Top 100 US patent owners 2020

The third annual IAM/ktMINE US Patent 100 ranks the entities that own the top 100 largest patent portfolios of granted, in-force US patents, as well as pending patent applications filed at the USPTO. This data is collected from the USPTO and aggregated by ktMINE through its IP data and analytics platform. ktMINE gathers information from sources such as the Securities and Exchange Commission (SEC), the USPTO, the EPO, WIPO, the System for Electronic Document Analysis and Retrieval (SEDAR), Public Access to Court Electronic Records (PACER)and other regulatory bodies, as well as hundreds of news sources, and links these data sets to form the most comprehensive repository of IP data.

ktMINE’s technology then cleanses hundreds of corporate data sources using algorithmic normalisation and clustering methods to consolidate entities. This company mapping processes more than 11.4 million corporate history records to determine an ultimate parent of each patent by leveraging SEC data on company subsidiaries and M&A information.

Top dogs

Over the course of 2019 a company needed 4,790 US patents to make it into the Patent 100, compared to 4,554 in the previous year – a rise of 5%. Overall, the number of US patents held by the top 100 increased by 2.8%, which aligns with observations that the USPTO issued a record number of patents in 2019. One development is that during that same period the number of applications held by the top 100 actually fell 23% from 2018 – this is explored more thoroughly below. However, what did not change from the past two years were the top four entities holding US assets. Samsung, IBM, Canon and Microsoft, in that order, held fast to the top honours.

Samsung is essentially flat year on year; with 106 more US grants than in 2018, it continues to enjoy its dominant US patent ownership position. Interestingly, it holds 30% fewer US applications than it did a year ago – the trend of fewer applications is found frequently this year in the top 100.

For 2020, IBM has entered a new world. Considering its patent licensing reputation, its membership of the defensive License on Transfer (LOT) Network could be considered as a departure from its longstanding IP strategy. Unlike Samsung, IBM holds at least 6,000 fewer US grants than in the previous year (the largest drop in patents on the top 100); similar to Samsung, IBM holds dramatically fewer US applications (down 26%).

Although Canon has 3,100 fewer US grants and 22% fewer US applications, it is still number three on our list. Like most Japanese entities, Canon does not have an assertive reputation. That said, it is no slouch when it comes to protecting its technology – as seen from recent court actions against alleged infringers.

For years, Microsoft has been a dominant player in the IP space. However, recent personnel changes within the patent licensing group have extended into the leadership ranks, with the latest departures of group head Erich Andersen and chief patent counsel Micky Minhas leaving some observers to wonder what changes or shifts to IP strategy the new head of intellectual property, Jennifer Yokoyama, will bring. Microsoft did increase the number of US grants that it held in 2019 by 559, but it also saw a precipitous drop in the number of applications (down nearly 40%).

Apply here

The reasons behind the slump in applications are unclear but a number of issues could be at play. These include effects from trade or tariff issues, which have increased uncertainty in the global economy, as well as the perceived diminution of patent rights in the United States prompting more patent holders to shift their filing practices to international offices.

This decline reflects the ongoing effects of the America Invents Act and the impact of certain case law, particularly in the area of patentable subject matter. After all, entities may be less likely to file if they feel there is a strong chance that their application will be rejected or invalidated.

The drop may also reflect a broader trend among many corporates, which are taking a far more rigorous approach to the development and management of their patent portfolios. While the 2000s and early 2010s saw a significant focus on the quantity of companies’ filings, more recently it is patent quality that has come under scrutiny. This is partly due to the changes in policy and case law mentioned previously, as well as an increased focus on costs.

Industrial output

There were some notable changes in terms of leading sectors in 2019. While we still see many companies representing electronics (20), semiconductors (17) and computing software (10) segments, which are traditionally big drivers of innovation, these areas have seen a net loss in the number of US patents that they hold (down 20,098; 3,424; and 3,896, respectively). There have been incremental losses in the number of entities representing the other industries on the list, with conglomerates, energy, medical/pharma and telecoms segments each losing one entity. Taking up this slack are financial institutions, which account for six new additions to the list. There has also been a shift in the automotive sector, with two fewer entities on the list. That said, this group added 7,752 more patents than in 2018, suggesting that patenting activity remains in robust health among the world’s largest car makers and their suppliers.

With key industries such as electronics, semiconductors, computing and imaging/printing experiencing a net drop in the number of US patents that they hold, while sectors such as finance, automotive and aerospace are experiencing net additions, it begs the question of whether we are witnessing a shift in innovation trends towards other industries. A closer look at the finance, automotive and semiconductor areas could be illuminating.

Finance

Entities within the financial industry provide third party and outsourced services to investment managers and commercial lenders, including the securitisation and collateralisation of patent assets. More and more, financial institutions are partnering with patent owners to structure securitisations to fund various forms of enterprise; in some cases, they are taking ownership and control of IP assets.

Surprisingly, the patent additions in US patent holdings of the seven entities in this segment total nearly 65,000 and almost single handedly offset declines in the list.

