Executive Summaries Aug 27, 2019
Investment and Patenting Trends in Artificial Intelligence
As we look down the road to future developments, it’s clear that artificial intelligence (AI) will continue to play a larger and larger role in how we use technology to solve problems.
AI is a branch of computer science that is directed towards creating computers and machines that can learn, work, and react like humans. Today AI is already driving important developments in many different areas, including autonomous vehicles, medical research and diagnosis, and advanced manufacturing.
As AI moves from the theoretical realm to the global marketplace, its growth is fueled by a profusion of digitized data, continuing research leading to improved AI tools for developers, and rapidly advancing computational processing power. These forces are having a revolutionary effect — they allow us to detect patterns among billions of seemingly unrelated data points.
The development of AI has also become a critical geopolitical issue; AI is at the core of the technology race between the United States and China for worldwide leadership.
Investments Keep Setting Records in the AI Space, From Tech Giants to Early-Stage Companies
AI is a constantly transforming industry providing many opportunities to invest within a diverse market. Numerous established companies such as Nvidia, Alphabet (Google), Salesforce, Amazon, Microsoft, Baidu, Intel, Twilio, Facebook, Tencent, and many others have already invested billions of dollars on various projects associated with AI.
Universities and public research have been driving innovation in this space since the early days, and in recent years the pace has been picking up even further. The Canadian government recently earmarked $125 million for developing AI research as part of the Pan-Canadian Artificial Intelligence Strategy.1 In the U.S., the Massachusetts Institute of Technology (MIT) is investing 1 billion dollars to establish a new cross-disciplinary college of AI.2
Early-stage and mid-sized companies are also benefiting from the wave of massive investments in AI. In the second quarter of 2019, a new record amount of funding to AI startups was reached with $7.4 billion invested while the total funding to AI startups over the last 5 years adds up to more than $66 billion.3
The AI Patent Landscape
The amount of research into AI has grown dramatically in recent years, and patent filings are reflecting this trend. There have now been nearly 340,000 patent applications for AI-related inventions, with patent filings growing by a factor of 6.5 between 2011 and 2017.4 No surprise, the big tech powerhouses are leading the patent race with Microsoft piling up around 6000 AI-related patent applications and Alphabet piling up about 4000.5
Some of the primary industries in which AI patents are filed are telecommunications, transportation, life and medical sciences, and security.
Although there have not yet been many AI patents asserted in court, we expect an increase in litigation as the use of AI continues to grow.
Merger and Acquisition (M&A) Activities in the AI Space
In addition to developing AI solutions in-house, many corporations have used acquisitions to increase their AI expertise. Major technology companies like Google, Amazon, Microsoft, and Apple have spent billions of dollars to acquire numerous AI startups.6
One example of a major acquisition was Google’s purchase of DeepMind Technologies, a UK-based AI company. DeepMind is well-known for developing AlphaGo, which became the first computer program to beat a professional Go player on a full-sized board in 2016. DeepMind was founded in 2010 and then acquired by Google in 2014 for £400 million. At the time of the acquisition, DeepMind Technologies was holding numerous patents relating to architectural details of neural networks and to aspects of training neural networks.
Why Should AI Startups Invest in Patents?
Even though a startup is unlikely to engage in patent litigation, there are still numerous benefits to applying for patent protection of an AI invention.
Investors considering a startup will likely look at whether the company owns or has applied for patents covering inventions that are key to the company’s business model.
Owning relevant patent assets can also make a company more desirable for an acquisition, and potentially increase the value of the company. For complex technology like AI, patents can be used as a tool to signal to investors that credible research and development has been done.
Although it’s a bit counterintuitive, patents can actually make it easier to collaborate with other companies. After a startup files a patent application, the startup can disclose the invention to other entities without worrying that someone else will copy their invention. The patents can also be used to formalize a framework for collaboration or licensing of the underlying technological developments. This can be particularly useful for AI startups wanting to collaborate with larger companies.
Finally, as AI-startups grow, having a portfolio of strategic patent assets will help maintain higher margins, discourage competitors from entering the market, and deter competitors from suing for patent infringement. Investing in patents sooner rather than later can help an AI startup lay the foundations for a long-term competitive edge.
1CIFAR Pan-Canadian Artificial Intelligence Strategy, https://www.cifar.ca/ai/pan-canadian-artificial-intelligence-strategy.
2Brittany Shoot, MIT Is Investing $1 Billion In New College With Computing, AI Focus (Oct. 16, 2018), https://fortune.com/2018/10/16/mit-college-computing-artificial-intelligence-billion-dollars/.
3Gabriela Barkho, Funding for Artificial Intelligence Startups Reaches Record High in 2019 (July 26, 2019), https://observer.com/2019/07/artificial-intelligence-startups-funding-record-high-2019/.
4World Intellectual Property Organization, WIPO Technology Trends 2019: Artificial Intelligence, https://www.wipo.int/edocs/pubdocs/en/wipo_pub_1055.pdf.
5World Intellectual Property Organization, WIPO Technology Trends 2019: Artificial Intelligence, https://www.wipo.int/edocs/pubdocs/en/wipo_pub_1055.pdf.
6Michael Guta, Is it any Surprise who is Buying all the AI Tech Startups? (Feb. 16, 2019), https://smallbiztrends.com/2017/12/most-artificial-intelligence-startup-acquisitions.html.
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