Patents

IBM Is One of the World's Biggest Patent Trolls

IBM Is One of the World's Biggest Patent Trolls
Image credit: Grant Dixon | Getty Images
  • ---Shares

Anyone who has been paying attention knows that IBM, once the dominant force in all of computerdom and technology in general, has slipped more than a little.

Or has it really? I think not.

People argue that the company is fading. Here are some of the indicators:

  • The company gave up the PC business, perhaps wisely, but never made up for it with any sort of mobile device. There is no IBM phone, for example.
  • The name IBM used to be emblazoned on all sorts of products from butcher scales to synchro-clocks (I have one), card sorters, computers of every sort, to giant stores. Now it seems as if the only thing it is doing is some vague cloud computing business and Watson -- a 1980's expert system gussied up with a fancy voice-recognition interactive interface that talks back.
  • The company has been buying itself (with share buybacks) as fast as it can to reduce the number of outstanding shares. By decreasing the number of shares its declining revenue still looks good on an earnings-per-share basis. Everyone is doing this trick.

So all this is bad, right? If you examine the one anomaly in the IBM story, you may think differently.

IBM's real value is with the R&D folks who have helped IBM top the list of companies with the largest number of US patents granted year after year. This has never stopped growing. Last year it was 7,355 patents granted for IBM (followed by 5,072 for Samsung and 4,134 for Canon, with a big drop-off after that to Qualcomm with 2,900 and Google with 2,835).

The patent system is out of control since many of these patents are idiotic software algorithm or blocking patents, designed to keep others away from certain technologies. The point, though, is that IBM has been leading this pack for over two decades and shows no signs of slowing down. That is unless you think 7,355 is slowing down from its 2014 tally of 7,534 patents. In 2013, it secured a mere 6,809.

These numbers are outrageous when you stop to consider that patents were intended to protect small inventors and companies. Now the system is used to dominate that small fry. Good work, USPTO.

Many of IBM's current patents are about data analytics and so-called cognitive computing, like Watson. It in turn collects "over" a billion dollars a year from licensing, which sounds low to me. I say this because on its licensing page, IBM claims to have 250,000 experts who will work with you to find the right patents for your company. 

Those experts likely generate at least $100,000 in business each every year, which I think is conservative. You do the math and that's $25 billion. This makes sense when the company claims to drop $6 billion into R&D each year. In fact, it would not surprise me if most of its revenues were from licensing, and far more than $25 billion. IBM's overall revenues are around $82 billion.

This is where IBM has always been headed. Its products were just platforms for more inventions. Once it gets enough inventions patented, like the Thinkpad, it sells off the product line and moves on to something else. Right now it's artificial intelligence and cloud computing.

Products like Watson are in the news to keep you thinking that IBM is actually a product company and not what amounts to a massive, institutionalized patent troll.

The company may have begun this process long before the days of the IBM PC. There is probably no company making hard disks, semiconductors, laptops, operating systems, or software of any sort, including social networking sites such as Twitter, that are not paying fees to IBM.

In other words, with this business model, IBM is not going broke anytime soon.


More from PCMag