PatentVest Metrics

PatentVest’s integrated database, search engine and analytics provide an objective framework to model IP for investment analysis and business intelligence. Along with a rich complement of information on a company's individual patents, the PatentVest analytic engine automatically assigns a number of proprietary IP related metrics to each company, using patent information updated weekly from the USPTO and both real-time and historical financial market data. Each of these metrics is presented in a standard PatentVest Report. 

Principal IP metrics include:

PV Tech Score:  

This important IP leadership and value metric measures the industry impact of a company’s patents and is a quality indicator of a company’s competitive position. This metric is based upon an analysis of the citation ratio of a company’s patents relative to a cohort group of patents (by age, number) and reflects its influence within the marketplace by its peers.

The mean PV Tech Score is 1.0, the median score is 0.90 from more than 4,000 companies rated by PatentVest. A higher PV Tech Score is better, signifying technology leadership; while a score of 0.90 - 1.0 reflects parity with the mean. For example a score of 2.0 would indicate that a company's patents rank 2x higher than the mean. 

PV 3-Year Patent Application CAGR:

This important IP growth metric is the year-over-year, compound annual growth rate of the number of patent applications filed during the last 3 years. PatentVest only considers applications published more than 3 years ago when calculating the rate. This means that, on average, each application will be at least 4.5 years from filing date. If it has not been granted at that point, it is considered it abandoned for purposes of conversion rate. 

PV Depth Rating:

This IP leadership and value metric measures the degree of concentration or depth within an area of technology. It measures self-citations and is indicative of a company “widening the moat” around an area of innovation. High Depth Ratings reflect a high degree of difficulty for competitors to “design around” a body of patents and, therefore, is a measure of high defensibility. Most patents can be designed around, so not surprisingly, the median Depth Rating for the 4,000 companies in PatentVest is 0.30.  Currently, the top quintile for Depth Rating is 1.0.  Acknowledged technology leaders with very high barriers to entry typically have Depth Ratings > 2.0, such as Research In Motion 2.94 (Blackberry), Microsoft 3.11 (Windows) and Apple 3.74 (iPod, iPhone).

PV Tech Isolation Rating:

This IP leadership and value metric measures the degree of isolation or novelty of a company's technology from other companies. High isolation ratings indicate technology that is either the beginnings of a new area of innovation (i.e. classically disruptive) or developments that are not yet recognized.  Median isolation rating for PatentVest's 4,000 companies is 5.50%. High isolation ratings are >20%. Disruptive is above >50%. Isolation is measured by looking at the percentage of self-citations versus citations by non-affiliated entities and reflects the degree of interconnectedness of a company’s technology to its peers.

PV Ratio:

This IP value metric is a measure of the current market-cap per net patent grant and application, adjusted for age and conversion rate and quantifies a “Net Present Market Value” per “Unit of IP”. Similar to other “market multiple” valuation measures (e.g. Market Cap/Revenue or Market Cap/EBITDA), a lower number is generally more desirable from a prospective investor's standpoint. The PV Ratio helps to identify and credit companies that are innovating new technology -- specifically companies that have significant patent portfolios and that are out of favor with the investment community.

Citation-Weighted PV Ratio:

This IP value and leadership metric operates similarly to the PV Ratio, but factors into the calculation a measure of patent quality based on the number of reverse citations of patents from unaffiliated entities. Citation-Weighted PV Ratio reflects current market-cap per net patent grant and application, weighted for citation ratios quantifies “Net Present Unit Value” of IP.  This metric is useful in identifying and valuing companies that have significant patent portfolios (including patent value based upon peer-group validation) and that are out of favor with the investment community.