Patent Technology Indicators

Patent are the most valuable form of information available for competivie analysis. Different indicator are being used to predict the value of a patent or any company’s strength. Tech-Line® uses three standard patent indicators and six advanced citation indicators invented by CHI to analyze corporate technological strength.

All indicators are calculated for particular companies, in specific technologies over a time period. Because patent citation rates differ by technology, comparisons should be made only within similar technology groups.

Basic Indicators

* Number of patents

* Patent growth percent in area

* Percent of company patents in area

Patent Citation Indicators

* Cites per patent

* Current impact index (CII)

* Technology strength (TS)

* Technology cycle time (TCT)

Science Linkage Indicators

* Science Linkage (SL)

* Science Strength (SS)

Basic Indicators

Tech-Line uses three indicators based on patent counts:

Number of Patents – A count of a company’s patents issued in the U.S. patent system. Because the U.S. is such a large market, even non-US companies seek the protection of a U.S. patent for their most important innovations. By tracking number of patents, growth in patenting and distribution across technology areas, you can monitor and compare the evolution of companies’ R&D activity by technology area. Number of patents tracks R&D spending but can be disaggregated across technologies whereas R&D spending usually cannot.

Patent Growth Percent in Area – The change in the number of patents from one time period to another, expressed as a percentage. This identifies technologies receiving increasing emphasis and those in which innovation is slackening off. It also identifies companies increasing their technological development, and those whose R&D is played out.

Percent of Company Patents in Area – The number of patents in a technology area divided by the total number of patents for that company, expressed as a percentage. This tells you which technologies form the core of a company’s intellectual property portfolio.

Patent Citation Indicators

Four Tech-Line indicators are derived by analyzing the references on the front pages of patents, or “patent citations.” References are placed on patents to help establish the novelty of the invention. Inventions must be novel to be awarded a patent. To enable the patent office examiner to assess the novelty of the invention, a patent document lists “prior art” in the form of references to previous patents in the same area. Patent citations also play an important role in patent infringement litigation by delineating the domain of the patent.

In counting citations, we reverse the perspective and count how many citations a patent receives from subsequent patents. This is a way of counting how many times a patent becomes prior art in future technological advances. Research has established that highly cited patents represent economically and technically important inventions. Details on the history and validity of patent citation analysis are in the Tech-Line background paper.

Cites Per Patent- A count of the citations received by a company’s patents from subsequent patents. This allows you to assess the technological impact of patents. High citation counts are often associated with important inventions, ones that are fundamental to future inventions. Companies with highly cited patents may be more advanced than their competitors, and have more valuable patent portfolios.

Current Impact Index (CII) – The number of times a company’s previous five years of patents are cited in the current year, relative to all patents in the U.S. patent system. Indicates patent portfolio quality. A value of 1.0 represents average citation frequency; a value of 2.0 represents twice average citation frequency; and 0.25 represents 25% of average citation frequency. In a Tech-Line company report, you can identify the technologies in which companies produce their best work. In a Tech-Line technology report you can benchmark a company’s technological quality against other companies and against the average for the technology. (CII’s vary by technology. For example, they are high in semiconductors, biotechnology, and pharmaceuticals, and low in glass, clay & cement, and textiles.) CII has been found to be predictive of a company’s stock market performance.

Technology Strength (TS) – Quality-weighted portfolio size, defined as the number of patents multiplied by current impact index. Using Technology Strength you may find that although one company has more patents, a second may be technologically more powerful because its patents are of better quality.

Technology Cycle Time (TCT) – Indicates speed of innovation or how fast the technology is turning over, defined as the median age in years of the U.S. patent references cited on the front page of the company’s patents. Companies with shorter cycle times than their competitors are advancing more quickly from prior technology to current technology. In semiconductors, cycle times are short (3-4 years); in shipbuilding they are long (more than 10 years). The average is 8 years. In fast moving technologies, TCT allows you to identify companies that may gain the advantage by innovating more quickly.

Science Linkage Indicators

Two Tech-Line indicators are derived by analyzing the front page of patents. Patent documents must cite relevant prior art (see patent citation). Increasingly, patents are citing non-patent documents as prior art, and many of these are papers in scientific journals. Tech-Line’s Science Linkage and Science Strength indicators are based on counts of patent references to scientific papers. Patents that reference many scientific journal articles are different from patents that reference none. For example, a patent on a genetically engineered seed, or on a neural network based process control may reference 10 or more scientific articles. In contrast, an improved design for a part of a motor may reference none. Tech-Line’s indicators build on this difference, differentiating companies and technologies that are high-tech from those that are not. This is particularly useful in areas like agriculture, where patents for plows are mixed in with advanced agrobiotechnology. Science Linkage can differentiate between the two.

Science Linkage (SL) – The average number of science references cited on the front page of the company’s patents. High science linkage indicates that a company is building its technology based on advances in science. High-tech companies tend to have higher science linkage than their competitors. Science Linkage enables you to pick out the high-tech players in even traditional areas such as agriculture or textiles. Science Linkage has been found to be predictive of a company’s stock market performance.

Science Strength (SS) – The number of patents multiplied by science linkage. Indicates the total amount of a company’s science linkage activity. Science strength reminds us that although a small biotech firm may use science very intensively, a big pharmaceutical firm in fact has a greater reliance on science because it makes use of research across a much larger R&D effort