Patent abandonment: IBM’s grant to lapse ratio touched 50% in 2016

IBM received more than 8000 patents last year but at the same time, they also abandoned more than 4000 patents from their portfolio. For the last few years, their patent grant to lapse ratio has been increasing continuously which touched 50.6% in 2016.

As we all know that IBM is the biggest patent filer across the globe with more than 101K patents in their patent portfolio. Its research division has 12 labs in 6 continents where more than 3000 researchers work. In 2016, its researchers were granted 22 patents per day.

At IBM, we patent above all to protect our ability to complete the innovation lifecycle. What begins as an “aha moment” is often the result of years of prior investment, perhaps in the hundreds of millions of dollars. Preserving IBM’s freedom of action to monetize that outcome is critical if we are to continue to produce breakthrough after breakthrough in technology and science.

–Bernie Meyerson, IBM Chief Innovation Officer

With such a vast patent portfolio it becomes vital to analyze which patents are worth keeping and which ones should be abandoned. After all, patent maintenance cost for a hundred thousand patents can run into millions.

5 years ago, in earlier 2012, Dennis Crouch analyzed IBM’s patent portfolio and noticed the company’s patent abandoning strategy. It is quite common for companies to abandon patents that fail to provide them any value and just sit there as another number in their portfolio.

“IBM could have predicted at the time of issuance that it wouldn’t pay the maintenance fee — so why did it pay the $1,000 issue fee?”

– Dennis Crouch

IBM is a bit aggressive when it comes to abandoning potential-less patents. Today, even after 5 years of Prof Crouch’s article, the percentage of patents that they abandon in first four years is still high.

Here are the latest stats from IBM’s portfolio where we expanded the analysis to cover patents issued between the year 2009 and 2012 and have abandoned in first four years:

You can see that more than 40% of the patents that got granted in 2012 are abandoned by now (right after 4 years of issuance). These patents were lapsed by not paying their first maintenance fees. It is safe to assume that IBM may be abandoning patents that it fails to implement into products or finds that they have no monetization potential.

Clearly we profit from having a large patent portfolio. We regularly license or occasionally sell intellectual property, which generates an income stream back to the company which offsets research and development expense.

– Manny Schechter, Chief Patent Counsel, IBM

Here’s another graph showing how rapidly they are abandoning patents:

If you look at their grant to lapse ratio from 2013 to 2016, it looks something like this:

Looking at the above graph it seems clear that IBM is set to abandon even more patent in coming time. Highly likely, we will witness more than 5000 patents getting abandoned by them till the end of the year 2017.

It is really interesting to see how a leading patent filer is also leading in patent abandonment. Another interesting aspect is that we have been working with many companies that were struggling to identify the patents that they can abandon. Patent pruning is a big problem and we work with a lot of them to figure out the patents that:

  1. No longer relevant to their current business
  2. Do not require for defensive purpose (not relevant to their competitors)
  3. Cannot help them generate the return (not good enough to be licensable)
  4. Have no requirement in the market (out dated technology and may not get sold in the market)

After running these in patent pruning projects, we observed that as the project reaches to culmination, the client gains two benefits out of which #2 gives them more value:

  1. He gets to know the patents that can be pruned (low quality)
  2. He gets to know the high-quality patents in their portfolio (Bonus)

Further, having a strong pruning process internally helped them re-channelize the budget which earlier got spent on filing huge maintenance fees into filing new patents.

That’s from our side. What are your thoughts on IBM’s patent abandonment strategy? What do you think is the grant to lapse ratio going to decline this year or is going to be the same?

What’s Next: Read Where You Can Find Ideal Patents to Mitigate Risks During Foreign Expansion?

Authored by: Shikhar Sahni, AVP, Operations and Shabaz Khan, Research Analyst, Market Research

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