Jim Stack's expertise is printed circuit boards, but that didn't stop him from tackling a medical design project. He teamed with fellow IBM engineer Mark Budman to design a light-sensitive prosthetic eye. The invention earned the pair a patent -just one among the record-breaking 3,439 U.S. patents assigned to IBM in 2003.

For Stack, whose daughter has had an artificial eye for 26 years, the prosthetic design project was personal.

"When my daughter was 3 she was diagnosed with a form of cancer called retinal blastoma," says Stack, who worked as a circuit board engineer at IBM before retiring from the company in 2002.

"I knew the drawbacks of artificial eyes, such as the pupil doesn't change size like a normal eye would," Stack says. So he and Budman set out to design an artificial eye with a light-activated pupil that could change diameter according to conditions.

The invention - awarded U.S. Patent No. 6576013 - is based on a liquid crystal display that projects an iris and pupil image. A sensor detects ambient light levels, and the prosthetic device chooses from among a number of iris images stored in memory and sends the appropriately sized one to the array display.

IBM supported the pair's design work, even though it wasn't in Stack's or Budman's job descriptions. At the time IBM offered a financial incentive to employees who came up with medical-related inventions, Stack says.

Encouraging medical patents is typical of IBM, which is renowned for its ability to generate patents at a rate that far exceeds that of any other company.

For 11 straight years IBM has topped the list of U.S. patent award winners. In 2003 it received 72% more patents than the No. 2 company, Canon KK of Japan, which pulled in 1,997 patents, according to IFI Claims Patent Services.

IBM has made a science of capitalizing on its intellectual property. The company has streamlined its processes so effectively that in as little as one month, inventors and intellectual property experts working together can complete the onerous task of writing and filing a patent application. And IBM's hit rate is impressive: More than 90% of applications submitted result in patents, says David Kaminsky an IBM senior software engineer and master inventor.

IBM reserves its "master inventor" designation for employees who have made substantial contributions to the intellectual property value of the company. As an IBM master inventor, Kaminsky helps identify ideas with patent potential. He's a mentor to employees who are unfamiliar with patent processes.

"Part of the art is selecting patent-worthy inventions," Kaminsky says. He sits on a review board in Research Triangle Park, N.C., that meets once every three weeks to talk about emerging business opportunities related to IBM software.

Some of the ideas shepherded through the review process have been Kaminsky's inventions. As a senior software engineer, he works to develop autonomic computing technologies, with a focus on policy-based systems. He has 17 patents to his credit.

Most recently Kaminsky was one of four inventors named on U.S. Patent No. 6507867, which uses statistical analysis to predict which Web pages a user will want to see and then automatically bundle those pages for delivery to portable devices with intermittent network connectivity.

That particular patent was granted Jan. 14, 2003 - more than four years after its inventors filed the application.

Necessarily hands-on and research-heavy the patent-issuing process is not speedy Inventions for which the U.S. Patent and Trademark Office now is issuing patents were novel two, three or four years ago, Kaminsky says. "The real cutting-edge stuff is being filed today," says Kaminsky, who currently has about 30 patents pending.

To help keep the ideas flowing, IBM offers incentives to its employees. Inventors receive an award when a patent application is filed and another when a patent is awarded. In addition, IBM keeps track of how valuable an invention is to the company, and it recognizes engineers who developed the top 5% of revenue-producing ideas with rewards that sometimes approach $100,000, Kaminsky says.

The effort is paying off. In 2002, the company booked more than $1.5 billion in licensing revenue associated with its intellectual property portfolio, according to industrial business consulting firm Principia Partners. Over the last decade, IBM has earned more than $10 billion in licensing revenue - the bulk of which goes straight to its bottom line, Principia says.

Turning intellectual property into revenue through licensing agreements is an often untapped area of opportunity for technology companies. Principia says 25% to 35% of the value of companies' intellectual property portfolios is never realized.

One company aiming to leave less money on the table is HP, which last week announced the formation of a dedicated intellectual property licensing organization. Already HP has been working to grow its patent portfolio: The vendor earned the No. 5 spot on the IFI Claims list, with 1,763 U.S. patents in 2003. HP was awarded 1,385 patents in 2002, the vendor says.

"Companies are starting to recognize that patents are not just a way to support competitive differentiation and provide a vehicle for legal action, but also can provide a source of licensing revenue," says Nick Wilkoff, a senior analyst at Forrester Research.

Wilkoff and a team of researchers from Forrester and Evalueserve devised a methodology for analyzing IT-related patent data. The team analyzed more than 30,000 patents and patent applications published in 2002 and 2003 and reported their findings in a research brief published earlier this month.

Overall, Wilkoff says the research uncovered an impressive amount of IT development. "Despite some of the issues with the tech economy it's good to see that there's still a heavy focus on research and innovation around these technologies," he says.

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