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Top US Patents 2012: Which Tech Companies Were Most Efficient With Their R&D Spending?


The US Patent and Trademark Office has just published its annual report on patents granted to companies last year. We look at who paid the most per patent.

The US Patent and Trademark Office (USPTO) has just published its report on patents granted to companies last year. There were no significant changes to the list; as in past years, it was led by IBM (NYSE:IBM) and densely populated with Japanese and Korean tech giants, including Samsung (KRX:005935) and Sony (NYSE:SNE).

SOURCE: USPTO. Author's note: For Panasonic's 2008 figures, we used the combined number of patents by Matsushita Electric Industrial Co. and Panasonic Corporation. Numbers for other subsidiaries and sister companies (like "Toshiba Tec Kabushiki Kaisha") were not included.

Interestingly, the official USPTO version of the list differs slightly from the one that was compiled by IFI Claims Patent Services in January. According to the government's report, Taiwanese Hon Hai Precision Industry (Foxconn (TPE:2354)) got only half as many patents as were claimed in the third-party report, thus dropping out of the top 10. The exact number of patents granted also differ between the two papers.
In the future, the numbers might change even more across the board due to recent changes in legislation. The America Invents Act was signed into law in 2011 and came into effect last month (March 16, 2013), marking a significant shift in the US intellectual rights recognition system. Now whoever files the patent first gets to claim the invention, while the previous system was based on who was first to invent.
Professor Dennis Crouch at the University of Missouri School of Law suggests that the regulatory changes "provide further incentive to file patents as soon as possible. One benefit of this is that more technology should come to light more quickly by being published in the patent system."
"The problem, however, is that the push to file a patent is so early in the process that we end up wasting substantial money on rights that are meaningless," he said in an email.
How substantial are those amounts? How much does each patent cost in terms of a company's R&D spending? To answer the question, I tried to roughly estimate the cost per patent for each company on the top 10 list by taking the number of patents granted last year amd comparing that to the company's annual R&D spending in 2009. According to USPTO data, the average application processing time was 31.2 months, or more than 2.5 years. That gives us three years if rounded up, so I looked back to research spending in 2009:

Author's note: This crude model is used for rough estimates for illustrative purposes only and cannot be used to accurately represent the actual research efficiency of the companies shown. The model doesn't factor in the industry specifics, the actual distribution of R&D budgets, the time spent on each patented technology, and other important factors. The data on R&D spending is taken from companies' documents aggregated by Bloomberg LP. To represent the 2009 calendar year accurately, reports on the 2009 financial year for IBM, Samsung, Canon, Microsoft, GE, LG, Qualcomm, HP, Foxconn, Apple and Google were included. Figures for the 2010 financial year (ended in February-March 2010) were used for Sony, Panasonic, Toshiba, Fujitsu, Seiko Epson, Hitachi, and RIM (now BlackBerry).

Long-time patent leader IBM is not surprisingly also the most efficient company in the top 10 according to my calculations. Each $901,000 of R&D money spent in 2009 brought a patent for the company. LG Electronics (PINK:LGEAF) finishes second with $904,700 per patent.
There are way more efficient patent-claimers around, though not on the top 10 list: Japanese Seiko Epson (PINK:SEKEY) paid $510,000 in R&D expenses, and Taiwanese Foxconn spent just $276,000 for each patent granted.
Microsoft was the least efficient company from the top 10 according to these metrics, spending $3.45 billion on each invention.
Although Google (NASDAQ:GOOG) received 15 more patents than Apple (NASDAQ:AAPL) in 2012, the latter brand was twice as efficient by our metric, spending just $1.1 million per patent granted. Google, on the other hand, succeeded in rapidly driving up the total number of patents. With the acquisition of Motorola Mobility in 2012 the company sealed the 20th position on the list, compared to being in 65th place in 2011.
One should not treat the number of patents in the portfolio and the application count as the only valid representations of a company's technological might, however, especially since this is a rough estimation that lacks a myriad of parameters.
Matthew Osenga, a registered patent attorney, warns that the R&D efficiency will vary greatly depending on the industry. "Some companies are granted a pioneering patent for an invention that may be all they need to protect their technology, such as a new drug, while other companies like telecom companies will have many, many patents on various aspects and features of their latest smartphones," he said in an email.
"That does not necessarily mean that the telecom company spent more on R&D than the pharma company. Further, the time frame for bringing a new drug to market is 10 or more years, so pharma companies try to delay patents as long as possible. Telecom technology, by contrast, is obsolete within a couple of years so they try to rush through their patents," said Osenga.
Pumping billions in R&D and building vast patent portfolios does not necessarily grant a company immunity from infringement claims: In that arena, quality matters over quantity. Apple secured four times fewer patents in 2012 than Samsung, though Samsung's aggressive patent schedule did not help the company evade extremely costly litigation with Apple.

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