Perpetual Innovation

Category: patent

  • The End of a Patent Dynasty, IBM has been Dethroned


    IBM is no longer King of the Patent World! 
    Samsung now reigns supreme.

    US Patents for 2016 by Fortune by IFI Claims Patent Services. IBM #1 with 8,052 patents issued. Samsung Electronics Co Lmt with 5,518. But, a better measure would have IBM coming in second in 2016, and even in 2015!… 

    The other approach that consolidates related companies here, or more directly from Sqoop here.   IBM #2 when Samsung has more patents collectively with 8,551 issued in 2016.
    In terms of patent applications, 

    In terms of patent applications, Samsung really beats out IBM:

    • Samsung — 10,695
    • International Business Machines Corporation — 8,800
    Samsung is way ahead of #2 Microsoft in Design Patents with ~1,500 vs. ~500. IBM is not in to the top 40 in terms of US design patents (as would be expected for the type of products (services, really) that they produce.

    Wow, no 25 year run for IBM. A questionable 24 year run through 2016. And arguably, not even a 23 year.

  • When your IP gets the boot, AAPL boots IMG

    WoW.
    Imagination Technologies (IMG) dropped about 70% over the last day or so as Apple says that they will no use IMG’s graphics processing (GPU) technology much longer. The stock dropped from a high of about $300 US to a low of $76. It dropped $180 in today’s trading, stabilizing at about $90. You might have an issue when the largest company in the world says they don’t intent to buy your products much longer, especially if they are your largest customer.

    Read about it here.

    Apple says that they will take other approached to get their graphics. IMG says that will be hard to do with their intellectual property protection.

    IMG is very similar to ARM Holding who makes the technology, not the products. But last year ARM got gobbled up by SoftBank (which owns Sprint), so Great Britain is becoming even less great the day or so after BrExit (wondering if any relation there). IPZine blogged about ARM holdings not holding out here.

    Yes, intellectual property will be an interesting problem for the UK as they work out the divorce agreement(s) with the EU.

  • Long-term good for R&D, Patents and Profits

    A recent study shows how long-term focus pays off. This study concentrated on switching the CEO compensation to longer-term. From that point forward, what happened, on average to several things related to the performance over time.

    Great study was by Flammer and Bansal (2016) and summarized in the WSJ, CEOs should focus on the long term, a study says. Although the study is coming out soon in the Strategic Management Journal, you can find it here.

    The researchers selected companies that were long-term focused based on those companies that had a long-term compensation package presented to the board that was narrowly approved. The narrowly approved implies that this was a bit of a surprise to the executives resulting, potentially, in a paradigm shift toward longer-term focus. The board voting was reviewed from 2005 through 2012 so that there would be room for performance analysis.

    There are many positives related to long-term focus all around. Companies with a long-term focus do better all around (profits, net profit margin, sales, stock price, etc.). Those long-term focus had a statistically significant improvement over the longer term (2 years and longer). Interestingly, they had a small dip insignificant dip in the short term.

    Longer term companies spend more money on R&D, got more patents, had more patents that “flopped” and had more patents that were “hits”. Flops and hits were based on the citations of their issued patents. Lots of citations means hit, not very many means flop. That has issues, but seems acceptable (unless you want to do a market analysis of the patented technologies).
    They also did a analysis of exploratory vs. exploitive. This was based on 80% vs 20% of the patents citations being internal to the company. So if lots of citations in my current patent refer to my own prior technology then it is a incremental, exploitive patent. They used a log scale on the number of patents, so a 0.568 correlation could be extrapolated on a logarithmic scale! A 57% correlation meaning that the decision to go long-term-centric resulted in a 57% positive change in the patents. Because they argue a cause-and-effect, they are an argument for causal correlation.

    Hits and flops of patents is interesting. First, the patent needs to be more disruptive (exploratory) and new to the company. Then the number of references to the patent were reviewed to see if it gets an abnormal amount of citation activity citing it. Flops would be exploratory that get very low citations. They first combined both hits and flops and indicate that total as a share of all (exploratory?) patents. This is statistically correlated at R-squared of 0.571. Trying a lot results in lots of failures and hits.
    Note that the number of flops and the number of hits were statistically correlated: 0.457 and 0.427. This is very interesting, if you aren’t trying, then you aren’t innovating. In this case, long-term focus means that you are trying and getting a good splattering of both. (They use the methodology here of Azoulay et al., 2011)

    Verdict. Boards should focus on long-term for compensation. This means that they have to be willing to take lesser profits in the short term.

