Patent Metrics – Tools for Efficient Patent Management
“If you can’t measure it, you can’t manage it.” Peter Drucker
Patent environment is constantly evolving. Nowadays, a single internationally operating company could own thousands of patent families. As these patent portfolios grow, so does their value, complexity and costs. Millions could be spent on patents, and yet when mismanaged they might have a negative effect on e.g. market share, revenues, and margins. In order to avoid these negative effects and manage patents efficiently, monitoring and measuring different aspects of these is essential.
The figure below shows a simplified picture of a patent portfolio assessment system. The base of the pyramid consists of the basic metrics, which get more complex and informative when moving towards the top.
Patent metrics are chosen based on company’s specific situation and as such there is no one-size-fits-all solution. There are, however, certain basic metrics that are used in almost every technology-driven company. These metrics audit patent portfolios by using different number counts such as:
- the number of patent applications filed;
- the number of priority applications filed;
- the number of patents granted;
- the number of invention disclosures received; and
- financial metrics such as costs.
These numbers could be monitored by a business unit or technology field, geographical positioning, a purpose, and an importance. They also could be compared to competitors in order to get an idea on how well a company is doing compared to its competitors.
main reason for inventorying patent assets is for creating patent portfolio statistics which informs a company on the present status of its patent portfolio. Even though these metrics communicate useful information, they could be misleading if used as sole measures. For example, the grant rate metric does not tell much about abandoned patents, pending or refused applications. Furthermore, patent count fails to give any picture of the quality and significance of those patents. Therefore, in order to get a more comprehensive picture on a patent portfolio, a deeper analysis of the patents should be made.
After inventorying and identifying all relevant patent assets, patent portfolio is analyzed by using ranking and scoring methods. These qualitative assessments score patent factors that impact its value by analyzing state, properties, and characteristics of a patent in order to determine its current or future uses.
This assessment could be as simple as dividing patents by their usage (current, potential and future usage), ranking them by business importance (high, medium and low), or linking them to certain technologies or products. Furthermore, by using patent information (such as patent citation, scope, family size, applicant, etc.), it is possible to monitor competitors, make technology assessment, and evaluate patent quality and strength.
Even though the results of the qualitative assessments could be used e.g. in raising a loan or searching for partners, they are mainly used in internal patent portfolio management in order to identify high quality patents; analyze a competitive landscape; identify patents that are associated with the market, technology or product and thus score their relative importance and quality; map patents to technology and competitors in order to show the position of a company versus its competitors.
Patent performance metrics differ from company to company. While to some patent performance is all about royalties, to others it could be freedom to operate or ability to mitigate risks. The most straightforward patent performance metrics are those that measure direct economic benefits such as licensing and divestment incomes. Even though patents could be turned into cash, the highest value comes from employing them in company’s business strategy. Therefore, beside the ability to generate future licensing incomes, patents should also be valued for their ability to increase margins, generate add-on sales, add market share, impact on product sales and earnings. These indirect economic benefits enable a patent holder to save money through eliminating or reducing negative costs as well as indirectly help the rights holder to generate cash flow e.g. by signaling the strength of the R&D which could help to raise investment capital.
Patent performance measures aim to generate an in depth insights on how to realize full potential and maximize the value and performance of the patents in different contexts. Therefore, besides revealing the strength, weaknesses and gaps in a patent portfolio, they also could be used in identifying opportunities to enforce patents strategically as well as enabling a company to access the portfolio in an efficient, focused and timely manner in order to react in situations such as infringement allegations or licensing opportunities.
Choosing the Right Measures
The development of appropriate metrics depends on various factors such as industry or technological field of a company, portfolio size, patent strategies, business model, competitive landscape, etc. Metrics must be informative and worth collecting. Because of this, focus should be on measures that will give an insight on things that may not be known.
There is no certain number of metrics that a company should use. Even a concise set of metrics could assist a company in e.g. making informed decisions on growth and patent renewal, defining patent strategy, optimizing a patent portfolio management, assessing the value of patent assets, increasing patent awareness among employees, establishing a competitive landscape, creating more comprehensive reports, understanding company’s own patent portfolio and its impact in the marketplace, as well as identifying potential areas of risks, trends, opportunities, and problems .
The article is based on the author’s Master’s Thesis ”Measuring Patent Productivity and Performance” (Hanken School of Economics, 2013).