IBM offers patents to start ups at bargain prices

IBM offers patents to start ups at bargain prices

In the spirit of making intellectual property more accessible to technology start ups, IBM announced Tuesday a program that provides all of the computer giant's 40,000 patents to young companies in its venture capital program for a dramatically reduced rate.

Companies with annual revenue of less than US$10 million can pay US$25,000 and gain access to IBM's entire patent portfolio for three years, says Deborah Magid, director of strategic alliances with IBM's Venture Capital Group. In order to qualify for the program, these start ups must list among their investors one of IBM's VC partner firms, which include Walden International, Accel Partners, 3i, Darby Overseas Investments, and nearly 100 others.

"We felt that a lot of the IT practices are really something of an obstacle to start ups, especially when companies are in the formative state. We thought this was one place that [intellectual property] should be more open than it is today," Magid says. The deal comes with no strings attached; start ups that participate in the patent program are not obliged to develop products with the patents, although they could create products that compete with IBM if they so chose, she says.

However, with this program IBM is hoping more small companies will develop software that work with its infrastructure offerings -- more than half of the patents in the company's portfolio are for software, Magid says.

Start-up companies play an important role in IBM's overall technology offerings because they can fill in with products in areas that IBM no longer plays -- software applications, for example.

"start ups represent a huge innovation and economic engine in the market; they're a huge source of partners for our own ecosystems and well as for the industry," Magid says.

Tuesday's announcement marks the third time this year IBM has made efforts to open up access to its patents. In January the company announced that open source developers would receive unfettered access to 500 of IBM's patents, and last month made some of its patents available to developers in the healthcare industry, Magid says.

IBM's Venture Capital Group takes an unusual approach to venture investing. Instead of investing cash directly in start ups, the company partners with select venture capital firms and offers their portfolio companies advice, guidance, and access to customers.

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