How Patents Became A Managing Board Agenda Item At Siemens With PatentSight
Siemens leverages LexisNexis® PatentSight® to integrate its IP activities into the company’s innovation process and measure the quality of its patents.
“In a digital world, patents document a company’s contribution to a digital ecosystem in which businesses work together to create solutions through partnerships and licensing. But companies can only share and license something they own.
To protect their ability to make money from their contributions and their competitive advantage, they must establish their IP rights. Siemens needed a different approach to IP rights and a different understanding of how to create these IP rights.”
Siemens leverages PatentSight to increase quality of patents...
...and create value for the business
Siemens is a digital pioneer focusing on the areas of electrification and automation. The company partners with its customers to unleash their business potential using energy-efficient, resource-saving technology and digital know how.
For more than 170 years, the name Siemens has been synonymous with internationality and worldwide presence. Siemens is a global powerhouse positioned along the electrification value chain—from power generation, transmission and distribution to smart grid solutions and the efficient application of electrical energy—as well as in the areas of medical imaging and laboratory diagnostics.
Siemens operates in production and manufacturing plants worldwide. In addition, the company has office buildings, warehouses, research and development facilities or sales offices in almost every country/region in the world. Siemens currently holds more than 100,000 patents and in 2013 was filing applications for more than 3,000 new patents annually across its lines of business. Based in Germany, Siemens is a multinational engineering company with annual revenues of €86.85 billion and 385,000 employees around the world in 2019.
When Beat Weibel joined Siemens in 2013 as the Chief Intellectual Property (IP) Counsel and Group Senior Vice President, Siemens consistently ranked number one or number two in the number of European patent filings. The company still is today.
However, when Weibel joined the company he saw right away that Siemens, like many large technology companies, was focused primarily on the quantity of patents, not their quality. This is a strategy that Weibel viewed as less effective in a digital world.
“Companies previously used patents to establish IP rights and block competitors from benefiting from basic innovations,” says Weibel. “In a digital world, patents are more often used to document a company’s contribution to a digital ecosystem in which businesses work together to create solutions through partnerships and licensing. But companies can only share and license something they own. So, to protect their ability to make money from their contributions and their competitive advantage, they must establish their IP rights.”
Adds Weibel, “I felt that Siemens needed a different approach to IP rights and a different understanding of how to create these IP rights.”
In particular Weibel felt that the focus on quantity over quality reflected a disconnect between the development and IP teams at Siemens. Inventors would invent first and then call on their colleagues to prepare and file patent applications. Siemens was not evaluating the quality of its inventions before filing patent applications. The upshot was that Siemens was spending huge amounts of time and money obtaining and managing patents with limited knowledge of whether they represented business value or created competitive advantage for the company.
For Weibel, the way forward for Siemens was to shift from a quantity-driven IP strategy to a value-driven IP strategy.
Tackling the challenge of proactively integrating IP activities into innovation processes
“Instead of waiting for inventors with good ideas to bring them to our patent attorneys, we sent our patent attorneys out to talk to researchers and developers to better understand how what they were working on might contribute value to our businesses,” says Weibel.
“This was a bit of a challenge. It required our attorneys to understand our businesses and business models so they could recognize the innovations with the most potential to add value and actively place IP rights on these sweet spots.”
According to Weibel, it took time, but Siemens’ patent attorneys rose to the challenge. The company’s innovation and IP activities are now aligned behind a value-driven IP strategy and the IP group is proactively involved in the company’s innovation process.
Finding the right patent quality measure
Integrating innovation and IP strategies was just the beginning. Another essential element of the shift to quality over quantity was selecting a metric for determining whether the change in strategy was successful. In other words, the company needed a way to prove whether the quality of its patents was improving over time.
“You can only improve what you can measure. The best measure of the quality of a patent is going to court, but just 5 percent of patents ever go. We needed an indirect measure and a tool that would help us measure the quality of each patent and our entire patent portfolio and track quality changes over time compared to our competitors.”
For this, Weibel turned to PatentSight, a LexisNexis company that provides business intelligence software, analytics tools, and insights into the strength, quality, and value of patent portfolios. PatentSight is known for its Patent Asset IndexTM, an objective measure of global technological strength and innovation. The measure takes into account both the number of patent-protected inventions and their quality, or value. The method allows the identification and profiling of patent gems businesses can leverage to create value from innovations. The Patent Asset Index is defined as the aggregated Competitive Impact of all patents in a portfolio. It can be calculated for the overall portfolio of a company, patents related to a certain technology, and any other group of patents based on selected criteria.
“PatentSight is quite a good match for Siemens,” says Weibel. “The tool came out of a university and has an academic objective, not just a commercial one. It allows us to track patent quality over time compared to our competition, taking changes such as acquisitions and divestitures into account. And the indices used to measure quality take into consideration differences in markets such as the U.S., Germany, and China.”
Excellent data quality is key
The foundation of the Patent Asset Index is excellent data quality, which the company achieves by maintaining a proprietary global patent database. To populate the database, PatentSight compiles patent data from more than 95 authorities worldwide, including more than 100 million patent documents, about 700 million drawings and illustrations, and nearly 100 million PDFs that are searchable and quickly downloadable.
To ensure the data is accurate and reliable, a highly skilled team of experts continually tracks factors that can affect the ownership of patents—and therefore who holds commercial power over them—including corporate structures, mergers and acquisitions, company name changes, patent transactions, and others. The team also checks for the validity and remaining lifetimes of patents. This ensures that analyses focus only on active patents, pending patent applications, and valid patents.
Siemens’ patent quality improvement in the Internet of Things market
An example of how the shift to a focus on quality is working is Siemens’ patent portfolio strength in the highly lucrative and competitive Internet of Things (IoT) market between 2016 and 2020, as objectively measured by the Patent Asset Index.
Portfolio strength is defined as the aggregate strength of all the patents the portfolio contains. The strength of each individual patent family is measured by its Competitive Impact, which is determined by both Technology Relevance and Market Coverage. (See Figure 1).
Between 2016 and August 2020, Siemens increased its IoT patent portfolio strength by 47.2 percent and was the only player in the market that showed clear average patent quality improvement.
Patent quality captures the attention of the managing board
“The managing board trusted me and the PatentSight tool when I told them we could harvest more valuable inventions and create broader and more important patents by changing our strategy and measuring quality improvement compared to our competitors.”
The benefits to Siemens of a patent strategy focused on quality over quantity, supported by PatentSight, are many. For starters, Siemens now realizes a better return on investment for its patents. For example, even though the company still files roughly the same number of patents each year, the quality of its patent portfolios is higher and continually improving.
Moreover, and of even greater importance, according to Weibel, patents now play a much larger role in the strategic development of the business. For example, the IP team can now make recommendations on where the company should invest more in research and development to create new opportunities such as acquiring new customers or new joint venture partners or to improve its competitive advantage in key regions or markets.
Not surprisingly, the transformation of patents from a necessary cost with little perceived return on investment to a strategic tool for creating business value and competitive advantage, has caught the attention of the Siemens managing board. After Weibel’s presentation reporting initial results of the shift to a value-based IP strategy, he’s now invited back to present to the managing board once or twice a year.
“It would be easy to go into the boardroom and say we’re number one in the number of patents we have, but I would rather report on how we can better protect our competitive advantage even in places like China because that makes a bigger difference to the business,”
says Weibel. “I was lucky that the managing board trusted me and the PatentSight tool when I told them we could harvest more valuable inventions and create broader and more important patents by changing our strategy and measuring quality improvement compared to our competitors.” Adds Weibel, with a smile, “Of course, now the board expects to see quality improvement every time.”