management of patent applications for digital camera ... · hiroaki nagatsuka and yoshitoshi...

218 Int. J. Liability and Scientific Enquiry, Vol. 4, No. 3, 2011

Copyright © 2011 Inderscience Enterprises Ltd.

Management of patent applications for digital camera considering the product life cycle

Hiroaki Nagatsuka and Yoshitoshi Tanaka* Graduate School of Innovation Management, Tokyo Institute of Technology, 3-3-6 Shibaura, Minato-ku, Tokyo 108-0023, Japan E-mail: [email protected] E-mail: [email protected] *Corresponding author

Abstract: Digital cameras have a long product life cycle. Generally, sales decline once the product reaches maturity. However in Japan, the number of patent applications continues to grow even after the maturity stage. This indicates that there must be a number of useless patent applications. In Japan, companies tend to file patent applications without regard to the possible effects of the patent application on the companies productivity and profitability. In general, patent applications are filed to thwart competition and improve its bargaining power in cross licensing agreements. This study analyses the cumulative number of patent applications using correlation analysis and examination of the financial indicators of each company. More importantly, this paper makes a comparative study of the company’s management of patent applications with the product life cycle of digital cameras.

Keywords: cumulative number of patent applications; product life cycle of digital cameras; financial indicators.

Reference to this paper should be made as follows: Nagatsuka, H. and Tanaka, Y. (2011) ‘Management of patent applications for digital camera considering the product life cycle’, Int. J. Liability and Scientific Enquiry, Vol. 4, No. 3, pp.218–238.

Biographical notes: Hiroaki Nagatsuka graduated from the Tokyo Institute of Technology (Bachelor of Science) and joined TOYO SEIKAN as an Engineer in 1996. He has been working for this maker until 1999 and moved to IP department of RICOH in 2001. He joined the Graduate School of Innovation Management, Tokyo Institute of Technology in 2008. He majored in MOT and IP management.

Yoshitoshi Tanaka is a Professor at the Graduate School of Innovation Management, Tokyo Institute of Technology. He graduated at the Tokyo Institute of Technology in 1980, and joined Japan Patent Office, Science and Technology Agency and then became a Research Fellow at UCLA in the USA, until 1991. He is a registered Patent Attorney since 1994, and a member of Japan Intellectual Property Academic Association, AIPPI, Japan MOT Society, etc.

Management of patent applications for digital camera 219

1 Introduction

1.1 History of digital camera

The year 1981 saw the emergence of digital cameras in Japan. Mavica made by SONY was the first digital camera prototype in Japan. This digital camera adopted a method of storing images on a floppy disk without films and an analogue-type recording method of video camera for recording images. Canon released RC-701 as a single-lens reflex (SLR) camera with interchangeable lens in 1986. This was the first product with analogue-type recoding method in Japanese market. On the other hand, the first digital-type camera was FUJIX DS-1P made by Fuji Photo Film in 1988. However, these cameras were for professionals and business use and very expensive (Kozaki and Nishii, 2009).

The rapid spread of SLR camera began in 2003 when Canon released EOS KISS DIGITAL. The marker price of the body of camera at that time in Japan was about 120,000 yen (Kozaki and Nishii, 2009). However, since 2003 the sales of digital cameras began to decline in Japan.

Therefore, it has been over 20 years since digital cameras were introduced in Japan. Digital cameras are the typical products having very long product life cycle. In this study, the product life-cycle is defined by changes of annual sales (see Figure 1). This sales curve is generally expressed by an S-curve and four stages (development, growth, maturity, and decline). The development stage indicates the introduction of the product. The growth stage indicates high demand. The maturity stage indicates stagnant demand. The decline stage indicates downturn in demand. The starting point of the maturity stage is defined by the point where the sales (S-curve) begin to flatten.

Patent application normally occurs during the introductory stage of the product life cycle in order to protect the intellectual property rights of the inventor and monopolise the market. In certain circumstances, patent applications are filed when new and original designs are added to the product. With sales of digital cameras declining since 2003, generally there would be fewer patent applications. However, in Japan, the opposite is true with more patent applications launched each year on digital cameras. The aim of this paper is to analyse the interplay between cumulative number of patent applications and product life cycle of digital cameras.

1.2 Product life cycle

According to statistical data compiled by Camera & Imaging Products Association (CIPA, http://www.cipa.jp/english/index.html) which is a Japanese industry organisation about camera and imaging products, the penetration volume of main consumer durables (general households) about digital cameras was 32% in 2003, 53.7% in 2006, 69.2% in 2009 (Camera Industry in Japan CIPA Report, 2009). It is possible that the commoditisation of digital cameras occurred with increasing speed for several years. The diffusion trend in digital cameras could be found by using statistical data compiled by CIPA.

