US companies dominate in patent power, and software dominates in patent category

IEEE Spectrum has published its annual statistics on patents. They show the dominance of US companies, such as IBM and Microsoft, and the rapid growth of Apple. The overview article is here.

The ranking approach uses what they call 'patent power' and takes into account the growth, impact, generality and originality of patent portfolios using various methods. The 2006 article describing the methodology is here

Here are a few observations:

Top companies in terms of patent power in 2010: The companies with the most powerful patent portfolios, in all industries, are the following. These are those with patent power over 2500. Companies were listed in just one category, even thought they may have patents in several categories. In these numbers I have combined the numbers where one company has bought another (e.g. Oracle having bought Sun)

1. IBM (8402 in Computer Systems)
2. Microsoft (7146 in Computer Software; this does not include the Nortel patents they bought in a consortium led by Apple; note also that if Microsoft buys Yahoo, as news articles suggest they are considering, the combined company would top the list at 9910)
3. Johnson and Johnson (6796 overall; 3610 in Biotechnology and Pharmaceuticals; plus 2810 through Ethicon Endo-Surgery and 376 through Depuy Spine)
4. Medtronic (5540 in Medical Equipment)
5. Covidien PLC (4544 overall, the top non-US company; 3333 in Medical Equipment; plus another 718 through Nelicor Puritan Bennett and 493 through Mallinckrodt)
6. Oracle (4171 overall; 3129 in Computer Software, plus 558 through BEA, 362 though Siebel, and 122 through Sun)
7. Samsung (4033 in Semiconductors; second-to-top non-US company)
8. Cisco (3299 in Communications/Internet Equipment
9. Qualcomm (3170 in Communications Equipment)
10. Yahoo (2789 in Communications/Internet Services)
11. Apple (2764 in Electronics; this does not include the Nortel patents they bought with Microsoft and others - with their share of these, they would likely be in 10th place)
12. Hitachi (2669 overall; 2531 in Electronics; plus 138 through Hitachi Global Storage)

Software-related patents: I am particularly interested in software patents, since I in general think they are counterproductive although it is a necessary evil to keep patenting in this domain until changes I have suggested are made. The rankings show IBM dominating in the Computer Systems category; Microsoft and Oracle dominating the Computer Software category, and Samsung, Yahoo and Apple with high presences in other categories that also include software patents. Clearly software patenting is of dominant importance in the patent world, which is unfortunate. It also seems to be on the rapid increase, which bodes badly for ordinary software developers.

Categories with relatively low power patent presence: There are no companies with patent portfolios above 2500 in domains such as aerospace, automotive and chemicals. It is notable that General Motors (1030) is still doing well despite its troubles in the last recession; it is only just behind Toyota (1272) in the automotive category.

Canadian companies:  Top Canadian companies are RIM (1064, Communications/Internet Services) and Magna (553, Automotive).

Google: I thought it notable that Google (2165, Communication/Internet Services) was ranked well behind IBM, Samsung, Microsoft, Oracle, Yahoo and Apple, companies they compete with or have intimate relationships with (e.g. Samsung is the top seller of Android systems). Google seems to be losing its reputation as an innovator. See yesterday's post for related comments. However, this year, Google has bought some IBM patents so if the list was recreated with 2011 data it might look a bit different.

Absolute numbers: In absolute numbers of patents (not 'patent power'), IBM also dominates with 5905, but Samsung comes second with 4599. Other companies are far, far behind.

One massive software patent consortium: A solution to the patent wars?

In an earlier post today, I talked about the distinction between 'pure software' and 'hybrid' patents and a couple of weeks ago I called for other changes to software patentability.

However, making changes to the patent law is for the long term. Right now we are in the midst of a very hot patent war, with Google on one side and several companies, including Apple and Microsoft on the other.

Google is clearly feeling the heat. Many commentators have discussed Google's post yesterday in which it complained about Apple and Microsoft attacking Android through patents. They have pointed out that Google itself was willing to bid high for Nortel's patents; it was just that Apple and its consortium bid even higher. The BBC has one interesting article, and there is some interesting discussion on Slashdot about it.

It is clear that despite the negative consequences of the patent system, corporations desperately need a large patent portfolio to defend themselves against claims of infringement . You can't produce software of any complexity today, without necessarily stepping on patents. Apple and Microsoft did what they had to do until the law changes, or until the status quo changes in some other fundamental way.

