25 Mar
2021

Clouded in uncertainty

It is difficult to look at the past year and make sense of a lot that happened, let alone compare it to 2019. The covid-19 pandemic has not only disrupted multiple sectors but has also introduced a high degree of economic uncertainty.

Industries on a downward trend are being challenged now more than ever, while the shift to working from home and changes in consumer habits (eg, the way that media is consumed) have created opportunities for others. In November Qualcomm CEO Steve Mollenkopf revealed that invention disclosures had jumped 60% year on year, with a marked increase in 5G filings. In an SEC filing, the chipmaker also revealed that it had spent $44 million in higher patent costs in the 2020 fiscal year compared with 2019.

According to the 2020 numbers, companies in no way pulled back from patenting in the course of the year and Mollenkopf’s comments reveal the extent to which some have doubled down on bolstering their innovation pipelines. The question for others is to what extent economic uncertainty will translate into constrained R&D budgets and then less money over the next few years for filing new applications and paying maintenance fees for existing assets.

Away from covid-19, one question that remains relates to the policy making of the new White House under President Biden. During USPTO Director Andrei Iancu’s tenure there were several shifts in policy that fell on the side of stronger patent rights, perhaps encouraging some to invest in their pipelines of US assets.

At the time of writing it is still unclear who will replace Iancu. Any successor clearly has big shoes to fill.

Grants up and applications up – by a little

In general, entities on the list held more grants in 2020 than in 2019 (up 8.1%). This is particularly noteworthy because of the 22% drop in applications in 2019, which led to the expectation that the number of grants this year would be down.

One reason for the uptick may seem obvious; 25 additional entities were added to the list, bringing with them a significant number of assets. Yet a closer look suggests that this only partially explains the story. The 81,539 grants added by the new entrants do not account for all of the new assets added to this year’s total.

M&A may also be a contributing factor – either through companies acquiring rivals and adding to their portfolios in the process or as synergies from combinations lead to greater investment in R&D.

Another piece to the puzzle might come from the finance sector. This year, like last, entities that accepted intellectual property as collateral saw huge increases in their tallies of assets.

In 2020 finance listed 29 entities holding 144,000 patents – behind only automotive, computing, electronics and semiconductors. This is a significant jump considering that in 2017 the Patent 1000 held only six financial entities, with fewer than 14,000 grants between them.

With the continued emergence of litigation finance strategies, advanced analytical tools and ample funding, financial institutions are uniquely equipped to provide liquidity to all entities – regardless of size – that are looking for options to ride out the economic storm.

Table 2. Top 20 ratio of applications to grants

Entity nameTotal grantsTotal applications2020 applicationsRation of applications to grants
Mastercard1,0861,629319150%
BBK1,2401,354929109.2%
Walmart1,3411,24528492.8%
Harvard1,05263121160%
Visa1,35677026456.8%
L'Oréal1,70293825055.1%
Altria Group1,63488332854%
Nestlé1,53774716748.6%
Intuitive Surgical1,19658125448.6%
Capital One1,84989657648.5%
Edwards Lifesciences1,00148419348.4%
The University of Texas System2,1211,00736147.5%
eBay3,3851,59149647%
Tencent2,2191,04036046.9%
Xiaomi1,71780235146.7%
Arkema1,13051617945.7%
Comcast1,91786839245.3%
Purdue University1,00645320145%
Johns Hopkins University1,30558520544.8%
Salesforce2,18696947844.3%

The pandemic

To identify the impact of the pandemic on US patent holdings, we started by looking at the top of the Patent 1000. Both Samsung and IBM are global IP juggernauts that are usually in lockstep. Yet this year their filing trends diverged; Samsung saw a 3.7% increase in applications, whereas IBM was down 14.2%.

Next we looked at regional application filings and noticed that Asia stood out with a 3.7% rise in applications. A closer examination put China, India, Taiwan and, to a lesser extent, South Korea ahead of the pack because of their increased application filings. However, the United States and the United Kingdom were both down.

The interesting thread that connects these countries is the rate of covid-19 infections. Simply put, the data shows that countries with lower covid-19 rates generally had higher rates of application filings. Entities from countries that were able to avoid prolonged disruptions (ie, lockdowns and shutdowns) have shown remarkable success at mobilising their innovation efforts.

As a corollary, the rate of grants did not follow this trend, but it may provide further support for it. The development of an application generally requires people, equipment, materials and other resources to be grouped together. The flow of information is internal to an entity and is definitely aided by face-to-face communication. Without the full complement of an entity’s resources at its disposal, innovation is still possible, but considerably harder.

While there is company involvement after an application has been filed, the interaction is more between the USPTO and the main inventor/prosecutor, utilising remote forms of communication and information transfer. This may explain why the rate of grants did not suffer due to the pandemic, while the rate of application filings continued on a steady downward trend.

The numbers also suggest that entities may be thinking short term. The increase in grants is a consequence of applications already in the pipeline where further investment is minimal, whereas the drop in applications indicates tighter budget control in preparation for uncertain times ahead.

Either way, the pandemic is, in some instances, leading to even more scrutiny of IP budgets.

Looking ahead

One point to watch will be the continued emergence of finance as a major holder of intellectual assets. If the giants in this space are already too big to fail from an economic perspective, they look set to become even bigger as they now hold not just cash, but innovations.

From an entity perspective, Huawei stood out – at 16,700, it holds twice the US grants that it did a mere four years ago. It gained 3,148 grants this year, a prodigious effort that rivals any other on the list.

It will be fascinating to see how innovation proceeds from this point as the world unwinds from the pandemic. We will be looking to see how entities re-engage innovation and transaction activities. Will the new tactics picked up during the pandemic be integrated into strategies in an attempt to redefine a new normal? Or will everything settle back into the way that it was before?

Methodology

This year marks the fourth annual IAM/ktMINE US Patent 1000 analysis, which lists all the entities that own at least 1,000 granted, in-force US patents. This data is collected and aggregated by ktMINE through its IP data and analytics platform. ktMINE gathers IP data from sources and regulatory bodies including the US Securities and Exchange Commission (SEC), the USPTO, the EPO, WIPO and PACER, along with hundreds of news sources. It then links these data sets to form the most comprehensive repository of IP data available. ktMINE’s technology cleanses hundreds of corporate data sources using algorithmic normalisation and clustering methods to consolidate entities. The company mapping processes more than 4 million corporate trees, which determine the ultimate parent of each patent by leveraging SEC data and M&A information on company subsidiaries.