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Diffusion of AI Technology and Future of AI Patents

4 minute read

Regardless of whether your startup is trying to help predict weather patterns to help farmers in Nebraska maximize the yield from their alfalfa crop or if it’s built with the sole mission of guiding New Yorkers to the softest pumpernickel bagels in their neighborhood, it undoubtedly relies on some form of Artificial Intelligence.

Introduction

Founders are realizing the value of the underlying AI within their core product or know that their product will eventually need AI to grow further. This realization is reflected in the steady uptick in the number of AI patent applications since 2002. The passage of the American Inventors Protection Act (AIPA) has also undoubtedly help this trend. There has been a subsequent and more drastic bump in the number of AI patent applications since 2012 as well. The latter of the two bumps is of particular interest to founders and businesses planning on patenting their technological inventions since it represents a broader adoption and diffusion of AI across several different technologies. The United States Patent and Trademark Officer (USPTO) recently created their own AI algorithm to identify the extent of growth in the number of AI patent applications and whether they are diffusing across technical areas, inventors, companies and geographies. This article will provide a brief summary of the findings of the USPTO’s AI algorithm and explain its potential impact on future patent applications.[1]

Scale of AI Diffusion

The AI algorithm’s finding backs the general hypothesis that inventors in various technological fields are increasingly filling AI patent applications along with patent applications for their broader invention. The sophisticated and complex hardware needed to support the growing integration of AI in different areas is the direct contributor in the increase of applications for AI hardware patents. However, AI patents within the area of planning and knowledge processing still continue to constitute a majority of the new applications, AI hardware, vision, machine learning, natural language processing, speech and evolutionary computation are also on the rise. AI patents within these areas are increasing in number and as a percentage of the total patents filed each year. As of 2020, 25% of all current patent owners in the US had at least one AI patent under their name, compared to just 5% in 1990.

The integration of AI within different areas of technology is not limited to individual innovators or startups but has diffused within the patent strategy of larger corporations as well. IBM (46,752), Microsoft (22,067) and Google (10,928) in that order own the most AI patents currently in the US. This is a clear indication of the growing significance of AI for most company’s business models. Another evidence of AI’s significance growing beyond its initial niche users is the geographical diversity in the patent applications. For example, several states in the Midwest have AI patent applications as a part of larger image recognition and data processing technologies created to provide medical care in rural areas.

Impact on Founders & Inventors

Inventors and founders should be mindful of the large-scale and rapid diffusion of AI in various industries. In order to secure early stage funding, build a successful product and eventually exit the startup, founders must develop a clear understanding and strategy for any AI patents that are essential for the product presently or maybe in the future. Even  founders with products that do not rely on AI currently must consider the future impact of AI technology on their products and industry. The amount of AI patents held by the traditional technology giants is an indication of their enthusiasm for investing in AI technology.

Startups innovating and creating valuable patents without any ready buyer but instead for sale at a later date often underestimate the complexity and the effort required to find such a buyer. Several startups retain specialized patent brokers to sell their innovations, and this requires the startups in return to share all their confidential information to determine the scope of the broker’s duties. While non-disclosure agreements are effective tools at protecting trade secrets, they are not nearly as effective as the protection provided by the US legal system. Founders should be advised to always secure or at least apply for the maximum patent protection they are eligible at any given time, prior to attempting to commercializing their innovations in order to protect its value. Furthermore larger companies looking to acquire or contract with newer startups often require that the startup secures appropriate protection for all it’s intellectual property but especially their patents. Startups can streamline any future acquisition or licensing of their products by filing for patent protection for each novel component of their product as soon as it is reduced to practice.

Filing for patents is a highly complex process that requires attorneys with a thorough understanding of the product to be patented in addition to resources and ability to conduct patent search, draft and amend patent applications, and respond to any issues raised by the patent examiner. AI patents, even more so than other process patents, are extremely complicated, and require seasoned attorneys that can efficiently articulate the underlying algorithm, and technology in a manner that satisfies the USPTO’s requirements.

Lloyd & Mousilli boasts a team of experts in the area of AI patents with extensive experience helping early stage innovators receive patent protection for each of their novel components at the earliest date and overseeing patent strategies for consumer products at some of the biggest technology companies. The different teams at our firm, led by seasoned attorneys work in synergy to help founders seamlessly weave their AI and other patents, within their broader business strategy. We make sure that equity agreements, assignment rights, employment agreements, non-disclosures and all other relevant documents accurately reflect the scope and rights regarding the company’s patents. Our goal at the firm is to help clients meet their long-term goals by working closely with them at each stage and tailoring our advice in accordance with the client’s aspirations.

As always, you should consult with your Lloyd & Mousilli startup legal team or set-up a free consultation through our website for questions about AI patents.

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