CRAFTING AN EFFECTIVE PATENT STRATEGY: HOW UBER BUILT ITS PORTFOLIO

In our previous blog posts, we’ve extensively covered various approaches for crafting a smart patent strategy, especially as it pertains to startups. But how has that played out for specific companies?

With that question in mind, we’re creating a series of blog posts spotlighting how successful startups are approaching the patent process. While every story is different, we can see common themes in how successful companies have leveraged the patent system in their growth from tech startups to major industry players.

To kick off this series, we’re starting with Uber: a highly innovative, well-funded industry player that was considered a startup until very recently. TechCrunch has reported that, as of 2018, Uber’s valuation was in excess of $60 billion and the company had raised over $21 billion from investors.

In doing our research for this post, we were fortunate to got some very helpful input from my friend Chris Storm, the legal director of emerging technologies at Uber. Chris and I served together on a committee of Dallas Bar Association a few years ago, and he was very kind to point us to some great public resources on Uber’s patent portfolio and strategy.

So let’s take a deep dive into how Uber’s patent strategy has helped bring the company to the forefront of tech innovation today.

WHAT IS UBER?

As most people undoubtedly know by now, Uber is best known for its ridesharing services, though it also offers other services like bicycle sharing and food delivery. Currently, Uber’s estimated to have over 100 million worldwide users (according to Statista), and about 70 percent market share in the United States (according to Second Measure).

It’s not the only ridesharing company in the market (notable competitors include Lyft and Grab), but Uber’s name has become nearly ubiquitous with ridesharing — almost to the extent Google’s name is with Internet search.

In any case, Uber’s niche isn’t restricted to ridesharing. In particular, Uber Eats — its food delivery service — is also hugely popular. Data from Second Measure shows that Uber Eats has outperformed industry giant GrubHub in 15 major U.S. cities.

AN OVERVIEW OF UBER’S PATENT STRATEGY

Using research and reports compiled by IAM Media, we’ve identified two key features of Uber’s patent strategy:

1. Their patent portfolio is relatively small
2. They often expand their patent portfolio through acquisitions

SIZE OF PORTFOLIO: QUALITY OVER QUANTITY

Uber’s patent portfolio is relatively small. According to ktMine, as of early 2018, Uber had just 272 granted U.S. patents, and 367 granted worldwide patents in total. (To put that in perspective, the top U.S. tech companies will obtain thousands of patents each — and that’s just per year.)

Moreover, Relecura reports that until 2016, Uber’s patent application numbers were in the single and double digits. It’s likely that the recent increase is because the company is likely aiming to go public this year, as disclosed by multiple news outlets.

Uber’s strategy is right in line with the suggestions we’ve offered startups in a previous post: By avoiding an oversized patent portfolio, Uber’s goal is to focus on patent quality.

Why use this strategy? Uber’s IP team has laid out two main reasons:

1. Avoid the consequences of the endowment effect — where the value of a particular invention is exaggerated, simply because an invention disclosure record exists
2. Avoid overvaluing one asset without taking into account other factors contributing to its potential value

How is Uber implementing this strategy? In the same article, Uber’s IP team has outlined the following approach:

1. Focus on patenting only the most relevant inventions — namely, products strategically important to Uber’s business goals, such as those covering the core business as well as product differentiators. (That’s right in line with the strategy we suggest in our blog post about why startups need to take an offensive approach in their patent strategy.)
2. Focus on obtaining patents that can actually be enforced. To pursue litigation against a competitor, you need to be able to detect an act of infringement using publicly available information. So when detection will be difficult, Uber’s team prefers to use trade secret protection instead.
3. Focus on inventions with cross-licensing potential, as this could open up future revenue streams.
4. Regularly pruning patents that aren’t valuable over time. Uber uses analytics data to calculate whether a patent is likely to withstand close scrutiny, or to generate litigation success. In a separate blog post, we’ve outlined how you too can map your patent strategy to key business milestones.

ACQUISITIONS

According to IAM Media, Uber is also acquiring innovations from other companies: It’s struck major deals with companies like AT&T, HP, and Microsoft. TechInsights has calculated that 41% of Uber’s U.S. portfolio consists of acquired patents.

Typically, companies will buy secondary assets to quickly beef up their portfolios. But in line with the principles discussed above, Uber prefers to use its resources on the most effective patents — which means it’s (again) focused on buying only high-quality patents.

How does Uber approach the acquisitions process? In a guest post for IAM Media, Kurt Brasch, head of patent transactions at Uber, breaks it down:

1. Identify portfolios for sale: Uber has developed its own acquisition portal to directly identify and solicit assets.
2. Automated review of each offered portfolio: Uber uses analysis software to evaluate the relevance of each portfolio to their business needs, as well as the strength of the patents’ claims.
3. Manual review of shortlisted portfolios: Each remaining portfolio is assigned to an internal team that deeply understands the relevant industry sector.
4. Negotiate a deal: This is the most complex step of the process; ideally, deals are mutually beneficial. In its communications, Uber prioritizes building trust through honesty and transparency.

AN OVERVIEW OF UBER’S PATENT PORTFOLIO

IAM Media reports that Uber’s core patents are focused on its key service offering: transport service. Accordingly, relevant technologies include call interactions, guided routes, geosearch, and rideshare. Uber also owns some patents in autonomous technologies.

TRANSPORT SERVICE

TechInsights’ analysis further substantiates the claim that a majority of Uber’s patents cover technology related to its core transport service technology.

The reasons why Uber wants to protect its core technology should be fairly obvious:

• Secure Uber’s position in the market
• Exclude close competitors from capitalizing on Uber’s key market differentiators

AUTONOMOUS TECHNOLOGY

Uber is also seeking patents for autonomous vehicles, such as self-driving vehicles. While there’s no guarantee that this technology will shake up the market, Uber wants to keep that door open just in case — as Chris Storm explained to the Pittsburgh Post-Gazette.

Still, in building its patent portfolio for autonomous technology, Uber’s sticking by its guns of prioritizing high-quality patents that fulfill strategic goals. For example, one such patent is “Virtual reality experience for a vehicle,” which covers an invention that offers riders a seamless VR experience despite changes to their outside environment.

Notably though, autonomous technology is highly reliant on other companies’ innovations, meaning that close collaborations and disclosures are key to implementing a successful patent strategy. The Pittsburgh Post-Gazette provided a good example: As Uber is retrofitting self-driving technology into a Volvo SUV, Uber needs to know the specifications for that vehicle. Another good example might be Uber’s reliance on national cellular data networks to operate its autonomous vehicles (not to mention, its ridesharing services in general).

To that end, Uber’s business viability depends on the company’s ability to negotiate robust licensing and confidentiality agreements. Unsurprisingly then, Uber has a vested interest in promoting fair and non-discriminatory licensing terms for its collaborative tech efforts — as evidenced by its amicus brief on FRAND royalties for standard-essential patent licenses.

CRAFTING AN EFFECTIVE PATENT STRATEGY

Uber’s case study proves that an effective patent strategy for startups isn’t just about filing tons of patent applications. Rather, you need to focus your limited resources on protecting the inventions that are most relevant to your business strategy, or will help keep your close competitors in check.

As Chris Storm described it to the Pittsburgh Post-Gazette, “Have you ever heard of the Cold War analogy? All you really want is detente. We don’t really want more missiles facing us than facing them.”’

Need help aligning your patent strategy with your business goals? The team at Henry Patent Law Firm has helped dozens of startups to craft effective patent portfolios. Contact us now to discuss your needs!