If nothing changes, Google is absolutely right: Android will end up costing more and more due to the need for manufacturers to license all the patents. And patents will go ever higher in price due to bidding wars. Further still, some platforms will lack features because patent holders refuse to licence the patents, or the manufacturers can't afford to pay.

The solution is for all companies of significant size in the area to hold a summit and agree to form a universal patent consortium for all software related patents. Perhaps Apple, Microsoft, RIM and Ericsson (the group that bought the Nortel patents) could initiate this by inviting Google, IBM, Samsung, LG, HTC, Nokia and others to the table.

The rules of the consortium could be like this:

• All software patents held by consortium members would be usable by all members at no cost. This would include pure software patents, and hybrid patents, as I described earlier.  
• Small companies (e.g. below $10 million in revenues), educational institutions, governments and nonprofits would be able to use the patents, with no application process, as long as they did not sue any consortium member for infringement of software patents.
• Any larger company would always be granted a license for any patent at reasonable cost, or else membership in the consortium as a whole, as long as they did not sue a anyone for software patent infringement. 
• A company that joins the consortium would pay a reasonable fee that could be cash or patents in-kind.
• Membership in the consortium would require an annual fee proportional to corporate revenues. However, this fee would be designed to be reduced over a period of 10 years to a level that would not be significant.
• Since many consortium members have paid a lot of money for their existing portfolios, such members would be compensated over a the next decade by a proportional distribution of funds from the consortium. The funds would come from licensing patents to non-consortium members, membership fees in the consortium, or members joining, as described above.
• All consortium members would have to agree to lobby for patent reform, such that software patents would not continue to be a burden on the industry. This would include pushing for legal changes that would eliminate or reduce the validity time of pure software patents.
• Once legal change had been effected, and the consortium reached a critical size, such that the risk from non-members was minimal, members would agree to contribute future ideas to the consortium without actually patenting them. Just publishing the ideas formally would prevent others from patenting them. Members would still be compensated for contributing to this pool of published ideas, and indeed perhaps even non-members such as universities could be compensated for contributing to it.
• Any consortium member sued by an outsider for infringement of a software patent would receive the support of all consortium members in fighting the suit.

My suggested rules as described above should have some of the following consequences:

• Innovation would be fostered in several ways: People would be free to put together ideas involving lots of patented components in innovative ways, without risk of being sued, and would receive benefit from contributing additional IP to the pool.
• The price war for patents would be eliminated eventually, reducing the costs of doing business, and hence the end costs to consumers.
• Patent troll companies would be forced out of existence, since the value of their patents would decrease, and they would have a formidable opponent if they chose to sue anyone. They would be better off just joining the consortium.

Pure software patents vs. hybrid patents, and the ethical dilemma if one is opposed to software patents

In a recent post, I called for governments to change the rules for software patents. 

Overall I am opposed to 'pure software' patents. In many jurisdictions, as I understand it, in the wording of its claims a patent has to 'pretend' that it is a hardware patent by having a key claim that incorporates the notion of 'system' or 'processor' on which to run the software. Otherwise, so the theory goes, it is just an algorithm, which are not patentable. This is bogus. In my mind, any claim for a patent where the invention could be run on hardware that is in todays world 'generic', should just be called a 'pure software' patent. The patent offices and lawyers should dispense with the ridiculous need to cite the 'data processing equipment' that it runs on in the patent wording. Pure software patents, as I have defined them are just disguised algorithm patents.

There are, however some true legitimate hybrid hardware-software patents. These are the ones in which the software interacts with novel electronics, such as new forms of touch screen, air interfaces for mobile devices, new cameras, new sensory devices, etc. I think that patents for these should be for a shorter number of years (as discussed in my previous post) if they are mostly software, and for the standard 20 years if they are mostly hardware. However, I think that any patent with a substantial software component should have a compulsory licensing provision.

I myself am the co-inventor (along with some former graduate students, and others) on a 2008 patent application describing the ability to wind back in time the changes to a document being edited, in an animated manner. This has not yet issued as an actual patent. It turns out it is a 'pure software' patent application, as I have described above. One of the claims includes the supposedly required wording, "a processor for processing computer program instructions."

The patent application arose out of my work with IBM. If the patent is issued, I will recieve no royalties, only a line on my CV. This is because IBM funded the research and have gone to the enormous expense of filing the patent.

Given my beliefs about software patents, however, should I have refused to be listed as an inventor and have refused to help formulate the wording of the patent? That is a thorny ethical question.

