IBM Tops Patent List for 22nd Year as It Looks for Growth

IBM captured the top spot in annual U.S. patents granted for the 22nd straight year. The question remains: Can the perennial leader translate those inventions into revenue?

International Business Machines Corp.’s 7,534 patents in 2014 beat the record it set a year earlier, the company said today in a statement. South Korea’s Samsung Electronics Co. and Tokyo-based Canon Inc. ranked second and third.

IBM Chief Executive Officer Ginni Rometty is still looking to newer areas like cloud computing and data analytics to reverse falling revenue and a projected decline in annual profit this year, the first drop since 2002. Last year, 40 percent of the company’s patents were issued for work relating to the company’s growth initiatives, IBM said in the statement.

“IBM’s continued investment in research and development is key to driving the transformation of our company,” Rometty said in the statement.

Still, IBM’s customers are spending less on its products and services. Sales have fallen for three straight years, helped by divestitures and weakened demand for the company’s hardware and services. In October, Rometty surprised investors by ditching a long-held earnings goal and projecting a 2 percent to 4 percent decline in operating profit for 2014.

Growth Opportunities

While computer-related patents can take almost three years to process, the annual list shows where companies are seeking growth opportunities. For IBM, it’s cloud computing, data analytics, security, and mobile- and social-centric offerings.

IBM spends about $6 billion a year on research and development. The Armonk, New York-based company’s investment has led to its patent volume dominance and offerings like the Watson data-analytics supercomputer.

Still, IBM spends about 6 percent of its annual revenue on research and development -- or about half that of its technology peers in the S&P 500 Index. Competitors like Google Inc., Cisco Systems Inc. and Oracle Corp. typically spend about 13 percent.

More American companies were able to breach the top 10 in patents this year, with Google’s seventh-place finish giving it a single-digit ranking for the first time. Software giant Microsoft Corp. and phone-chip maker Qualcomm Inc. have made the top 10 since 2013, according to patent information compiled by IFI Claims Patent Services, a unit of Fairview Research LLC.

Apple Inc. just missed the top 10, rising two spots since 2013 to 11th place, according to IFI data. U.S. companies General Electric Co., Intel Corp. and Hewlett Packard Co. were also among the top 20 patent recipients last year.

Tougher Reviews

The U.S. Patent and Trademark Office has become more stringent in its reviews of patent applications, particularly with software. In a series of rulings, the U.S. Supreme Court and the top appeals court for patent cases have limited what types of ideas are eligible for legal protection and required that applications be written with more specific language.

Most importantly for IBM and other software manufacturers, the high court ruled in June that taking a well-known concept and implementing it on a computer isn’t enough to justify a patent. Since that ruling, more than a dozen patent cases have been thrown out by district courts and the patent office is developing new rules that could mean more applications for software patents are rejected.

The patent office also has become a popular forum for reviews of already issued patents, putting applicants on notice that weak patents are more vulnerable to challenge.

The Top 10 U.S. Patent Winners of 2014

1. IBM 7,534 2. Samsung 4,952 3. Canon 4,055 4. Sony 3,224 5. Microsoft 2,829 6. Toshiba 2,608 7. Qualcomm 2,590 8. Google 2,566 9. LG Electronics 2,122 10. Panasonic 2,095 Source: IFI Claims Patent Services
Before it's here, it's on the Bloomberg Terminal.