info@olartemoure.com

WORK WITH US
olartemoure logo
olartemoure logo

Generative AI: Trends, Industry Applications and IP Protection

Jul 30, 2024 | Innovation, Publications

generative artificial intelligence

Generative Artificial Intelligence and patent trends

The release of OpenAI’s ChatGPT chatbot in November 2022 has been described as an “iPhone moment” for GenAI. This is because the OpenAI platform has made it easier for all users to access advanced GenAI programs, particularly large language models (LLMs). These models have reached new levels of performance, demonstrating the potential for various real-world applications, triggering a wave of research and development, and large corporate investments in GenAI1.

Generative Artificial Intelligence (GenAI) is a rapidly evolving subset of AI focused on creating content, ranging from text and images to music and video, using advanced machine learning models. These models, such as OpenAI’s GPT-4, leverage vast datasets to generate new content that mimics human creativity. The transformative potential of generative AI spans various industries, promising significant advancements and raising crucial considerations regarding intellectual property (IP) protection and revenue generation, particularly in technologically advanced nations like China and Japan.

The technological advances in GenAI are reflected by the sharp increase in patenting activity. Over the past 10 years, the number of patent families in GenAI has grown from just only 733 in 2014 to more than 14,000 in 2023. Since the introduction of the transformer in 2017, the deep neural network architecture behind the Large Language Models that have become synonymous with GenAI, the number of GenAI patents has increased by over 800%. The number of scientific publications has increased even more over the same period, from just 116 in 2014 to more than 34,000 in 2023. Over 25% of all GenAI patents and over 45% of all GenAI scientific papers were published in 2023 alone2.

Tencent, Ping An Insurance Group and Baidu own the most GenAI patents:

a. Tencent plans to add GenAI capabilities to its products such as WeChat to improve the user experience.
b. Ping An focuses on GenAI models for underwriting and risk assessment.
c. Baidu was one of the early players in GenAI and recently unveiled its latest LLM-based AI chatbot, ERNIE 4.0.
d. The Chinese Academy of Sciences (fourth) is the only research organization in the top 10 ranking.
e. Alibaba (sixth) and Bytedance (ninth) are other Chinese companies in the top 10.
f. IBM (fifth), Alphabet/Google (eighth) and Microsoft (10th) are the top US companies in terms of GenAI patents. IBM has developed a GenAI platform, watsonx, which enables companies to deploy and customize LLMs with a focus on data security and compliance. Alphabet/Google’s AI division DeepMind recently released its latest LLM model, Gemini, which is gradually being integrated into Alphabet/Google’s products and services. Microsoft is another key player in GenAI and an investor in OpenAI. OpenAI itself has only recently filed its first GenAI patents.
g. Rounding out the top 10 is electronics conglomerate Samsung Electronics (seventh) from the Republic of Korea. Behind there are companies from Japan and India as well.
h. In summary, Asian countries such as China, Republic of Korea, Japan, and India account for the majority of the patenting activity and application of GenAI nowadays3.

The key application areas for GenAI patents include: 1. Software, 2. Life sciences (Healthcare), 3. Document management and publishing 4. Business solutions (including Entertainment), 5. Industry and manufacturing, 6. Transportation, 7. Security, and 8. Telecommunications.

4

graph

Among the above, there are some key Industry Applications of Generative AI that deserve attention for the monetization and revenue generation:

Healthcare

Medical Imaging

Aiding in the diagnosis of diseases by simulating various medical conditions, improving diagnostic accuracy and training for healthcare professionals.

Drug Discovery

Generating molecular structures and predicting their interactions, accelerating the drug discovery process and reducing costs.

Entertainment

Content Creation

Creating music, writing scripts, and generating visual effects producing realistic characters and scenes, significantly reducing production time and costs.

Gaming

Generating complex environments, characters, and storylines, offering more immersive and personalized gaming experiences.

Finance

Algorithmic Trading

Developing sophisticated trading algorithms, analyzing vast amounts of financial data to generate trading strategies and forecasts.

Fraud Detection

Generating scenarios of fraudulent activities, helping to better understand and detect potential fraud by banks, governmental authorities and financial institutions.

