Patent transaction trends in cloud computing: are PAEs buying into the market?

Cloud computing
Cloud computing describes a type of internet-based computing that provides access to shared computer processing resources. Cloud users store and process data to run diverse sets of software application on shared computing systems. Cloud computing allows users to run performance-intensive processes on demand – this avoids upfront infrastructure costs and permits systems to be scaled up or down depending on user traffic. Pay-as-you-go models enable users to load applications quickly, often with low maintenance costs and improved manageability. The number of applications using cloud infrastructure is constantly growing, and worldwide spending on cloud computing is predicted to rise drastically in the coming years. In this regard, the number of solution providers has been constantly increasing and the market is becoming more competitive.

Companies increasingly compete on innovative technologies, including those which:

• enable efficient up scaling of virtual machines;
• quickly deploy data; and
• rapidly recover applications.

Such innovative technologies are increasingly patented to:

• secure future technological areas for patent owners;
• demand royalty payments from other service providers; and
• ward off claims made against cloud providers by aggressive patent holders.

Patent analytics
IPlytics Platform can perform extensive keyword searches in worldwide filed patent titles, abstracts and claims in order to identify the strongest patent holders in the cloud computing space. One such search identified over 26,000 granted cloud computing patent families – 95% of which were filed between 2013 and 2017. The results showed that the landscape of cloud computing patent owners is highly diverse. Figure 1 illustrates that the three strongest patent holders – IBM, Microsoft and Google – filed a combined total of more than 5,000 granted cloud computing patent families in recent years. Sony, SAP, Samsung and Canon are the only non-US companies among the top patent owners.

Figure 1. Number of granted cloud computing patent families up until January 2017

In addition to new patent family filing rates, patent trading has also grown in the recent years. Figure 2 illustrates the number of patent family transfers between 2013 and 2016. The number of annual patent transfers peaked in 2015 with approximately 790 transferred unique patent families.

Figure 2. Number of reassigned cloud computing patent families as to main industry of the buying entity and year of reassignment

To accurately reflect bare patent transfers among independent companies, the applicant and the new owner company are differentiated with regard to the highest parent company; cases where the former and new owners were subsidiaries of the same parent corporation are omitted. Such reassignments are likely to result from fiscal optimisation and strategic motives at the corporation group level. These are labelled as ’internal’ transfers if they take place between established entities of the same group, and as ’acquisition’ if they immediately follow the acquisition of the initial patent-owning entity by the group.

Figure 2 takes into account only bare patent transactions and differentiates the patent transfer deals as to the buyer’s main industry of operation (the ‘main industry’ refers to the main business service or product marketed by the applicant). The largest buyers in the examined industries are as follows:

• in the software industry, SAP, Microsoft, McAfee and Adobe;
• in the hardware industry, Intel, HP, Ricoh Company and Lenovo;
• in the internet industry, Google, Amazon and Facebook; and
• in the licensing and assertion industry (ie, patent assertion entities (PAEs)), Intellectual Ventures, Rovi Corporation and Dynamic Invention.

While the upsurge of patent acquisitions has consistently increased in the hardware, software and internet industries, the share of patent family acquisitions by PAEs increased significantly in 2015 and 2016. Figure 3 illustrates monthly patent transfers to PAEs. On average, these transfers have increased by 130% since 2011.

Figure 3. Linear trend average of monthly reassigned patents transferred to PAEs

PAEs often acquire patents in technology areas that will likely become strategically important for future markets. The increasing number of patent acquisitions generally and the acquisitions by PAEs in particular hint to an increasing strategic use of cloud patents.

Comment
Cloud patent analysis results show that even cloud technologies which are considered to fundamentally rely on shared environments and follow public standards are subject to increasing patent filings and patent-acquisition activities. The presented report is an extract of an ongoing study around patent activities in the space of cloud computing. The analysis conducted by IPlytics intends to shed light on the potential legal risks for cloud technology users.