300 Granted US patent milestone

Today I reached the 300 granted US patent milestone.

It took close to 20 years to reach that milestone, since the first patent I was involved in was filed October 1998.

However, I’m a co-inventor of some 150+ more filed patent applications, and I’m aiming for at least 500 granted US patents :-).

If you or your organization are interested in learning more about the noble art of inventing and patent creation, I offer seminars about the innovation process and my own trade secrets on how to invent, create patents and become a prolific inventor, as well as patent creation workshops, helping your organization to boost your patent portfolio.

For contact information, see here.

The market value of a standard essential patent for 5G

A standard-essential patent (SEP) is a patent which claims an invention that must be used to comply with a technical standard, such as the 4G or the forthcoming 5G cellular communication standard. As I have mentioned in an earlier blog post  a company claiming to have a SEP has to agree to license the patent according to FRAND- fair, reasonable, and non-discriminatory terms. However, what is the market value of a SEP for, say the forthcoming 5G (or NR) standard? The answer is;

The value for a 5G-NR standard essential patent is predicted (2020) to be 1 US cent (US$ 0.01) per 5G smartphone sold!

Below I will reveal how to figure that number out. Hang on.

How Many SEP will there be for 5G?

First of all, one needs to determine; how many SEPs there are (or more correct, will there be) for the 5G-NR standard? The way of determining whether a patent is essential to a particular standard, can be complex. In order to have a SEP, all parts of at least one claim in the granted patent need be possible to map to the standard. Hence, just for a company claim – for marketing purposes – having X SEP does not necessarily mean that they are actual SEP unless a deep analysis is made for respective of the X patents to see that they actually are possible to map to the standard.

Fortunately, from a recent finalized litigation between Ericsson and TCL in California, US, the FRAND rate for 2G, 3G and 4G SEP was determined . In this trial, the total number of standard essential patents for each wireless communication standard was estimated based on a quite detailed analysis. From the analysis one concluded the following total number of SEP patent families per 2G, 3G, 4G.

4G: 1481 families

3G: 953 families

2G: 265 families

As can be seen, the number of SEP increases for every new generation, mainly due to two things;

  1. The cellular communication standards cover wider scope for every new generation.
  2. The amount of companies involved in the standardization increases for each new generation (*), hence the total number of involved innovative persons worldwide increases, and that will increase the innovation and therefore the number of patentable ideas.

The 5G cellular communication standard will support new use cases, such as supporting ultra-low-latency applications (URLLC ) and massive MIMO on mmWave, and therefore becoming a wider standard than 4G. Hence, to predict the number, we use a first order linear extrapolation to estimate the number of 5G SEP. Then, one obtains the following estimate ;

5G: 2100 SEP families

5G FRAND rate

Next step is to determine the FRAND rate. Referring to the decisions in the Ericsson vs TCL trial again, the total royalty rate for 2G and 3G SEP was 5% and for 4G 6% of the smartphone sales price, hence a bit higher for smartphones supporting  the latest generation. We assume that the FRAND rate for 5G, when smartphones are out on the market 2019-2020, will be a bit higher (more advanced technology and hence higher R&D investments), say 7%.

5G smartphone market value 2020

OK, how to predict the worldwide smartphone market value 2020? Some googling gives that the worldwide smartphone revenue for 2017 was $ 478 Billion, and a total of  1.5 Billion smartphones was shipped. That gives an average sales price of $318 per smartphone.

Estimates of the smartphone market 2020, indicates 1.7 Billion units shipped. I have not found any revenue estimates, but assuming a sales price corresponding to the average of the average sales price 2014-2017, (variation between $278-$318), giving an estimated sales price of $295, which rounded will be $ 300.

Now we have that

One single 5G SEP market value per smartphone 2020 (US $)= 300*0.07/2100=0.01. 

“QED”

That means, in case one has an approved standard essential 5G patent, the market value 2020 – condition on that you succeed to sign a FRAND license agreement will all smartphone vendors in the world –  will be …. US$ 17 Million…

This is of course a guesstimate with a lot of uncertainties, but the value might be higher, taking licensing possibilities for 5G Internet-of-Thing devices into account as well.

Anyhow, to conclude, if you are an inventor of a 5G SEP – be very proud – you have created significant business value for your company!

 

(*) According to the myths and legends within the 3GPP standardization, a famous 3GPP standardization delegate – and editor to one of RAN1 standard document – may have quoted:

“The number of standardization delegates participating on the 3GPP meetings doubles for every new cellular wireless communication generation”

The “Moore’s law of 3GPP”, is rumored to been shown at a conference in Sweden last year ? … so maybe the number of SEP per new G increase exponentially instead of linear as I have assumed, reducing the marketing value ….?

