Patent portfolios for strategic R&D planning

1. Patent portfolios for strategic R&D planning Journal of engineering and technology management 作者：Holger Ernst 報告人：楊易霖

2. outline • Introduction • Patent portfolios on the company level • Patent portfolios on the level of technology fields • Discussion • Conclusions and implications for further research

3. Introduction • A cornerstone of technology management is the establishment of technology monitoring systems, which allow a company to timely anticipate technology changes within its competitive environment, which can, at the same time, yield either chances for new business opportunities or risks for existing businesses. • However, empirical evidence shows a discrepancy between the perceived importance and the actual level of information on competitor’s R&D strategies.

4. Introduction • This information deficit can first be attributed to the fact that R&D figures are either not at all published by companies or, if published, are only available on an aggregate level and are almost impossible to compare due to measurement differences. • Second, empirical studies reveal that most companies rely on sources of information for technology monitoring, which allow to detect technological changes only, when the new product has already been introduced into the market, e.g., trade fairs, product analyses. • Consequently, the time to effectively react to technological challenges is often not sufficient.

5. Introduction • Therefore, several authors have called for the use of information contained in patent data in technology monitoring. • Major support for the use of patents as a measure for R&D activities comes from quantitative empirical research, where the lagged relationship between R&D activities, patents and market changes on the company level has been examined. • This result supports the use of patent data even as an output measure of R&D, since they indicate those technological activities which lead to subsequent market changes. This information proves to be very valuable, since it goes far beyond the input-oriented measure of the level of R&D spending by patents (Ernst, 1996).

6. Introduction • Several studies show that many companies have not yet recognized the benefits of patents as a strategic information source and therefore rarely use patent information for strategic planning purposes. • This paper picks up this issue and introduces patent portfolios to be simultaneously used for the strategic planning of R&D. • Based on patent data from 21 German, European and Japanese mechanical engineering companies.

7. Patent portfolios on the company level

8. Patent portfolios on the company level • We use the patent portfolio, as described above, to evaluate the overall patenting strategy of the 21 companies in our sample. • For this purpose, we gathered patent data, which had been published between 1981 and 1992 by the German Patent Office. • Based on this patent data, we calculated five different patenting indicators per firm with respect to patent activity and patent quality.

9. Patent portfolios on the company level • Five different patenting indicators per firm with respect to patent activity and patent quality. • Patent applications (PA) • This patenting indicator measures the total number of patent applications at the GPO. The number of patent applications measures the patent activity of a company. • Share of granted patents (Share of GP) • A patent will only be granted, if the technological invention consists of new technological elements. Share of GP = granted patent/(patent applications -patents under examination)

10. Patent portfolios on the company level • Share of valid patents (Share of VP) • Patents are valid, if they have been previously granted and the protection fee is still paid for by the patent applicant. It can be argued that valid patents are still economically valuable for the company, i.e., the economic benefit is larger than the cost of maintaining the patent. (Share of VP=valid patents/granted patents) • Share of US patents (Share of USP) • International patent applications are considered to be more valuable, since the cost of obtaining an international patent is substantially higher than that of a national patent application. (Share of USP = US patents/patent applications)

11. Patent portfolios on the company level • Citation ratio (Cit-Ratio) • The number of citations received by a patent in subsequent patent documents can also be viewed as a sign for an economically important invention. (Cit-Ratio = patent citations/patent applications) • Based on the five individual patenting indicators, two additional indicators of patent quality and patent activity per firm need to be defined: • Patent Quality • Patent quality is calculated as an index, which consists of the sum of relative measures for each of the above described individual indicators of patent quality, i.e., the shares of granted, valid and US patents and the citation ratio. • Patent Activity • Similarly to patent quality, the company’s patent activity is measured by the number of its patent applications relative to the average number of patent applications over all 21 companies. (Patent activity per firms = number of patent applications per firm/mean number of patent applications over all 21 firms)

12. Patent portfolios on the company level

13. Patent portfolios on the company level

14. Patent portfolios on the company level • Whereas the patent portfolio on the company level contains useful information for the evaluation of overall R&D strategies, it fails to provide information about variations in companies’ positions according to specific technological fields. • Thus, differences in technological emphasis cannot be identified and evaluated, i.e., companies’ technological strengths may vary depending on the respective technological field. • Therefore, in the following section a patent portfolio on the level of technology fields is presented, which can serve as a basis to support strategic R&D allocation decisions.

15. Patent portfolios on the level of technology fields

16. Patent portfolios on the level of technology fields • On the abscissa the relative patent position is measured, which is derived from the number of patent applications by the firm relative to the number of patent applications of its most active competitor. • The abscissa values are predominately determined by the behavior of the firm under consideration. • On the ordinate the attractiveness of each technological field is assessed by using growth rates of patent applications. Here, the growth during the past 4 years relative to the growth in the preceding 16 years is measured, which covers the 20 year patenting period and stresses recent changes in patent growth. • The ordinate values are largely influenced by all companies that file patents in the respective technological fields.

17. Patent portfolios on the level of technology fields • From Fig. 3 it becomes obvious that the company holds strong patent positions in many of the considered technological fields. • Basically, the patent portfolio can be used to evaluate technological strengths and weaknesses of competing companies with respect to different technological fields.

