Calculating Return on Investment of Patent Portfolios
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Pulling Back the Curtain
Return on Investment (ROI) is a widely used measure of efficiency or profitability of an investment.
It measures the return on a particular investment relative to its cost and has been applied across virtually every area of business from R&D, brand, marketing and information technology.
Although ROI is routinely used to identify ways to enhance the performance of investments, it has not been applied to patent portfolios.
Jeremiah Chan and Jonathan Liu from Facebook, Nigel Swycher and Steve Harris from Cipher authored a report titled, Pulling Back the Curtain: Calculating Return on Investment of Patent Portfolios. The report covers the following areas:
- 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
See below for more information on how this calculation was done.
The abridged version of this report first appeared in IAM on 19 May.
An example of applying the ROI calculation to a hypothetical company
This is an application of the technique for a hypothetical company, their threat list, and existing cross-licences. It considers two technologies X and Y. Some factors have been removed, in order to make the table of results more compact.
An Excel sheet with the complete calculation, as well as a blank one for completion for your own company or client is available to download:
Example ROI Calculation Complete your own ROI
To find out more about the benefits of calculating Return on Investment of your patent portfolio, please get in touch
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With Cipher you can…
Optimise your portfolio
Ensure you have the right portfolio to meet your strategic patenting objectives.
Gather competitor intelligence
Understand who’s doing what by automating patent to technology mapping.
Model cross licensing
Combine patent and revenue data to determine rational licensing outcomes.
Manage your budget
Justify patent budgets and communicate the impact of your investment.
Conduct due diligence
Automate manual reviews for efficient execution of M&A and licensing transactions.
Tackle inbound patent assertion
Be prepared with evidence to create a fast and effective threat assessment.
Benchmark your portfolio
Assess your portfolio in comparison to other owners through your technology lens.
Monetise your portfolio
Identify opportunities to create value through licensing or sale of patent assets.
Predict technology trends
Track new technologies and discover the unknown owners of future innovation.
Create Risk Mitigation Strategies
Understand the materiality of your threats to define your risk mitigation strategy.