The phrase “I am not a lawyer” (IANAL for short) is used with alarming frequency when publicly discussing the increasing number of legal issues surrounding patents, copyrights, trademarks, and trade secrets (what is commonly referred to generally as intellectual property, or IP for short) in the technology industry. Seldom do we hear directly from the IP trenches; most of the public commentary on IP issues seems to come from bloggers, so-called “luminaries” or “thought leaders,” news editors, and press-hungry CEOs, few or none of whom are qualified to offer informed opinions on these subjects. In this interview, Jack Haken, the vice president of the Philips Intellectual Property and Standards and 2006-2007 visiting professor at Fudan University Law School in Shanghai, China describes some of the work he does as an IP attorney for a technology company that has had a significant impact on the computer, audio, and video technology industries, explains some of the issues facing technology companies today, and offers some advice to open source software developers.

Ed. note: While Philips has no affiliation or relationship with The Jem Report or its parent company JEM Electronic Media whatsoever, Jack Haken is my uncle and my business partner’s father.

I think a lot of readers associate Philips primarily with things like light bulbs and consumer electronics. What are some of Philips’ more exciting products?

Jack Haken: Philips started business as a light bulb company over one hundred years ago and, while we have expanded and shifted our business lines, we stick to our roots and are presently the world’s largest manufacturer of lighting products. Lighting remains an exciting and innovative field as we apply new technologies to save energy and protect the environment. We recently announced a major initiative to phase out incandescent lamps in the Americas and to replace them with more efficient light sources that provide the same illumination with only 20% of the energy input.

Overall, we are shifting our business into areas where our proprietary technology and innovative efforts give us a competitive edge. For example we have sold most of our semiconductor, display and mobile telephone businesses and are concentrating more on medical systems, personal care appliances and lighting.

What sort of innovations and contributions have you helped Philips bring to the world of technology?

JH: My first assignment at Philips was working with intellectual property for medical imaging technologies. We made a lot of early inventions that enabled CT, ultrasound and MRI diagnostics. Over the years I’ve also worked with Philips’ pioneering patents in the fields of optical recording, mobile telephones, signal compression, high definition television and computer hardware.

Does Philips primarily license its technologies to other companies, or does it generally try to develop technologies that it can use to make its own products competitive?

JH: We have a variety of business models that we use to extract value from our intellectual property. The particular models we choose to use mainly depend on the nature and maturity of involved products and markets. For example, the consumer electronics, entertainment and IT markets depend on interoperability of products manufactured by many companies and we openly license our patents to promote standards. Many of our patents in these fields are, in fact, offered through pools which are administered by independent agents. In other areas, like shavers and domestic appliances, we use patents to assure that we have exclusivity for our product features. We apply mixed strategies in the medical and lighting fields — we protect some features, but it would be immoral to insist on exclusivity or otherwise to limit availability for inventions that can significantly improve public health or quality of the environment.

In protecting and monetizing Philips’ technologies, what sort of problems have you encountered? Specifically I’ve heard that you’ve had some problems with Microsoft.

JH: We are in a number of tough business lines. Most of the competitors we face are fair and honest, but we also see a few who try to achieve an upper hand by unfair competition or outright cheating. For example, we need to do a lot of auditing to assure that some of our optical recording licensees fully report and pay patent royalties on all of their exposed sales of recordable CD and DVD media.

Philips and Microsoft have a good and longstanding two-way relationship as customer/supplier and as licensee/licensor. I think our biggest area of disagreement has to do with some aspects of proposed U.S. patent law reform. Microsoft and its software industry allies are pressing for new legislation which, we believe, will give them an unfair advantage when they compete against hardware companies for a share of the traditional entertainment and consumer electronics market.

We are also concerned when it appears that any company is attempting to use a monopoly position as an unfair tie-in to enter and compete in our traditional markets.

What have been the results of the majority of patent infringement incidents you’ve handled?

JH: Most all of the patent infringements that I deal with are eventually settled through negotiated licenses. We occasionally get involved in litigation, but the litigation is really just another tool the parties use in the negotiations. People sometimes disagree about the strength and value of a patent or other IP right. The American litigation process certainly has many problems, but it also is quite an effective way to let your opponent understand your position.

Software patents seem to be an important issue these days, not just for technology corporations, but for end-users and politicians. Clearly there is some brokenness in the current patent system — or at least the widespread perception of it. Do you think patent law should change as a result?

JH: You need to be very careful with terminology. I think the term “software patent” is unclear and it unfairly charges up the debate. The United States probably has the most liberal definition of patentable subject matter among countries today, but our law still excludes patent protection for abstract ideas and mathematical principles. If U.S. patent examiners properly applied the existing law, then I think we would eliminate most of the current problems. Unfortunately, the Patent Office is not adequately funded; examiner salaries are below industry norms and their training and supervision are inadequate. This is where I believe that legislative reform can help most, but we are battling politics and special interest groups like a stubborn Examiner’s Union.

The TRIPS treaty properly requires that countries cannot use their patent laws to discriminate in favor of one field of technology over other technologies. Thus, the same patent protection needs to be available for a technologic device, for example an anti-skid brake actuator in an automobile, even after a competitor ports an original hardware logic implementation into firmware.

The prohibition against technology discrimination impacts patent reform in other ways as well. Some proposals that seem to make sense for the IT industry, for example shortening the current twenty year patent term so that it better matches our short product life cycles, are opposed by pharmaceutical and biotech companies who are faced with long development periods before they can bring their innovations to market. These industry groups support well-funded and effective congressional lobbyists who will pull out all the stops and play political hardball to protect their positions in a U.S. presidential election year. The final result is likely to be a package of compromise reforms which are suboptimal for any individual industry.

With regard to intellectual property issues — those dealing with patents, copyrights, and trade secrets — do you have any advice for people who work on open source software?

JH: Probably the most important advice that I can offer is a caution that most of the law associated with open source license agreements is still theoretical. The fundamental principles appear to be sound, but the applications of those principles to open source business cases haven’t been tested in many litigations or reviewed by appellate courts. It’s even quite likely that some aspects of the licenses will be interpreted differently by courts in different jurisdictions, states and countries. You have to decide how much of your work effort and personal savings you want to risk by relying on a particular standard open source license in any particular business context. If the amount of money involved in any deal or venture is significant to you, then get advice from a knowledgeable lawyer who understands the IP law in the relevant jurisdictions.

Open source is a great resource, but it carries with it real business risks and uncertainty. Understand those risks before you make significant financial commitments. Ultimately your rights to freely use open source code depend on representations and promises which you receive, via a contractual license, from earlier authors and contributors. Oftentimes you don’t know who all these people were or how honest they are. Even if you can identify them, and if they made their contributions in good faith, if IP problems develop they may not have the financial resources to back up their promises.

What’s the question I haven’t asked? What else on the subject of intellectual property in the technology industry is interesting that you haven’t mentioned?

JH: There are still some big problems with the application of intellectual property laws in developing countries and the third world. I see real progress in some aspects of IP enforcement in China. The responsible government agencies here in China seem finally to realize that an effective IP system supports local innovation. However it also seems apparent that some of the big international software companies are willing to tolerate third world piracy because it effectively enables them to maintain a monopoly among the users in developed countries who can afford to purchase their products.

India is moving at a disappointingly slow pace putting its IP system into effect. We also see some judges and politicians in Asian manufacturing countries who openly discriminate IP enforcement to assist their inefficient local industries in competing in export markets.

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Copyright 2007 JEM Electronic Media, Inc. No reprints without written permission.