12/14/2016
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`Using citation analysis to value patents — Financier Worldwide
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`Using citation
`analysis to value
`patents
`
`January 2016  |  SPECIAL REPORT: INTELLECTUAL PROPERTY
`
`Financier Worldwide Magazine
`
`42
`
`A useful, e€cient and increasingly utilised indication of the value of a
`patent is the number of times that it is cited by a later patent
`(‘forward citations’). More valuable patents (that is, patents for which
`there is relatively high demand for the technology described in that
`patent) tend to be cited more often than less valuable patents. An
`analysis of patent citations to determine the value of patents has
`been used in the academic literature since at least the 1980s. The
`basic concept has broad recognition and has been extensively tested
`empirically. It is often used in the commercial practice of valuing
`intellectual property and cited in studies by WIPO and the OECD.
`
`The intuition behind the positive correlation between the intrinsic
`value of a patent and the number of forward citations is
`straightforward. Patents for inventions that appear to be very valuable
`
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`https://www.financierworldwide.com/using­citation­analysis­to­value­patents/#.WFGxg9IrJeM
`
`January 2016 Issue
`
`BY
`
`Alan Cox
`
`NERA Economic
`Consulting
`
`Intellectual
`property
`
` 
`
`1/4
`
`PMC Exhibit 2048
`Apple v. PMC
`IPR2016-00754
`Page 1
`
`

`
`12/14/2016
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`Using citation analysis to value patents — Financier Worldwide
`are likely to encourage research and patenting in very similar areas.
`There is an economic incentive to research areas and claim ideas that
`are very close to the original patent. A patent application must cite all
`ideas that are precedents to the idea being patented. The larger
`amount of research focused on an area related to a valuable patent is
`more likely to result in a greater number of citations to the original
`patent.
`
`This can be a useful tool in valuation. In a simple example, a patent
`that has been sold for $10,000 may have been cited 20 times by later
`patents. A patent in the same general area of technology that has 50
`forward citations might be inferred to be more valuable than the
`$10,000 patent.
`
`However, the absolute number of citations is not, by itself, a clear
`indicator of relative value. Patents in diŒerent technologies tend to
`be cited at diŒerent rates, and patents that are older, obviously, tend
`to have more citations than patents that were issued more recently.
`To estimate the relative value of a patent or a group of patents, one
`needs to account for these diŒerences. One way to do so is to
`identify other patents of the same class of technology
`(‘technologically similar patents’) and the same ‘vintage’ (year of
`application and/or publication). One can then calculate the average
`or median number of forward citations received by technologically
`similar patents of the same age. Such an average or median can be
`compared to the number of forward citations received by the patent
`of interest to get an indication of how valuable it is.
`
`Identifying patents of the same age is relatively easy since the
`application and issuing dates appear on every patent. Identifying
`patents that are technologically similar for the purposes of citation
`analysis is more di€cult but can be addressed by using other
`information on the patent. Major patent o€ces classify patents by
`technology according to an international standard classi›cation
`scheme, the International Patent Classi›cation (IPC) system. In the
`United States, these classi›cations are assigned at the time that the
`patent is granted by the patent examiner. The system allows patents
`to be classi›ed by technology in categories of increasing speci›city
`that vary from one to 10 digits.
`
`To describe, more explicitly, how such data might be used, suppose
`that a company is interested in assessing the value of the ‘650 patent
`which was issued by the United States Patent O€ce in April of 2010
`and which was placed in GO6F, ‘Electric Digital Data Processing’,
`under the IPC convention. The analyst could identify all, say, 5755
`patents issued within three months of the issue date in that IPC class
`and count all the forward citations received by each of those patents.
`If the ‘650 patent received more forward citations than 99 percent of
`all the other technologically similar patents of the same age, that
`would be an indicator that it may be a patent of considerable value.
`On the other hand, the opposite inference would be made if it
`received fewer forward citations than 75 percent of the comparison
`group.
`
`https://www.financierworldwide.com/using­citation­analysis­to­value­patents/#.WFGxg9IrJeM
`
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`Using citation
`analysis to value
`patents
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`
`2/4
`
`PMC Exhibit 2048
`Apple v. PMC
`IPR2016-00754
`Page 2
`
`

