The Patent Asset Index takes into account both the number of active protected inventions and their quality. The method has been developed and validated in scientific research and has been used for several years by leading companies in many industries.
PatentSight featuring the Patent Asset Index has been used for several years by leading companies in many industries. Numerous corporations trust the Patent Asset Index to illustrate the strength of their patent portfolios in annual shareholder reports and other stakeholder communications.
"The method is valuable not only to demonstrate the importance of our patent portfolio to investors, but also to internally evaluate our patent strategy over time."
Member of the Board of Executive Directors, BASF
The Patent Asset Index of a patent portfolio is defined as the aggregate strength of all the patents the portfolio contains. The strength of each individual patent is measured by its Competitive Impact™. The Competitive Impact consists of two dimensions: Technology Relevance™ and Market Coverage™.
Technology Relevance is based on forward citations. Patent offices investigate all patent applications to reveal on which prior patents new inventions are based. If a patent is of significance for the technical development in a field, subsequent patents will build on it and patent offices will frequently cite it as prior art.
Technology Relevance measures whether a patent has been more often cited than other patents from the same technology field and year. The total number of patent citations received not only depends on the relevance of the patented invention, but also on the time that has passed since the patent was published. Patents only recently published tend to have received much less citations than older patents. The time-dependency of citations is corrected by dividing the number of citations received by a patent by the average number of citations received by all patents published in the same year.
Technology Relevance also considers that international patent offices follow different citation rules.
Market Coverage measures the total size of the worldwide markets for which patent protection exists. The more patents firms own in important markets, as indicated by high Market Coverage values, the more valuable the patents are, because innovators spend more on multi-market protection via patents if they believe an invention is more valuable.
Thus, the scope of international patent protection is an important indicator of patent value. Market Coverage is calculated based on granted and pending, hence valid patents per country adjusted for each market’s size. The size of each market is estimated using the countries’ gross national incomes relative to the US gross national income as the largest global economy. Alternatively, Market Coverage may also be calculated based on industry-specific market size data.
The economic value of the patents as measured by its Technology Relevance and Market Coverage. Competitive Impact is stated relative to the other patents in the same field (e.g. a value of three means that the patent is three times as important as the average patent in the field).
The measure of overall patent portfolio strength. Calculated as the sum of the Competitive Impact of all patents contained in the portfolio.
The Patent Asset Index methodology is based on many years of scientific research and validation studies. It is published in an academic journal for review (Ernst and Omland, 2011). Patents with high Competitive Impacts have higher values when compared to a randomly chosen control group of patents. As stated above, the indicators may be calculated for any selected group of patents, e.g. single patents, firms’ patents belonging to single business units, entire firms’ portfolios, multiple firms’ patents, patents from entire technological fields, entire countries’ patents or any other patent selection.
To guarantee the reliability of analyses based on the Patent Asset Index, PatentSight maintains a high quality database. Patent data is harmonized and integrated from more than 90 patent offices and complementary sources that cover e.g. litigation activity, technical standards, or medical uses.
The high data quality is achieved by employing a combined software- and human research-based process to prepare, harmonize and integrate the data. Continuous data validation studies with clients show that the database we maintain reliably identifies all worldwide patents on the same invention and that we determine the actual current owner and legal status of each patent with exceptional precision.
Based on the Patent Asset Index, PatentSight offers a Business Intelligence solution that helps board members, investors, portfolio managers, technology scouts, patent professionals and other stakeholders to understand and increase the value of patent portfolios and to uncover trends and disruptive innovation worldwide.
PatentSight’s solutions are used for strategic and operational decision making by leading companies in chemicals, telecommunication, auto-motive, electronics, mechanical engineering, food, logistics and other industries.
It is also used by the European Commission to validate merger cases, such as that between Dow and DuPont in 2017.
Read more about the various application possibilities of the Patent Asset Index™ in our analyses done with PatentSight:
The Patent Asset Index™ method allows the identification and profiling of the patent gems businesses can leverage to create value from innovation. Calculated at the patent level for maximum scalability, allowing analysis of the complete portfolio of a company, for a certain technology field, or a single patent.
The Patent Asset Index™ is the heart of our analytics platform for strategic IP management and, therefore, a key component in everything we do for our clients. Being scientifically validated, industry leaders trust PatentSight to illustrate the strength of their patent portfolios in annual shareholder reports and other stakeholder communications.