Return on Investment of Patent Portfolios
Return on Investment (ROI) is a widely used measure of the efficiency or profitability of an investment. It identifies which parts of your portfolio are delivering value to your organization and which are not.
$40 billion is spent on patent portfolios each year.
How can you measure the value derived from such a significant investment?
What is return on investment (ROI)?
ROI measures the return on a particular investment relative to its cost.
Why ROI?
ROI is used across the business for the financial modeling of investments and assets.
So why treat patents differently?
Patents are a business asset, and a patent portfolio’s ROI can be calculated and used to communicate its value to the business and improve that value.
ROI of your patent portfolio promotes transparency and actionability
Transparency
ROI allows you to speak to the business using a language they understand, as it is already widely used amongst R&D, Marketing and Finance teams.
Actionability
ROI allows you to compare the outcome of different strategies and decide how to maximise the gain from a scarce resource.
Calculating return on investment of patent portfolios
Joined by the Head of Patents at Facebook, the webinar Pulling back the curtain: calculating ROI of patents covered the key components to calculating the value of an organisation’s greatest asset and improving communication with the wider business.
Measuring ROI of a patent portfolio
What is the primary purpose of your patent portfolio?
Defense against third parties
The assumption is that a patent portfolio’s number one use is to defend your business against a potential aggressor. 62% of organizations report that this is their primary strategy for their portfolio.
What is the number one strategic objective that your patent portfolio serves?
Building blocks of ROI
The Cost
What is the total cost of building your patent portfolio?
- Organic patent COST (patents you have filed) – what is the average yearly cost?
- Acquired Patent COST (excluding non-core patents, including core patents)
The Benefit
What is the deterrent value of your patent portfolio?
- Looking backwards to understand what the portfolio has delivered and
- Looking forward to compare different strategies to enable the best choice.
Calculating portfolio ROI
Bringing this together, we have the final ROI calculation:
| Technology | X | Y | Overall | Notes |
| Benefit | $20.8M | $23.8M | $43.6M | The sum of the Benefit or Adjusted benefit columns |
| Cost | $13.1M | $11.5M | $24.6M | Annualized cost of building and maintaining the portfolio |
| Overheads | $2.0M | $1.7M | $3.7M | Salary, outside counsel fees, etc |
| ROI | 38% | 80% | 54% | ROI = (Benefit — Cost — Overheards) / (Cost + Overheads) |
Want to calculate ROI of your patent portfolio?
Jeremiah Chan and Jonathan Liu from Facebook, and Nigel Swycher and Steve Harris from Cipher authored the full report on, Pulling Back the Curtain: Calculating Return on Investment of Patent Portfolios. The report goes into more detail on:
- Why is it important to measure ROI?
- Is Portfolio ROI too difficult to measure?
- The building blocks of ROI analysis
- Applying the ROI calculation to a hypothetical company
Get your copy of the report and see how you could apply this ROI calculation to your own portfolio using example calculation spreadsheets.
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We are excited to show you an alternative to manually tagging patents and building long boolean queries to get your view of the technology landscape. With the automated classifiers, you can:
- Pull through all the latest patents in the technology area
- Analyze the results to understand new technology trends
- Benchmark your portfolio against your competitors
- Optimize your portfolio for monetization or risk management
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