`
`UPC jurisdiction for
`EP patents: should I
`opt out or stay in?
`
` 
`
`The Italian IP Box: a
`box full of contents
`
` 
`
`Q&A: Creating
`value through IP
`asset management
`and valuation
`
`12/14/2016
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`Using citation analysis to value patents — Financier Worldwide
`Data is frequently available on the prices paid for patents in sales
`between companies. Information on royalties in patent licences is
`also frequently available. Such information can be used in
`combination with citation data to provide more precise estimates of
`value along the lines suggested in the example above. If the objective
`is to value a large portfolio of patents, this exercise can be repeated
`for each of the patents in the portfolio.
`
`Patent citation analysis allows one to draw certain conclusions about
`the relative value of patents in a portfolio. Patents cited more
`frequently than other patents in the portfolio can be viewed as
`relatively more valuable. In a frequent scenario faced in litigation, a
`patent will be asserted that has recently been sold as part of a large
`portfolio of dozens of patents. The plaintiΠwill claim that the patent
`being litigated represented most of the value of, or the entire value
`of, that portfolio. Such a claim may be supported by testimony of the
`plaintiŒ’s technical expert. The sort of analysis described above can
`be used to assist in determining if such a claim is credible. This is
`accomplished by looking at the number of forward citations received
`by the asserted patents compared to the other patents in the
`portfolio, properly correcting for age and technology, as described
`above. While such testimony cannot entirely replace expert technical
`testimony for the defendant in this situation, use of IPCs has the
`advantage that they are assigned by a patent examiner who has to
`be totally indiŒerent to the outcome of a litigation that is being ›led
`many years after he or she makes the assignment to an IPC class.
`
`While this is, at its core, a relatively straightforward methodology
`which can be applied to a number of valuation scenarios, it is crucial
`that it is applied correctly to the problem at hand. There are many
`details that need to be thought through carefully, many of which are
`addressed in the academic and trade literature. One issue is that
`some patents being assessed for valuation may have been issued
`very recently. Such patents, and those in their comparison group, will
`have a limited time to develop a track record of citations. However, a
`model can be used to predict the number of citations that patents
`will achieve over their lifetimes, allowing better citation-based
`valuations of more recently issued patents.
`
`A correctly implemented citation analysis requires calculations that
`may involve the analysis of a very large number of patents. There
`may be thousands of technologically similar patents of the same
`vintage as a patent of interest, as was the case in the hypothetical
`‘650 patent mentioned above. Such an analysis does require access
`to a comprehensive patent database, but there are several academic
`and commercial databases available for such an investigation. These
`computations on massive amounts of data, however, are amenable
`to being addressed by computer programs and should not be an
`obstacle to getting useful information from forward citations.
`
` 
`
`https://www.financierworldwide.com/using­citation­analysis­to­value­patents/#.WFGxg9IrJeM
`
`3/4
`
`PMC Exhibit 2048
`Apple v. PMC
`IPR2016-00754
`Page 3
`
`

`
`12/14/2016
`
`Search Site
`
`About
`
`Contact
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`Subscribe
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`Using citation analysis to value patents — Financier Worldwide
`Alan Cox is a senior vice president at NERA Economic Consulting. He can
`be contacted on +1 (415) 291 1009 or by email: alan.cox@nera.com.
`
`© Financier Worldwide
`
`©2001-2016 Financier Worldwide Ltd. All rights reserved.
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`https://www.financierworldwide.com/using­citation­analysis­to­value­patents/#.WFGxg9IrJeM
`
`4/4
`
`PMC Exhibit 2048
`Apple v. PMC
`IPR2016-00754
`Page 4