Quantifying innovation is difficult because it can take various forms, can cut across technologies and business models, and can range from incremental to revolutionary. But patents can be used as a metric of innovation, particularly during the past 20 years when the increased patentability of business methods and software, coupled with market expectations, have led companies from virtually all industry areas to develop or purchase patent portfolios.
Overview of Analysis
We identified a set of over 1 million patents and applications for the period 1995 – 2016 that cover a wide span of commerce technologies and business models, including payment processing, financial technology (FinTech), payments and payment gateways, commerce data analytics and monetization, ERP, reservations, inventory management, payroll management, tax automation, and other omnichannel areas. We additionally identified another approximately 1 million patents and applications that cover technology areas surrounding commerce, such as data processing technologies and communication protocols with particular applications to commerce (e.g., encryption and security protocols used in commerce, data analytics , etc.). The data sets were too large to be processed via normal patent searches and Excel spreadsheets, so most of the analytical work was conducted using Python and the final results were synthesized in Excel. More information about the scope of the analysis is provided at the end of this article.
Commerce Patents by Year
Figure 1 shows the total number of Commerce patents and applications granted and published worldwide between January 1, 1995 and December 31, 2016.
Figure 1 shows that innovation in Commerce, as measured by patents, has grown dramatically in the past 20 years and has remained high. It is interesting to note, however, that the growth in patent filings and publications slowed down after 2002.
Figure 2 shows the YoY growth rates, which makes it easier to see how the growth rates stalled in 2003-2004, 2009-2011, and 2015-2016.
We will explore in a future article in detail why this happened, but the answer is largely a combination of shifting dynamics in the venture and capital markets, regulatory changes in the patent space, evolution in the technology landscape for which patents are being pursued, and underlying economic cycles.
As an investor, it is intriguing to observe an apparent cycle of ~6 years in terms of patenting rates when looking at the post-2002 data. Note in Figure 2 how high growth rate suddenly drops in 2003, then recovers over the next 5 years, then drops again in 2009 with a recovery by 2014, and then drops again in 2015. We will dive into these issues further and analyze whether patenting rates could be used to predict company earnings and stock market performance.
Global Patent Coverage
This analysis covered patents granted or issued between 1995 and 2016 in a total of 67 countries, plus applications published within the World Intellectual Property Organization (WIPO) framework. Figure 3 shows a breakdown of the top 20 jurisdictions considered.
Please note that in Figure 3, at Number 17, we have approximately 1,000 patents and applications for which a country of publication code was not available. This is not a surprise. The issue of non-attributable patents is a complex and long-term topic in patent analysis: a large number of patents and applications are granted or published every year without properly identifying an assignee, which makes offensive and defensive patent analysis harder. Since this analysis was done programmatically in Python, patents missing defining characteristics such as assignee of record or publication country could not be processed automatically and were segregated for special handling. We will explore patents without assignees of record in a future article, but for now, it could be helpful to understand that this can be the result of assignee information not being properly published the patent offices, or could be an intentional misdirection from the patent owner to make patent searching and attribution more difficult. Counterstrategies for identifying the true assignees exist, including inventor-bases searches and address searches, which can also be automated and run programmatically. And of course, sophisticated patent owners can escalate this race one more time and file patents through shell entities in a final attempt to separate them form the real assignee in interest, but even then, some strategies for identifying assignees could be employed.
About this Analysis
For this analysis, we retrieved a set of over 1 million patents and applications for the period 1995 – 2016, which cover all aspects of commerce and peripheral industries, including the following:
Payment space and Financial Technology (FinTech):payments, payment processing, credit processing, traditional currencies and crypto currencies, credit card and ATM card processing, ATM and credit banking systems, SWIFT transactions and security technology, block chain technology (including distributed ledger and consensus-based algorithms), payment gateways, Point of Sale technology, credit card readers and other credit card processing equipment, and related data processing and communications technologies.
Omnichannel Technologies:digital coupons, digital offers, commerce data collection and data analysis, SKU-level data collection and processing, Consumer Relationship Management (CRM) systems, Enterprise Resource Planning (ERP) systems, cloud-based platforms, desktop computers and other devices, electronic tablets (iPad, Android, Windows and other operating systems and form factors), Application Programming Interfaces (APIs), data analytics, data monetization, table reservations, order deliveries, order management, mobile ordering using phones and tablet devices, and other forms of business digital transformation.
We identified an additional set of over 1 million patents that are not directly part of the commerce chain, but support commerce directly or indirectly at either the implementation or application layer. While a search focused directly on commerce technologies may miss these patents, they should not be minimized: it would be virtually impossible to operate in payments, retail or hospitality, omnichannel, or data monetization without employing the technologies that underpin and run commerce. Alternatively stated, operating in commerce would inherently infringe patents covering a broader range of related technologies. Here are some of the technologies covered by these additional patents:
Technology areas that support commerce through customized implementations or dedicated applications, such as data storage and cloud systems deployed for commerce data analytics, payment encryption and tokenization, PCI and EMV compliance, advertising through web, TV and other channels, secure communication networks, servers and cloud platforms adapted for commerce and sales, web-based shopping and electronic commerce (e-commerce) platforms, GPS application for mobile commerce applications, near-field, BlueTooth and other wireless communication protocols for payment transactions, customized hardware systems for payment processing (e.g., Point of Sale systems),
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This analysis was performed programmatically, without a review of actual claims. The opinions in this article are limited to the scope of this article, and do not necessarily reflect our opinions in general, or the opinions of any of our clients or partners.