The Industrial Application of Patent Analysis: An Empirical Study.

Abstract

This research investigates the value of patent analysis in an industrial context. An empirical approach is taken to test the benefits and limitations of a series of patent analysis techniques. The technology profiles of a group of competitor companies within the oil/petrochemicals area are mapped to evaluate the analysis techniques. Patent quantity analysis benefits from speed of execution but provides no indication of patent quality. The International Patent Classification (IPC) hierarchy can map a company’s technological diversity but the correlation of IPC categories with industry or product areas may present difficulties in a business-focused analysis. An experiment within the polymer chemistry area suggests there is a positive association between a patent’s citation counts and its commercial significance, as rated by expert grading. This supports the use of patent citation data to compare the quality of companies’ patent portfolios but the time lag to build citation counts may limit its usefulness in practice. Maps of inter-company patent references may indicate technological leadership but the value of other bibliographic-based techniques appears more marginal. A trend of inter-company differences in the volume of the ‘References Cited’ list is observed. If confirmed, this could impact the value of bibliographic-based patent analysis techniques. Patent analysis can assist in a merger evaluation, particularly at the due diligence phase, but it is often of secondary importance to financial and product market information. Several factors that may distort patent statistics are identified. These include inadequate company name consolidation, errors in patent classification and differences in national patent legislation. The study concludes that patent analysis has a valid place in the corporate environment, provided the output is interpreted judiciously.