Here are some arguments against my participation in the patent application:

• Perhaps I am selling my soul to the devil? Is this not the same as if 200 years ago I had participated in slavery because it was the only way to get business done? Is it not the same as if today I backed a patent on a new way to make an addictive product, or a technology that I knew would damage the environment?
• Surely one must stick up for one's principles. 

Here are the arguments in favour of my participation in the patent:

• The current legal and business environment makes patents critical to success in high technology. Without patents, one can be put out of business by a competitor who happens to have them, or by a patent troll. This can only change when the law changes.
• Getting research done in todays world requires working with companies who can fund the research. One of the major impetuses for companies to fund research is the potential for patents that might arise.
• I could have removed my name, but the patent application would have gone forward anyway.
• Someone else might have filed for the same invention. As it stood, the law in the US was, and I believe still is, 'first to file'. It is perhaps better that the patent is filed, and openly disclosed, by a prominent company like IBM that has a history of licensing patents, than by a patent troll company.
• The comparison with 'participation in slavery' or 'participation in damage to health and environment' is bogus because it is business, innovation and economic progress that stand to be hurt by the patent situation, not individual people or the environment.

I think, on balance, I made the right decision. I invite comments on this post with your perspectives.

It will be interesting to see if the patent I discussed above actually issues. I will have further comments on it if and when it does (or does not).

Later today I will have another post on patents, discussing the hot war currently going on with Google and others.

Patent wars in software: A call for some reasonableness

The idea behind patents is to protect inventors from having their ideas immediately copied by others. This is supposed to serve as an incentive for people to innovate, and to put their ideas into practice without fear that their efforts will be wasted.

It has worked well over the centuries to ensure that inventors of things like the telephone have an opportunity to market their products. Research, development,and building a company to develop the market is expensive; if Alexander Graham Bell had not had been able to patent the telephone, he might have had little incentive to develop it to start with, or alternatively lots of little companies might have sprung up putting him out of business. Business savvy rather than inventive savvy would have won.

In today's world, we hear about patents most often in two domains. The first is biotechnology, where companies spend hundreds of millions developing, testing and seeking approval of drugs. It seems absolutely certain that without patent protection, they would have no way to do this.

The other area is software: There have been many articles in the news about Apple, Microsoft, Google and the manufacturers of Android phones tussling over patents. Not all of these are software patents; a few relate to the hardware of phones, but a substantial number are primarily related to software.

It is being suggested that the whole Android platform might be in jeopardy due to  patents. Microsoft is supposedly enjoying more revenue from Android (due to licensing of Microsoft's patents) than from Microsoft's own mobile platform. Apple is poised to bring in a lot of revenue from Android too. Together these companies could  raise the cost of Android phones to a level where Android manufacturers just can't compete. It won't help innovation to put the Android platform out of business solely as a result of a patent war.

The problem with software is that is is incredibly easy to 'reinvent' ideas that others have patented. This is because the vast numbers of developers out there can each churn out tens of thousands of lines of code a year, and many dozen user interfaces. Developers have to be extremely wary of accidentally violating a patent, yet most have no way to verify whether their 'inventions' violate patents. This is because there are so many, because they are hard to read, and because there is a delay before they are 'laid open' for public viewing.

Some suggest that software patents are just as important for innovation as hardware patents. But is this really true? If Apple (to take an example) had not received a patent on core aspects of their iOS user interface, would Apple not have produced that interface? I think they would have. Such patents however still seem somewhat fair: It certainly seems that a company should receive some market head-start from developing a truly new software concept. However in my mind there are two key changes that are needed:

1. The concept of what is truly new needs to be changed in the software arena: Patentable inventions are supposed to exclude ideas that those with normal skill would have been able to come up with create to solve a given problem. This needs to be reinforced for software. Patent offices need to search extensively through open source software, commercial software (that they would have to license) and academic research in order to see if others that have come up with the same idea or something close. Currently most patent examination for prior art focuses on other patents. I also think that all software patents should be subjected to open and systematic peer review to test their true originality.

2. Software patents should be open for public scrutiny the moment they are filed.

3. The period of protection needs to be shortened. Four years from the time of issue should be enough.

4. Licensing should be mandatory after a certain number of years (e.g. 2 years) have passed.

I think points 1 and 2 would exclude most patents to start with, and points 3 and 4 would reduce their impact. 

Here's another excellent article on this topic.