Manufacturing

Product Design

Creating innovative product designs for optimizing performance, aesthetics, and cost, simulating various design scenarios and allowing manufacturers to select the best possible design.

Supply Chain Optimization

Predicting supply chain disruptions and optimizing logistics, enhancing efficiency and reducing costs.

Marketing

Personalized Marketing

Generating personalized content for marketing campaigns, improving customer engagement and conversion rates, creating tailored advertisements, emails, and social media posts.

Market Research

Analyzing market trends and generating insights, aiding in the development of marketing strategies and product development.

A quick glance of intellectual property protection and revenue generation in China and Japan of generative AI:

CHINA’S IP LAWS

Copyright Law

China’s Copyright Law, last amended in 2020, is designed to protect original works of authorship. This law extends to various types of works, including literary, artistic, and scientific creations, provided they are original and fixed in a tangible medium of expression.

Authorship

For GenAI-generated works, the copyright can be complex. Chinese law typically requires a human author for copyright protection. However, if GenAI is used as a tool by a human creator, the resulting work can be protected under the human creator’s name.

Originality

The work must demonstrate a minimum level of originality. For instance, AI-generated content that is unique and not a mere copy of existing works can qualify for protection.

Economic Rights

The copyright human holder enjoys economic rights such as reproduction, distribution, and public performance.

Patent Law

China’s Patent Law, last revised in 2021, provides protection for inventions, utility models, and designs. Patents grant the inventor exclusive rights to use and exploit the invention for a specified period.
Patentability
AI algorithms and models can be patented if they meet the criteria of novelty, inventiveness, and industrial applicability. GenAI-related patents might include specific algorithms, software applications, or novel uses of GenAI in various fields.
Exclusions
Pure mathematical methods and abstract algorithms without a specific technical application are not patentable. However, algorithms applied in a technical context, such as a specific industrial process, can be patented.

Trademark Law

China’s Trademark Law, amended in 2019, protects signs, symbols, logos, and names used in commerce to distinguish goods and services.
Branding
Companies developing GenAI technologies can protect their brand names, logos, and distinctive signs used in association with their AI products and services.
AI-Generated Marks
Trademarks generated by AI can be registered if they meet the requirements of distinctiveness and non-confusion with existing marks.

Trade Secret Law

Trade secrets in China are protected under the Anti-Unfair Competition Law, last amended in 2019. Trade secrets encompass confidential business information that provides a competitive edge.
Protection
Companies can protect GenAI-related proprietary algorithms, data sets, and methodologies as trade secrets, provided they take reasonable measures to maintain confidentiality.
Misappropriation
Unauthorized acquisition, use, or disclosure of trade secrets by third parties is prohibited.

Data Protection and Privacy Laws

China’s data protection landscape is governed by several laws, including the Cybersecurity Law (2017), the Data Security Law (2021), and the Personal Information Protection Law (PIPL) (2021).
Data Usage
GenAI systems often require large datasets for training. Compliance with data protection laws is crucial, ensuring that personal data is collected, stored, and processed legally.
Data Ownership
Ownership and rights over data used in GenAI systems need clear delineation to prevent disputes.
Non-Compliance
Non-compliance with data protection laws can result in significant fines, business suspension, and other legal consequences.

What are the options relevant for revenue generation from GenAI IP in China

Licensing
Companies can generate revenue by licensing AI-generated content and technologies. Licensing agreements can cover various industries, from entertainment to manufacturing.
Collaboration
Chinese firms can collaborate with international companies, leveraging their AI capabilities to co-develop products and services. These collaborations can lead to shared IP rights and revenue.
Monetization Platforms
Platforms that host AI-generated content can monetize through subscriptions, advertisements, and premium content offerings. For example, AI-generated music and art platforms can attract paying users and advertisers.

JAPAN IP LAWS:

Japan has been proactive in developing guidelines and policies specific to AI. The Japanese government has issued several strategic documents and guidelines to address AI development and its implications for IP. These include the “AI Strategy 2019” and the “AI Governance Guidelines.” The Japan Patent Office provides specific guidelines for examining AI-related inventions, ensuring clarity and consistency in the patent application process.