With an increase so large concentrated in a single sector, we confirmed that the rise was not based upon any changes in our methodology or exclusively upon events such as assignments.

For instance, in March 2019 the Bank of New York Mellon took assignment of nearly 14,500 assets from Dell and several of its subsidiaries in the form of an indenture. Strikingly, this agreement includes any patents subsequently acquired by Dell, in addition to those formally listed, so it is likely that this number will grow. We would not expect Dell to hold so few patents as it navigates through such a competitive market, so we speculate that its portfolio of patents will eventually be released back into its ownership.

However, while this mode of asset transfer is not new, it is becoming more usual.

The number of patents currently owned and held by financial institutions has increased steadily over the past decade, which would rule out any transitory volatility associated with security assignments. Several entities in the financial sector have made big jumps in our ranking or are appearing for the first time in lofty positions. Newcomer Wilmington Trust broke onto the list at number 13, while JP Morgan leapt 63 spots from its 2018 placement.

With the state of US patent law still arguably impeding the ability of companies to drive value, many patent holders remain less successful in realising returns on their intellectual investments than they did a decade earlier. Rather than wait for legislation to catch up or for case law to turn in their favour, patent holders are pursuing more creative forms of engagement involving tactics such as litigation funding and collateralisation of their patent assets. Financial institutions, for their part, see patents as a new asset class that can be used to diversify their holdings, attract equity investors and provide insights into innovation activities that yield more informed investment decisions.

In most cases, once an asset is securitised it becomes a lot harder to make use of it. The many patents held by financial institutions may provide an additional reason as to why assertions have declined. These observations highlight the trade-off: either securitise (and thus encumber) your patent or keep it free for litigation.

Automotive

The automotive sector is experiencing an innovation confluence, which has carried its upward momentum from 2018 into 2019. Technologies such as batteries for electric cars, AI and automotive operating systems that enable communication with systems outside of the vehicle are converging quickly into this segment.

Based on their patent holdings, Ford, Toyota and Hyundai all leapt up in the rankings (up eight, nine and 13 places respectively), while GM made more modest gains (up four). In contrast, Honda and Denso lost ground (dropping by six and five places, respectively) and Nissan disappeared from the top 100 altogether.

The number of applications held by those in the automotive segment is also worth exploring. While Ford and GM are enjoying an uptick in US patents (up by 15% and 6%, respectively), their US applications have fallen by 14% and 29%, respectively. Among the auto players, only Hyundai and Honda have seen a strong increase in the number of US applications (up 12% and 15% each). With Ford and GM on one end of the spectrum and Hyundai and Honda on the other, this might foreshadow movement within the industry (either in the rankings or in regard to M&A activity).

Semiconductors

It is not all bad news for the chip sector. Micron, Taiwan Semiconductor Manufacturing Company and STMicroelectronics enjoyed a surge in their US applications in 2019, with 76%, 66% and 61% of these being published within the past year, respectively. Entities in this space are looking forward to better market conditions that will foster the uptake of key technologies such as autonomous vehicles, wearable devices, 5G, the Internet of Things and others that have recently attracted investment. Any hints of success will serve to reinforce capital strategies, which should in turn encourage further investments.

Separately, Micron – while being at the heart of a high-profile IP theft dispute between the United States and China – saw an astounding 76% of its applications published in 2019, the highest ratio in the list this year.

Headed for the exit

There were 10 departures from the Patent 100 list for 2019, with GlobalFoundries and Dell arguably the most significant.

GlobalFoundries was 37th on the 2019 list but dropped off this year’s ranking entirely because of extensive corporate restructuring, which resulted in the transfer of significant portions of its patent portfolio. Dell was 42nd on the 2019 list before it assigned a massive portfolio over to Bank of New York Mellon.

Others that no longer appear on this year’s Patent 100 were on the margins (ranked between 90th and 100th) and dropped out either because of an incremental dip in their portfolio or because of a strong showing from another entity.

Other notable movers

Intellectual Ventures’ (IV) fall of eight places attracted some attention as it is one of the few entities on the list formally defined as a patent assertion entity. A quick look at the numbers suggests that IV is continuing to streamline its portfolio; it now holds 10% fewer patents and 60% fewer applications. Only 21% of its applications were published in 2019 (the lowest ratio on the list), perhaps in an attempt to maintain the value of its remaining portfolios. IV seems to be reorganising or reinventing itself, if not unwinding entirely.

The IP fortunes of Hon Hai and Huawei appear to have switched places in 2019; last year, Hon Hai was 29th, with Huawei perched at 51st. After slipping 33 spots, Hon Hai is now at 62nd, while Huawei has leapt up to 36th place. One notable difference is that Hon Hai has filed for patents in the United States, whereas until recently Huawei filed predominantly in China. Over the course of 2019, Huawei’s US grants ramped up by 25%, with the company potentially strategising on how to better secure a position within the US market.

In contrast, Hon Hai’s US patent holdings have declined 34%, as it has seen some modestly sized portfolios assigned to third parties. One sign of hope is that 52% of Hon Hai’s US applications were filed in 2019 – an indication that innovation remains strong. With no big divestitures to note, the future rankings of both companies will likely depend on the prevailing economic and political circumstances.

