Lognormal Distribution of IP Assets’ Value

An important integrated intellectual property and business process is to create a lognormal distribution of value of intellectual property assets. The reason for doing so is that Edward Deming found that when values were over three standard deviations from the group average special cause was involved. This is his famous three Sigma test that drove improvements in the quality movement for decades. When applied to patents, this test shows how few are special in terms of likely strength and value, and should receive special attention from the Corporation. A classic example of this was mentioned in the Procter & Gamble example where only 10% of their intellectual property assets were being used. Many other Gathering 1 corporations conducting similar studies found that not only 10% of the patents were being used, but more like 5% of the patents they hold are creating value for the Corporation that a shareholder can see. This is shown schematically in the “Lognormal Distribution of IP Assets’ Value” figure. Guidance coming from this figure is that there are very few patents of high value to the Corporation that are protecting profitable commercial products and services. The bulk of the art that the Corporation possesses provides image protection that enables the business to sell at slightly higher price points to customers and/or is available to license out to others. For unmanaged portfolios there is a significant amount of art that can be divested or donated.

A fast way to establish relative value of intellectual property is to use the following three tools. These are use map, product revenue patent tables, and a value map. These tools have evolved because they provide a fast and efficient way to value IP for internal business decisions.