Australian companies are the world's fourth-largest recipients of network security-related patents, according to a new analysis that has evaluated the patent portfolios of leading organisations by business line and geography.
The Network Security: Overview of patent out-licensing opportunities report, compiled by technology-advisory firm LexInnova, evaluated the information-security portfolios of information-security vendors, categorised those patents by functional area, and evaluated functional overlaps that might pose risks of intellectual-property conflicts or acquisition activities.
Security protocols represented the most frequently patented area, with 5622 applications, while distributed computing (2900), packet switching (2478), packet filters (2351), network error detection and correction (1989), antivirus (1875), and identity and access management authorisation (1841) were also areas of intensive patent focus.
Cisco Systems had the largest portfolio with 6442 security-related patents, followed by Symantec (5757), Juniper Networks (2926), and McAfee (1934). Smaller organisations like Trend Micro (507), Riverbed Networks (468), Fortinet (353), F5 Networks (332) and Websense (201) all had small but significant patent portfolios and many were, in LexInnova's evaluation, often quite similar and Juniper Networks the large vendor with the least similarity to the patents of smaller vendors.
While the United States had the highest number of patent filings related to security technologies, Australia was the fourth most-active, following second-place China and third-place Canada.
The high interest in security-related patents, particularly as smaller companies developed and patented novel security techniques, had seen mergers and acquisitions expand significantly from the third quarter of 2008, when there were just 4 such mergers, through to a peak of 30 acquisitions in the second quarter of 2012 and 22 acquisitions in the second quarter of 2013, the last time period analysed.
These mergers and acquisitions represented the growing importance of information-security defences and the efforts of larger players to broaden their product and intellectual-property portfolios to keep up with changes in the information-security climate.
They had also been hugely successful for investors, with the approximately 80 startups exiting the market delivering a tenfold ROI for investors on average.
“The network security industry is highly competitive,” the report's authors noted, “and dominated by big companies. These companies try to protect their market position through constant innovations and frequent acquisitions.”
The report also identified areas where particular vendors might be vulnerable, as suggested by a proportionately low share of patents in any particular area. For example, the analysis found, while Trend Micro has 10.7 percent as many antivirus patents as McAfee, Riverbed Networks and A10 Networks had just 0.2 percent as many. This might not be a significant strategic issue for those providers, which focus their niche technologies in other parts of the security industry – but it could be an issue for McAfee rival Sophos, which like McAfee grew out of a legacy as an antivirus company but has just 2.7 percent as many patents in that area.
LexInnova applied a proprietary methodology, which it calls LexScore, to rank security players based on their patent portfolios and found that while Cisco and Symantec were leading in terms of portfolio filings, “promising companies” Check Point and Palo Alto Networks were leaders in terms of portfolio quality – based on bibliographical references and the claim characteristics of a particular patent – “but are found lacking here, due to their reduced patent filing”.
This article is brought to you by Enex TestLab, content directors for CSO Australia.