As telecommunications carriers’ revenues are under attack in light of increased competition, BellSouth Corp. has found a way to generate billions marketing its intellectual property to other companies.
“BellSouth is spending millions developing state-of-the-art technologies like Caller ID for traditional customers,” said Scott M. Frank, president of BellSouth Intellectual Property Management Corp. “We’re now recognizing we can generate substantial revenues from focusing on competitors and other telecom companies who may pay many millions in patents.”
IP has become a major priority for the regional Bell operating company, which recently has stepped up efforts to file a number of technology patents-many pertaining to wireless technology-with the U.S. Patent Office. In September, BellSouth created BellSouth Intellectual Property Management to manage and protect the company’s IP, and BellSouth Intellectual Property Marketing Corp. to market the carrier’s IP to third parties. Most carriers today have IP divisions within their legal departments.
BellSouth has taken its cue from large technology companies like Texas Instruments and IBM Corp., which both generated more than $1 billion in revenue from IP in 1997. Manufacturers traditionally have been the companies in the telecommunications industry with the large patent portfolios and the drive to aggressively promote them to generate revenue, said Frank.
“Estimated revenue is in the hundreds of billions,” said Frank. “When you market and sell IP, there are no R&D costs because those already are sunk costs since the technology is developed for internal purposes … The only cost is your sales force, which is pretty nominal. IBM had more than $1 billion. That is almost pure profit.”
BellSouth didn’t see much value in its IPs until the early 1990s. AT&T Corp.’s divestiture in 1983 gave AT&T ownership of technology patents, though RBOCs like BellSouth could use the technology for internal use. Developing patents for manufacturing was senseless since RBOCs are prohibited from manufacturing telecommunications equipment and telephones.
BellSouth was developing many patentable software ideas, however, and teaming with vendors to develop software and equipment, though sometimes giving protectable ideas away to vendors in the process. Changes in patent law during the last decade allow companies to patent software technology, which gave BellSouth the incentive to assess its strengths in IP.
“Laws continue to clarify that software is patentable,” said Frank. “Twenty years ago, BellSouth couldn’t protect what they did with patents.”
BellSouth began hiring IP experts earlier this year and now is marketing its billing system, accounting and network-based software to telecom companies and manufacturers. The IP marketing division so far has generated several million dollars in value for BellSouth, said Frank. This value includes cash and trades of services and technology.