Figure 1 shows the annual value of shipments to Japan of digital cameras with built-in lens and digital SLR cameras with interchangeable lens (Camera Industry in Japan CIPA Report, 2009). The concept of digital cameras in this study includes both camera with built-in lenses and SLR with interchangeable lenses because these cameras have many

220 H. Nagatsuka and Y. Tanaka

common functions. Digital cameras with built-in lens which hold a majority of value of shipments to Japan continued to grow rapidly from 1999 and reached a peak in 2003.

Figure 1 Value of shipments to Japan (see online version for colours)

Note: One US dollar is about equal to 100 yen. Source: CIPA REPORT (2009)

Figure 2 shows the total annual quantity of shipments to Japan of digital cameras with built-in lens and digital SLR cameras with interchangeable lens (Camera Industry in Japan CIPA Report, 2009). Digital cameras with built-in lens which hold a majority of quantity of shipments to Japan continued to grow rapidly from 1999 until 2003.

Figure 2 Quantity of shipments to Japan (see online version for colours)

Source: CIPA REPORT (2009)

Figure 3 shows the average unit price of shipments to Japan of digital cameras with built-in lens and digital SLR cameras with interchangeable lens from 1999–2008 (Camera Industry in Japan CIPA Report, 2009). The unit price of digital cameras with built-in lens dropped dramatically in 2003 and has continued since then to decrease. The unit price of digital SLR cameras with interchangeable lens also begun to decrease in 2003.


Figure 3 Average unit price of shipments to Japan (see online version for colours)

Source: CIPA REPORT (2009)

The volume of shipment of digital camera declined in 2003 (Figure 1). This indicates that digital cameras went into maturity stage in 2003.

1.3 Patent applications of digital camera

We extracted the annual number of patent applications and the cumulative number of patent applications about the top six companies which filed a lot of patent applications in Japan from 1983 to 2007 (Table 1). These six companies are Olympus, Canon, SONY, FUJIFILM, Panasonic and SEIKO EPSON. All of them are participants in the CIPA Statistical Research (Camera Industry in Japan CIPA Report, 2009).

We used JP-NET of Japan Patent Data Service Corporation (http://www.jprom.co.jp/) for patent searching. Data sources are based on the data of the Japan Patent Office (IPDL, 2009). Patent searching followed four conditions. In addition, we removed some noise applications, which are not suitable and are beyond the scope of this research.

Condition 1 Partially matching retrieval by applicant name (company name).

Condition 2 Keywords retrieval from full text including claims and patent specification.

Keyword: digital camera or digital still camera or electronic still camera

Condition 3 International patent classification (IPC): G or H.

Condition 4 Period subject to retrieval: patent applications and utility model applications filed in Japan Patent Office from 1 January 1983 to 31 December 2007. Application date is based on actual filing date. In addition, hereinafter referred to as patent applications including utility model applications.


Table 1 Patent applications data of six companies (*: cumulative number)