18. Patent portfolios on the level of technology fields • Definition of technology fields • Five technological fields were identified in intensive talks with company experts. • Data retrieval • Patent data were derived from the database PATDPA for the time period between 1981and 1992. • Since the case study was carried out at the end of 1994, patent applications, which had been filed until the end of 1992 could only be included, due to the 18-month time lag between priority date of the patent application and its publication. • For the years 1988 to 1992, patent applications, which are assumed to mirror the latest technological developments were retrieved.

19. Patent portfolios on the level of technology fields

20. Patent portfolios on the level of technology fields • The total number of patents can be allocated according to each patent’s classification with respect to the IPC classification scheme. However, this approach turned out to be problematic, since the respective IPC-classes did not always gave a clear picture of the main technological content of the individual patent. • Based on all pieces of information contained in a patent document and with the inclusion of company expertise, patents were assigned to the five technological fields. • Here, it became obvious that the essence of the technological invention did not always coincided with the assigned IPC-class. Furthermore, in a substantial number of patents only the supplementary IPC-class provided the decisive piece of information for allocating the respective patent to the correct technological field.

21. Patent portfolios on the level of technology fields • The drawing of patent portfolios comprehends three elements, the relative patent position, the technology attractivenessand the technology importance. • The relative patent positionof a company in a particular technological field measures the number of patents owned by the company relative to the number of patents of a competitor in a particular technological field. • number of firm’s patents in the technological field / number of patents in the technological field from the most active competitor. • Thus, the maximum value for the relative patent position in each technological field is 1.

22. Patent portfolios on the level of technology fields • The technology attractivenesswas measured by calculating growth rates of patent applications at the GPO in the respective main and supplementary IPC-classes, which are of relevance for each technological field. • Two different growth rates of patent applications were calculated. • the relative growth rate (RGR) • measures the average growth of patent applications in a technological field relative to the average growth of total patent applications in all above defined technological fields over the entire time period of our analysis between 1981 and 1992. • relative patent growth per technological field (RGR) = average growth of patent applications per technological field between 1981 and 1992 / average growth of patent applications in all technological fields between 1981 and 1992.

23. Patent portfolios on the level of technology fields • the relative development of growth rates (RDGR) • measures the development of the average growth of patent applications in a technological field relative to the development of the average growth of total patent applications in all technological fields. • relative development of patent growth per technological field (RGDR) = development of patent growth per technological field / development of patent growth in all technological fields. • development of patent growth per technological fields = average growth of patent applications per technological field between 1987 and 1992 / average growth of patent applications per technological field between 1981 and 1986.

24. Patent portfolios on the level of technology fields • The importance of a technological field within the companies’ portfolio of R&D activities is measured by the share of patents in a technological field relative to the overall number of patents owned by the company. • Number of firm’s patents in a technological field / total number of firm’s patents.

25. Patent portfolios on the level of technology fields

26. Patent portfolios on the level of technology fields

27. Patent portfolios on the level of technology fields • Company GE3 is the dominant patentee in TF1. This technological field is given the highest priority within the company’s patent activity. The technological efforts seem to be mainly directed towards the development of new machining concepts and machining components. • Company GE3 also holds strong patent positions in TF2 and TF3, however, these technological fields receive less attendance compared to TF1. • 以上二點可看出公司研發投入領域、重視哪一領域的投入。 • Contrary to company GE3, the technological effort of company GE1 does not vary over the technological fields. Each technological field, except TF5, is given almost equal importance. • It is noteworthy that company GE3 captures a weak patent position in TF4, which receives a high technology attractiveness rating and which is dominated by Japanese competitors. • 以上二點與其它公司作比較討論。

28. Patent portfolios on the level of technology fields

29. Patent portfolios on the level of technology fields • TF3 and TF5 receive high attractiveness ratings independently of the respective growth rate taken to measure technology attractiveness. Therefore, strong patent positions in these technological fields are to be evaluated positively. • 可得知技術領域的未來發展性。 • According to expert judgments, the development potential of TF5 is viewed to be even more important, since new technological developments in this field are believed to have the highest competitive impact. • 可詢問相關專家或是從相關報導，為何此技術具發展性。 • Thus, competitive moves in this technological field have to be recognized immediately and be included in strategic R&D investment decisions.

30. Patent portfolios on the level of technology fields • Reliability of positions in patent portfolios • The evaluation of technology attractiveness has a large impact on the strategic recommendations derived from the positions in patent portfolios. • Thus, it should be examined to what degree positions in patent portfolios deviate depending on the respective attractiveness measure on the ordinate.

31. Discussion

32. Conclusions and implications for further research • Active patentees of high-quality patents are the technological driving forces within the industry under consideration and the technological potential of selective patentees of high-quality patents should not be underestimated. • Companies positioned in the lower quadrants of the patent portfolio should basically question the productivity of their R&D activities. • These technological positions were further evaluated with regard to the attractiveness of each technological field, since it becomes essential for the formulation of strategic R&D investment decisions. • Based on our experiences made in this case study we summarized recommendations for the effective use of patent portfolios in further applications.

33. Conclusions and implications for further research • The automatic allocation of patents to technological fields according to IPC-classes increases the efficiency of the patent portfolio method. However, this may come at the expense that patents are not assigned to the proper technological field. • It has been suggested to measure both dimensions of the patent portfolio as multidimensional constructs.

34. Conclusions and implications for further research • In this article, one could attempt to directly test the relationship between a company’s position in the patent portfolios and various measures of economic performance. • The hypothesis to be tested is that companies holding strong patent positions in highly attractive technological fields are more successful than those competitors holding weak patent positions in unattractive technological fields.