The Importance of IBM’s Patent Dominance

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    In 2015, IBM once again led with the number of patents granted, followed by Samsung and Canon. Google was fifth, Microsoft dropped to tenth, and Apple followed at eleventh. (Microsoft assigned patents to some holding companies, which are designed to form a stronger shared patent troll defense and that is likely why it dropped in rank. More on that later.)

    Let’s talk about the importance of patents.

    Measuring Innovation

    Patents are one of the few independently validated ways a firm can measure innovation. A patent is supposed to be a unique way of doing something, and by definition “unique” is innovative. While you can certainly argue that creativity is solving a unique problem, without someone validating that no one else had done it before, you really can’t tell if what was done was uniquely innovative or just copying something else, intentionally or unintentionally. This isn’t an absolute method of measurement, because most people don’t patent aggressively, but it is one of the only ones that can be independently validated.

    The Importance of Innovation

    Being able to showcase innovation suggests flexibility in problem solving. It is said that the hammer company views every problem as a nail and clearly there have been long-term issues with folks trying to get a tool not designed for a particular purpose to work to solve a related problem. So innovation reflects, particularly with a company as broad as IBM, a deeper tool bench and an ability to at least consider alternative ways to solve a problem. Once again, this isn’t absolute, but it does suggest an advantage, and the advantage is validated by the patent office, not just the vendor’s own claims of being “innovative.”

    The Downside of Innovation

    However, you also don’t want a company that treats every problem as an opportunity for innovation. Reinventing the wheel is not only a waste of time, it can result in some pretty ugly solutions where a better existing course of action could have been used. The nice thing about patents is that they don’t lend themselves to this craziness. It really isn’t worth the time and money to patent a less than ideal way of doing things, and practitioners will use what they know over something new in most cases. So as long as the firm fields experienced people, this doesn’t become an issue, but for a new company excessively focused on “innovation,” this could become a real pain for customers.

    Patent Trolls

    One of the big benefits of patents is as a defense against other firms’ intellectual property. This is often termed the mutually assured destruction defense; the sued firm threatens to sue the plaintiff in an intellectual property action for also violating their patents. Then end result is often a cross license between the firms so that both can focus on the work and not on litigation, in which they seldom have expertise. However, with the emergence of patent trolls, firms that are basically staffed with lawyers who buy up patents in bulk cheaply but don’t actually build anything, this defense is often worthless. Being aggressive in patents does increase the probability that the firm is protected by its own patents, though, allowing it to invalidate the patents from the trolls. It isn’t an ideal defense, but it is sure better than nothing.

    Patent Pools

    As noted above, companies like Microsoft and Panasonic are starting to pool patents with other companies to form stronger defenses against patent litigation. Realizing that litigation isn’t their business, this change in focus from owning to sharing patents allows these companies to collect far more patents into a single pool and create a stronger patent defense. This is less about innovation and more about making sure the firms remain focused on doing business instead of getting buried in patent litigation over time. This is a relatively new and innovative way to use patents.

    Wrapping Up: Patents Remain Important But We Still Need Reform

    Companies like IBM continue to show that investments in patents are both important and a good independently validated showcase of innovation. Unfortunately, the fact that we even have patent trolls continues to suggest that we desperately need patent reform. Patents were intended to protect those who innovate and patent trolls actually do the opposite. They create huge penalties for those that are successful at innovating but come into conflict with a patent bought for pennies from someone who was never actually able to get their idea to produce revenue. Whenever it is just the attorneys making money, you have an issue. That is largely the case with the current system. Here is Patent Progress’ listing of the bills currently in progress to reform patents.

    Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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