Metrics related to intellectual property have been covered lightly in some of the previous chapters on intellectual property. This section specifically addresses intellectual property metrics is related to R&D or business performance. Key high-level intellectual property metrics relating to R&D performance are:
- R&D $ / Patent
% Patents Utilized (by category of Existing Products, future products, licensing, or no business use).
Key and Emerging Technologies With IP Dominance
Key and Emerging Technologies with IP Subservience
To determine whether a company’s patent strategy matches its business and R&D strategies, the performance of the company’s patent assets can be assessed using the following evaluation indicators:
- Number of reported inventions / R&D employee
Number of reported inventors / number of reported inventions
Average age of patents
Total number of patents
Total number of patented inventions
Percentage of patented inventions commercially used by the company
Percentage of patented inventions involved in disputes
Percentage of total sales protected by patents
Percentage of new to market products and services protected by patents
Sales protected by patents / R&D expenditure
There are also many ways to get a single indicator of the value of a Corporation’s overall patent portfolio. One common patent strength indicator used in some commercial software programs has the following factors, and their weighting, on a five-point scale.
- Number of patents (5.0)
Number of patents with large number of forward citations (4.0)
Average age (2.5)
Average number of claims per patent (2.0)
Average number of pages of specification and drawings (1.5)
Number of patents litigated (4.0)
Number of patents reissued or re-examined (3.0)
Number of patents licensed (4.0)
A more complete set of indicators that show the value of a corporation’s overall patent portfolio was provided by the Patent Scorecard. This scorecard was organized at a company level, including all US patents held by each company across multiple industry sectors. This commercially available scorecard allowed comparison of company positions in various industry segments. The attributes measured were:
- Technology strength. Technology Strength is the basis of the rankings and provides an overall assessment of a company’s intellectual property and innovation strength.
Current Impact Index. The Current Impact Index showcases the broader significance of a company’s patents by examining how often its US patents are used as the basis for other innovation in the current year.
Science Linkage. Science Linkage reflects the core science referenced in a company’s US patents. A high figure indicates a company is closer to the cutting age than its competitors with lower values.
Technology Cycle Time. The Technology Cycle Time indicates a firm’s speed in turning proprietary research and innovation into intellectual property.
Patent Count. The Patent Count equals the number of US patents awarded, excluding design and other special case inventions.
For corporations who derive a significant portion of their revenue and profits from patent related activities, the metrics used to evaluate performance or dictated by the licensing objectives.
- To generate royalty income:
Estimated EVA of the licensing function.
Annual royalty income and number of transactions.
Royalty income as a percentage of R&D expenditures.
Racial royalty income to IP protection costs.
Racial royalty income to patents licensed.
To prime new markets:
Number of new market center through licensing out.
Develop industry standards:
Number of technologies licensed by at least X percent of the market.
Traditional protection activities:
Number of patents available through cross-licenses and licensing-in.
Ratio of issued patents to annual R&D expense.
Ratio of issued patents to total sales.
Aging of the patent portfolio.
Freedom to operate:
number of patents relative to competitors.(Overall, annually, by major product line)
Number of lawsuits in which you been sued for infringement by one or more of your competitors.
Number of patent secured through cross licenses.
Number of lawsuits in which you are the defendant relative to the number of lawsuits in which your competitors are the defendant.
Assessing the IP portfolio:
Number of invention disclosure submitted.
Number of patent applications filed.
Number of patents received annually total portfolio size (patents and trademarks)
Ratio of patents granted to applications filed.
Average prosecution costs per patent granted.
Annual maintenance fees.
Cycle times for various activities (i.e., invention disclosure to patent filing)
Board of Director Metrics: Although the form of questions, there are metrics which a company’s Board can assess the value of IP to shareholders. These high-level questions Board Directors should be asking about Intellectual Property follow. Each metric has proposed anchored scales for ease in evaluation.
Group A: overall positioning
this first set of questions is designed to develop an overall high-level sense of the role that IP plays in your industry, the company’s relative position with respect to its IP portfolio, and it’s IP management level of sophistication.
