ATLANTA … Few know it, but Scott Frank is head of one of the more interesting pieces
of the massive BellSouth Corp.

You’ll not find Frank’s name or his unit’s numbers in any company reports. There’s
nothing on the phone bill about it and little on the BellSouth website. A search of the online archives of The Atlanta Journal Constitution turns up exactly zero mentions of Frank or his operation.

Nevertheless, the BellSouth Intellectual Property Management and Marketing Corp. could be a significant player in the future of the $25 billion-a-year “phone company.” It is, at the least, a sign of the times, part of a broad effort to move BellSouth beyond being a plain old telephone company.

Formed in 1998, BellSouth IP’s job is to find inventions and original software that’s been cooked up inside the company, get it patented, copyrighted or trademarked, then find ways to make money from it.

This sort of thing has been routine at a few invention factories like IBM and Xerox and a
handful of elite universities like MIT and Stanford for decades. But BellSouth just formalized its intellectual property operation four years ago, and a lot of others have also lately awakened to what IP lawyers call a potential gold mine.

The number of patent applications filed with the U.S. Patent & Trademark Office jumped 42 percent from 1996 to 2000, to 293,000. And the USPTO figures that number will climb another 25 percent from 2000 to 2002. The number of patents issued climbed 41 percent from 1996 to 2000, to 165,504, according to the USPTO.

Meanwhile, as the applications flood in, they are stacking up. The USPTO predicts its backlog of unprocessed patent applications — 278,000 in 2001 — will soar to 807,000 in
2006.

Value of patents keeps climbing

There are a few reasons for this rush to secure patents. Besides the rise of the information economy, a major one is the rising value of patents. Scott Killingsworth, chairman of the technology transactions practice at the large Atlanta law firm Powell, Goldstein, Frazer & Murphy, cites statistics showing that since the middle 1980s, patent holders have been on a winning streak in court.

After the establishment in 1982 of an appeals court in Washington, D.C., that primarily hears patent and trademark cases, patent owners defending IP rights in court against alleged violators were by 1988 successful more than 80 percent of the time, Killingsworth says. In 1980, they won 40 percent of their cases.

Many of those cases have produced judgments in the tens of millions of dollars.

“That gets people’s attention,” Frank says.

So too, he notes, does the fact that IBM generates nearly $2 billion a year in revenue from IP licensing, much of it related to the PC. And it’s mostly profit: You invent something once and can license it to many paying customers.

BellSouth IP has 30 employees and has in its short history pushed through dozens of patents, copyrights and trademarks, says Frank. For example, his outfit has fashioned licensing agreements with other regional phone companies that allow those firms to use a billing software program BellSouth developed. The software allows the telecom companies to give big commercial customers bills that can be sliced and diced in great detail. That’s produced “many millions” of dollars for BellSouth, Frank says.

Frank is in talks now with voicemail vendors about a technology BellSouth devised that lets you, while listening to a voicemail, press a button to instantly call the person who left the message. A patent attorney who spent seven years at a big Atlanta law firm, Frank figures this “boomerang” technology will also will generate millions in high-margin revenue for BellSouth.

Patent on getting patents?

He doesn’t like to get more specific. But it’s clear that as companies like BellSouth face
increased competition, they’ll look to squeeze profits out of anything at hand. Frank and
Killingsworth say that, as a result, their line of work is proliferating, while the number of
people who are good at it is not keeping pace.

In fact, hoping to exploit this growing interest in IP commercialization, BellSouth IP has filed patents relating to the processes it has created for turning IP into dollars, Frank says. He won’t detail what the applications involve. Frank says he has not come across similar patents of significant value, but figures there will be many applications in the next couple of years.

Killingsworth likewise says he knows of no such patents. He cautions, though, that getting such business process patents has gotten tougher. The Internet boom brought a deluge of patents relating to business processes or methods implemented by software. Responding to a backlash, the USPTO reexamined and subsequently revoked many such patents.