Figure 1. Industry representation

Global reach

Last year, we pointed out that 55 of the Patent 100 entities holding US patents were located outside the United States and held 55% of the grants. This year, the numbers have tilted a little closer to parity, with 54 entities outside the United States holding 53% of US grants. This is further highlighted by the fact that US entities in the top 100 collectively hold 56,500 more US patents than a year ago. Conversely, entities from outside the United States hold 18,598 fewer US patents. In particular, Japanese entities now hold 25,822 fewer US patents than in 2018, which could be explained by either the divestiture or the expiration of dated portfolios.

As mentioned before, a key driver of this shift is the growth of the financial sector. Six of the seven entities in this segment are from the United States and all but JP Morgan Chase enter the 100 for the first time. These entities all hold significantly sized portfolios, which gives them commanding positions on the list.

Follow-up from last year’s activity

Last year, we predicted that M&A and divestiture activity would be an area to watch. Based on our observations, M&A has not lived up to expectations. Bigger is not better. In fact, the acquisitions over the past 12 months were not bigger (in the sense of larger working patent portfolios), in many cases, they were not better.

Baker Hughes As it turns out, GE did not acquire the balance of Baker Hughes and decided to divest its interest instead. Baker Hughes was one entity to drop out of the Patent 100 this year; although GE moved up a spot, it holds 423 fewer US patents.

DowDupont Since a highly publicised merger and subsequent split, Dow, Dupont and Corteva remain a work in process. So far, there have been no discernible or formal asset assignments to shed light on the final disposition of the entities. While Dow and Dupont’s survival is fairly certain, Corteva’s situation is clouded by recent engagements involving the transfer out of certain IP assets. DowDupont is a complicated and simultaneous merger-scaling-spinout of three distinct businesses, which will likely take years to complete.

Bayer/Monsanto Bayer’s acquisition of Monsanto closed in September 2019 and, as was suspected, legacy Monsanto brands have been dropped in favour of marketing the acquired products exclusively under the Bayer name. So far, Bayer’s US patent holding is relatively flat year on year, but its applications have fallen by a staggering 43%. Of course, there is more work to be done to integrate the two giants but broadly speaking, the transaction appears to be an argument for better M&A diligence.

AT&T/Time Warner Now that all of the antitrust court appeals have run their course, AT&T’s acquisition of Time Warner can be deemed finalised. However, as with any other massive transaction, the size and scale of the event means that it is still too soon to conclude whether this behemoth will pay for itself (see DowDupont).

Toshiba/Pangea Pangea KK resulted in the splitting of nearly 6,500 US patents from Toshiba. Pangea and Toshiba have been largely quiet as they work through financial restructuring, but we can see that Toshiba dropped nine slots as its US patent holdings declined by 20% and its US applications plummeted by 53%. On the other hand, Pangea moved up one spot based on a 12% increase in its number of US patents and a 26% rise in US applications.

To watch

The fall in volume of US applications is of particular significance, especially considering that a record number of US grants were issued last year – we will be interested to see if this translates to a pullback in grants for 2020. We will also be waiting to see whether this phenomenon is centred on the United States only or if there is a global impact.

Another development on our radar is whether more fast-moving tech businesses break into the Patent 100. Uber practises a more disciplined form of IP management: instead of high filing rates, it has turned to the secondary deals market in order to provide IP protection that is precisely tailored to its business needs. Alternatively, Tesla’s Elon Musk has long felt that patents are less an indication of technology leadership and so embraces an open source philosophy seemingly more focused on avoiding confrontation. As for those entities that dipped in this year’s list – Philips (down 15 places), Nokia (down 15), Honeywell (down 11) and P&G (down 11) – it is understood that holding a sizable portfolio is expensive, so there is curiosity as to whether a focused strategy similar to Uber and Tesla will catch on.

Of the so-called ‘FAANG group’ (Facebook, Apple, Amazon, Netflix and Google) Alphabet, Apple and Amazon’s positions are stable or increasing, while Facebook has broken into the Patent 100 for the first time. Without dramatic movement, it is unlikely that Netflix will enter the Patent 100 anytime soon.

M&A activity came to the fore in 2018 and, to a lesser extent, in 2019. It seems that neither antitrust concerns nor the possibilities of unforeseen circumstances are sufficient to dissuade others from attempting to increase scale through such activity – the benefits associated with greater access to technology, access to markets and growing market share are simply too great a temptation. In particular, we will be watching for movement on the proposed deal between T-Mobile and Sprint. Meanwhile, the search continues for content to monetise; new content types will be pushing for the development of enabling technologies and possibly fostering IP transactions.

Finally, with the financial sector holding sizable patent portfolios, the growth of litigation funding and the additional activity of patent defensive groups such as the LOT Network and pools such as MPEG LA, patent holders now have more options to explore and derive additional value from their assets. We are curious how these will develop and what new possibilities will emerge for the owners of the largest US patent portfolios.