Cal

enda

r yea

r O

lym

pus

Oly

mpu

s*

Can

on

Can

on*

SON

Y SO

NY*

FU

JIFI

LM

FUJI

FILM

* Pa

naso

nic

Pana

soni

c*

SEIK

O E

PSO

N

SEIK

O E

PSO

N*

1983

4

1

13

1

23

1

19

84

13

17

6 7

27

40

9 10

29

52

0

1 19

85

21

38

20

27

48

88

121

131

35

87

2 3

1986

24

62

40

67

75

16

3 19

4 32

5 28

11

5 1

4 19

87

69

131

61

128

50

213

164

489

34

149

1 5

1988

13

2 26

3 97

22

5 31

24

4 23

2 72

1 32

18

1 0

5 19

89

104

367

87

312

61

305

166

887

41

222

6 11

19

90

90

457

108

420

51

356

162

1,04

9 48

27

0 9

20

1991

90

54

7 92

51

2 72

42

8 16

6 1,

215

24

294

5 25

19

92

68

615

101

613

67

495

119

1,33

4 13

30

7 0

25

1993

85

70

0 52

66

5 43

53

8 73

1,

407

7 31

4 1

26

1994

29

72

9 49

71

4 24

56

2 87

1,

494

6 32

0 0

26

1995

25

75

4 82

79

6 18

58

0 71

1,

565

9 32

9 2

28

1996

34

78

8 16

7 96

3 55

63

5 10

8 1,

673

35

364

20

48

1997

90

87

8 28

3 1,

246

110

745

244

1,91

7 67

43

1 60

10

8 19

98

198

1,07

6 44

1 1,

687

183

928

374

2,29

1 94

52

5 10

6 21

4 19

99

220

1,29

6 62

4 2,

311

239

1,16

7 55

6 2,

847

123

648

171

385

2000

25

6 1,

552

695

3,00

6 32

0 1,

487

596

3,44

3 19

8 84

6 17

2 55

7 20

01

360

1,91

2 85

1 3,

857

386

1,87

3 75

8 4,

201

289

1,13

5 24

0 79

7 20

02

300

2,21

2 1,

105

4,96

2 40

5 2,

278

1,65

6 5,

857

234

1,36

9 48

5 1,

282

2003

38

6 2,

598

1,13

3 6,

095

600

2,87

8 1,

202

7,05

9 44

4 1,

813

904

2,18

6 20

04

548

3,14

6 1,

467

7,56

2 71

4 3,

592

1,24

8 8,

307

578

2,39

1 93

8 3,

124

2005

46

8 3,

614

1,61

7 9,

179

708

4,30

0 1,

426

9,73

3 58

4 2,

975

998

4,12

2 20

06

471

4,08

5 1,

302

10,4

81

861

5,16

1 1,

052

10,7

85

570

3,54

5 96

7 5,

089

2007

48

3 4,

568

1,21

4 11

,695

1,

119

6,28

0 87

6 11

,661

50

7 4,

052

929

6,01

8

Sour

ce:

IPD

L of

Japa

n Pa

tent

Off

ice


Figure 4 shows the annual patent applications of Olympus, Canon, SONY, FUJIFILM, Panasonic and SEIKO EPSON. Each company rapidly increased the number of patent applications since 1997. The figure shows that some companies increased the number of patent applications and other companies decreased the number of patent applications after 2003 as shown in Figure 4. Since it was difficult to determine a certain characteristic tendency from Figure 4, we considered only the cumulative numbers of patent applications of these six companies.

Figure 4 Trends of patent applications from 1983 to 2007 (see online version for colours)

Source: IPDL of Japan Patent Office

Figure 5 shows the annual cumulative numbers of patent applications of the six companies. The first group includes FUJIFILM and Canon. The second group includes SONY, SEIKO EPSON, Panasonic and Olympus. FUJIFILM and Canon in the first group have the similar curves. The curve of SONY categorised in the in the second group is about half the level of FUJIFILM or Canon.

Figure 5 Trends of cumulative numbers of patent applications from 1984 to 2007 (see online version for colours)



2 Hypothesis

2.1 Hypothesis formulation

Generally, there are a number of patents in one electronics product. It is difficult for one company to own all the patents. Therefore, the electronic company tends to file a number of patent applications in order to protect its product and thwart competition. Since Japan has a first to file system, a company gains an advantage if it is the applicant of a number of patent applications. It can prevent other companies from claiming intellectual property rights on the technology. At the same time, other companies will be prone to enter into cross licensing agreement with the patent applicant. Figure 6 shows the relations between the product life cycle and patent applications with conceptual basis.

Figure 6 The relation between product life cycle and patent applications (see online version for colours)

A new product progresses through a sequence of stages from introduction to growth, maturity and decline. In the research stage, patent applications containing information about the product’s basic concept and elemental technology are filed. In the development stage, patent applications about more concrete product technology and product process are filed. In the maturity stage, patent applications about further application of the technology, etc. are filed. Under Japan Patent Law, each patent has limited protection period of 20 years from the date of filing. Therefore, there is no protection of after 20 years. On the other hand, the product life cycle starts when the product is launched in the market. In the case of long life cycle product, company faces the difficulties of acquiring profit and maintaining its market share after the maturity stage because either new products are launched in the market or new players stake their claim on the market territory.

However, in Japan, even though the products have reached the maturity stage, companies tend to continue applying for patent protection (Figure 6) even though the patents do not contribute to the company’s profit. Many of these companies file useless patent applications, only in order to prevent competitors from filing similar patent applications and getting similar patents. This practice contradicts proven management


strategy of applying ownership for only useful and carefully-selected patent, which includes inventions comprising new technology or adding new function. In order to prolong the maturity stage, it is important to make a patent portfolio based on said new technology because the protection period of basic patents begin to expire.

To keep the balance between quantity and quality of patent applications, each company should manage a number of patent applications taking into consideration of their own financial indicators (sales, income and R&D expense). Based on this dichotomy, we hypothesise the following:

Hypothesis 1 The cumulative number of patent applications of each digital camera company has the same transitional change as other competitors. In formulating its patent application strategy, each company takes into account the competitor’s patent application trend.

Hypothesis 2 A certain digital camera company considers the cumulative number of patent applications as the patent application strategy, without considering own financial indicator (especially, income).

Hypothesis 3 A certain digital camera company files patent applications which do not contribute to the corporate profitability and without consideration of its own financial indicator (especially, income) after the maturity stage of its product life cycle.

As a starting point, this paper takes the view that a company will be able to reduce extra cost and time, which is derived from useless patent applications, by managing patent applications linked to the product life cycle and financial indicators and focus on R&D.