“Everything has already been invented”

Maybe you have heard the quote “Everything has already been invented”?

This quote was, according to the legend, stated by Charles H. Duell who was the Commissioner of the US patent office in 1899. However, there is a belief that he didn’t say so, but it may be a similar quote stated already 1843 by another Patent Office Commissioner, Henry Ellsworth – so there might be some truth behind the quote….

Anyhow, in the year 1900, approximately 25000 patents were granted  in the US, while 115 years later the granted rate was 300000 per annum (!). The number of patents has really exploded over the last 100 years, so stating that everything has already been invented today, will problably not be true either.

As a prolific inventor, whos main task is to find out innovative solutions to problems that might be patentable, you will however sometimes feel that;

“No, now I really can’t find anything new, I have made my last filing”.

However, if you are working in a creative environment, you will sooner or later find yourself in discussions with colleagues about new topics or new challenging problems that need to be solved, and from that, new ideas will pop up.

So don’t give up. The ideas will continue to come, you just need to show perceverance!

 

FRAND patents

As I have mentioned earlier, patents are business, and below I will describe one business model related to patents that is common in the area of wireless communication such as 2G,3G,4G and the forthcoming 5G standard. i.e. patent areas in which I have been heavily involved.

Let’s say that a company has invested money for research and development and comes up with a new technology that may fit into a certain technical standard such as the 3GPP standard (the organization developing the cellular communication standards, such as 4G-LTE, or 5G-NR). In order to propose the solution to the standard, operating according to FRAND principle, the company has to agree to license the patent according to FRAND- fair, reasonable, and non-discriminatory terms. FRAND  denotes a voluntary licensing commitment that standards organizations often request from the owner of a patent that is essential to practice a technical standard.

Fair relates mainly to the underlying licensing terms. Fair terms means terms which are not anti-competitive and that would not be considered unlawful if imposed by a dominant firm in their relative market.

Reasonable refers mainly to the licensing rates. According to some, a reasonable licensing rate is a rate charged on licenses which would not result in an unreasonable aggregate rate if all licensees were charged a similar rate. A pragmatic way to see it; The total licensing cost for all licensees related to the FRAND agreement should not be more than a single digit percentage (<10%) of the products sell price. However, the exact value is negotiable between the licenser and the licensee, but this “total below 10%” gives the order of magnitude of the licensing cost.

Non-discriminatory relates to both the terms and the rates included in licensing agreements. As the name suggests this commitment requires that licensors treat each individual licensee in a similar manner. This does not mean that the rates and payment terms can’t change dependent on the volume and creditworthiness of the licensee. However it does mean that the underlying licensing condition included in a licensing agreement must be the same regardless of the licensee. This obligation is included in order to maintain a level playing field with respect to existing competitors and to ensure that potential new entrants are free to enter the market on the same basis.

This way of licensing patents according to FRAND gives the licenser possibilities to get the technology into the standard and by that get a reasonable return on investment for the development  of the technology, from those doing products compliant with standard, and at the same time the licensee get rights, for a reasonable cost, to a technology that it has not invested money on for its development.

Hence a win-win scenario.

 

Which patent is you most proud of?

“Which patent is you most proud of?”, is also a question I have got several times. Among all 400+ filed it is a hard question answer, since it depends on what you mean. Some inventions are about really clever details requiring a lot of research to figure out, while other patents, still new and inventive, does not require “rocket scientist” education to figure out the solution, but are important from an business perspective.

But if I have to choose, one of my favorites from a cleverness point of view is (I’m sorry for the technical details, below)

US6725024 Offset local oscillator frequency

I was visiting Ericsson Research in Rayleigh, NC, US a week end of summer 2000, and discussed with some of my research colleagues there, about improving the performance of the channel estimator for the highest data rates in EDGE. It turned out that, with a low cost direct conversion receiver, the DC component introduced by the receiver and channel estimator severely limited the performance of EDGE in the mobile device implementation. Is it a way to achieve better estimation performance by doing something in the radio receiver? After some hours of discussion, we found the answer. By offsetting the local oscillator in the radio with some few kHz, different offset for different GSM/EDGE training sequences, channel and DC offset performance coming close to the Cramer-Rao bound (a measure on ho how good a channel estimate could be) can be achieved. We later on presented the results at a Conference as well.

  1. Hui, B. Lindoff and K. Zangi, Enhanced DC estimation via sequence-specific frequency offset, In the proceedings of 56th IEEE Vehicular Technology Conference (VTC 2002 fall), Vancouver, Canada, September 2002, p161-165, vol.1.

Start with the figures!

