Patent filings won’t let Acer innovate itself out of trouble, but will give it more options for future revenue

Just six years ago, Acer was one of the world’s leading personal computer (PC) vendors, its 14% share of the market coming second only to Hewlett-Packard’s 18%. Fast forward to today and the Taipei-based company doesn’t even feature among the top five PC manufacturers.

As with many Taiwanese high-tech companies that cut their teeth on building mass-production PCs, Acer has seen its market share eroded by the growth in popularity of smartphones, as well as cheaper competition from mainland China and elsewhere.

Bloomberg reported this week that Acer now plans to follow the lead of compatriot HTC by betting its future on the burgeoning market in virtual reality (VR) technologies including, in particular, VR headsets that could have applications in fields including gaming, cinema, theme parks and healthcare.

Since taking the helm two years ago, Acer CEO Jason Chen has refocused the company’s efforts on R&D. As he revealed at a media briefing in Taipei last month, one result of this approach has been an increased output in terms of patent filings; last year, Acer filed 419 patent applications with the Taiwan IP Office, making it the island’s highest-ranking applicant from the PC industry and the fourth-highest domestic patent filings originator overall. “Acer can remain profitable on the back of its renewed focus in R&D, as proven by its sheer volume of patents. Such effort should help reshape its low-end PC brand image,” Vincent Chen, an analyst at Yuanta Financial Holding, is quoted as saying by Bloomberg.

However, Acer executives and outside analysts alike should remember that the number of patents and patent filings a company has should not be conflated with its ability to innovate. Of course, this is not to say that patents are in no way linked to innovation. The number and quality of patents are certainly indicators of a company’s innovativeness – but they are far from being the main indicators.

For one thing, R&D efforts can be focused in many areas, and any resulting innovation can take many forms. It is probably the case that most innovation does not translate into patents, simply because the subject matter it covers is not eligible for protection under patent laws. With this in mind, we can see how a company can be highly innovative without necessarily having hundreds of patents to show for it – and vice versa.

Moreover, there are plenty of situations where a company might prefer not to seek patent protection on an invention, even where it is patent eligible. There may be strategic considerations or compelling business reasons to maintain the invention as a trade secret, for example, rather than disclosing it to the public by attempting to patent it.

In other words, the simple fact that Acer is upping its patent filings does not lead us safely to the conclusion that it is a more innovative company – or that its increased investment in R&D is paying off.

Nevertheless, increased patent filings could still prove to be crucial in securing Acer’s future. With more patents and applications under its belt, Acer significantly increases its options for creating value in the longer term. It may well be the case that these IP assets will not underpin wildly successful new product lines or disruptive innovations. But they may nonetheless hold strategic value as defensive assets, or could read onto other companies’ products. These patents could even become a lucrative source of bottom-line revenue if third parties consider them valuable enough that they are willing to license or buy them – just ask IAM Market’s vendors.

Acer’s current predicament is one that a great many companies have found themselves in, or will do so sooner or later. By continuing to invest in patents, it is keeping its options open.

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