Alibaba: The Story of One of China's Greatest Innovators - January 2015 - Drinker Biddle & Reath Leverages Power of LexisNexis IP Solutions to ...
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Drinker Biddle & Reath Leverages Power of LexisNexis®
IP Solutions to Improve Success with USPTO & Reduce
Time Spent on Review of Patent Applications
Alibaba:
The Story of One of China’s Greatest
Innovators
January 2015
Table of Contents Introduction ........................................................................................................................ pg.1 Background.......................................................................................................................... pg.1 Alibaba’s Patent Portfolio .............................................................................................. pg.2 Alibaba’s Patent Filings ................................................................................................... pgs.2-4 Patent Purchases and Sales ........................................................................................ pgs.4-5 Patent Citations ................................................................................................................. pg.5 Portfolio Strength ............................................................................................................. pgs.6-7 Conclusion .......................................................................................................................... pg.8
Introduction
Can we understand a giant such as Alibaba by studying its In September 2014,
patents instead of its products? IP acquisitions instead of
sales figures? Can we predict where the company is going Alibaba became the
without looking at how much they have in the bank or their
market share, but at how strong their IP portfolio is and world’s largest IPO,
which technology sectors they have better protected?
valued at over
US$230 billion.
Background
Alibaba is a highly valuable organization doing business in
a market that could be described as a combination of the
markets addressed by eBay, Amazon, PayPal, and Google.
This Chinese online and e-commerce company is a mere 15
years old. It started as Alibaba.com, a business-to-business
portal to connect Chinese manufacturers with buyers all
over the world. In September 2014, the conglomerate of
web portals became the world’s largest IPO, valued at over
US$230 billion.
Alibaba’s businesses include Taobao, Tmall, and Alipay.
Taobao is a consumer-to-consumer portal, which similarly
to eBay, allows people to sell anything to other people
anywhere. Taobao features about 750 million products
and is listed as one of the 20 most visited websites globally.
Figure 1: Alibaba Holdings Patent Portfolio
Tmall, Alibaba’s business-to-consumer business unit, a
spin off of Taobao, is estimated to have more than 50% of
the Business-to-Consumer (B2C) market in China1. Finally,
Alipay, an online payment escrow service, similar to PayPal,
accounts for nearly half of all online payment transactions
in China.
1 Wikipedia
1 | Alibaba: The Story of One of China’s Greatest Innovators
Alibaba’s Patent Portfolio
This is an interesting case of success in the Internet era. Part of the Alibaba story can be discovered when looking
at their new product offerings, their investments in other companies, and partnerships. However, not all of
Alibaba’s transactions are public, in this paper we will examine how their patent filings may be indicative of future
plans.
The intellectual property (IP) for Alibaba can tell us about their strategic intent. First, we will look at their patent
portfolio and filing history in order to understand Alibaba’s IP position and priorities in relation to technology
areas and geographic markets. Then, we will look into patent ownership changes or assignment changes to gain
insight into Alibaba’s inorganic versus organic portfolio development: patent acquisitions and sales may give an
indication of new market being pursued or markets being exited. Next, we will analyze Alibaba’s citations to get a
sense of other important players that could compete or partner with Alibaba. Finally, we will use PatentStrategiesSM
PatentStrength™ technology to look at the relative strength of their IP portfolio compared to those of other top
players. Comparing their portfolios will provide great insight to their potential as business partners.
Alibaba’s Patent Filings
Alibaba’s active patent portfolio contains more than 3,000 active grants and applications globally, only 25%
of which are issued patents. In many cases we could red flag this kind of proportion, as pending applications
represent a risk as they may or may not become granted patents. However, in this case, the young age of the
portfolio may be the perfect explanation for the large number of pending applications. It was not until 2006 that
Alibaba started filing patent applications in earnest and their portfolio shows an average of three years from file
to publication with some patents taking up to six years to grant. Since 2010, the filing activity has increased even
more drastically most likely due to the company getting ready for a large IPO. A company’s filing trends in many
cases can give us insight to both current and future strategies and growth plans.
Figure 2: Alibaba’s Patent Filing by Source Jurisdiction
2 | Alibaba: The Story of One of China’s Greatest Innovators
In terms of jurisdictions, and as expected, Alibaba’s portfolio is dominated by Chinese patents, which account for
near 45% of all their active filings. The world map visual illustrates the relative size of the sub-portfolios by country,
which coincides closely with the major markets where Alibaba has a presence today: China, United States, Europe,
Hong Kong, Japan, Korea, and Taiwan.
