Tag Archives: patent portfolios

Samsung is the leading US patent holder, 24,000 ahead of IBM

Of the top eleven active US patent holders, only four are American companies.

But who gets the best return on their innovation rights is less clear. 

It is no surprise that many foreign companies are significant US patent holders. The leader in active US patents, Samsung, with 63,434, is now more than 24,000 issued invention rights ahead of the American leader, IBM, with 39,436. But US patentees are learning that they do not all need to be top banana to succeed.

What this tells us is that for some companies – especially foreign ones – the quantity of US patents still counts, even if quality appears to be somewhat of a moving target. And besides, big technology companies seldom put their patents to the test. US-Patents

“Depending on the stage of a corporation’s development, intellectual property may be a primary value driver,” according to an article, “The largest US patent portfolios are shrinking,” by Michael Chernoff of MDB Capital in the May IAM magazine.

“This list provides insight as to whether a company’s portfolio has been growing and the impact that those assets appear to be having within their technology verticals.”

Big and Growing

Of the top 100 holders, Alphabet (Google) had one of the highest three-year compound annual (patent) growth rates (CAGR), 16%. They were outdone only by Apple, 19%, Ford, 19% and Taiwan Semiconductor at 22%. Huawei’s CAGR was a 26%, but on a lower base.

Alphabet is #12 and Apple #26 on the top 100 active US patentees list. Microsoft is now four, displacing Panasonic.

Seven entities moved up the ladder and made it onto the US Patent 100 list during the last year: Avago Technologies (36), Kyocera (81), Merck (84), Huawei (86) Caterpillar (97), EMC Corp (98) and Halliburton (100). While most of these new entrants won their place as a result of sustained IP development, some are due to significant acquisitions, as noted in Chernoff’s article. (I understand that Google also, has been an active acquirer.)

Getting vs. Having 

While IBM has received the most patents granted by the USPTO every year for the past twenty years, or so, it does not have the most active US patents. Samsung does, and Canon has inched ahead of IBM.

2015-Patents-Top-Ten-IBM

This is one area where lack of leadership can be strength. IBM allows many patents to lapse once it knows that rivals will not secure them or they are not likely to provide much value. The company also generates many defensive publications that prevent others from securing patents on inventions it may wish to use or build trade secrets (consulting “know-how”) around.

Because IBM is more selective and may have a greater number of quality assets than some of its foreign rivals, the company’s patent portfolio is likely more relevant for out and cross-licensing, and occasional sales, which in past years it has engaged in with the likes of Facebook, Twitter and Google. Fewer active US patents also means lower maintenance costs.

Image source: http://www.diyphotography.net; www.thenextsiliconvalley.com

Online Retailer Alibaba ‘Stocks Up’ on U.S. Patents Pre-IPO

In the days preceding what could be the largest U.S. IPO ever, Alibaba, the Chinese e-commerce giant, has been buying patents as well as filing them in an attempt to establish a stronger IP presence.

According to Bloomberg News, Alibaba’s pre-IPO patent buying is part of a larger move on the part of some e-commerce companies to “bulk up” with IP rights for defensive reasons just before or after they go public. (See video here.) However, the source and value of these patents indicate these moves may be more style than substance.

Bloomberg News may be right to suggest that these unproven companies need intangible assets like patents to justify their high valuation. However, it’s unclear if acquiring these untested patents really does provide a meaningful competitive advantage. Patents with an apparent pedigree are not necessarily quality patents, but for some they may provide sufficient freedom to operate. (Click on either image below to see Bloomberg News clip.)

 

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The news service reports that Alibaba has bought 102 patents, 20 from IBM, and has some 300 pending. Perhaps more important, Alibaba is 24% owned by Yahoo!, which has 1,500 patents, presumably those with relatively early prior art in e-commerce.

Twitter pre-IPO has just 9 patents and had been saying that it would not enforce them. Post IPO through and an acquisition with from IBM it has added 900. (Twitter reportedly paid $36 million for them of about $40K per patent, less than what Intellectual Ventures averages per purchase.)

Facebook had just 12 patents pre-IPO. Following it public offering, it used a relatively small amount of cash to buy 750 (from, guess what, IBM). Google, was somewhat of a laggard, but caught up quickly with two large portfolio purchases from IBM and the Motorola acquisition, which included 17,000 patents and 6,000 applications. Presumably, those rights were more focused on wireless inventions and chipsets.

An interesting pattern is emerging for e-commerce businesses: Raise a lot of money, go to the IBM or other well-known stock room and buy (not license) what they can for whatever price so they can at least appear to be IP competitive. Sometimes, the perceived value of a patent portfolio is as important as their actual value, especially if there is little likelihood they will be tested.