2.2 Existing literature

There are no current literature dealing with IP management for reducing useless patent applications of specific products based on the product life cycle and financial indicators in the electronics industry.

It is an important factor to diffuse products to the market for corporate sales. Rogers set up the theory of diffusion of innovations by observing diffusion of agricultural instruments in USA. The mechanism of diffusion of innovations is described in the literature of Rogers (2003). This diffusion curve is expressed by the ratio of annual intakes and has five stages (innovator, early adopter, early majority, late majority and laggard).

In marketing field, Levitt (1965) proposed the marketing action plan based on the steps of product life-cycle. These steps consist of four stages (development, growth, maturity, and decline). This product life-cycle curve is expressed by annual sales.

Generally, it was difficult to predict the diffusion curve and the sales curve precisely. As to mathematical approach, Bass came up with product growth model for consumer durables (Bass, 1969). Bass model is a simulation model for diffusion process of consumer durables. However, it requires many parameters such as accumulated diffusion ratio, innovation coefficient, and imitation coefficient. It is difficult to collect these data about a certain product fully and predict the latter half of diffusion curve precisely.

With regards to the IP fields, Nakamura describes factors of filing a lot of patent applications by Japanese electronics companies. In the electronics field, cross-license


between competing companies is generally accepted because of the reduction in the risk of lawsuits. Therefore the quantity of patents and patent applications is considered as important factors in Japanese electronics companies (Nakamura and Kyomoto, 2006).

There is also a study of IP management in pharmaceutical firms concerning the relationship between patents and product life cycle (Ida, 2005). In this study, the literature describes IP management for maximising the profit from drug discovery research over long periods by different types of patents. Pharmaceutical companies can directly protect their drugs through the substance patents. Thus, the number of patent applications in the pharmaceutical industry is low compared with electronics companies.

3 Research methodology

In this session, we used deductive methodology, starting from an analysis of patent applications (A) in order to reach the conclusions (E).

A Analysis of patent applications

We determined the annual trends of patent applications and the cumulative numbers of patent applications for six companies, which participated in the CIPA. We formed Hypothesis 1 and verified it by using a correlation analysis regarding their cumulative number of patent applications.

B Patent applications and financial indicators

We formed Hypothesis 2 about the relationship between each company’s cumulative number of patent applications and the financial indicators. We verified Hypothesis 2 by using a correlation analysis.

C Classification of six companies

We analysed the critical factors of each company according to the financial indicators based on the verification result, and classified these six companies by critical factors.

D Specifying useless patent applications about a certain company

We selected one company and analysed the relationship between the patent applications, which have not been requested for examination, and the importance of technology for specifying useless patent applications after the maturity stage, to verify Hypothesis 3. It is assumed, in our research, that the importance of technology may be decided using inspection data and offer of information data.

E Conclusions

We recommended that companies should reduce useless patent applications which are not linked to financial indicators and corporate profitability. Lastly, we proposed future subjects in connection with the outcome of this research.


Table 2 Correlation among cumulative numbers of patent applications (*: cumulative number)

Com

pany

C

orre

latio

n O

lym

pus*

C

anon

* SO

NY*

FU

JIFI

LM*

Pana

soni

c*

SEIK

O E

PSO

N*

Oly

mpu

s*

Pear

son’

s cor

rela

tion

coef

ficie

nt

1 .9

94**

.9

90**

.9

97**

.9

84**

.9

57**

sign

ifica

nce

prob

abili

ty (t

wo-

side

d)

0

0 0

0 0

Can

on*

Pear

son’

s cor

rela

tion

coef

ficie

nt

.994

**

1 .9

96**

.9

97**

.9

95**

.9

79**

sign

ifica

nce

prob

abili

ty (t

wo-

side

d)

0

0 0

0 0

SON

Y*

Pear

son’

s cor

rela

tion

coef

ficie

nt

.990

**

.996

**

1 .9

91**

.9

98**

.9

86**

sign

ifica

nce

prob

abili

ty (t

wo-

side

d)

0 0

0

0 0

FUJI

FILM

* Pe

arso

n’s c

orre

latio

n co

effic

ient

.9

97**

.9

97**

.9

91**

1

.989

**

.967

**

si

gnifi

canc

e pr

obab

ility

(tw

o-si

ded)

0

0 0

0

0 Pa

naso

nic*

Pe

arso

n’s c

orre

latio

n co

effic

ient

.9

84**

.9

95**

.9

98**

.9

89**

1

.993

**

si

gnifi

canc

e pr

obab

ility

(tw

o-si

ded)

0

0 0

0

0 SE

IKO

EPS

ON

* Pe

arso

n’s c

orre

latio

n co

effic

ient

.9

57**

.9

79**

.9

86**

.9

67**

.9

93**

1

si

gnifi

canc

e pr

obab

ility

(tw

o-si

ded)

0

0 0

0 0

Not

es: T

he si

ngle

ast

eris

k *

in a

ll ta

bles

, sho

ws s

igni

fican

ce p

roba

bilit

y of

bel

ow 5

%, t

he d

oubl

e as

teris

k **

show

s sig

nific

ance

pro

babi

lity

of b

elow

1%

.


