The Patent Portfolio and
Its Effect on Stock Price
|•||I dentify the firms in an industry that are likely to experience the greatest increase in value|
|•||Recognize three figures of merit useful in analyzing patent portfolios and their potential impact on stock price|
It is generally believed—or hoped—that research and development (R&D) expenditures by a business corporation will lead to increased profits and, ultimately, to an increase in the value of the corporation and the price of its stock. Empirical research tends to support this belief. It should be apparent, however, that all such expenditures do not produce equal results. Some R&D programs are technologically successful, while others are not. Some programs are focused on areas of declining interest or value, producing only incremental improvements to mature technologies, while other programs are pioneering efforts in promising new fields. Some otherwise successful R&D efforts result in products that are market failures.
The task therefore is to ascertain the value, as opposed to the cost, of a firm's intellectual assets, in such a manner as to provide an indicator of future stock appreciation. If this can be done, based on publicly available information (the SEC is really cracking down on insider trading), one can