Is it possible that IBM, which is fast becoming the Home Depot IP rights, could have that many meaningful e-commerce patents? I hope not.

The Alibaba IPO is expected to exceed the $16 billion that Facebook had raised with its initial offering in 2012.

Image source: anyoption.com; bloomberg.com  

 

 

Bold IP Moves Enable Microsoft to Lead in Patent Performance

The inability to dominate in its product lines has not prevented Microsoft from crafting a purposeful IP strategy that has generated billions in patent licensing and enables it to participate other technology businesses’ success.

Microsoft is not you typical technology company. The software business has taken more heat over the past 20 years for what it has not achieved than practically anyone.

While missteps in product development and market strategy have slowed Microsoft’s once meteoric growth and hampered its shares, the time and research spent developing new ideas and protecting them are not without a silver lining.

Microsoft has emerged as a study in smart IP management, and what an evolved business can achieve when it understands the power of selected IP rights and how to deploy it. Not only has MSFT (NASDQ), a laggard with just 300 patents and applications a decade ago, established a formidable portfolio of more than 40,000 patents and a successful licensing program generating about $2 billion annually and likely to generate more, it has displayed a marked ability to move swiftly and deploy its huge cash position when the IP opportunity arises.

“Microsoft: Bold Moves and Intriguing Results,”  will appear as the next Intangible Investor in the January IAM Magazine, out this week. The piece looks at how Microsoft, which has failed to dominate in games (Xbox), operating systems (Windows) or search (Bing) has managed to carve out a formidable niche in IP asset management. A few of the more notable Microsoft IP moves are listed below.

Notable Microsoft IP deals, disputes and investments:

– Purchase/License:
From AOL 925 patents and applications, plus 300 licenses for $1.056M (2012)

– Sale:
To Facebook, 650 patents from the AOL deal for $550M (2012)

– License:
For Adaptix patents from Acacia with Samsung (2012)

– License:
74 smartphone patents from Acacia (2010)

021109_2115_PercentofPa1– License:
To majority of Android smartphone manufacturers for up to $10 per unit (2007-2013)

– Acquisition/License:
From Nokia for $7.2B for its mobile phone and services business. Includes, all of some 30,000 Nokia patents for $2.17B over ten years and licensing income from some Nokia licensees (2013)

– Purchase:
Paid approximately $800M for its participation in Rockstar Consortium’s 6,000
patent Nortel portfolio: with Apple, RIM, Sony, Ericsson and EMC. (2011.)

– Suit Filed re: Above:
Rockstar Consortium US LP and Netstar Technologies LLC vs. Google, 13-893. (November)

– MS has been involved in five of the ten largest patent damages suits (see PwC Patent Litigation Study, figure 2c). It has prevailed in three, settled one, and lost at the United States Supreme Court in another.

– Successful Defense:
Eolas (U. of California) v. MSFT; in a decade-long quest for $500 plus in patent damages.

– Successful Defense:
Alcatel-Lucent v. MSFT, reversed $1.53 billion verdict on appeal (2008)

– Unsuccessful Defense:
i4i v. MSFT, $290 loss at Supreme Court (2011)

– Successful Suit:
Won $14.5M in a case against Motorola Mobility/Google for violating FRAND (2013)

– Plaintiff (settled):
Against Barnes & Noble, Foxconn, and Inventec for patent infringement over the retailer’s
Android-based Nook e-readers and tablets manufactured by Foxconn and Inventec (2010)

– Investment:
In 2011, Microsoft announced that it would invest $300M in B&N’s Nook business for a 17.6
percent stake, which ended their patent litigation

– Investment:
Approximately $1B into Intellectual Ventures fund giving it access to IV’s patents (2002)

– Investment:
1.6% of Facebook (2009)

Transactions compiled by Brody Berman Associates

Image source: reuters.com; patentlyo.com

Going Ape for Apps: Samsung is Gaga for U.S. Patents

No company has more Active U.S. patents than Samsung or files more applications.

In fact, outside of IBM, Samsung leads all filers in U.S. patent applications by better than two to one.

According to “The US Patent 100” published by Patent Vest and MDB Capital in IAM, Samsung is the biggest current U.S. patent holder with 45,012 issued and more than 25,457 applications on file. Highly active patentees like Canon, Panasonic, Sony, Toshiba and Microsoft are not even close, with around 10,000-11,000 applications each.

What does Samsung know that others don’t? It’s hard to say. Perhaps they hope that at least some of their patents will read on their competitors’ products and will discourage them from filing infringement suits. This will do little to slow down NPEs, unless, of course, the NPE is a proxy for an operating company. Like Apple and Microsoft before them, outspending the competition on filing and/or litigation defense is a viable strategy for some players.

