Book Review: "Burning the Ships"

Marshal Phelps was best known for his 28-year career at IBM Corp., where he served as vice president for IP and licensing and built the now-legendary $2B a year licensing program. In 2003, Phelps was recruited to join Microsoft to help transform the company's IP into an "open innovation" platform. Naturally, Microsoft's hard-nosed reputation for dealing with competitors caused many skeptics to howl that Phelps' presence was a sign that Microsoft was "keen to [use patents to] reign in Open Source."

So far, there has been scant evidence that demonstrates this is the case with Microsoft. So what is Phelps and Microsoft up to and where are they going with all this? Phelps, who teamed up with famed author and IP consultant David Kline (author of the 2000 best-seller Rembrandts in the Attic) attempts to account for his experiences and explain where he and Microsoft are (IP-wise) in Burning the Ships.

The book essentially starts from the time Phelps joined Microsoft around 2003 - money was plentiful, Microsoft reigned supreme, and virtually every major OEM hated licensing with Microsoft due to the non-assertion of patents (NAP) clause written into every Microsoft contract. Since 1993, Microsoft viewed the NAP clause as a means to "patent peace" among the OEMs and the PC industry for limiting patent litigation.

According to Phelps, getting rid of NAP was the first major step in setting up an "open innovation" environment which would allow Microsoft to collaborate with others and to "more broadly and rapidly disseminate its technologies and products into the market through the cooperative efforts of others . . . In short, IP-enabled collaboration can materially enhance the bottom line of a company and serve the interests of its shareholders." Another area for improvement was Microsoft's patenting strategy - despite running the largest R&D operation of any company in the world, Microsoft, at that time ranked 34th in the number of patents issued.

Thus, Phelps devised a "5 year plan" that set forth the following objectives

1. Build an outward-facing IP and licensing culture within the company;
2. Play a leading role in the global IP debates;
3. Develop closer coordination between the IP group and the technical development teams in the business units to help guide innovation strategy;
4. Better protect technologies by becoming a top-10 patentee;
5. Maximize the utilization of IP assets to support the companies business goals, standards efforts, and relations with open source and other firms; and
6. Use licensing revenue and cost optimization to fund IP&L's expanded efforts.

Naturally, not everyone in Microsoft was on board with Phelps' vision, and the book provides a very interesting (but understandably limited) "behind-the scenes" account of Phelps' "transformation" of Microsoft, as well as dealings with competitors during that time. The book is written in a first person narrative, detailing many of Phelps' encounters and experiences, which, considering the 177-page length of the book, are quite plentiful and involve a LOT of different individuals (as one earlier review put it: "at times it seems like you are reading the organizational chart of the Microsoft Intellectual Property and Licensing department."). Intended for business executives/manager types, the book provides a refreshing peek into the world of IP portfolio management.

Of course, most every book has flaws, and Burning the Ships is no exception. While a certain amount of "spin" goes into books that recount incidents or periods of time, Burning the Ships can lay it on thick at times. For example, in one portion of the book, Phelps recalls Nathan Myhrvold explaining that, during Microsoft's expansion, companies will become more aggressive in asserting patents against Microsoft, and writes Myhrvold responded that "I was like, 'Oh my God, they can do this? They can just demand money from us?' A lot of people were shocked by that, I can tell you." There are other examples of this, but it never reaches a level that detracts from the main story on the role that IP can play in liberating previously untapped value in a company and opening up powerful new business opportunities in today’s era of "open innovation."

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