(11) Look Beyond Mere Accumulation of Patents
June 2013
Don’t Assume Patents Mean Competitiveness

In reality, the number of patents, etc., may bear little relationship to the company’s earning power or competitiveness. Let’s compare the examples of Apple Inc. of the U.S., Samsung Electronics of Korea, and three Japanese companies, Sony, Panasonic and Sharp. For the five years from 2007 through 2011, looking at the five companies, the number of patent applications and average earning power (earnings before interest, taxes, depreciation and amortization (EBITDA)) appear to have an inverse relationship. It goes without saying that the full relationship between applications and earning power cannot be grasped only from this graph, but it is safe to say that trying to increase the number of patent applications alone is unlikely to result in improving competitiveness or earning power. In fact companies that are highly competitive in the global market endeavor to disclose, grant and license their intellectual property, while – skillfully and simultaneously – developing their businesses in their exclusive-right territories by intensively acquiring patents. Looking at Apple, for example, in its patent dispute with Samsung, it might appear that Apple places patents at the core of its business-expansion strategy. Yet the number of patent applications by Apple is not particularly high. In the five years from 2007 through 2011, Panasonic applied for an annual average of 2,067 patents, and Sharp, 1,111, while Apple applied for only 197. At the same time, Apple distributes its Software Development Kits (SDK) free to software developers to facilitate such development. It also provides electronic manufacturing services (EMS) companies with its manufacturing technology to support start-up of production. In short, Apple integrates both aspects of management of its intellectual property, securing uniqueness for its terminals through its exclusive rights of patent, while making its technology and manufacturing know-how open and available as it sees fit. In this way, the company achieves a smooth coalition of forces supporting its own value chain.