Figure 3: Alibaba Jurisdictional Coverage
3 | Alibaba: The Story of One of China’s Greatest Innovators
Looking further into the company’s actual patents and what technologies are represented, we can better understand their main technology areas of interest. The patent landscaping algorithms for LexisNexis PatentStrategies provide a great tool for this. PatentScape allows you to take a collection of patents and drill down into the title, abstract, and claims to understand both their content and their organization. The graphical representation of Alibaba’s portfolio using the PatentStrategies PatentScape visual tool shows about half of their active patents relate to Databases or Search. These two categories are at the core of Alibaba’s main businesses: e-commerce and Search Engines. Figure 4: Alibaba’s Technology filings - Applications and Grants Patent Purchase and Sales Next, we will look at patent transactions and reassignments. Changes in assignee may provide insights on company’s strategy and IP moves. For example, Alibaba’s total portfolio includes 41 patents in which original assignee is not Alibaba but IBM, which has been reported by analysts as a strategic acquisition2. Of these 41 documents, 25 are active assets and 14 of those have a PatentStrength™ score greater than 703, which is considered strong, as 70 and higher captures 98% of litigated patents in the US. The acquired patents are in diverse areas of technology including online payment processing, e-commerce security, Internet searching, content delivery, and file sharing. Most of these represent key current business areas for Alibaba. Content delivery is thought-provoking as Alibaba has been investing on a large scale in content and video streaming partnerships and may soon dominate video on demand services in China. 2 http://www.bloomberg.com/news/2014-04-29/alibaba-on-patent-buying-spree-may-avoid-tech-ipo-pitfall.html 3 PatentStrategies’s PatentStrength™ algorithm is based on the paper Valuable Patents by John R. Allison, Mark A. Lemley, Kimberly A. Moore, and R. Der- ek Trunkey. Covering nearly 3,000,000 patents and over 4,000 patent lawsuits, it’s the most comprehensive study of the patent system, and associated value, ever conducted. Starting from the basic assumption that patents are litigated because of their intrinsic value, they explored additional character- istics of these patents. 4 | Alibaba: The Story of One of China’s Greatest Innovators
Of note, 1,205 active patents were have been assigned to Alibaba at different points in time. With Chinese patents,
it is not uncommon for there to be delays in updates of assignment records. Unfortunately, the patents that
Alibaba reportedly acquired from Yahoo in 2013 have not been publicly disclosed and assignments have not
been recorded. It will be intriguing when we can take a look at this important new part of their portfolio, which in all
likelihood will strengthen their US patent portfolio. No “out assignments” (meaning patents originally owned by the
company and now assigned to a different entity) have been found in the Alibaba portfolio. This is not uncommon
for a young organization in growth mode. As the organization matures, Alibaba may consider licensing as a revenue
stream.
Patent Citations
A great way to understand how influential a company is and whom they follow in a given marketplace, is by looking
at their citations. Forward citations refer to patents that have cited the portfolio of interest and suggest companies
following the lead of Alibaba. Backward citations help identify inventions or technology areas that others began
and Alibaba is building upon. If we exclude self-cites, we can identify potential competitors and partners.
The table below lists the top 10 organizations citing Alibaba and the top 10 cited by Alibaba. It’s striking that many
of the same names are in both columns, and in almost the same order. Key competitors definitely include Google,
Amazon, Yahoo, and eBay. But are any of these also candidates for acquisition or partnerships?
Alibaba’s Top 10 Cited Organizations by number of Citations
Citing Alibaba Cited by Alibaba
IBM IBM
Microsoft Microsoft
Oracle Google
Google Yahoo
N5 Networks Oracle
Amazon Amazon
Rovi HP
eBay Hitachi
Cataline Marketing eBay
Yahoo Fujitsu
5 | Alibaba: The Story of One of China’s Greatest Innovators
Portfolio Strength
A good way to understand a competitive landscape and to get a sense of the value of a given portfolio is to
compare competitor portfolios side by side. Looking at the active patents and applications by Google, Yahoo,
eBay, Amazon, and Alibaba, some interesting pieces of information can be obtained.
1. Google is a clear patent application leader based on their US and EP patent portfolio. However, Alibaba leads the
pack when looking at their portfolios in China, Hong Kong, and Taiwan.
Figure 5: Comparison of Alibaba’s Jurisdiction filings Compared to Key Competitors
2. The strength of Google is again evident when looking at the MarketMap. The other players considered: Amazon,
eBay, and Yahoo, could eventually be strong business partners for Alibaba in these competitive markets.
Figure 6: Alibaba’s Strength in Their Technology Sectors Compared to Kep Competitors
6 | Alibaba: The Story of One of China’s Greatest InnovatorsThe image below presents the distribution of Alibaba’s patents on a patent strength scale using the
PatentStrategies PatentStrength™ metric. A large concentration of patents is found in the mid-range in terms of
strength. It is also worth noting more patents are in the top percentiles than in the low range, suggesting a strong
portfolio as a whole.
Figure 7: Patent Strength Comparison Between Alibaba and eBay
The distribution of Alibaba’s US granted patents on the same PatentStrength™ scale, shows a different picture, as
illustrated in Figure 8 below. Most of their US grants fall into the mid and high end of the scale (only 15% of their US
patents are rated below 30 and less than 30% are rated below 40), a sign of a very strong portfolio.
Figure 8.
7 | Alibaba: The Story of One of China’s Greatest InnovatorsConclusion
Patent application filing trends can be great indicators of strategic direction. By looking at Alibaba’s filing trends you
could have predicted expansion into new geographical markets outside China, expansion/emphasis on specific
technology markets and a major strategic event: their 2014 IPO.
Assignment changes provide another side of the story. Acquisitions of patent portfolios are usually strategic
moves to strengthen a portfolio in specific technology or geographic areas. In the case of Alibaba, the acquisition
of valuable US patents is clearly a move toward a more international portfolio, especially useful in the face of a US
IPO.
Citation analysis is useful to identify competitors and other key players in the market space. Once key players
are isolated, competitive analysis provides valuable insights regarding the company and its position compared
to others in the market. By comparing IP portfolios, leaders and followers can be identified, as well as potential
strategic partnerships or acquisitions.
Alibaba is certainly growing its patent portfolio quickly and does not show plans to slow down. Its intentions
to conquer more markets, in particular the US, are clear. It would not be a surprise to see more acquisitions
of western IP, as well as companies to strengthen their product offerings and their ability to compete. Some
acquisitions relating to viewing and streaming media online could be a natural next step.
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