Question 1: How sophisticated is our industry with respect to invention and innovation?
This question relates to the industry your enterprise competes in. Where are the majority of competitors with respect to their level of sophistication with respect to invention and innovation?
A. Most companies use technology invented by others: competitiveness depends upon adopting and using the right technology, not inventing or adapting it. Examples are banking, professional services, and retailing.
B. Invention and innovation takes place at low to moderate level in our industry: most competitors have some technology adaptation capability, but it is possible to be successful without it. Examples are commodity manufacturing.
C. All competitors have a basic innovation capability: it is a critical success factor in our industry, and it is impossible to be competitive without it. Examples are auto-parts and other high-end manufacturing.
D. Competitive position in our industry is directly related to the sophistication of innovation and invention capability. Examples are chemicals, IT, communications.
Question 2. How does our invention and innovation capability compare to our competitors?
How is the enterprise positioned against their competitors with respect to invention and innovation capability? Or would you locate your enterprise along the following continuum:
A. Our invention and innovation capability on balance legs compared to most of our competitors.
B. Our invention innovation capabilities are generally on a par with the majority of our competitors.
C. Our invention and innovation capabilities are superior to the majority of our competitors.
D. We are considered among the top companies in our industry with respect or invention and innovation capability.
Question 3. How large are IP portfolios held by the leaders in our industry?
This question focuses on the average size of IP portfolios held by the leading companies within an industry. Is measured by reference to IP families. The relevant number for IP portfolio management purposes is the number of discrete patents, trademarks, or other items which may be filed and registered in multiple jurisdictions. Of course there are many characteristics of an IP portfolio that are important, not the least of all being the quality of the IP in the portfolio. But as an additional indirect measure of importance of IP in an industry, it is useful to consider the size of the IP portfolio held by leading companies in an industry as follows:
A. Small to none: average portfolio is less than 50 IP families.
B. Moderate: average IP portfolio is less than 500 IP families.
C. Significant: average IP portfolio is less than 5000 IP families.
D. Large: average IP portfolio was greater than 5000 IP families.
Question 4. How does our IP portfolio size compare with our competitors?
Where would you locate your enterprise along the following continuum?
A. Our IP portfolio is smaller than those of most of our competitors.
B. Our IP portfolio is about the same size as most of our competitors.
C. Our IP portfolio is larger than that held by most of our competitors.
D. Our IP portfolio is acknowledged to be the largest in our industry.
Question 5. How sophisticated is our industry with respect to IP management practices?
This question focuses on the level sophistication of our industry with respect to IP management practices. While this can be asked as a series of complex questions, as a form of shorthand in this context, it is suggested that a level of sophistication with respect to IP management practices can be determined by distinguishing among managing IP as a legal, business, or strategic asset. Given this context how would you locate your industry among the following continuum?
A. Most competitors are not active in acquiring or managing IP
B. Most competitors are focused on building up an IP portfolio and/or focused on managing IP is illegal asset.
C. Most competitors are focused on managing IP is a business asset.
D. Most competitors are focused on managing IP is a strategic asset.
For definitions: (I) companies that manage IP is illegal asset can have IP attorneys in charge of the portfolio, tend not to have significant revenues from IP or technology licensing, and tend to file for new and renew IP is a matter of course. (II) companies that manage IP as a business asset tend to have created an IP management function at the corporate and/or business unit level, are selective about what IPRs are created and renewed, tend to have an active program for creating revenues from IP licensing, actively exploit their IP rights. (III) companies that manage IP at a strategic asset are good at managing IP as a business asset, and take active steps to protect the company’s ability to innovate in the future, use IPRs to create competitive advantage through a variety of approaches, such as selective litigation, using IP to protect standards, and use IP rights to channel industry activities along desirable paths
Question 6. How does our IPM level of sophistication compare to our competitors?
Where would you locate your enterprise along the following continuum?
