Innovation disrupts the status quo to build another status quo; rinse and repeat. We have witnessed multiple computing platform shifts in the last 30 years. Each technology paradigm shift opened new frontiers for building innovative products and services. Mobile evolution, for instance, expanded the possibilities in social networking, ride-hailing and work collaboration. The new paradigm shift is metaverse. It is the latest gateway to the internet, made up of persistent, shared, programmable 3-D virtual environments linked to a perceived virtual universe via augmented reality and virtual reality devices. As a programmable collection of virtual experiences, metaverse will radically change how we perceive the internet by making it more immersive.
This paradigm shift opens up opportunities to innovate in extended reality devices, chips, processors, haptics, displays, software development platforms, games, consumer applications and enterprise applications. The previous decade gave rise to the app store and crypto entrepreneurs; the coming decade will pave the way for metaverse entrepreneurs.
For the companies building metaverse, it is vital to capture market share and create intellectual property moats (IP moats) in this new paradigm.
The IP moat of a technology company refers to the coverage and strength of its intellectual property (patents and trademarks) in its technology sector. IP moats are assessed across three different dimensions.
• Defensibility: measures the coverage and strength of a company’s IP regarding their products. E.g., if Acme sells VR headsets, it might have patents covering motion sickness reduction during the use of VR headsets.
• Enforceability: measures the coverage and strength of the company’s IP regarding the competition’s products.
• Opportunity: measures the potential of the company’s IP regarding the invention of white spaces available to be captured in that technology segment.
The companies investing heavily in metaverse are already acquiring, building and strengthening patent portfolios related to the metaverse and hence creating IP moats to build a competitive advantage that will compound in the long term. A sophisticated IP moat acts as an anchor while engineering and R&D teams adapt toward the shift into the metaverse.
Companies Creating IP Moats In Metaverse
Metaverse technologies can be broken up into four key areas: end-user devices, hardware stack powering the end-user devices, development platforms and applications. Here’s a quick rundown of what major companies’ IP moats look like in each of these four areas.
1. End-user devices (AR/VR headsets): As of 2021, Meta owns the largest market share in VR headsets with its Oculus Quest 2, followed by Sony’s PlayStation VR and Microsoft’s HoloLens. Based on internal research from my company, while Meta is the market leader and has 1000+ patents covering end-user devices, Samsung has around four times as many patents as Meta in this area.
2. Hardware stack (GPUs, chips): NVIDIA is presently leading the market for AI (artificial intelligence) chips and graphics, with plans to invest heavily in the metaverse and related technologies. Based on more internal research, NVIDIA’s IP moat strength of 25 patents does not come close to Samsung and Microsoft, which each has 300+ patents in this category. With NVIDIA now geared to become one of the leading development platform companies, and its collaboration with Meta to build the largest AI supercomputer, it will be interesting to see how they strengthen their IP moats.
3. Development platforms (gaming platforms): Gaming will flourish in the metaverse. Unity Software is the leader in gaming development platforms, with more than 50% of the market share as of Q2 2020. While Unity is the market leader in this segment, the largest patent portfolio is owned by Microsoft, which has more than 200 patents.
4. Applications (games, social, enterprise): Microsoft has the largest market share in this category due to its dominance in the enterprise application/software market via Office, Teams and LinkedIn. It also has the most robust portfolio size with close to 4,000 patents. It is followed closely by Intel, Google and Apple. With its recent acquisition of game developer Activision Blizzard, Microsoft is looking to further strengthen its position in this category.
Metaverse technologies are constantly evolving. Safeguarding innovation and converting it into patents will become a critical business strategy for metaverse companies to stay ahead of technological disruption. Building internal IP processes to enable the executive teams to foresee the shifts in the technology paradigm is an essential step toward building IP moats.
Here are some guidelines for companies looking to prepare for this change and begin to build IP moats.
1. Strengthen Defensibility: Conduct a thorough internal assessment of the current IP (trademarks and patents) covering your products by measuring the extent and strength of that coverage. For the areas that are not covered, assess and capture new IP to cover those areas.
2. Assess Enforceability: Thoroughly assess the coverage of your current IP (trademarks and patents) over your competitor’s products and measure the extent and strength of that coverage.
3. Create Opportunity: Conduct a detailed analysis of the metaverse technology landscape to assess the white spaces, and evaluate the potential of your current IP to cover those white spaces.
Metaverse presents many opportunities for innovative companies to both build new products and build IP moats around them. The evolution of metaverse will take time as companies pivot and innovate within this paradigm shift.