patent everything. Rather, our focus is on patents that represent significant technological innovation. (In this regard, we were happy to see that the Federal Circuit will reconsider the patentability of business methods. )
Aside from our focus on patent quality, there is another reason we are filing fewer patents. It has to do with our business model. Unlike some companies, we don’t have a corporate goal for revenue derived from patents (and patent litigation). Instead, we invest in patents to support our customers and the communities in which we participate. This support can be in the form of a defensive response to an attack on a community or in the form of the assurance provided by the patent licensing provisions of the CDDL or GPLv3. In the end, it’s about delivering innovation to our customers and communities.
If they succeed, we succeed.
I had one of those flashes of insight a few months ago. It occurred while I was fixing a go-kart with my youngest son. He was reinstalling the chain guard and as he did he stopped to ask me which way to turn the screw. I replied in my best Dad voice: “If you’re tightening it, you want to turn it clockwise.” His response floored me. He asked: “what do you mean by ‘clockwise?'”
Now mind you this is a bright young lad with good grades in middle school. Yet, he didn’t understand my reference to the movement of the hands of a clock. At first, I was astounded by this gap in his learning. But, then I realized that he and most of his friends don’t wear watches (they use their cell phones or, more likely, given their age, are indifferent to the concept of time). And when they do wear watches, they are digital – not analog. It was then that I began to lament the advent of the digital age. My fear was that we are raising a world of children who have almost unlimited access to information, yet little ability to use this knowledge to create or repair the tangible. At this point in his life, my son is more familiar with on-line tools than the ones in our garage. And, I’m not sure this is entirely a good thing.
So, I was elated when we recently attended the Maker Faire in San Mateo, California. For those not familiar with the event, it is an outgrowth of Make Magazine, which I can only describe as Popular Science for this millennium. The Maker Faire represents the intersection of science + art + shared knowledge + “using your hands to make stuff”. It has everything including incendiary Burning Man sculptures, Steampunk minibikes, astronomy experiments, a Tesla coil machine, demonstrations on how to retrofit your home for grey water usage, electric powered cupcake cars and, of course, the now ubiquitous Diet Coke + Mentos “experiment.” We wandered around for hours, but next year will be there for the entire weekend.
And, my son even purchased a kit to build a solar powered toy car. It gave me a chance to teach him how to solder…and made me feel a little better.
The handsome guy with the five o’clock shadow seated on the right is my avatar. Someone in Sun’s marketing group created it. And, let me stop right here and give them a big “thanks” for not adding a dorsal shark fin, forked tail or similar appendages. Given the sometimes less than positive public esteem for my profession, someone could have had a lot of fun with this particular assignment.
The reason for the avatar was an internal Sun employee conference held last week in Second Life. The meeting included a number of Sun executives interviewed throughout the day by Chris Mellissinos in our Sun virtual campus. Sun employees were able to attend either in Second Life or to watch and listen to the meeting in progress through a browser window on their desktop
During my session, I spoke a bit about the interesting legal issues raised by some social networking technologies. But most of the conversation was about how these technologies can be a valuable tool for the legal profession. For example, some law schools are already using virtual classrooms for instruction. My team has also been discussing whether this would be a good way to deliver compliance and other training to employees. No doubt there will plenty of future opportunity to use sites like Second Life to enable information sharing within firms, in-house legal departments and between attorneys and clients. But, to be candid, at this stage the virtual experience is not yet compelling. Despite my good looking avatar-self, the overall visual effect is still primitive and coarse and the UI is a barrier. Overall, the experience feels more like participating in a conference call while watching a mid-1960’s cartoon. But one only has to imagine the impact when the bandwidth and rendering capabilities deliver the visual experience found in today’s gaming and movie releases. At that point, people will sense a greater integration between their virtual and “real” identities making these tools more effective.
To some extent this is similar to evolution of the Internet. I still remember using my Mosiac browser at Sun to connect for the first time. I waited for what seemed an interminably long time to download a photograph of a painting in the Louvre. As I watched each row of pixels complete, I thought to myself that at some point this is going to touch every aspect of our lives. And, a little more than a decade later – it does.
