Most Profitable Software Patents

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Patents on Software, Algorithm and Data Structures are very profitable if it finds widespread use. For example, PageRank algorithm which was in use by Google was patented by Stanford Unversity. Due to this single patent, Stanford University earned $338M.

These are some of the Most Profitable Software Patents:

Invention Owner Revenue
PageRank Algorithm Stanford University $338M (one-time stock)
Karmarkar's Algorithm AT&T $8.9M per partnership (Total: $270M+)
Lempel Ziv Welch Algorithm Unisys Partnerships + $7500 per license (Total: $200M+)

We will dive deeper into each Software Patent.

Patent on PageRank algorithm in 1999

  • Patent issued in: 1999
  • Invention: PageRank Algorithm
  • Patent owner: Stanford University
  • Inventor: Larry Page, Founder of Google
  • Profit: $338M in 2005

PageRank algorithm is a well known algorithm as the algorithm that powered Google Search Engine. Very few know that PageRank is a patented algorithm. It was patented in 1999 and was assigned to Stanford University as Larry Page (Inventor) was pursuing PhD at that time.

Google brough exclusive Licensing rights from Stanford University for the use of the Algorithm at the cost of $1.8M in stocks. Stanford University sold the Google stocks for 338 Million dollars in 2005.

The patenting rights on PageRank is over as of 2019. Google has patents on other search algorithms which were later integrated into Google's search engine.

Patent on Karmarkar's algorithm in 1985

  • Patent issued in: 1985
  • Invention: Karmarkar's Algorithm
  • Patent owner: AT&T
  • Inventor: Narendra Karmarkar
  • Profit: $8.9M per partnership

Karmarkar's algorithm was the first polynomial time algorithm for solving linear programming problems. It was formulated by Narendra Karmarkar when he was a researcher at IBM, presented it at Stanford University and later, joined AT&T.

At AT&T, the power of the algorithm in practical problem was realized. Karmarkar's algorithm was patented in 1985 by AT&T (Employer of Karmarkar). It was a major trigger to the revolt of software patents in 1980s.

The computer system designed to run this algorithm was priced at $8.9M and its first customer was Pentagon.

Karmarkar's Algorithm was a milestone in Linear Programming and for several decades, no alternative was found. This made a unique situation and put AT&T at a significant advantage. Over 30 companies came to partner with AT&T which made is earn nearly $270M.

The patent was over in 2006 and can be used by anyone currently.

Lempel Ziv Welch (LZW) lossless data compression (Patented in 1985)

  • Patent issued in: 1985
  • Invention: Lempel Ziv Welch (LZW) algorithm
  • Patent owner: Unisys
  • Inventor: Jacob Ziv, Abraham Lempel and Terry Welch
  • Profit: $7500 per license (Over $50M in total)

Lempel Ziv Welch (LZW) lossless data compression is a compression algorithm that is used in GIF format. It was patented in 1985 by the company Unisys.

In 1977 and 1978, Jacob Ziv and Abraham Lempel developed several compression techniques which where later refined by Terry Welch in 1983 and the resultant algorithm was named Lempel Ziv Welch algorithm.

The patent was first assigned to Sperry Corporation in 1985. In 1986, the company was merged with Burroughs Corporation and the new company was named Unisys.

Unisys got licensing agreements from over 100+ companies.

The patent rights were not enforced for some companies but later, one-time royalties were collected. It reduced the popularity of GIF at that time provided an alternative (PNG) was ready. The one-time licensing fees was $7500.

In total, Unisys is reported to have earned over $200M for this one patent.

Note: The figures quoted are revenue numbers. The actual profit is less as the company had to pay taxes on it and the salary of employees involved in the growth of the project.

Conclusion:

Software Patents on Algorithms and Data Structures are highly profitable despite the opposition towards it. Go for it.

With this article at OpenGenus, you must have a good idea of how profitable patents are to Companies and Universities.