The use of patent analysis in evaluating portfolios
Bob Stembridge
Thomson Scientific
June 2005
This article is an abridged and adapted version of the original that appeared in “IP Value 2005: Building and enforcing intellectual property value” published by Globe White Page.
According to Mark Twain quoting the 19th Century British Prime Minister, Benjamin Disraeli, there are three kinds of lies: “Lies, damn lies, and statistics”. And certainly, a measure of caution is essential in using statistics. But to dismiss them completely is to deny a valuable tool for helping to evaluate and understand sets of data.
Applications of patent analysis
The use of patent analysis to evaluate and understand trends in the
development of technologies, and in the competitive positioning of organizations
within areas of technology, is an evolving field with many exciting recent developments.
These include improved techniques for:
- Assessing the technological and competitive landscape in which an organization operates
- Changing emphasis in activities over time
- Identifying the key technologies on which an organization’s portfolio is built
Understanding the content of an organization’s portfolio can help explain how and where it fits in with the organization’s competencies, and what the market opportunities are for exploiting the owned technology. It can also help to identify gaps where complementary technology can be licensed-in, and identify non-core technology where know-how can be licensed-out or divested for financial return. These analyses are an essential part of assessing the competitive positioning and potential value of an organization’s technology competencies and holdings.
Some of the techniques used within patent analysis are illustrated here, using a couple of NASDAQ-listed companies as examples.
Intel Corporation (Nasdaq: INTC)
Founded in 1968, Intel introduced the world's first microprocessor
in 1971. Today it supplies the computing and communications industries with
chips, boards, systems, and software building blocks that are the ingredients
of computers, servers, and networking and communications products. This technology
is based on many thousands of patented inventions, protected around the world.
A review of Intel’s patents holdings reveals the depth and breadth of their technology: a search for Intel as patent assignee amongst US granted patents returns 9,401 results. But what are the key areas of technology covered by these patents, and how does this coverage compare with Intel’s competitors?
An analysis of the IPC (International Patent Classification) for Intel’s patents shows dominance in the area of digital data processing (IPC G06F), with 35.1% of patents relating to this area (figure 1).
A complementary analysis (figure 2) can divide the patent portfolio into clusters of similar technology, as defined by the terminology used within the patents to describe the technology:
The twelfth cluster in the patent portfolio analysis contains 476 patents and comprises technology relating to flash memory devices (figure 3).
How does Intel’s technology stack-up against the competition?
Advanced Micro Devices are Intel’s closest rival. By conducting
a similar search of US patents, and analysis by IPC of AMD’s patented
technology, we can plot both holdings together on a radar map and identify areas
of dominance and overlap (figure
4).
Where Intel’s strength lies in digital data processing inventions, AMD’s is in solid state semiconductor technology. There is some overlap with Intel in this area which may indicate significant competition for this technology space.
Nanogen Inc (Nasdaq: NGEN)
One of the more recent Nasdaq-listed companies, Nanogen, was founded
in 1993 and specializes in the integration of advanced microelectronics and
molecular biology, with applications in the fields of medical diagnostics, biomedical
research, genomics, genetic testing and drug discovery. Techniques for the analysis
of nucleic acids and proteins, and clinical diagnostic assays, are important
in a wide range of fields from drug discovery through to forensic science. An
analysis of Derwent Manual Codes for Nanogen’s portfolio (figure
5) shows this range of applications.
Further evidence of the broad–ranging application of nucleic acid test methods is evident from the high citation frequency of patents describing different approaches to solutions in this area. Nanogen’s portfolio of 84 patents is a case in point. Analysis of the number of times individual Nanogen inventions have been cited by later published patents can help to measure the importance of those inventions. A scatter graph (figure 6) shows a number of significant inventions as identified by this measure.
A straight count of the number of times an invention has been cited may be misleading, since the older an invention, the longer it has been in the public domain and therefore the more times it has opportunity to be cited. A best-fit trend line showing average citations per age of invention is used to identify those inventions above the line which have been cited more frequently than would be expected on the basis of their age. These represent significantly more important inventions by this measure. The ten inventions identified as significant in this way are given in figure 7.
As a further measure of the importance of these inventions, patents for protection of the technologies claimed in each are filed in between seven and ten jurisdictions, and are covered by between four and eleven granted patents.
Conclusion
As we see here, analysis of an organization’s portfolio to map
key technologies (as identified by IPCs and Derwent Manual codes), comparison
of that technology map with competitors, and identification of key patented
inventions (as measured by forward citation frequency) are just some of the
techniques that can help understand an organization’s patent portfolio
and help sort the wheat from the chaff.
Resources used:
Delphion
Derwent Innovations Index
Derwent Analytics