Patenting Activity as an Indicator of Revenue Growth

1. Chapter 15 By: Kin Tat Lay Patenting Activity as an Indicator of Revenue Growth

2. I. Introduction • Patents are a significant factor in the success of an enterprise for many industries • Patents are assets that enabling companies to generate their revenues by selling the unique products of their research • Patents are evidence of innovation, an indication of something worth defending from others (Pic) Patent Certificate

3. Factors that determine the success of a company’s portfolio: Introduction • Timing • Demand for the inventions covered • The quality of the proprietary rights and how they are managed

4. Question Can patient activity (usually refer to the number of patents that a company filed and accepted) helps to predict income growth and future stability?

5. II. Finding the Growth Areas: Five Industries Five areas of technology: • Business methods • Telecommunications • Semiconductor manufacture • Molecular biology or biotech • Drugs

6. Finding the Growth Areas: Five Industries • The relationship between patenting activity and growth of revenue varies depending on the nature of the technology and the products • It is important for companies to keep pace with competitors by maintaining a similar rate of research and patenting activity in a growing industry

7. III. Semiconductor Field Characteristics: • Short product cycles • Innovation protected from patent may become outdated before the terms of the patent expires • If patenting rate declines consecutively over the years, it’s an indication that the company might be in danger

8. Semiconductor Field • Sample companies in semiconductor area: • Micron Technology, Advanced Micro Devices, Intel, National Semiconductor Corp.

9. Semiconductor Field Our samples provide evidence to support the fact that if the patenting rate of a company remains flat or continues its downward trend, it suggests the future revenue growth to be in danger. Also, it suggests that increasing in patenting usually accompany with increase income.

10. IV. Drugs • Longer product cycles • Potentially longer payback period than a patent for semiconductor chip improvement • Drugs are marketable for many years, even after their patent protection expire

11. IV. Biotechnology • Relatively few non-U.S. companies • U.S. is leading in biotechnology patenting activity • Most biotech products fall into one of the three categories: 1) Treatments for disease 2) Agricultural products 3) Equipment, methods, and databases for doing genetic research

12. Biotechnology • Sample companies in biotechnology area: • Incyte Pharmaceuticals, Affymetrix, ISIS Pharmaceuticals, Chiron, Human Genome Sciences, Genzyme, Inc., Immunex

13. Biotechnology

14. Biotechnology The case study provides evidence that for biotech firms, an increase in patenting activity does not guarantee an increase in income growth. Although both Incyte and Affymetrix have shown steady patenting growth over the past five years, they will have to continue the trend to maintain a secure position in their businesses and stay ahead of the competition

15. V. Telecommunications • Patents are a good indicator of technological strength for companies in the telecom business • Smaller companies should focus on patenting within a narrow specialty to lock in as much profit as possible • Companies with larger diversified patent portfolios are less vulnerable if improved technology replaces the need of a certain patented system as compared to small companies.

16. Telecommunications • Sample companies in telecommunication area: • Nokia, Motorola, Ericsson, Qualcomm

17. Telecommunications Our case study shows that patents are a good indicator of technological strength for companies in the telecom business. The relationship between patenting activity and revenues growth is similar to semiconductor businesses in which rises in patenting usually accompanied by rising income.

18. VI. Patents for Automated Business Methods • In U.S., one can obtain a patent on computer-implemented method of doing business • Most of these patents are owned by large, well-known tech companies • This patent can be sold to others who need the new technology • Owning patents in the computer-aided business area shows that the companies are starting to invest in intellectual property and are using the benefits of networking and computerization that will be a requirement for success n almost every business I in the future

19. VII. Conclusion • A rise in patenting activity does not guarantee a growth of future income, but a continuous decline or flat motion in patenting activity would signals a company's revenue maybe at risk.