4 Analysis

4.1 Correlations among cumulative numbers of patent applications

We tried to verify Hypothesis 1 by using a correlation analysis among the six company’s cumulative number of patent applications from 1984 to 2007. We made an analysis of the collected data by SPSS (IBM SPSS statistics), which is a statistical software. We used correlation analysis because we intended to show that each company takes into consideration the competitor’s company’s patent applications.

Table 2 shows the results of the correlation analysis. Each company’s cumulative number has a very high correlation to each other. Therefore, we concluded that each company controls and decides their own cumulative number of patent applications by considering the other companies’ cumulative number(s) as an external factor. The first half of Hypothesis 1 was verified, the last half of Hypothesis 1 was not verified. It will be necessary to make further evaluation with interview or questionnaire survey to verify the last half of Hypothesis 1.

4.2 Analysis between each company’s cumulative number of patent applications and financial indicators

There is a high correlation among each company’s cumulative number of patent applications. However, we predicted that the determining factors of filing patent applications are related to financial indicators which are an internal factor, as well as the other cumulative number of patent applications. On the other hand, it is assumed that some companies decide the number of patent applications without considering its own financial indicators based on Figure 4. Such companies may file useless patent applications which do not contribute to corporate profitability, at least in the short-term. We defined financial indicators as sales, income, and R&D expense, because we predicted IP budget in each company would be decided according to these indicators. So we tried to verify Hypothesis 2 by correlation analysis between the cumulative numbers of patent applications and the financial indicators about six companies.

We collected information concerning the financial indicators of each company from each company’s website (Historical Data of SONY; Historical Data of Canon, 2009; Financial Highlight of FUJIFILM Holdings, 2009; Financial Data of SEIKO EPSON, 2009; Fact Book 2009 in Panasonic Corporate Information, 2009; Annual Security Report of Olympus, 2009). In addition, we considered the number of items and years of financial indicators. The cumulative number of patent applications is shown in the calendar year. The financial indicators are shown in the financial year. Generally, companies decide the budget based on the performance of the previous year. Thus, in our analysis, we shifted financial indicators to the previous year like the cumulative number of patent applications in FY1999 and the financial indicators in calendar year 2000. Hereafter, we explained the results of correlation analysis between the cumulative numbers of patent applications and the financial indicators about six companies.


Table 3 shows the correlation analysis of SONY between the cumulative number of patent applications and the financial indicators. The financial indicators were retrieved from SONY’s web page (http://www.SONY.net/SONYInfo/IR/financial/fr/ historical.html). SONY’s cumulative number of patent applications has a high correlation with sales and operating revenue (total sales). SONY’s cumulative number of patent applications has very high correlations with R&D expenses. SONY’s cumulative number of patent applications has high correlations with sales and operating revenue (total sales). On the other hand, SONY’s cumulative number of patent applications has no correlations with operating income.

Table 3 SONY’s correlation between the cumulative number of patent applications and the financial indicators

Sales and operating revenue (total sales)

Operating income Net income R&D

expenses

Pearson’s correlation coefficient

.779 (*) –0.666 0.221 .959 (**)

Significance probability (two-sided)

0.013 0.05 0.567 0

Table 4 shows the results of correlation analysis of Canon between the cumulative number of patent applications and the financial indicators. The financial indicators were retrieved from Canon’s web page (http://www.canon.com/ir/historical/). Canon’s cumulative number of patent applications has very high correlations with sales (camera), operating profit (camera), R&D expenses, sales (Japan), operating profit (Japan), and current net income, etc.

Table 5 shows the results of FUJIFILM’s correlation analysis between the cumulative number of patent applications and the financial indicators. The financial indicators were retrieved from FUJIFILM holdings’ web page (http://www.fujifilmholdings.com/ en/investors/performance_and_finance/financial_highlights/index.html. FUJIFILM’s cumulative number of patent applications has very high correlations with sales (Japan), sales (worldwide), and R&D expenses. On the other hand, FUJIFILM’s cumulative number of patent applications has no correlations with operating income, net income before tax, and current net income.