    There are also very strong correlations to the KLD factors, collectively and all four components: employees, environment, consumers and society.
    Verdict. Corporations should focus on sustainable, long-term targets for goals and for compensation.

    They have some limitations to this study, but they also combine it with good literature support for long-term-centric management practices. And minimizing the principle-agent problem common to executive compensation.
    We want everyone highly motivated by the long-term, sustainable success of businesses (& not-for-profits & Gov)…
    Anything else is, well, short-sighted!

    References
    Azoulay P, Graff Zivin JS, Manso G (2011). Incentives and creativity: evidence from the academic life sciences. RAND Journal of Economics 42(3): 527–554.

    Flammer, C., & Bansal, P. (2016). Does a long-term orientation create value? Evidence from a regression discontinuity. Strategic Management Journal. doi:10.1002/smj.2629

  • Readying a Patent Portfolio for Sale

    In years gone by, companies with extensive patent portfolios were loathe to sell these assets, strongly preferring to license them.  These Patent Licensing Agreements (PLA) came in several flavors, most had some form of royalty payments for the licensor and the fundamental was that ownership of the patents remained with the original owner, i.e., the company granted the patent(s).
    While not totally different today, much has changed in the disposition of thousands of US patents.  Patents are now sold in much greater numbers than in decades past.  Some of the reasons for this are:
    ·         Corporate decision to shut down or sell of an operating division
    ·         Near term need to financially rescue another part of the corporation
    ·         Shift in corporate direction/strategy
    ·         Pay a court imposed penalty
    Patent sales are now so commonplace that online IP reporter sites like www.IAM.comrecently devoted a webinarto the patent selling process.  This process, as one can see, includes seven steps.  The assumption here is that the seller completed a validity check to the extent possible on each patent offered for sale. 
    It is noteworthy under Step 6 that the biggest buyers of patents review around 1,000 seller packages per year.  This clearly puts the onus on the seller to develop a first class patent package.  It also suggests that this is a buyers’ market putting more of a burden on the seller to find ways to get the most value for its assets.

    Keywords: patent, patent portfolio, licensing, PLA, Patent Licensing Agreement, commercialization. 

  • Supreme Court Brings back Treble Damages – WSJ

    Supreme Court Makes It Easier for Patent Holders to Win More in Damages – WSJ:

    The unanimous ruling by the Supreme Court brings back the serious damages — up to 3 times — for willful patent infringement. Recent lower court rulings were making it virtually impossible to go after big, treble-the-losses, damages. That is the BIG STICK in patent infringement cases. Some companies strategy is to just keep infringing and simply let the lawyers do the heavy lifting. Smaller companies often do not have the resources to fight, especially if it becomes long and protracted.

    The threat of treble damages, kind of keeps every honest, usually. Take that away and infringement becomes much less risky.

    One of the first options for a patent holder is to enjoin the infringer from producing and selling. This can take some time; the patent claims are always contested, etc., etc. Fortunately, the USPTO has improved this process of patent review so that the strength and quality of the patent can be established early on.

    Of course, one end result of infringement is a licencing agreement. However, someone who will infringe your patent, might also go to great lengths to avoid giving an accurate count of the units sold and the royalties payable.

    During all this time, the infringing company is trying to develop a work-around so that they can continue selling the products but avoid the infringement. Market build, product established.

    If the patent has not yet been issued, the game is even more convoluted.

    On the flip side of treble damages is the patent troll (NPE). One would hope that judges would evaluate the case of a troll company that simply sits on a pile of patents with no intentions of producing any actual products and takes a toll off of any and all commerce in the industries/products where their patented technologies apply.

    *** Update below on June 17, 2016. ***

    An excellent Legal-centric focus of this ruling comes form Dennis Crouch at Patently-O. He also discusses “willful” and suggests that “egregious infringement” might be the new standard going forward.

    From a more business perspective, Joff Wild at IAM-media offered some interesting insights about the Halo ruling. He noted that Justice Roberts gave us the first official definition of “Patent Trolls”, there s also a discussion of “efficient infringer”, and this ruling obviously is a great step forward for patent owners, but a small, first-step.

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