US patent grants slow in wake of Supreme Court business methods ruling

IT giants are no longer driving growth in U.S. patent grants

There are some big changes in the patent landscape hiding behind a small drop in the number of utility patents granted by the U.S. Patent and Trademark Office last year.

The 1 percent decline in utility patent grants -- the first since 2007 -- follows three successive years of more than 8 percent growth, according to analysis by IFI Claims Patent Services.

Grants to IT companies have driven growth in recent years but even IBM, which has topped the patent rankings for 23 years, received fewer grants last year (7,355) than in 2014 (7,534).

Behind the stagnation in overall numbers are some big changes in the classes in which the USPTO is granting patents.

Patent grants in the business method and data processing class, for example, fell 24 percent year-on-year to 8,828 -- a drop that, by itself, could account for almost the entire overall decline in grants.

IFI blames the business method turnaround on the U.S. Supreme Court's June 2014 decision in Alice vs CLS Bank International.

In that landmark case the court ruled that encoding a business method in software does not make it patentable -- or, as Justice Clarence Thomas put it in the first paragraph of the ruling, "Merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention."

There are signs that that ruling has not just had a chilling effect on grants of business method patents, but also that it has led to the overturning of numerous others.

If the Alice ruling has knocked some of the lowest-hanging fruit off the patent tree, there are still plenty more opportunities for those willing to make a little more intellectual effort. Grants of patents for the notoriously math-intensive fields of image data processing and recognition of data were up by 14 percent and 18 percent respectively, although those patent classes accounted for fewer total patents than the business methods class.

The computers and electrical digital data processing class accounted for the largest share of patent grants, with 43,652 of the 299,365 total. Telecommunications was next, with 28,117, followed by semiconductors (25,409).

It's been years since Apple came up with the pentalobe screw to make it harder for people to repair their iPhones, but maybe repair sites such as iFixit will be railing about some of the 25,108 patents granted in the fourth-largest patent class, metalworking and hardware -- fasteners and connectors.

Pictorial communication via television and video accounted for 16,602 patent grants, and wireless communication networks were close behind with 16,629. With the decline in business methods patents, the pharmaceuticals (12,197) and medical diagnostics (11,921) classes were comfortably in seventh and eighth place.

Given the preponderance of IT-related patent filings, it's no surprise that South Korean and Japanese industrial research powerhouses Samsung Electronics and Canon ranked second and third behind IBM for patents granted, but Californian companies are closing in fast, according to IFI: Qualcomm and Google both jumped three places, to number four and five, respectively. Toshiba clung on to sixth place but Sony slipped three places to seventh.

Google's gain was Microsoft's loss: It slipped from fifth to tenth place, ahead of Apple by the narrowest of margins.

Microsoft is one of several companies making it harder to track its patent output by assigning its patents to specialized holding entities. The USPTO only granted 465 patents to Microsoft Corp. in 2015 -- but granted 1,956 to Microsoft Technology Licensing LLC. Other companies entering the assignment game this year include Panasonic Intellectual Property Management Co Ltd, Panasonic Intellectual Property Corp of America and Google Technology Holdings LLC, IFI said.

Given Apple's activity in the patent courts in recent years, it may be a surprise to see the company so far down these rankings. One reason is that many of the patents Apple has asserted so aggressively are design patents that protect the look and feel of its devices, and not the utility patents that IFI counts. A design patent for the iPad's rounded corners helped Apple win an initial damages award of US$1.05 billion from Samsung in August 2012.

One of the strongest climbers is, which jumped from 50th to 26th place. The infamous "one-click" patent it filed in 1997 has survived reexamination and, so far, the Alice ruling. The company's patent interests now extend far beyond business methods, though, and more recently it has been innovating in cloud computing and robotics.

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