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A new way of measuring the elusive value of intellectual property

The Economist | Dec 4, 2021

Patents - A new way of measuring the elusive value of intellectual propertyA startup called PatentVector, founded by a law professor, an information science professor and a software engineer, is trying something new. It uses a variation of a method started in the 1960s which evolved into tallying up how frequently individual patents are cited (a similar process based on citations is used to evaluate academic research).

Rather than attempting to understand the patent, PatentVector employs artificial intelligence to comb through 132m patent documents kept by the European Patent Office in Munich (the world’s biggest collection). Then it evaluates, first, how frequently a patent is cited and, second, how frequently it is cited by patents that are themselves cited frequently. That provides an indication of importance which is then multiplied by a mean value of patents based on an estimate by James Bessen, an economist at Boston University, which has become a reference point. A number of companies, legal firms and institutions (including the Canadian Patent Office) are buying PatentVector’s product.

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The results contain interesting insights into inventing. Frederick Shelton IV (pictured) does not feature among prominent innovators of the 20th century but he probably should. He works at Ethicon, a medical-devices subsidiary of Johnson & Johnson, and PatentVector values his inventions at a cool $14bn, placing him aeons ahead of anyone else. His top three are for a mechanical surgical instrument, surgical staples and the cartridge for the staples; in short, tools to cut tissue and bind it up.

Ethicon itself, a medical-device maker, holds 95 of the world’s 200 most valuable patents, PatentVector finds. The firm also employs Jerome Morgan, who is listed in second place with $5bn worth of patents (many overlapping with Mr Shelton’s). Only one other person is in the $5bn club: Shunpei Yamazaki, president of Semiconductor Energy Laboratory, a Japanese research-and-development firm. Mr Yamazaki’s most important patent covers the displays on computers, cameras and other semiconductor devices.

PatentVector found 65 other people each responsible for patents worth in excess of $1bn. Only 14 of the top 650 tinkerers are women. The highest ranked is Marta Karczewicz, who works for Qualcomm, an American chip designer, and played a vital role in inventing the video-compression technology that makes Zoom and other video services function.

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Almost all valuable patents can be found in a few broad industry groups: biopharma, software, computer hardware, medical devices and mechanical equipment. Over the past 40 years the importance of specific categories has marginally expanded and contracted, but biopharma and information technology (IT) have dominated and their significance has grown. The companies with the largest aggregate value of patents are in IT, topped by IBM, Samsung and Microsoft.

PatentVector’s figures on the patent holdings of countries are revealing, too. America has the most active patents of any country, at 3.3m, followed closely by China with 3.1m. But there is a world of difference in how frequently they are cited and their imputed value. America’s library is calculated to be worth $2.9trn, compared with China’s collection at $392bn.

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