Bob Sutor, vice president of open source and standards at IBM, sat down with Network World Senior Editor Deni Connor to discuss the relationship between intellectual property and open source. The discussion ranged from how a company can balance open source and proprietary software development to what Novell and Microsoft are doing.

Editor's Note: According to his blog site, Sutor is the IBM executive responsible for driving and executing the cross-company business and technical strategy for open standards and open source as they relate to software, hardware, services, vertical industries and emerging markets. In particular, he's helping to move IBM from its traditional technical and intellectual property approach to one where business exploitation of standards and open source for greater customer value is paramount, especially in vertical industries and emerging markets.

You gave the keynote at the Frontiers of Intellectual Property conference at the University of Texas in Austin last week. What was the gist of that talk?

IBM is the world patent leader -- the patents cover everything from software to hardware and everything in between. We have over 40,000 global patents, yet simultaneously we are the leader in open standards and a corporate leader around open source. We've done things like releasing 500 patents to open source last year. The big question today is, how does a company balance these? In the business climate today, how do you make decisions about what you keep and what you let other people use? That's a big change for IBM.

For a long time we looked at licensing -- if you want to use our stuff, then come pay us. That worked for a long time. We make about a billion [dollars] a year from our intellectual property. We realized several years ago that that wasn't going to be enough, that if we wanted to look at growth in the long term in markets we were interested in moving into, we had to loosen up and start building a foundation around open standards for connecting systems over the Internet and driving a service-oriented architecture.

How does a company balance open source and proprietary software development? What is the right combination?

It depends on the physical organization within the company. At IBM, we have three separate, but closely related, structures -- standards and open source, intellectual property licensing and the legal staff. I'm in charge of giving stuff away; the licensing guys are in charge of getting people to pay us money for things; and, the legal staff is there to help us assess risk and write contracts. To begin with you have to have an internal structure whereby you don't have someone who just automatically says no. You have to understand that if things are going to be strategic for you, the organization has to assess that and have an open mind about what might give you some short-term income vs. what will really generate money in the future. Regarding software, you further need a more enlightened software organization that, rather than thinking about open source, thinks about the opportunity -- that thinks, that of everything I could build, what is it I should be building, versus letting someone else build.