Use of Patent Information in theFinancial IndustryA huge potential for financial analysts

Dr. Jochen Spuck, Manuel Wirz

CFA Society SwitzerlandEvent of April 20, 2017

The purpose, our motivation, your expectations

• Why:convince CFA’s to think about patent informationdifferently

• How:by explaining the benefits of modern patent analysis

• What:insight into adding quality to patents, added valueto benchmarking of companies, technologicaltrend analysis, company valuations for M&A’s…

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The golden circle, Simon Sinek

Overview: 5 steps to go

Basic patent knowledge•Patent life cycle•Patent family

Valuableindicators•Legal status•Coverage•Citations

Normalized data•Patent practice•Age of citations•Technological

fields

Business relevant parameters•Corporate

information•Market

From patent to businessinformation•Methodology•Validation

Examples• Early

prediction• Mergers• Trendings

3

Basics: Life cycle of a patent (simplified)

4

Priority = Filing date

6 months +/- 18 months

ForeignFiling

Published Granted Expired

EP

US

others

12 months

20 years

PatentFamily

Basics: bibliographic data

5

Patent number

Priority date

Patent classes

Applicant

Inventor

Filing date

Title

Abstract

Valuable indicators: legal status (simplified)

Rationale:discourage others to use invention

• active patents are of value• Expired/ withdrawn/ rejected of no value

6

Priority = Filing date

6 months +/- 18 months

ForeignFiling

Published Granted Expired

12 months

Pending Grant

legal status = active/pending

Valuable indicators: geographical coverage

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• Annual patent fees for territorial rights• Patent filing and application costs (lawyer, translations)

Rationalecosts = value

• Number of countries applied forU

SA

Chi

na

EP

pen

ding

Japa

n

PC

T pe

ndin

g

Can

ada

Sou

th K

orea

Aus

tralia

Uni

ted

Kin

gdom

Ger

man

y

Portfolio Size 383 188 142 101 99 87 80 71 38 33

Countries protected: Countries in which patents or patent applications existand are active

countries protected

Valuable indicators: citations

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Applicant ofpatent

Patent office

Patents

Patents

Publi-cations

Publication date

citingcited

backward citation forward citation

past future

Forward citationsfrom patent office

Rationale:forward citations

• considers prior technology of relevance• expert rating from patent office of higher value

How to add quality: Normalize patent office practices (1)

ProblemDifferences in average numbers ofcitations across patent offices

SolutionDiscount factor to normalize citationfrequency between patent offices

9

0

2

4

6

8

10

12

14

Num

bero

fcita

tions

Patent Office

Average number of citations per patent application

EP DE GB

US

Source: J. Michel, B. Bettels (2001): Patent citation analysis: A closer look at the basic input data from patent search report. Scientometrics 51, pp. 185-201.

How to add quality: Normalize age of citations (2)

ProblemAverage number of citations receivedis decreasing with patent age

SolutionCorrecting time dependency ofcitations

Approach No of citations per year/ no ofcitations all patents of this year

10

0102030405060708090

100

Num

bero

fcita

tions

(in %

)*

Year

Average number of citations a patent receives over time

Source: Ernst, H., Omland, N. (2011): The Patent Asset Index - A New Approach to Benchmark Patent Portfolios. World Patent Information 33, pp. 34–41.

* 1998 = 100%

How to add quality: Normalize technological fields (3)

ProblemDifferences in average number ofcitations across technologies

SolutionCorrect the technology dependencyof citations

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Source: own analysis of 10 April 2017

A61B: Diagnostics / Surgery

H01L: Semiconductor Devices

C02F: Treament of water

Avg. number of citations in IPC classes

How to add quality: add business relevant parameters (1)Corporate information

Problem:• Patent information applicant ≠

owner• Spellings, typos• Name changes, mergers,

aquisitions, spin-offs

Solution:• Corporate information providers

linked to patent search databases

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RocheHoffmann-La Roche

Hoffmann La RocheRoche Holding

Roche DiagnosticsGenentech

ChugaiVentana

…

How to add quality: add business relevant parameters (2)Market Information

Problem:• No information on market size in

patent data

Solution:• Use Gross Domestic Product (GDP)

as proxy for market size

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China

EUUS

India

JapanRussia

0

5

10

15

20

25

TnIn

t$ (G

DP d

olla

r)

Countries

Largest economies by GDP in 2017

Source: According to International Monetary fund estimates. Gross domestic product (GDP) dollars in purchasing power parity (PPP) calculations. www.wikipedia.org/list of countries by GDP

From patent to business information: Concept

Defineparameters Aggregate data Analyze, visualize

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• Active patents• Countries protected• Forward citations• Corporate information• Market (GDP) Harmonize Normalize