A. Our IPM practices in general are weaker and lag those of most of our competitors.
B. Our IPM practices are on a par with most of our competitors.
C. Our IPM practices on average are more sophisticated than most of our competitors.
D. Our IPM practices are acknowledged to be the leading edge for our industry.
Group B: Assessing IP management strategic alignment and positioning
Question 7. Importance of IP and IP management to our business strategy
What is your judgment about the role that IP and IP management have in the company’s business strategy? Where would you locate your enterprise along the following continuum?
A. IP is not an important factor in our business strategy, and our level of IP management capabilities is not a competitive factor for us.
B. IP is of moderate importance compared to other competitive factors, and maintaining a competitive level of IP management capability is a factor in our strategy.
C. IP is an important factor for us and IP management is a significant factor in our competitive positioning.
D. IP plays an important and essential role in our strategy, and the level of our IP management capabilities is one of the most important critical success factors for us.
Question 8. How are IP and IP management positioned in our latest business strategy document?
One of the clues to the perceived importance of IP in IP management with respect to the company strategy is the amount of detail devoted to it in the latest strategy document. How would you locate your enterprise along the following continuum?
A. IP and IP management is not explicitly mentioned in our latest business strategy document.
B. IP and IP management is mentioned in passing in our latest business strategy document, but not a lot of attention is given to it.
C. Our business strategy document explicitly describes in detail the role of IP in IP management in our strategy.
D. Our latest business strategy document includes a detailed analysis of our IP portfolio and IP management capabilities, and includes specific targets, actions, timelines, and responsibilities for future enhancements.
Question 9. Do you have an IP function and if so what is its role.
How would you locate your enterprise along the following continuum?
A. We do not have a defined or formalized function with the responsibility for managing intellectual property, knowledge, or intellectual capital.
B. Our IP function is largely perceived as an administrative function that focuses on securing and maintaining protection of our intellectual property rights arising from current inventions.
C. Our IP function collaborates actively with business managers to support business unit strategy and realize optimum value from IP rights, as well as securing and maintaining those rights.
D. Our IP function makes a major ongoing role to strategy formulation, and is highly proactive in securing IP rights that are highly significant to the future evolution of our key technologies and lay ground work for future inventions.
Question 10. Speed of adoption of IP management best practices
Another way to get a fix on the positioning of IP management function is its approach to adopting IPM best practices as they emerge over time. Or would you locate your enterprise along the following continuum?
A. We adopt new IP management practices after they have diffused widely in our industry.
B. We monitor the IP management practices of the leaders in our industry, and adopt similar practices once a clear direction has emerged.
C. We monitor IP management developments broadly, and are early adopters of new approaches that help enhance our capabilities.
D. We are recognized as an organization that creates new practices that are eventually adopted by others as best practices.
Group C: Assessing our IP management processes and capabilities in greater detail
Question 11: IP generation and protection
IP generation and protection includes the processes and capabilities that are involved in identifying innovations that should be protected, and deciding on the best method of protection. Where would you locate your enterprise along the following continuum?
A. Our processes and practices for managing and screening disclosures, and making decisions about patenting or other protection approaches are largely rudimentary three or nonexistent.
B. We have reasonable processes and practices for managing and screening disclosures, and making decisions about patenting or other protection approaches, and they come into play late in the innovation process.
C. Our processes and practices for managing and screening disclosures, and making decisions about patenting or other protection approaches are employed early in the innovation process, and are supported by advanced IT enabled analytical tools.
D. Our IT enabled processes and practices for managing and screening disclosures, and making decisions about patenting or other protection approaches are extensively automated in ways that are regarded as leading-edge within our industry and set the pattern for others to follow.
Question 12. IP portfolio management
IP portfolio management includes processes and capabilities that are involved in decisions about what IP rights to renew, monitoring the performance of the portfolio, and tracking its evolution. Where would you locate your enterprise along the following continuum?
A. Our portfolio management practices and capabilities are less developed than the leaders in our industry.
B. Our IP database focuses on patent management and helps is managed patent renewal costs and identify licensing opportunities.
