Monday, 20 June 2016

Microsoft and the missing Link? The LinkedIn deal has a patent profile

News broke last week of software giant Microsoft's $26.2bn acquisition of business-oriented social networking service LinkedIn. Given the magnitude of the price and the fact that Microsoft and LinkedIn both have a ubiquitous high-profile presence in the high-tech communication scene, the deal seems to have attracted little surprise, excitement or indeed interest in many quarters -- though there were some exceptions.  The Guardian, noting the price worked out at $255 per active user, described the purchase as an expensive bet. Motley Fool criticised the deal as an overpriced acquisition of unprofitable assets on the basis of no clear business plan.  Venturebeat warned of a possible privacy fiasco. Microsoft founder Bill Gates however gave it his blessing and CNBC said it heralded a new era. 

Is there a patent dimension to this acquisition? One might not think so when reading the comments of the various news services and market analysts, but IP analytics can be trusted to unearth a patent dimension where one exists. With the aid of Cipher we have thrown a few figures together below, which show this is the case here.


First, let us make a comparison of LinkedIn with other social networking companies. Taking granted patent families into account, we can see that
* Facebook and Shenzhen-based Tencent are both very well endowed with patents;
* LinkedIn’s portfolio of over 1,000 families of granted patents, though only roughly half the size of Facebook’s, is on a par with Twitter’s.


Age of a patent portfolio is also significant, since the possible maximum duration of a granted is relatively short. In this context
* Tencent has the youngest portfolio, which therefore provides legal protection and comfort for investors for a longer duration into the future, while that of Twitter is the oldest;
* Facebook and Linkedin patents share a similar age profile. Coincidentally those two companies both own relatively few patents that are 4-7 years old.


In the joined-up global information economy, the scope of territorial coverage is a major factor to take into account. In this regard Linkedin follows what can be regarded as the traditional American tech corporation pattern: its patent holdings are strongest in the United States, but its focus is a narrow one. In comparison Europe is relatively free from social networking patents.



A portfolio comparison of six leading companies based on specific technologies yields further notable information. In particular:
* All of these companies reflect a somewhat similar pattern, with a high emphasis on both data processing and social networking;
* In the cluster “Prediction and fact check”, LinkedIn seems to have proportionally more patents than any other social network company by a large margin. This being so, we note also that Microsoft seems to have plenty of patents in that area as well. Exactly two years ago to the day, LinkedIn was reported to have been acquiring fact-checking patents, so it may be speculated whether there is some potentially profitable synergy here (though probably nowhere near $26.2bn worth). LinkedIn's filing in this area has also been reported here.



Linkedin has also left a trail of reassignments, as recorded by the table above.
* This graph shows patents that have been reassigned to LinkedIn by year (including homegrown patents in red);
* This pattern of acquisition of patents essentially didn’t start until 2012;
* 2013 marked the start of a big push for homegrown patents while, in 2014, Linkedin acquired 801 patents from IBM (this being its biggest purchase to date).


Looking more closely at the LinkedIn reassignments and linking them to patent family activity, we can compare reassignments from AT&T, INC, Yahoo and Cisco with LinkedIn’s homegrown patents. In terms of filing activity:
* homegrown filing has increased, starting from virtually zero in 2010;
* In contrast, IBM patents are much older, mainly having being filed between 1997 and 2009 and peaking in 2007;
* The rest filed roughly in the window of 2002 - 2006.


How many patent applications in this sector actually get to grant? According to the table above:
* IBM has an extremely high conversion rate;
* AT&T, Yahoo and Cisco have similar conversion rates with roughly 80-90 percent of their applications converting to patents within 12 years of application. 

This data does not necessarily provide the answer to any question, but it does enable us the better to decide whether the marriage of Microsoft and LinkedIn is made in financial heaven or hell, where the combined operation might be heading, what areas of activity might be best suited for licensing-out or acquiring further patent strength -- and whether the price-tag for LinkedIn now makes better sense.

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