Shares in Qualcomm have soared 44% in 2016, partly thanks to the stabilization of its patent licensing business. Donald Rosenberg, the mind behind the creation of the strategic IP function that values and breeds the company’s massive IP portfolio, shares the behind-the-scene story.
Leaders League. How did you create the IP strategic function at Qualcomm, and what is its current status?
Donald Rosenberg. Qualcomm’s IP portfolio is extremely valuable and very well known in the mobile communications industry, starting with the with the introduction of CDMA technology to the 2G standard, which created opportunity for many device makers to use technology that ultimately became the foundation for mobile internet access and the quick movement of huge amounts of data. It wasn’t simply our new patented technology, but it was our earlier decision to license that technology to allow any device maker to practice and contribute to this standard that was really a major factor in the expansion of the mobile communications ecosystem.
When I came to Qualcomm almost ten years ago, I looked at ways to not only keep that success going but to improve on it. Like most corporations, Qualcomm has a patent department with excellent patent lawyers, as well as a big engineering community: about 65% of our employees are engineers, and I wanted to enhance the direct engagement between the patent lawyers and the engineering community.
As I thought about the enormous value our IP portfolio and licensing business have to the company, as well as our virtuous circle of innovating, inventing, protecting IP, licensing our technology broadly and reinvesting in innovation, I realized that compared to many corporations, Qualcomm’s IP portfolio is even more significant, so I wanted to keep it well cultivated.
We needed a system that contributed more than following the engineering community by helping filing patent applications, and we needed to thoroughly look at the IP portfolio as an important element of our business. I like to use the example of a garden: a lot of nice things grow in a garden. I wanted to build a process nurturing our “garden,” examining what IP is valuable, what IP is less valuable or what IP was valuable but needed to be further cultivated, watered and fed. I thought about creating a complementary internal organization that could assist our business in many ways, notably in understanding and valuing IP, be it our own, of our business partner companies, potential acquisition targets or future sellers.
After finding the right lawyer/engineer to be the leader of the strategic IP function, we then populated it with equivalent parts from three disciplines: lawyers, engineers and business development people, which allowed us to have a broader scope, assisting the patent department in doing evaluation and valuation work on patents and other IP assets. The team had multi-facets: it could support the business when an acquisition was being examined or worked on; it could also engage with the litigation function to help express the value of our patents to potential litigants or actual litigants, or value patents that we may want to use or prioritize in an offensive or a defensive way; it was also dedicated to helping our licensing team, people who truly understand business and the licensing basis. This organization turned out to be even more successful than I had anticipated, and it has become very integrated into the entire business of Qualcomm and added real value on many levels. A few years ago, I decided to close the loop by combining the existing patent function with the strategic IP function. Together this larger organization is run by the senior VP, the lawyer/engineer that I initially put in charge of the strategic IP function.
From your perspective, what are the key issues to consider in the balance between IP protection/valuation and competition control?
A lot of discussions are going on, often about the intersection of antitrust/competition law and IP rights, and I’ve always been a believer in the notion that such an intersection is neither a problem nor a conflict. In fact, both concepts, IP rights and competition law principals, are aligned in many ways very naturally with the broader desire to promote innovation and competition. A lot of people have been trying to argue the other side by defining IP rights as a kind of monopoly or power that negatively impacts competition, which in my view is the farthest thing from reality.
IP rights are first and foremost property rights, and they have a value which is often market driven and decided. Owning a patent is not having a monopoly; it is having a right that the law grants to you after you have made a social contract to disclose an enormous amount of information in your patent application and define the very narrow limits of your claims, the areas that you believe are related to your invention and that you are in the entitlement to own the property interest, and the patent issued to you. In fact, the issued patent means you get a property right, which is only a right to exclude – but not to monopolize – for a limited period of time others from infringing on those narrow claims that you have carefully laid out and specified. There is enormous value that the patent owner has given to the community by inventing a new item but also by defining it clearly and giving everyone the ability to understand it and build on it. That opportunity is often underappreciated, as people tend to focus on the other side of that equation: you’ve got the right and you can abuse it.
I think what happened in the last several years is an unfortunate drift of several competition agencies from various parts of the world, who have crossed the line over the coexistence of IP and competition law, and have elevated theoretical competition law concerns over the value of IP rights and the system that promotes IP rights. I believe that is a dangerous trend, because if continued, it would ultimately reduce the amount of innovation that our society produces, and the amount of investments in innovators, people who want to spend their blood, sweat and tears inventing new things, and in the long run the society would suffer from fewer innovations and inventions. So I think that trend needs to be examined very carefully and turned around to some extent.
In 2013, you wrote an article in the Wall Street Journal entitled “First Rule of Patent Reform: Do No Harm.” What is your key message on patent reform?
When I wrote that piece, I was referring to some legislators at the time in the U.S. attempting to modify our patent law. Generally speaking, people around patent agencies in the U.S. or elsewhere are usually very pro-patent and understand the enormous value that IP rights provide to society, but sometimes legislators are influenced or at least lobbied by certain commercial interests that have ideas that are genuinely or ideologically different from what we believe. For their own short-term commercial interests, they may want to impact certain aspects of IP rights. Back then in the U.S., a lot of focus was on the potential of litigation reform to address the concern that patents were abused as a weapon of litigation and often in a harmful way to the consumers, as well as the concern that a lot of the patents used by so-called trolls and non-practicing entities were not even invented by them and probably not as valuable as they claimed. I still believe that in case of potential or actual abuse of the litigation process and misuse of patent rights, legislation should be focused narrowly on trying to fix that abuse of litigation behavior; but if you go beyond the legislation to the heart of the IP rights protection, then you may end up doing much more harm than the problem that you are trying to address.
There have been some reform efforts to address certain abuses, in the way the court responded to the litigation process, and so far legislators have carefully tried to walk the line that will not affect negatively our valuable and successful IP protection system. There are still attempts to devalue IP rights and modify our protection system to make it harder for people to enforce their rights, but most of us believe these attempts will remain individual.
Is there some work to do to educate the public?
I think the public is often misinformed about IP rights. If you take trademark as an example, I doubt most of the world understands this notion and its significance. Trademark is, from a consumer’s perspective, primarily very beneficial, as it tries to avoid consumer confusion, so when somebody has a mark on something, he or she would hope that consumers recognize the mark as representing the mark owner, good quality and consistency so as to make a good choice. When you focus instead on the enforcement of trademark, or whatever the particular current litigation might be on IP, the general public loses sight of the fact that the company is actually fighting for the proper work of the system to provide benefits for consumers. I think educating the public about the exact value of IP and getting them to understand that it’s really focused on consumer welfare is important.
Jeanne Yizhen Yin
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