C. Our IP database is comprehensive and is supported by advanced decision support tools that help us to decide when, what, and how to protect all forms of IP.
D. Our analytical and performance measurement systems enable us to demonstrate the systematic evolution of our IP portfolio, which is been demonstrated to be an important source of competitive advantage.
Question 13. IP value extraction commercialization
IP value extraction commercialization includes the processes and capabilities that are involved in extracting value from the portfolio. Where would you locate your enterprise along the following continuum?
A. We do not extract significant value from our IP portfolio except through protection afforded to strategically important technologies.
B. Value extracted from the IP portfolio is mainly through patent licensing, and generates Limited, incremental revenues.
C. We use various advanced analytic and decision support tools to identify value extraction opportunities, and generate results which are significant to the Corporation’s overall performance..
D. Our value extraction capabilities and systems are recognized as a critical competitive advantage for the enterprise.
Question 14. Strategic leverage from IPM
Strategic leverage from IPM focuses on the processes and capabilities that can help build a strategic advantage for the enterprise. Where would you locate your enterprise along the following continuum?
A. We have limited competitive intelligence about IP portfolios, strategies, and capabilities of the leading companies in the sectors within which we operate.
B We periodically undertake initiatives designed to enhance our knowledge of competitors IP portfolios, strategies, and capabilities.
C. Our advanced and IT enabled systems provide us with the intelligence needed to undertake strategic patenting, strategic disclosure, and take other types of preemptive actions designed to enhance our competitive position.
D. Our advanced IT enabled systems provide us with the intelligence needed to lead standards and other types of collective initiatives with the potential transformer industry.
Question 15 IP management performance measurement
IP management performance measurement focuses on the processes and capabilities attract the overall performance of the IP management function on an ongoing basis. Where would you locate your enterprise along the following continuum?
A. We have no specific processes to track the performance of the IP management function.
B. The IP management function is tracked using operational metrics to track patent filings and related activities and standard financial metrics.
C. We have detailed drill down capabilities for IP management that allows us to link goals of individual organizational units to the broader performance targets for the enterprise as a whole.
D. We use a variety of specialized analytics that allow us to comprehensively track value creation from IP and IP management and that link performance to the overall strategic performance objectives of the enterprise.
The questions in this section explore the company’s stance with respect to leading-edge practices and new frontiers in and beyond IP management.
Question 16: Intellectual Capital Management
This question explores whether we are only focused on IP management, or have the adopted practices for management of other types of intellectual capital. Where would you locate your enterprise along the following continuum?
A. We do not actively manage other forms of intellectual capital other than IP.
B. We recently have begun developing some specific processes for managing other forms of intellectual capital.
C. We have well-developed processes for managing specific types of intellectual capital beyond IP.
D. Managing intellectual capital is virtually identical with managing the enterprise. Our key processes take IC into account, and all employees are part of the IC management process.
Question 17: New Business Models
Where would you locate your enterprise along the following continuum?
A. Our business model is exclusively traditional, and we expect it to stay that way.
B. Our business model is primarily traditional, but we earn significant revenues from IC related activities.
C. Almost all business units in our enterprise are traditional; we are actively developing some which are primarily earning revenues from IC activities.
D. We can foresee a time when the majority of our revenues are derived from intellectual capital related activities.
All businesses participate in a value chain or network. Increasingly, leading businesses are recognized for their role for managing IC beyond the boundaries of the organization, in relation to other participants in the value chain or network. Where would you locate your enterprise along the following continuum?
A. Our intellectual property and intellectual capital management activities take place entirely within the boundaries of our organization.
B. We actively manage ongoing relationships with universities and research organizations that have knowledge and/or technologies that can support our innovation activities.
C. We actively participate in upstream and/or downstream co-creation activities and have processes in place to manage the intellectual property and intellectual capital issues across organizational boundaries.
D. Our business strategy includes active management of intellectual property and intellectual capital processes throughout the value network within which we operate.