TAEUSTimes NEWSLETTERJuly 2008March 2008February 2008November 2007May 2007April 2007February 2007

Patent Analysis

Patent Analytics: How They Can Impact Your Business

The financial impact of patents to corporations cannot be denied.  Annual revenues stemming from patent licensing are conservatively estimated to be well over 120 billion dollars in 2008.  Patent licensing revenue often makes up over 10% to 20% of total income in R&D-centric companies.  At the same time, patents are, in effect, pre-paid assets—providing a return on investment well over 95%—if you regard the R&D expenses are costs sunk well before the patent itself is monetized as a stand-alone asset—that is, detached from a particular product.

At the same time, due to international regulations on patent applications, patents are a valuable and unique source of up-to-date scientific and technological information.  Patent applications are published 18 months after the date they are filed, usually before the first action on the patent, and well before the patent is granted.  The consensus among experts we have spoken with suggests that the scientific knowledge contained in patents comprises about 80 percent of all scientific knowledge—making it by far the most useful corpus of data available to the scientific or innovation researcher inside of today's corporations.  While 80% may sound reasonable (or not) at first glance, its accuracy can be further argued by analyzing the real data in the body of patent citations.  The importance of patent data to the corporate technology researcher is further amplified by the fact that nowhere else in the world is so much technological information available in one place.

Gaining insights into the growing knowledge-base represented in patent literature is immense in scope.  The number of patent documents worldwide is at least 60 million documents and growing at 1.5% year-over-year, with approximately 750,000 patents issued worldwide in 2007, and almost twice that many patent applications published.  (Approximately 25 percent of patent applications are abandoned before they are published according to the most recent USPTO statistics from 2007 data).

As the volume of patent documents grows, so does the opaqueness of the patent data—making it more complicated to digest, absorb and glean insight (or actionable information) for patent researchers.  Put simply, unfiltered data is anarchy.  It is therefore not surprising that the demand for advance patent analysis software and document processing techniques that ensure easier access to patent data is on the increase.

Today, there are a growing number of techniques for analyzing patent literature, each with their own benefits and limitations.  The field is rapidly changing as well, due to larger market forces.  More than any other factor, patent data has only recently become available to researchers in machine-readable format at a reasonable cost. Moreover, raw computing power is greater today than ever before, and access to super-computer-like processing power is available at a practical cost through massively parallel clustered servers such as the Amazon EC2 cloud.  Today Thomson Reuters still controls almost 80% of the patent information and processing market, but the genie has been unleashed, and new, innovative approaches are being undertaken by researchers and entrepreneurs interested in patent processing.

With the exception of SEARCH or DOCUMENT RETRIEVAL automated patent processing techniques have not proven dependable, and therefore there is a tendency among potential users to dismiss new entrants into the marketplace as more of the same, but we believe that this attitude is risky in light of the amount of work that has going into patent data analysis in the last few years.  

We recognize that there will never be a magic bullet that will slay all your dragons, but tools available today and in the near future will bring new efficiencies and a competitive edge to those who effectively embrace them.

What Patent Analysis Can Do For Your Company

If you accept that approximately 80% of technological innovation is represented in patent data, surely you also recognize that there is tremendous value mining patent literature to further your company's goals.   Patent analysis, used correctly, can uncover information saving or marking today's corporations millions of dollars.  Following is a partial list of some of the benefits it offers.

• Patents constitute an important source of information about competitors.  They represent the only publically accessible indicator (albeit a lagging indicator) of your competitors' future strategies.  As a result, analysis of patent data is one of the primary tools for technological and business intelligence.
• Patents can be visualized as part of a larger landscape of similar and overlapping technologies.  A careful patent landscape study can point toward companies that are good candidates for M&A; it identifies new competitors in the market; it uncovers potential future threats from existing competitors; and it flags outlying patents from smaller firms or individual inventors for in-licensing or acquisition.
• Patents constitute about 80 percent of all cited prior art and cited documents in state-of-the-art studies.  They are the most accessible source of information when trying to invalidate a competitor's patents for both anticipation (single document) and more commonly obviousness (combining several documents).
• Patent analytics can show you what you have in your portfolio and identify technology groups to which they belong.  Analytics is a valuable first step when performing an internal IP audit.
• By substituting a patent characteristic for value (there is no transparent market for patents, and therefore no way to find comparables) such as renewal rates, litigated patents, or patents that have international counterparts, you can develop profiles for all your patents, which can help prioritize your investigation strategy.
• Patent analytics can uncover potential buying opportunities to fill gaps in your existing portfolio.
• Corporate licensing executives can identify potential licensees by uncovering who else is patenting in the general area of the innovation.  It's like a GAP analysis in reverse where your technology may fill holes in your competitor's technology.
• Advanced linguistic processing techniques can be used to make reading patents far easier for the lay business person, not accustomed to reading the style and legal jargon presented in patent claims.
• Targeting specific technologies that read on your patents can be accomplished when patent analytics is combined with an analysis of non-patent literature.

Conclusion

Patent analytics is an essential tool for IP managers to uncover new business opportunities, find gaps in the company's R&D strategy, and assess your company's exposure to competitive threats.  Because of the sheer volume of patent data, good patent analytic tools are required to do the job.  Analytical tools group, cluster and find relationships among patents, but they cannot tell you if your patent is good or not.  For that, you still have to use old fashioned human judgment.