Table 6 shows SEIKO EPSON’s correlation analysis between the cumulative number of patent applications and the financial indicators. The financial indicators were retrieved from SEIKO EPSON’s web page (http://global.epson.com/IR/). SEIKO EPSON’s cumulative number of patent applications has high correlations with sales. On the other hand, SEIKO EPSON’s cumulative number of patent applications has no correlations with operating income, current profit, net income before tax and other adjustments and current net income, etc.


Table 4 Canon’s correlation between the cumulative numbers of patent applications and the financial indicators

Sa

les

(cam

era)

O

pera

ting

inco

me

(c

amer

a)

Ope

ratin

g in

com

e to

sal

es

R&D

ex

pens

es

R&D

exp

ense

s to

sale

s Sa

les

(Jap

an)

Ope

ratin

g in

com

e

(Jap

an)

Ope

ratin

g in

com

e to

sale

s (J

apan

) Sa

les

(Jap

an)

Pear

son’

s cor

rela

tion

coef

ficie

nt

.995

(*

*)

.961

(*

*)

.951

(*

*)

.992

(*

*)

0.43

2 .9

82

(**)

.9

94

(**)

.9

70

(**)

.8

47

(**)

Si

gnifi

canc

e pr

obab

ility

(tw

o-si

ded)

0

0 0

0 0.

285

0 0

0 0.

008

Sa

les

(tota

l) G

ross

ope

ratin

g pr

ofit

Ope

ratin

g in

com

e

(tota

l)

Ope

ratin

g in

com

e to

sa

les

(tota

l)

Net

inco

me

befo

re ta

x N

et in

com

e be

fore

ta

x ra

tion

Cur

rent

net

in

com

e C

urre

nt n

et

inco

me r

atio

Pear

son’

s cor

rela

tion

coef

ficie

nt

.986

(*

*)

.994

(*

*)

.996

(*

*)

–0.0

73

.998

(*

*)

0.36

.9

96

(**)

0.

61

sign

ifica

nce

prob

abili

ty

(two-

side

d)

0 0

0 0.

864

0 0.

382

0 0.

109


Table 5 FUJIFILM’s correlation between the cumulative number of patent applications and the financial indicators

Sales (Japan)

Sales (world)

Operating income

Net income before tax

Current net income

R&D expenses


.816 (**)

.905 (**)

–0.508 –0.514 –0.654 .919 (**)

significance probability (two-sided)

0.007 0.001 0.163 0.157 0.056 0

Table 6 SEIKO EPSON’s correlation between the cumulative number of patent applications and the financial indicators

Sales Gross operating profit

Operating income

Current profit



.773 (*)

–0.083 –0.263 –0.144 –0.303


0.042 0.859 0.568 0.758 0.509

Current net income

Sales (Japan)

Operating income (Japan)

Sales (department)

Operating income

(department)


–0.214 .803 (*)

–0.285 0.72 –0.341


0.645 0.03 0.535 0.068 0.454

Table 7 shows Panasonic’s correlation analysis between the cumulative number of patent applications and the financial indicators. The financial indicators were retrieved from Panasonic’s web page (http://panasonic.net/ir/factbook/index.html). Panasonic’s cumulative number of patent applications has very high correlations with sales (department). And, Panasonic’s cumulative number of patent applications has high correlations with operating income, sales (location), and income (location).

Table 8 shows Olympus’ results of correlation analysis between the cumulative number of patent applications and the financial indicators. The financial indicators were retrieved from Olympus’ web page (http://www.olympus-global.com/en/corc/ir/brief/, http://www.olympus-global.com/en/corc/ir/brief/archive/). Olympus’ cumulative number of patent applications has very high correlations with sales and R&D expenses (total). Olympus’ cumulative number of patent applications has high correlation with R&D expenses (department).


Table 7 Panasonic’s correlation between the cumulative number of patent applications and the financial indicators

Sales Operating income

Operating income to

sales



ration

Current net

income


.882 (**)

.750 (*)

0.675 0.581 0.509 0.513


0.004 0.032 0.066 0.131 0.197 0.193

Current net income ratio

Sales (department)

Sales (department, Japan)

Sales (location)

Income (location)


0.466 .976 (**)

0.936 .783 (*)

.779 (*)


0.244 0.001 0.228 0.037 0.039

Table 8 Olympus’ correlation between the cumulative number of patent applications and the financial indicators

Sales Current profit

Current net income

R&D expenses (total)

R&D expenses (department)


.976 (**)

0.601 0.542 .951 (**)

.749 (*)


0 0.087 0.132 0 0.033

From the correlations shown in Tables 3 to 8, there is high possibility that SONY, FUJIFILM, SEIKO EPSON, and Olympus do not decide cumulative numbers of patent applications by considering own income. Especially, this tendency is true in SONY, FUJIFILM, and SEIKO EPSON because they have no correlations or negative correlations about incomes. Therefore, it can be said that Hypothesis 2 was tested.