Copyright Law

Japan’s Copyright Law, last amended in 2018, aims to protect the rights of creators over their literary, artistic, and scientific works. This law ensures that creators can control and profit from their creations.
Authorship
Under Japanese law, copyright protection is typically granted to works that are the result of human creativity. For AI-generated works, the law is evolving to recognize the role of human authors who contribute to or oversee the AI’s creative process.
Originality
The work must be original and demonstrate a degree of creativity. For AI-generated content to be protected, there must be a discernible human input that meets this originality threshold.
Economic Rights
The copyright holder has exclusive rights to reproduce, distribute, perform, and display the work. In the case of AI-generated works, these rights would typically belong to the entity or individual overseeing the AI.

Patent Law

Japan’s Patent Law, administered by the Japan Patent Office (JPO), protects inventions by granting exclusive rights to inventors for a certain period, provided the inventions are novel, inventive, and industrially applicable.
Patentability
AI algorithms and models can be patented if they fulfill the criteria of novelty, inventiveness, and industrial applicability. This includes new methods of generating content, innovative uses of AI technology, and improvements in AI algorithms.
Exclusions
Pure mathematical methods and abstract ideas are not patentable. However, AI technologies applied in specific industrial contexts can be patented.

Trademark Law

Japan’s Trademark Law protects signs, symbols, logos, and names used in commerce to distinguish goods and services. The law ensures that trademarks provide an indication of origin and maintain consumer trust.
Applicability to GenAI
Branding:

Companies developing GenAI technologies can protect their brand names, logos, and distinctive signs associated with their AI products and services.

AI-Generated Marks:

Trademarks generated by AI can be registered if they meet the requirements of distinctiveness and non-confusion with existing marks.

Trade Secret Law

Trade secrets in Japan are protected under the Unfair Competition Prevention Act (UCPA). Trade secrets include confidential business information that provides a competitive advantage.
Protection
Companies can protect GenAI-related proprietary algorithms, data sets, and methodologies as trade secrets, provided they take reasonable measures to maintain confidentiality.
Misappropriation

Unauthorized acquisition, use, or disclosure of trade secrets by third parties is prohibited under the UCPA.

Data Protection and Privacy Laws

Japan’s data protection framework is primarily governed by the Act on the Protection of Personal Information (APPI), last amended in 2020. The APPI regulates the handling of personal data and ensures the privacy of individuals.
Data Usage
GenAI systems often require large datasets for training. Compliance with data protection laws is crucial, ensuring that personal data is collected, stored, and processed legally.
Data Ownership
Ownership and rights over data used in GenAI systems need clear delineation to prevent disputes. Consent from data subjects is essential for the lawful use of personal data.
Non-Compliance

Non-compliance with data protection laws can result in significant fines, business suspension, and other legal consequences.

Authorities can impose corrective measures, and individuals can seek compensation for breaches of their data rights. The Personal Information Protection Commission (PIPC) oversees compliance and enforcement of the APPI.

Revenue Generation

Commercialization
Japanese companies are focusing on commercializing AI-generated products and services. From AI-driven medical devices to smart manufacturing solutions, the commercial potential is vast.
Partnerships
Strategic partnerships between Japanese companies and global AI firms can facilitate knowledge exchange and co-innovation, leading to joint IP ownership and shared revenue. This open new and interesting opportunities for foreign talent and companies.
Innovative Business Models

Companies in Japan are exploring innovative business models, such as AI-as-a-Service (AIaaS), where AI technologies are offered as subscription-based services. This model allows businesses to access cutting-edge AI without substantial upfront investments.

Generative AI in Japan and China case studies and its financial impact

JAPAN

Sony Corporation

Product/Service
Sony’s AI technology has been integrated into various aspects of its business, notably in entertainment and electronics.
Applications
Music Generation:

Sony’s Flow Machines uses AI to compose music. It has created entire albums by analyzing and learning from a vast array of musical styles and compositions.

Video Game Development:

AI is used to generate realistic characters and environments in video games, enhancing the gaming experience.