Say that you got a brilliant idea that you believe is novel and inventive. Now you need to write an invention disclosure, which is a confidential document for use by a company’s patent department, or by an external patent attorney, to determine whether patent protection should be sought for the described invention. But how to write such an invention disclosure?

I used to say, start with a flow chart (or block diagram). I have, during my professional career reviewed many invention disclosures with a huge amount of text; long background, long summary  and a long description, but it was quite hard to understand what the inventor believed to be novel and inventive.

By starting with a flow chart or block diagram (or other drawings depending on what type of invention) and pin pointing the “combination of boxes” in the flow chart, or block diagram that might be novel and inventive, and then writing the text document and highlight these parts, you will gain two things;

  1. It will be much easier for you to write the entire invention disclosure
  2. It will be much easier for the patent engineers/boards or patent attorneys to review the disclosure and by that determine whether patent protection should be sought on the invention.

Below I show an example based on a fictive invention:

You have realized that to determine an estimate of a characteristic of a received signal comprising of two received signal streams, you need to perform a compensation of a mean value estimate over the two received signal streams, where the compensation value is a function of the received signal to noise ratio. The characteristic value of the received signal is then used in the further processing of the received signal.

Then, the flow chart in your invention disclosure might look like the below example

(100) receive the first and second signal stream

(110) compute an average value over first and second received signal stream

(120) estimate signal to noise ratio, SNR

(130) determine compensation value based on SNR

(140) determine characteristic value of received signal based on average value and compensation value

(150) use characteristic value in further processing of the received signal

Here, (120) “estimate SNR” is not new, but I believe the combination of (100), (110), (130), (140) is the really novel and inventive thing. Adding further a block diagram over the different blocks involved with then further give insight over your idea.

Hence, the quote; “A picture is worth a thousand words” is valid also in the area of inventing and patent creation.

 

On the value of inventors from an R&D company’s perspective

In the last post, I showed that around 30% of the patents created in large companies within the area of digital communication, such as Huawei, Ericsson, Qualcomm, Nokia etc. originates from the top 100 inventors. Hence a very large part of the patent portfolio is created of less than 1% of the R&D employees, and therefore these top-inventors will create a large value for the companies.

Below I will do some back-of-the envelope calculation of the value of top-inventors. I will focus on Ericsson, mainly due to that they invest a lot in R&D and patents, and have a lot of patents (42000+ ) and license their developed technologies in open standard, such as the cellular communication standard LTE (“4G”) to other players in the market, and have been quite successful in their patent licensing business during the last 10-15 years and have a quite significant patent licensing revenue stream.
All the calculations below are based on open sources and clever guesses, and patent statistics is based on search using lens.org.
According to the annual report , Ericsson made 10 BSEK in patent revenues 2016, and during the last 5 years the revenue have been 7-15 BSEK, so hereinafter we use 10 BSEK/per year in patent revenues. Furthermore, Ericsson claims to have 42000 granted patents world wide (I guess they mean valid, still paid). Using the 30% created by the top 100 inventors, we have that 12600 patents, or 3 BSEK/year of the patent revenue originates from the top-100 inventors. That is 30 MSEK per year o average (Looking at the patent distribution between top 100, it is very skew, meaning top 10 inventors produce approx. 3-8 times than the inventors #90-100, but for easiness we take the average) the top 100 inventors “create” in patent revenues for Ericsson per year! Of course, creating patents and keeping patents alive come with a cost, so everything is not a profit.

But how much of these 30 MSEK is pure profit? Let us do an estimate. According to the annual report, the R&D spending is around 34 BSEK/year and with 24000 employees that gives an average cost per employee of 1.4 MSEK. The top-inventors are senior persons and hence the cost for such a person is, say twice the average number, say 3 MSEK/year. Patent maintenance and cosst associated to patent development are included in the R&D numbers, but to be conservative, we add the cost of creating and maintaining patents to the 3 MSEK number. How much is that? When looking at the Swedish patent office, PRV, a typical cost for a patent family (including 10 patents) over a life length of 11 year is around 700kSEK rounded to, say 1 MSEK. Hence the cost per patent per year is 1M/10/10=10 kSEK, and on average, a top-100 inventor at Ericsson has contributed with 126 patents, which means 1.26 = 1.3 MSEK per year.
So; A top 100-inventor at Ericsson generates patents giving a revenue stream of 30 MSEK/year, while the yearly cost of one of the top 100-inventor is upper bounded by 3+1.3 =4.3 MSEK.
That is quite good margin, I will say. Again, as a suggestion to all companies out there investing heavily in Research and Development; keep your top-inventors happy and loyal to the company, they are extremely valuable.