• Technological fields asreference data:• Smart house• Fintech• 3D printing• …

• Select appropriateanalysis

• Analysis andinterpretations

• …

TECHNOLOGY RELEVANCE™Worldwide citations received from later patents, adjusted for age, patent office practices and technology fieldAverage value: 1

MARKET COVERAGE™Market size protected by active patents and pendingpatent applications on a certain inventionValue of a granted US patent: 1

PATENT ASSET INDEX™(Sum of all Competitive Impacts of an entire portfolio)

COMPETITIVE IMPACT™(Individual patent strength)

The relative business value of a patent

LaterPatent

Individual Patent

Source: The scientific publication was made in: Ernst, H., Omland, N. (2011): The Patent Asset Index – A New Approach to Benchmark Patent Portfolios. World Patent Information 33, pp. 34–41. An overview can be found in the document “Introduction to the Patent Asset Index” available from PatentSight. Patent Asset Index is a trade mark of PatentSight

∑

From patent to business information: Methodology byPatentSight

7.8

0.7

0

2

4

6

8

Opposed patents Abandoned patents

The average Competitive Impact of

opposed patents is significantly higher

Com

petit

ive

Impa

ct

CONSIDERED A KEY PATENT

ATTACKED AND DEFENDED

ENFORCED IN COURT

MAINTAINED LONGER

COMMERCIALIZED

STANDARD-RELEVANT

Validation studiesPatents with a high Competitive Impact are more frequently

Source: Sample: 74.732 patent families. Source: Ernst, H., Omland, N. (2011): The Patent Asset Index - A New Approach to Benchmark Patent Portfolios. World Patent Information 33, pp. 34–41.

From patent to business information: validation

From patent to business information: technologicalfield as reference

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Questions:

1. Howcompetitive ismy portfoliocompared tomy competitors(technologicalfield)?

Answers:

1. I have lost compared tothe averagefield from 2000 to 2006

2. I am still behindthe fieldaverage, but recovering

Average competitive impact (CI)

0

0.5

1

1.5

2

2.5

3

my portfolio Field average CI

From patent to business information: portfolio strength

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Questions:

1. Is my portfoliostronger?

2. Is my portfoliogrowing?

Answers:

1. Yes, constantincrease in strength (PAI)

2. Yes, constantgrowth ofportfolio size

050

100150200250300350400

Patent Asset Index™ Portfolio Size

Patent Asset Index (PAI)

19N

umbe

rofa

ctiv

epa

tent

fam

ilies

Year

Com

petit

ive

Impa

ct™

Year

From patent to business information: the global view

Quantitative (old way) Qualitative (new way)

Source: Analysis using the PatentSight database. Competitive Impact ™ is a trademark of PatentSight GmbH and represents the relative business value of patents.

From patent to business information: the Swatch case

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Apple watch: Launch 2015

Quantitative (old way) Qualitative (new way)

Prediction

Source: Analysis using the PatentSight database. Competitive Impact ™ is a trademark of PatentSight GmbH and represents the relative business value of patents.

Analysis of the number of citations the Swatch portfolio receives from other companies

From patent to business information: portfolio analysis

Market leaders dominate in both quantity and quality

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size of portfolio

Aver

age

qual

ity

+

–– +

Market leadersTechnology leader orspecialists

Market playersMe too or newcomers

Bubble Area: Overall value of the portfolio in the selection (sum of all quality values of the aggregated individual values)

From patent to business information: Mergers & Aquisitions

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British American Tobacco has agreed to a $49.4 billion takeover of U.S. rival Reynolds American, creating the world’s biggest listed tobaccocompany… Reuters, Jan 17, 2017

Source: Analysis using the PatentSight database. Competitive Impact ™ is a trademark of PatentSight GmbH and represents the relative business value of patents.

From patent to business information: Targetingemerging technologies

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Pate

nts

Asse

t Ind

ex

Year

PortfoliogrössePortfolio Size

Analysis of players in medtech field «energyconversion»

Com

petit

ive

Impa

ct™

Source: Analysis using the PatentSight database. Competitive Impact ™ is a trademark of PatentSight GmbH and represents the relative business value of patents.

Take home message

• Patent data contains usefull business information• Normalized parameters are key to add quality to patent information• The adequate analysis transforms patent information to valuable competitive

advantage• Early prediction is possible: identify technology information prior to launch of

products• Impact of mergers & aquisitions may be simulated, potential candidates may

be analysed• Emerging technologies are detectable through trend analysis

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Contact

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Manuel WirzPhone +41 31 377 73 75Email manuel.wirz@ipi.ch

www.ip-search.swiss ip-search · Swiss Federal Institute of Intellectual PropertyStauffacherstrasse 65/59g · CH-3003 Bern

Jochen SpuckPhone +41 31 377 73 85Email jochen.spuck@ipi.ch