Drones: up in the air, but grounded in patent protection

Few words in the English language have enjoyed greater upward mobility this century than 'drone'. Originally defined as a male bee that did no work and lived off the labour of others, the word was borrowed for use in PG Wodehouse’s Jeeves books as the name of a club for male humans who were similarly inclined. But now the drone – more properly termed as unmanned aerial vehicles (UAV) – is a must-have item, whether for military purchasers or for greatly-valued recipients of Christmas gifts. Indeed, it has been predicted that more than one million of these devices will be given as presents during the 2015 festive season, to the consternation of the US Federal Aviation Authority (FAA).

While the majority of patent activity has been in the defence sector, this patent analysis focuses on civilian drones which are put to a variety of commercial uses. Albeit technically similar, military drones are typically aeroplane shaped and operate at high speeds and with heavy loads (eg, ammunition), while civilian drones are typically 'quadricopters' that are light and can carry a small package or camera. Figure 1 shows that while the military market was developing drones before there was any appreciable scope for their commercial exploitation, by 2024 the civilian market will have gained substantial momentum, growing at a proportionately faster rate than the military one.

Source: Teal Group, Business Insider

Turning to Figure 2, our Cipher analysis of the broader UAV technology landscape shows that of the top 30 patent holders, no fewer than 18 (or 60%) are involved in the military drone area.

Unsurprisingly, the large aeronautical companies have a rich heritage in aviation and large portfolios covering various aspects of commercial flight; however, civilian drones also incorporate technologies that might not be core to them. Figure 3 puts this in perspective by comparing civilian drone manufacturers with large aviation companies, within the area of commercial drones. The largest three with strong growth since 2009 are Honeywell, Airbus and Boeing. With the exception of Parrot SA, there is a clear gap in terms of the number of granted patents between military and civilian drone manufacturers; however, there is rapid growth among the civilian drone companies.

Exploring the civilian drone sector, which businesses are its current lead players? Among recent filings, Chinese company DJI is ahead of the pack in terms of growth, followed by French company Parrot and Berkeley-based 3D Robotics. Other leading drone makers are Hubsan (China), Hobbico (United States), Yuneec (China) and Xaircraft (China).

Only one of these companies has been around for some time – Hobbico, which made radio-controlled hobby products in the 1970s. The others are far more recent. Parrot SA dates back to 1998 and Yuneec to 1999. Patent-rich DJI was founded in 2006, Xaircraft began its operations in 2007, 3D Robotics started up in 2009 and Hubsan, the most recent, has been in business only since 2010.

DJI, Parrot and 3D Robotics – arguably the top three civilian drone manufacturers – could not pursue more different patenting strategies.

DJI is the market leader. Its powerful position in the market is shown by the fact that it holds more than two-thirds of the 700-plus exemptions from regulation granted by the FAA under Section 333 of the FAA Modernisation and Reform Act 2012. According to a Summer 2015 report in Fortune, the company owned more than half of the global market for what it called “consumer-focused drones”. Its global control of the market may not be as great as its slice of the market suggests. The intensive patent application activity shown since its launch is reflected almost entirely in its Chinese filings. Interestingly, its fellow Chinese drone companies are not as purely focused on China.

Parrot, on the other hand, already had a wider patent strategy in place when DJI started up, and its filing activity – which peaked in 2006, DJI’s birth year – is reflected by the company’s ownership of some of the earliest patents in the industry.

3D Robotics might be described as travelling light, with just two patent families to its name. This suggests that the company is taking the opposite approach to DJI’s patent-heavy strategy, betting on the sector benefiting from third-party development of open software and architecture that will enable both it and its competitors to use these open platforms as a basis on which to build their own value-added software and hardware. This is corroborated by a quote from Fortune that: “3DR likes to analogize Solo with the smartphone, which didn’t really take off until third parties were able to develop an ecosystem of apps around the hardware”.

The spread of patents shown in Figure 5 demonstrates that there is far more patent filing activity by competitors in the United States than elsewhere in the world. This strongly suggests that if there is to be any industry-defining make-or-break patent infringement or invalidity litigation, it will be before US courts. In fact, in July this year Parrot lost a case for its app-based control of drones to Taiwanese company Drone Technologies and had to pay $1.7 million.

This sector is too new and too dynamic to draw firm conclusions as to how it will develop. However, it does provide an opportunity for patent analytics to depict the action as it happens, where it happens. Given the buoyant growth of the market for drones, the one firm prediction that can be made is that it will provide a fertile ground for further analysis as the sector matures.