Financial Impact

Sony’s AI initiatives contributed to its overall revenue, with the company reporting a significant increase in its gaming and network services division, which generated ¥2.66 trillion (approximately $24 billion) in fiscal year 2022. While specific figures for AI-generated content are not isolated, the technology is a key driver in these revenue streams.

NEC Corporation

Product/Service
NEC leverages AI in various fields, including biometric authentication and public safety.
Applications
Biometric Authentication:

NEC’s AI-driven facial recognition technology is used in airports and public spaces for security purposes.

Healthcare:

AI is used to analyze medical images, aiding in the early detection of diseases.

Financial Impact
NEC’s public safety and biometric solutions have been part of contracts worth over ¥150 billion (approximately $1.35 billion) in the past few years, demonstrating the financial viability of their AI applications.

CHINA

Alibaba Group

The company uses products and service across its e-commerce platforms, cloud services, machine learning platforms for businesses to develop their own AI applications, and AI labs.

In fiscal year 2023, Alibaba’s cloud computing division, which heavily integrates AI, generated RMB 77.8 billion (approximately $12.2 billion). AI-driven enhancements in e-commerce have significantly contributed to the company’s gross merchandise volume, which exceeded $1 trillion.

Baidu, Inc.

Baidu applies AI across its search engine by creating and providing summaries and answers for search queries, improving user satisfaction and engagement, autonomous driving projects, such as Baidu´s Apollo project, that generates real-time data for autonomous driving technology and AI-powered hardware.

Baidu’s AI cloud revenue reached RMB 16.4 billion (approximately $2.6 billion) in 2023, and the company’s investment in autonomous driving has led to partnerships and projects valued at over $3 billion.

Tencent Holdings Ltd.

Tencent utilizes generative AI in gaming, social media, and healthcare:

Gaming
AI is used to create complex game environments and characters, providing immersive experiences in games like Honor of Kings and PUBG Mobile.
Social Media
AI generates personalized content and recommendations for WeChat users.
Healthcare
AI-driven diagnostics and patient data analysis are part of Tencent’s WeDoctor platform.

Tencent’s AI-driven gaming revenue was a significant part of its total revenue of RMB 482 billion (approximately $74.5 billion) in 2023. WeDoctor, partially driven by AI, is valued at over $5 billion.

Bibliography and references

1. World Intellectual Property Organization (WIPO) (2024). Generative Artificial Intelligence. Patent Landscape Report. Geneva: WIPO.

2. Chen, H. (2020). “The Future of AI in China: Opportunities and Challenges.” Journal of Technology Innovation, 12(4), 321-340.

3. Japan Patent Office (JPO). (2021). “AI-Related Inventions and Patent Protection in Japan.” Retrieved from here.

4. Ministry of Economy, Trade and Industry (METI) Japan. (2020). “Strategic Roadmap for AI in Japan.”.

5. National Intellectual Property Administration, PRC. (2021). “Patent Examination Guidelines for AI Technology.” Retrieved from here.
6. OpenAI. (2022). “Generative AI and Its Applications: A Comprehensive Overview.” Retrieved from https://openai.com/research.
7. Alibaba Group. (2023). “Annual Report 2023.” Retrieved from https://www.alibabagroup.com/en/ir/reports/annual.
8. Baidu, Inc. (2023). “Baidu 2023 Annual Report.” Retrieved from https://ir.baidu.com/financial-information/annual-reports.
9. NEC Corporation. (2022). “NEC’s AI Initiatives and Financial Performance.” Retrieved from https://www.nec.com/en/global/ir/library/annual/.
10. Sony Corporation. (2023). “Sony Financial and Corporate Information 2023.” Retrieved from https://www.sony.com/en/SonyInfo/IR/library/annual.html.
11. Tencent Holdings Ltd. (2023). “Tencent 2023 Annual Report.” Retrieved from https://www.tencent.com/en-us/investors.html.
12. WeDoctor. (2021). “AI in Healthcare: WeDoctor’s Approach.” Retrieved from https://www.wedoctor.com/en/news/2021/

Our Expert

Carlos A. Parra

Carlos Parra

Partner | Head
of Asia Office