Ranking companies based on their patent value is critical, as not all patents are created equally
Chicago, IL (Vocus) January 20, 2010
Ocean Tomo, LLC, the Chicago-based Intellectual Capital Merchant Banc® firm, announced the results of a proprietary study performed for Bloomberg BusinessWeek.
The study, which ranks the 25 companies with the Most Valuable Patent Portfolios, was performed using the Ocean Tomo PatentRatings® system. This proprietary web-based platform (U.S. Patent No. 6,556,992) calculated the relative quality of patents issued by the world’s 1,000 largest companies (by revenue). “Ranking companies based on their patent value is critical, as not all patents are created equally,” states Jonathan Barney, PatentRatings® system inventor and Ocean Tomo Managing Director, “Simply counting how many patents a firm holds can lead to a very misleading view.”
The Ocean Tomo PatentRatings® study conducted for Bloomberg BusinessWeek suggests that companies holding high quality patents do indeed shape their respective industries. “Patents are one of the most reliable and critical indicators of a company’s strategic intent,” says James E. Malackowski, President and CEO of Ocean Tomo. “Furthermore, companies holding valuable patents in sufficient quantity are likely to shape industry direction and outperform their peers with respect to equity returns.” Malackowski cites the strong performance of the Ocean Tomo 300® Patent Index (NYSE Euronext: OTPAT) and related Exchange Traded Fund (NYSE Arca: OTP) as support for the firm’s conclusions. "The ultimate value of a patent portfolio is not the rating or even licensing income; both are indirect effects” notes Malackowski. “The ultimate measure of value is the portfolio's effect on earnings and stock price. Our rating system has proven to be a forward looking indication of stock value with proven out-performance over a sustained period of time.”
Top 25 firms selected cumulatively account for about $1.6 Trillion in annual sales and enterprise value of about $2.5 Trillion (median revenue of $53 Billion with a firm value of $46 Billion). The inventions of these firms significantly influence the global economy and their respective industry sectors such as Computers, Wireless, Medical/Pharmaceutical, Industrials, Semiconductors and Consumer Electronics.
By studying the patents issued to a company over the past five years, Ocean Tomo determines how inventive a firm is using its proprietary patent quality measure, the IPQ® score (as provided by http://www.patentratings.com). The IPQ® score is a numerical measure of patent quality with a median value set at 100. “To use IPQ® scores as a proxy for measuring the inventiveness of a firm, we time adjust (e.g., age, technology obsolescence rates) the data, recognizing that a patent has a finite useful life,” explains Barney. “Although the business community has historically leveraged financial data and market share information to assess relative competitiveness of firms, going forward, it will be critical to identify inventive strength.”
Ocean Tomo reports that the total Inventiveness Index of a firm signifies inventive prowess of a company as well as its likely ability to have a defensible advantage in the marketplace. Collectively such data demonstrates an indication of true value creation ability.
Methodology for Top 25 Most Inventive Company Selection
The Top 25 Most Inventive Companies were selected from the 1,000 listed companies with the greatest revenue over the most recently reported trailing one year period (9/2008 to 9/2009). These firms were rank ordered based on an analysis of their patent portfolio over the past five years using Ocean Tomo PatentRatings® software to calculate the relative quality of all patents issued by the U.S. Patent and Trademark Office. The system analyzes more than fifty independent and objective factors. Scores are based on identified predictor variables (“metrics”) determined to have statistically significant correlation to the payment of patent maintenance fees (periodic taxes paid to the U.S. Patent Office).
The premise of the rating model is that more valuable, higher-quality patents will be maintained at a higher frequency (have a longer lifespan) than less-valuable patents. Typical metrics include the number, length and type of patent claims, the presence or absence of limiting claim language, the patent prosecution history, the technology classification, the growth rates and filing of new applications in a given technology space, and more than thirty other relevant factors. Ocean Tomo’s patent quality scores are calculated by multiplying statistically-determined coefficients with variables representing each of the relevant metrics, and then by normalizing the resulting values to an appropriate scale.
About Ocean Tomo PatentRatings® Software System
Ocean Tomo PatentRatings® software system is the first proven, market-validated software platform for objectively assessing patent quality, relative valuation, and competitive trends for patents, patent portfolios, companies, and technology sectors. The PatentRatings® system provides customizable data solutions and delivers actionable data to companies, investors, bankers, attorneys and other intellectual property professionals and decision makers. Ocean Tomo PatentRatings® provides an unparalleled understanding of patent quality, technology implications, and strategic insight. Visit PatentRatings (http://www.PatentRatings.com) for more information about data subscriptions or individual reports.
About Ocean Tomo
Established in 2003, Ocean Tomo, LLC (http://www.OceanTomo.com), is the leading Intellectual Capital Merchant Banc® firm. The company provides financial products and services related to Intellectual Property expert testimony, research, investments, risk management and transactions. Ocean Tomo assists clients – corporations, law firms, governments and institutional investors – in realizing Intellectual Capital Equity® value broadly defined.