Might Samsung also believe, similar to the Japanese in the 1980s and 1990s, that it will be difficult to get a fair shake in U.S. courts (see Apple v. Samsung)? Relying on large numbers of patents, quality aside, to increase their likelihood of having some of them read on a potential adversary might discourage a law suit, or may provide bargaining leverage. It has worked for IBM.

Size vs. Quality

Patent portfolio size was of questionable help in Samsung’s much reported dispute with Apple, where it had been directed to pay Apple $1 billion in damages until the award was reduced two weeks ago by Judge Koh to $450 million. But no check has been written yet, and without an 3725709injunction, Apple’s victory is little more than a series of admittedly valuable headlines for it and a write-off for Samsung. Despite Apple’s tough talk, Samsung may find a silver lining by including some of its many patents in a licensing package that Apple would find acceptable. (Some companies see patent litigation as a very expensive form or licensing. It works better for some than others.)

The US Patent 100, similar to data provided in the past by CHI Research, now 1790 Analytics, monitoring patent filing and citation trends, suggests that analysis of the largest, fastest growing and most recognized (cited) portfolios can predict prowess. Certainly, size counts when it comes to patents (both in terms of portfolio breadth and claims), but it counts more to some than others.

IBM, now number two in U.S. patent grants (38,394) and applications (19,138), still has more grants over the past twenty years. Patent Vest suggests that divestitures to Google and Facebook, totally over 3,000, have brought down the number of IBM’s patents in-force. They do not mention IBM’s lapse rate, which I understand is among the highest. (Lapse can mean prudent management or it can mean that IBM didn’t care much about securing the patents in the first place, or does not think they will be very useful to anyone. It also may mean that once their goal of not allowing anyone to own a particular patent is achieved, there is little value in maintaining it.)

So, who has the better patent portfolio? I’m not sure that size, maintenance or citation frequency is very  indicative of quality or success. Those with the biggest portfolios often don’t have the best or most valuable patents. But size does count in court where discovery is costly, and time is money. Whose to say which patents at a given time have value to a particular business.

Who’s Gaming Whom?

It’s ironic that owning ten’s of thousands of questionable patents, those primarily intended to protect market share and slow competitors, is typically more meaningful to a businesses than a handful of well-crafted, timely rights that actually read on successful products.

Deployment of increasingly larger portfolios, like Samsung’s, makes it unclear as to who is really gaming the patent system, and who has the most useful inventions and best quality patents.

China, BTW, is now ahead of the Japan and second only to America in U.S. patent applications. Permitting innovation to become little more than a numbers game is likely to affect its future and the economy’s health.

Mark Cuban ought to think about that. His gutless tirade against “stupid” patents was documented in TechCrunch and dissected in IP Watchdog, and followed by a long stream of angry comments. When it comes to innovation rights, Mark is in no position to determine what is stupid.

Image source: locatetv.com

IBM’s Huge Lead in Patents: Under the Microscope

Big Blue may be caught in its image as the perennial patents-received leader, for better or worse.

Obtaining large numbers of patents is often more effective for large companies than securing a handful of really good ones.

U.S. patent count leader IBM, which has boldly dominated patents-received for two decades, has made something of an art in the science of securing IP rights. It has obtained 46,000 U.S. patents since 2000, and more than 6,000 in 2011 alone. Of those, it has allowed about two-thirds to lapse.

aggregate-patents

Until recently, companies like Google and Apple had chosen not to compete in this costly and somewhat cynical numbers game. Winning the patent count race means more to large IT businesses than others. However, the patents a business receives should not be confused with those it holds or is able capitalize on because of the inventions they read on.

Does IBM know something about IP management that other companies do not? Or are cash-rich Google and Apple simply prepared to make bold purchases or settlements when necessary for defensive purposes? Some think that IBM is caught in its own IP image, believing to appear innovative more patents are inevitably better.

When Narcissus fell in love with his reflection in a pool of water, he got soaked. If I recall my Greek Mythology correctly it was Nemesis that attracted Narcissus to the pool in the first place.

*     *     *

The value of IBM’s volume strategy, which is generally more meaningful to large consumer products companies, such as smart phone makers, may be less readily cost-justified than it once was. Many companies like H-P and AT&T are filing about the same number of patents or even fewer than in the past, concentrating on balancing patent counts, quality and current needs.

IBM vs Key Competitors

In the January IAM magazine (number 57), which will be published next week, the Intangible Investor is devoted to IBM’s out-sized lead in obtaining patents. (They allow most to lapse within about 24 months, suggesting that for some holders it is as important to keep patents out of the hands of the wrong parties as it is to maintain them.) Emphasizing their patent-securing prowess has until now has worked for Big Blue, an IP licensing powerhouse that is seldom sued for infringement.