Last month, I was invited to speak to the USF Law School Intellectual Property and Cyberlaw Association. A nice group of students all with a shared interest in intellectual property law. I’m not a big fan of presentations, so I spent a few minutes talking about Sun and then opened it up for questions. And, there were many ranging from “how do you monetize products that you give away” to “what is the Peer to Patent project” to “what’s your job like”? It was a very fun session.
But as I drove back to the office, I reflected on one particular question and wished that I had handled it differently. It was asked by a 3L (third year law student graduating this year) who wanted to know whether I thought the current macro-economic conditions were going to impact employment opportunities for this year’s graduates. My response was that I’ve seen several of these downturns in my career and that they are cyclical. I also pointed out that the current economic conditions will likely impact every industry – except perhaps the energy sector. All in all, not a very comforting response on my part.
Here’s what I should have added.
Despite the present economic environment, I can’t think of a better area for future legal career opportunities than intellectual property law. Consider for a moment a few of the recent and more interesting IP cases like Viacom v. Google, Eros v. John Doe, Fair Housing Council of San Fernando Valley v. Roomates.com and A.V. v. iParadigms. Then realize that the technologies and business models underlying each dispute haven’t existed much longer than you have been in law school. The pace of innovation around us is accelerating – not declining. Each year the universities of the world graduate even more engineering and computer science students with the facility to manipulate 1s and 0s in inventive ways. Every day there are new businesses emerging based on the digital economy that will touch every aspect of our lives whether it be in health care, entertainment, politics or consumerism.
And, there’s something else to consider. What I have described here are U.S. examples. Current estimates are that only about 20% of the world’s population is connected to the internet. Without doubt, when the rest of the world is fully able to participate in the digital community, even more innovation will result.
So, Mr. 3L. Take a deep breath. Spend the next few months preparing for finals and the Bar Exam. And, take comfort in the fact that even during this short period the intellectual property landscape will have changed – creating opportunities that you haven’t imagined.
Last fall, we released a revised version of the Sun Contributor Agreement. It’s part of our work to take a fresh look at all of our agreements. The feedback from the open source community has been very positive. So, now we’ve made it available under a Creative Commons attribution-share alike license for others to use with their open source projects
I really dislike the word “compliance”. That may sound a bit odd given that compliance is a large part of my role as a General Counsel. But, to me it’s an oppressive word. Who wants to be told that they have to behave in a certain way? And, having to constantly remind employees of their obligations and of the importance of compliance – well, let’s just say it’s one of those incredibly important, but thankless jobs. So, you can imagine my excitement, when after a particularly exhausting week, I noticed that the last meeting on my Friday calendar was the filming of a Sun corporate compliance video. As I walked to the location, I thought of the 100 other things that I would prefer to be doing at that moment including my tax returns, giving my fidgety son a haircut and commuting in rush hour traffic.
When I arrived at the conference room, no one seemed to have any idea of what we were to talk about as the director of the video intended for it to be completely unstructured – his attempt at corporate “reality TV”. Just a few Sun executives discussing compliance while hand-held video cameras captured the conversation. For the next ten minutes, my fellow participants and I struggled to identify the points we thought we should cover. But, none of us were particularly excited. Finally, Jonathan asked a single question: “why is compliance important to Sun?”
It was the only question asked. And, well over an hour later, we finally stopped talking.
Our conversation was wide ranging and passionate with personal examples of why compliance is so significant to each of us. Despite my initial lack of enthusiasm, I came away from the session feeling energized by the fact that we all viewed compliance the same way. Not as something you do to avoid negative consequences (loss of employment, criminal penalties and fines). But, instead, because you want to behave in a way that reflects the values of your community. In our case it’s a global community of more than 30,000 people wearing one of these.
Anyway, below is the link for the final video. I had hoped to include just the uncut version and have you listen to the entire conversation. But being that it was more than an hour in length, I didn’t kid myself into thinking that I could hold your attention that long — you can thank me later. The people in the conference room with me are Jonathan, Cheryl Fackler Hug, our Chief Compliance (there’s that word) Officer and Bill MacGowan EVP of People and Places (the gentleman who sounds like Tom Waits). It also incorporates additional segments with other Sun executives and board members.