Valuing patents -- and measuring innovation

By now, you have probably heard that IBM, for the 17th year in a row, is the company with the most patents issued in 2009. However, a Business Week story on various companies' patent portfolios argues that Microsoft is really number one (see also the accompanying BW story on The 25 Most Inventive Companies). BW bases this on an OceanTomo study of the strength of the patent portfolios.

The study is sure to spark a discussion on how one values patents. The OceanTomo rating, for example, penalizes IBM for having more service patents, which according the BW story "do not command as high a price as the video-game and software patents that heavily weigh in Microsoft's portfolio."

One especially interesting comment on all this comes from Joff Wild over at his IAM blog:

perhaps it is arguable that the biggest benefit IBM reaps from its patents is not the freedom to operate, the licensing revenue or the products and service they protect, but the notion of the company as a pre-eminent innovator that they confirm in people's minds. In other words, it's all about the brand.

As Joff notes:

In the end, abstract notions of what is valuable matter not a jot when it comes to patents. Instead, it's what you do with them that counts.

I would take that even a step further. It is not what patents you have that determines how innovative you are -- it is what you do in the marketplace. To its credit, the Business Week list is on the most inventive companies, not the most innovative. The two are not the same.

Given that, IBM may do well to fall off the top spot on "inventiveness" and start playing up its "innovativeness." After all, IBM has been repositioning itself as a "provider of customer solutions", not a hardware/gadget company. Stressing innovation would be good for the brand -- regardless of how many patents they get.