When Research in Motion began to struggle, chatter about the value of its patent portfolio to a competitor got chattier.More than a century ago, on July 25th, 1911, IBM was awarded a patent for a perforating machine.
The New York-based company has since become the undisputed heavyweight patent champion of the world, filing more than 70,000 of them, half of which are still active. “Big Blue” now generates about a billion a year in licensing revenue. Increasingly, other technology companies are jumping on board with IBM’s strategy, as uncovering the value of existing assets must feel like found money to management.
Not everyone thinks the move to monetize intellectual property en masse is a good idea. A lament in the New York Times recently pointed out that the $20 billion spent on patent litigation and purchases in the smartphone space alone is equal to eight Mars rover missions. “The marketplace for new ideas,” argued authors Charles Duhigg and Steve Lohr “has been corrupted by software patents used as destructive weapons.”
Patents are hot, in part, because of the rise of defensive patent aggregation, which is seen as a necessary guard against IP litigation. This was almost certainly the reason Nortel’s 6,000 deep collection of wireless and LTE, optical, voice and internet patents were sold last summer for an unexpectedly high $4.5 billion to a consortium that included RIM, Apple, Sony and Microsoft.
When Research in Motion began to struggle, chatter about the value of its patent portfolio to another competitor got chattier. Are RIM’s patents worth more than Nortel’s? “Couldn’t be”, said some, arguing that the average value of a wireless patent is a million dollars, and RIM had just slightly more than half the total patents of Nortel.
This “million dollar per-patent” rule of thumb shows how patent values of soared and illustrates the folly of assigning a blanket value to intellectual property collections. Is RIM’s entire portfolio worth as much as the famous “one-click buying” patent, which has generated billions of dollars for Amazon? Some would say no.
While there are constant concerns about Canada’s status as an innovator (The Organization for Economic Co-operation and Development recently warned that Canada will have to develop sectors of its economy other than resources if it wants to keep the good times going) IP filings in the country that gave the world the telephone, the light bulb, insulin, and the Wonder Bra, nearly tripled between 1996 and 2010, from 8,698 to 23,645.
With this list, we give you the TSX Technology stocks that have the biggest war chest of patents. While nailing down the exact numbers was difficult because some companies don’t make the number public, we relied on data from PatentBuddy.com, a site put together in 2007 by a group of senior patent lawyers, for clarification. If a company expressly made public its patent number, we accepted that number instead.
1. Research in Motion (TSX:RIM)
Number of patents: 3730
The story of RIM as a stumbling behemoth that has been leapfrogged by more lithe and innovative competitors has been repeated so often, it is accepted as fact. One piece of evidence that contradicts popular sentiment, however, is the number of patents the Waterloo company continues to file. RIM filed 663 in 2011 alone, placing it in 40th spot on the IFI CLAIMS® 2011 Top 50 US Patent Assignees, just one behind Apple.
Patent experts Maulin V. Shah and S. Farhan Mustafa, of Envision IP, Inc. say one interesting aspect of RIM’s patents is that the remaining term is significantly longer than many of its peers. RIM’s patent portfolio has an average remaining shelf life of 13.5 years, say Shah and Mustafa, much better than Nortel’s average shelf life of 9.4 years, and far longer than the Motorola Mobility’s patent portfolio that was sold to Google in 2011 for $12.5-billion, and had an average shelf life of 8.1 years.
This article is brought to you by Zecotek (TSXV:ZMS). Zecotek holds over 50 patents and launched a major U.S. patent infringement lawsuit earlier this year. Click here to learn more.
2. Wi-LAN (TSX:WIN)
Number of Patents: 3000+
Ottawa’s Wi-LAN has quietly become one of the world’s top patent acquirers, on par or better than Apple, Google and Samsung in the third quarter of 2011. The company is now no stranger to patent infringement claims, having launched actions against dozens of multinationals, including Apple, Hewlett-Packard, Intel, Sony and Toshiba. Calculating the number of patents the company holds has become something of a moving target, because they keep adding more. On October 1st, Wi-LAN acquired than 150 patents from broadband solutions provider Alvarion Ltd. (NASDAQ:ALVR) for $19 million. Byron Capital analyst Tom Astle says the company in the top five of all 4G patent holders worldwide.
3. Mitel Networks (TSX:MNW)
Number of Patents: 700+
In March, before the IPO of the social media giant, Mitel sued Facebook, claiming the company infringed upon two of its patents, one for an “Automatic web page generator” , another for “Pro-active features for telephony”. This past summer, in a move that reveled the complex and sometimes comical current environment around patents, Facebook counter sued Mitel over two AOL patents it acquired from Microsoft Corporation $550 million in April. The lawsuits showed that Mitel, which was formed in 1973 by Michael Cowpland and Terry Matthews, who had met at Nortel forerunner Bell Northern Labs, can still pack an IP punch.
4. COM DEV (TSX:CDV)
Number of Patents: 282
Cambridge, Ontario-based Com Dev makes space-based wireless communications products and electronic and optical instruments for Earth observation and space exploration programs. The company’s products are sold to satellite contractors and government space agencies for use in military and defense, space satellites and commercial communications. The company says its intellectual property base includes “…282 patents related to space hardware, numerous proprietary design tools and processes that have been validated in the supply of components on more than 150 satellites to date.”
5. OpenText (TSX:OTC)
Number of Patents: 175+
OpenText, which holds it patents under its subsidiary Open Text SA, grew out of a collaboration between the University of Waterloo and the New Oxford English Dictionary. The project was a partnership with the Oxford University Press to computerize the Oxford English Dictionary. This engineers on this project realized that it required developing search technologies that could be used to quickly index and retrieve information. The search technology they developed, which incorporated full-text indexing and string-search, was recognized as being useful for other electronic applications. In 1991, at about the same time the Internet was emerging, the results of this project were commercialized by a private spin-off called OpenText Corporation. Today, the company competes with the likes of Oracle and Microsoft in the lucrative Enterprise Content Management space. OpenText has filed recent patents around its document sharing product OpenText Tempo, which provides users with a cloud-based app experience while keeping enterprise data safe.