4.3 Result and consideration

The results shown in above-mentioned Tables 3 to 8 have been combined in Table 9. These financial indicators can be classified into three groups: sales, income, and R&D expenses. The company’s attitude towards its IP is reflected in these indicators. Three indicators are linked with the IP budget of each company.


Table 9 The correlations between cumulative numbers and financial indicators

Correlation against other company’s cumulative number Sales Income R&D

expense SONY CANON FUJIFILM SEIKO EPSON PANASONIC OLYMPUS Hypothesis 1 Hypothesis 2

Notes: ≥ 0.9, 0.7 < < 0.9

Six companies are classified into three groups as shown in Table 9. The first group includes SONY, FUJIFILM and Olympus. These companies are thought to consider sales and R&D expenses for deciding cumulative numbers of patent applications. The first group can be said to be ‘R&D type’. The second group includes Canon and Panasonic. These companies are thought to consider sales and income mainly for deciding cumulative numbers of patent applications. The second group can be said to be ‘income type’. The third group includes SEIKO EPSON. This company is thought to consider only sales for deciding cumulative numbers of patent applications. The third group can be said to be ‘sales type’.

There is a tendency that each cumulative number of patent applications is not directly linked with corporate profitability because the cumulative numbers of patent applications in the first group and the third group do not have positive correlations with incomes. On the other hand, the cumulative numbers of patent applications in the second group has positive correlations with income, and it is evaluated that its patent application management is preferable. Especially, Canon’s cumulative number of patent applications is positively linked with almost all the financial indicators including income; thus, Canon’s patent application management is well integrated with financial indicators, which is considered to be a contributor to corporate profitability.

4.4 Specifying useless patent application in certain company

We selected SONY as the certain company which filed useless patent applications after the maturity stage.

Figure 7 shows the status of SONY’s patent applications from 1983 to 2007. The data was searched on 29 October 2009 by JP-NET of Japan Patent Data Service Corporation. The ratio of patent applications which have not been requested for examination from 1983 to 2000 was about 50%. The number of granted patents increased from 2001 to 2003; however the ratio of patent applications which have not been requested for examination in 2003 was still about 25%. It is assumed that these patent applications without request for examination have not contributed to the corporate profitability.


Figure 7 The status of SONY’s patent applications (see online version for colours)


Figure 8 shows the number of patent applications which, have been submitted with offer of information of prior technology, have been made available for inspection and those which have not requested examination.

Figure 8 Offer of information, etc. in main IPCs (SONY) (see online version for colours)


In Japan, the applicant can make a request for examination within three years after the date of filing (in the latest patent law). In case that the company decide that the patent is not necessary, the company does not need to pay for the examination, and the application will be deemed as withdrawn. For the patent application which has not been requested for examination, we call it; ‘no request for examination’. In Japan, everybody can submit technical information for a specific patent application in order to defeat the patent application. Patent examiners can consider this technical information as one of prior arts. When someone submits this information, this means that there must be a certain strong interests to oppose the patent application. The number of technical information influences the patent application. The submission of technical information is called ‘offer of


information’. Additionally, in Japan, the examination processes are basically open to the public, and everybody can request an inspection of the processes of examination, which we call it; ‘inspection’. In case there are many inspections done, this means that there must be strong interests in the progress of examination.

We made an evaluation on the patent applications by SONY in the main IPCs, under the categories of ‘no request for examination’, ‘offer of information’ and ‘inspection’. IPCs including more than 100 patent applications were selected in the IPC class G or H. From the view of No request for examination, H04N (pictorial communication) is the first. G06F (electric digital data processing) is second.

Table 10 shows the ratio of no request for examination, offer of information and inspection in main IPCs of SONY. Offer of information and inspection are very important indicators, which show that the competitors have strong interests in SONY’s patent applications. In the offer of information, any ratio is less than 1%; inspection, H04N is 3.5%; G09G (arrangements or circuits for control of indicating devices using static means present variable information) is 11.4%. Therefore, it is highly possible that G09G is a very important technology, and it is necessary to file patent applications for making the patent portfolio. On the other hand, it is possible that IPC, s except G09G, are not very important to the competitors.

Table 10 The ration of Inspection, offer of information, and no request for examination in main IPCs

G02B G02F G03B G06F G06T G09G G11B H01L H01M H04N

Total 454 151 390 680 216 317 345 264 212 2207

Inspection 77 33 125 175 39 39 156 70 50 589

% 17 21.9 32.1 25.7 18.1 12.3 45.2 26.5 23.6 26.7


Total 454 151 390 680 216 317 345 264 212 2207

Offer of information

2 0 0 3 0 0 0 0 2 5

% 0.4 0 0 0.4 0 0 0 0 0.9 0.2


Total 454 151 390 680 216 317 345 264 212 2207

No request for examination

8 3 5 19 2 36 3 11 5 77

% 1.8 2 1.3 2.8 0.9 11.4 0.9 4.2 2.4 3.5


Table 11 shows the number of no request for examination in main IPCs. The maturity stage started in 2003 (see Section 1.2, Product life cycle). It is evaluated that the patent applications in IPCs, except G09G, are useless for corporate profitability. Therefore, Hypothesis 3 was verified. Each company can control patent applications through new technology in the maturity and declining stage of the product life cycle.