With its business model now focused on services, and the public smarter about IP rights, IBM is not in need of more patents, but better ones. Of course it depends on how they intend to use them and on how they choose to measure performance.

In “The need to lead: IBM under the microscope,” out next week in IAM, Brody Berman Associates compiled “aggregate totals” for US patents granted to leading IT companies from 2000 to 2011. Over this period IBM (46,292) was granted, 2.5 to four times as many patents as Microsoft (18,120), HP (17,699) and Intel (17,484).”

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IBM is unabashedly proud of its out-sized dominance in  patent counts, besting some innovative competitors by 20-fold. (See the graphic from IFI Claims, above.)

Is Big Blue’s volume approach — which it shares with Intellectual Ventures and several defensive-mined Japanese companies like NEC, Hitachi, Sony and Canon — a relic of patent wars past?

Patent portfolios are a means to support innovation and and facilitate performance, not an end to qualify them.

Illustration sources: Brody Berman Associates; IBM Annual Report

Low R&D Cost Per-Patent is a Poor Indicator of Good Return

Patent Yield-Per-R&D Dollar Varies Widely by Industry, Technology & Business Model

For most businesses obtaining patents and costly R&D go together like love and marriage – you can’t have one with out the other. Or can you?

The cost of R&D that underlies a particular invention varies greatly by industry, business model and area of technology. In pharma, for example, a lot of R&D typically yields a handful of patents. Those that are valuable are very much so.

In the IT industry, however, some patents can be generated with relatively little R&D. Software patents and algorithms, for example, often do not require the same level of costly research as chemical or bio-pharma inventions or those in the semiconductor space. They still require a lot of thinking, planning and awareness of prior art.

The most efficient patentees may not hold the best quality rights. Similarly, those with the most expensive patents have no guarantees about their value or the return they may generate. 

Some IT companies that spend significantly on R&D generate abundant numbers of patents (e.g. IBM, $6b 2008 R&D; 6,146 patents in 2011), while others who spend more modestly, and file more selectively, generate patents at a higher average cost per patent (Qualcomm, $2.3b R&D; approximately 1,000 U.S. patents). Do those who spend larger sums on R&D and file more actively secure better or more valuable inventions or rights, or those that generate greater return? Probably not.

(CLICK ON GRAPHS TO ENLARGE THEM)

Return on IP (ROIP)

Patent yield or efficiency is easily ignored. It is, however, central to return on IP (ROIP) that a company generates. More R&D and more patents (at a lower cost per patent) are very limited indicators of success, but it would be inaccurate to say they mean nothing.

A lot depends on the purpose of the R&D: Is it  to obtain patents that provide design and sales freedom? To reveal ideas for new products? To generate licensing income? All of the above?

The first Brody Berman-researched graph above employs a three-year delay between R&D spent and patents issued, to provide an idea of  the role prior research might have played in current patent issuance.

IBM is off the above chart (literally) in terms of R&D spent ($6 billion) and patents obtained, with almost three times as many U.S. patents secured as it’s closest U.S. competitor and even higher spending rival, Microsoft.  On the other hand, Apple spent a fraction of the R&D ($1.1b) and received about a 1/10 as many patents.

 

Could IBM, the most “efficient” patent generator among large companies, secure the $500m or more in annual patent licensing revenues it does typically with fewer patents and less R&D? Would its design freedom be seriously hampered with fewer patents? How significant a role does quality play in its portfolio? (In IBM’s case, I’m told, it depends on who you ask.)

Why don’t more U.S. businesses create the massive patent wall that IBM does? Surely, they can afford it. (The short answer: It is only one way of generating IP return, and for some businesses not necessarily the best.)

Bigger or Better?

What is to be learned from all of this? That the manner in which companies obtain patents, or the volume they produce, is not necessarily tied to patent quality or return. The bigger portfolios are not always better, but frequently can be relevant because matters, especially to operating companies contemplating  enforcement against large holders. Infringed parties immune to counter-assertion, like NPEs, increasingly key players in patent monetization, are less likely to care.

Companies (and shareholders) need to look carefully at not only how many patents a business produces and what they cost, but what those patents provide in term of direct and indirect return. For most companies it remains a mystery.

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Businesses are encountering new ways of directing R&D dollars, securing patents and monetizing them. Generating them the old-fashioned way – internally from R&D — may or may not be the best method. More patents at lower cost does not necessarily mean higher productivity or better business performance.

Business that deploy patents as part of their business strategy need to be clearer about their true costs and real return.

Illustration source: Brody Berman Associates; referenceforbusiness.com


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