Inventor Productivity in Digital Communication

In the last two blog updates I have discussed the most prolific inventors in the world. But how does it look when looking into specific companies? For instance, how large fraction of the patents in a company are created by the top-inventors? Let us do some quick studies based on open information that can be found on the internet.

I will restrict the back-of-the-envelope calculations made in this blog post to the top 10 patent applicants for EP patents during 2016 in the field of digital communication   (I will check the statistic for other areas in a later post). The companies are (in the order of amount of filed EP applications 2016); HUAWEI TECHNOLOGIES CO. LTD, L M ERICSSON AB, QUALCOMM, INC., NOKIA CORPORATION, ZTE CORPORATION, INTEL CORPORATION, SONY CORPORATION, LG GROUP, SAMSUNG GROUP, NEC CORPORATION.

All these companies are known to invest heavily in Research and Development and have as a strategy to invest a lot in inventions and patents used for licensing their own technology and by that receive a return of investment of the R&D spending. All the companies above, as far as I know, have at least more than 10000 employees working with R&D.

Furthermore, I have used the search engine lens.org, and restrict the search to granted EP patents, which publication date was 2000-01-01 and later (up to March 2017). Then I have checked how many of the granted EP patents that the top 100 inventors were co-inventors on (again according to the patent search engine lens.org). This gives an indication of how large fraction of the company’s total patent portfolio that is created by the top-100 inventors. Below you can find the result.

Company             #Granted EP       #Top

……………….                 00-17                    100 inventors

Huawei                3729                      1244      33%

Ericsson              8661                     2656      31%

Qualcomm         4246                     2308      54%

Nokia                    4842                     1466      30%

ZTE                          904                      403        45%

Intel                       1735                       515        30%

Sony                     7038                     1656      24%

LG                          4330                     1433      33%

Samsung             8159                     1555      19%

NEC                      3674                     990        27%

Total                     47314                   14226    30%

As can be seen the fraction is surprisingly close to 30% in all the companies (with some few exceptions) and is probably a result of the Lotka’s law (I have to check, but that will be in another blog post ?).

Anyhow, one can conclude that patent creation is not evenly spread over the entire R&D, but instead made by a smaller amount of people. As an example, Huawei has 80,000 R&D employees , and 1/3 of the patents originates from 0.12% (!) of the R&D employees. For the second applicant on the list, Ericsson, who claims to have 24,000 R&D employees , 1/3 of the patents originates from  0.42% of the R&D employees.

Hence, from the above one can conclude that the top inventors, which may be less than 1% of the total R & D  employees generate approximate 1/3rd of the total patent portfolio (and patent value) for these high-tech companies!

Finally, as a suggestion to all companies out there investing heavily in Research and Development; keep your top-inventors happy and loyal to the company, they are extremely valuable. In the next blog post I will do some back-of-the envelope-calculations for estimate the value of prolific inventors, so hang on …

 

Keep an Innovative Climate in the Company

In the last update I discussed the importance of being open minded to your own ideas. It is also important that there is an innovative climate in the  company/office in order to succeed in the development of new inventions. For instance, one needs to keep an open mind in discussions with colleagues.

Below, there is one exercise for the blog-reader I hope you can solve ?.

Which of the two answers by the person B below would have the largest potential to create inventions?

1 . Two persons A and B meet at the coffee machine

A. “I have a brilliant idea!”

Person A explains the idea.

B. “Great idea! This seems to be new and I have some proposals on how to improve your idea!”

2.  Two persons A and B meet at the coffee machine

A. “I have a brilliant idea!”

Person A explains the idea.

B. “No No, This can’t be new, go back to your office!”

Any guesses?

Ok, you guessed no 1. Great! That is correct!

So make sure to be positive and open minded not only to your own ideas; you and your colleagues need  also to be open minded towards other person’s ideas and coach and enhancing each other’s ideas.

So, from now on, throw the “Not Invented Here/By Me” mentality in the garbage can!

 

Generate ideas

Ok, now we start with the first secret:

Generate ideas and take your ideas seriously!

I will say that every person on the planet comes up with brilliant ideas once in a while. That is of course also true for let us say professional people working as engineers/researchers. However, many also believe that oneself is an “Average-Joe” and just my ideas, I come up with “must be simple and well known to all other persons on the planet”. But hold on … how many people actually work with the tasks/topics/subjects you are working on for, say the last years? If you think about it, it is probably not so many that you would expect from the beginning.

What does that really means? Well, you might be a World class expert in your task/topic/subject ?!    And world class people, they can make inventions, right? So don’t be shy!

Of course every idea you come up with is not new and inventive, but if you start by thinking ”no” and censor you own ideas without further investigations, you will miss a lot of good ideas that might be novel and inventive and hence patentable!

So, next time you come up with a brilliant idea, think “yes”, not “no”!