Table 11 No request for examination in main IPCs (SONY)


1983 2 1984 3 5 1985 2 10 10 1986 5 10 1 22 1987 5 7 1 8 1988 1 6 1 9 1989 4 6 10 1990 3 7 10 1991 1 9 1 26 1992 2 26 1993 1 2 2 1 11 1994 1 1 1 1 4 1995 1 5 1996 5 1 3 1 17 1997 1 4 3 1 1 4 3 1 22 1998 11 4 19 1 11 4 1 35 1999 2 1 7 18 3 5 19 4 30 2000 4 2 7 25 4 15 6 11 39 2001 3 5 11 21 2 3 11 8 3 55 2002 10 6 9 24 4 2 3 14 7 53 2003 10 4 13 15 4 2 4 5 5 46 2004 17 6 17 28 12 7 13 10 8 71 2005 10 2 18 9 5 11 5 8 6 48 2006 7 3 7 11 3 8 4 3 8 27


5 Conclusions

In an industry with numerous incidents of cross licensing, it is necessary for each company to have a large number of patent applications for the purpose of thwarting competition. In case of cross licensing in the electronics field in Japan, it is said that the number of patents and patent applications are the most crucial elements of cross licensing agreement. It is assumed by electronic companies that the more applications, the stronger is the bargaining power. The result of this study showed that there was a high correlation between one company’s cumulative number of patent applications and the cumulative number of others as described in Hypothesis 1. Some companies file applications without regards to their financial indicators (Hypothesis 2 verification). In addition, a certain company herein identified as SONY filed patent applications which do not contribute to the company’s profit and without regards to its financial indicators (especially, income) after the maturity stage of product life cycle (Hypothesis 3 verification).


As shown in Figure 4, the high number of patent applications of the companies continued even after the maturity stage in 2003. The result of the study showed that SONY, SEIKO EPSON, and FUJIFILM filed excess patent applications which do not contribute to the company’s profitability. These three companies could reduce or avoid filing a large number of patent applications. In contrast, Canon and Panasonic continuously filed patent applications based on the result of their corporate profit statement (see Table 9). Thus, it can be said that they apply an efficient patent application management.

This study shows the importance of linking the patent application with the product life cycle and financial indicators of the company. It is a waste of time and cost for each company to maintain a large number of useless patent applications in order to compete with the cumulative number of patent applications of competitors.

6 Recommendations

This study recommends the application of the following patent application management:

Action 1 Each company should carefully select the inventions and should file patent applications according to the position of the invention in line with its product life cycle. They should determine whether the patent will contribute to the company’s profitability based on its financial indicators.

Action 2 Each company should carefully select patent applications which include inventions comprising new technology or additional new function after the maturity stage of product life cycle. Companies should not file defensive applications or applications based on minor improvements.

Action 3 Each company should make continuous and regular inventory during the maturity stage and abandon useless pending patent applications and useless existing patent rights.

By implementing the above patent application management, each company will be able to focus on R&D. The company should file patent applications based on business forecasting, even if the cumulative number of patent applications is not linked with financial indicators.

It is said that the cross licensing is commonly used among Japanese electronics big companies. Based on this cross licensing agreement, all parties to the licensing agreement must abandon the enforcement of mutual exclusive rights so that the legal power of patent rights will be minimised among concerned parties. If such cross licensing is agreed within the limited members, it may generate a discussion whether it violates competition law or not.

7 Future issues

In this study, we focused on the Japanese patent applications and market. We dealt mainly with macro data, such as cumulative numbers of patent applications in digital camera industry. However, we did not consider the detailed technical contents and


strength of patent applications, influences of other patent data such as patent-holding period, foreign applications, a number of patent rights, etc. We would like to study patent application management, including these factors in the future. We intend to carry out interview or questionnaire survey to these companies in connection with the critical factors, which have been verified in this research.

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Kozaki, Y. and Nishii, Y-B. (2009) Mechanism of Digital Camera, 2nd ed., Nikkei BP Soft Press. Levitt, T. (1965) Exploit the Product Life Cycle, HBR, November–December. Nakamura, S. and Kyomoto, N. (2006) ‘Analysis on factors affecting patent application

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management of patent applications for digital camera ... · hiroaki nagatsuka and yoshitoshi...

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