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Measuring innovation - why is it so important and can trademark data be used?




A lot of people, including corporate and government officials, are interested in the measure of innovation to determine where they rank[1] in comparison to competitors in the same industry, or perhaps against other countries. The measure of innovation is used to:

· “to understand if the investment—the time, all of the activity, and all of the capabilities being built to push innovation—is actually amounting to anything” (McKinsey & Company, October 2018 podcast[2]);

· To understand and track what “[…] efforts and methods are working, and what innovation is ultimately delivering for the enterprise” (Forbes article[3], November 5, 2015). Without measurement and using the right KPIs, you are effectively running blind, “…faintly hoping once again that innovation will deliver something useful rather than demanding it, and holding ourselves accountable for achieving it.”[4]

Though there is discussion as to the number and nature of key performance indicators (“KPIs”) used to measure innovation[5] (i.e., “gross margin, R&D, and sales from new products”, etc.); more likely than not, intellectual property (“IP”) is factored into the equation.[6]

The nexus between innovation and IP - the IP KPIs

Indeed, the most commonly used IP indicator consists of patents (pending and/or issued)[7]. But what of trademarks? Recent publications respond to this question by a “yes”; suggesting a significant linkage between innovation and trademarks[8]. For example:

- James Potepa and Kyle T. Welch stated:

“First, the value of patents represents technology already developed whereas trademarks represent a combination of recognition and what customers anticipate the firm to develop in the future. Second, many firms prefer to keep advances under wraps by relying on [trade secret] law; since patents would necessarily give away details to potential competitors, firms may choose not to go this route. Regardless of the approach taken (patent or not), trademarks help firms capitalize on advances but not necessarily provide so much information that competitors can replicate the technology. Finally, many innovative firms are moving towards open source approaches; for example, Alphabet’s Android operating system is open source, so patents would not be a good way to measure the innovation associated with Android, but clearly everyone knows this trademarked operating system.” [9]

“[…] trademarks are able to pick up something above and beyond the value of recognition. Trademarks can actually predict the value of a firm’s expected future advances…”[10]

In the same vein, “the number of new trademarks in a given year is an indicator of product and marketing innovations. Trademarks per million population is a useful indicator of innovation because it benchmarks services sector innovations and non-technological innovations not captured by data on patents.”[11]

In light of the above, and as trademark applications showed the strongest annual growth in Canada (IP Canada Report 2018[12]), it could be argued that trademark numbers should be more frequently factored into the measure of innovation.

As suggested by Wilkof, “[p]erhaps the time has come for economists to engage the IP community more actively devising better means to measure the nexus between innovation and IP.”[13]

[1] A couple of useful innovation indexes we refer to are: (1) Global Innovation Index - https://www.globalinnovationindex.org; (2) World Bank, including: (i) TCData360 - https://tcdata360.worldbank.org/stories/tech-entrepreneurship/ and (ii) Doing Business Report - https://www.doingbusiness.org; as well as (3) the World Economic Forum, including: (i) the Global Competitiveness Report - https://www.weforum.org/reports/global-competitiveness-report-2019, and (ii) the Global Information Technology Report - https://www.weforum.org/reports/the-global-information-technology-report-2016, amongst many other useful resources (i.e., OECD, IMF, etc.). [2] https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-to-take-the-measure-of-innovation. [3] https://www.forbes.com/sites/brianquinn/2015/11/05/why-measuring-innovation-matters/#39c52cfb6cd8. [4] Id. [5] NAPPI, V., KELLY, K., Key Performance Indicators and Dimensions for the Innovation Process, Conference Paper (June 2018), available at: https://www.researchgate.net/publication/333880925_Key_Performance_Indicators_and_Dimensions_for_the_Innovation_Process; TAQUES, F.H., et als. Indicators used to measure service innovation and manufacturing innovation, Journal of Innovation & Knowledge, 2020, ISSN 2444-569X, https://doi.org/10.1016/j.jik.2019.12.001 and http://www.sciencedirect.com/science/article/pii/S2444569X19300605; de Beer, Jeremy and Fu, Kun and Wunsch-Vincent, Sacha, The Informal Economy, Innovation and Intellectual Property - Concepts, Metrics and Policy Considerations (2013). WIPO Economics and Statistics Series, Economic Research Working Paper No. 10. Available at SSRN: https://ssrn.com/abstract=2329410. [6] OECD (2019), “Concepts for measuring innovation”, in Oslo Manual 2018: Guidelines for Collecting, Reporting and Using Data on Innovation, 4th Edition, OECD Publishing, Paris, https://doi.org/10.1787/9789264304604-5-en. [7] NAGAOKA, S. et als., Patent statistics as an innovation indicator, Handbooks in Economics, Volume 02 (2010), Elsevier B.V., pages 1084-1124, available at: http://dec.ec.unipg.it/~fabrizio.pompei/nagaoka2010.pdf; OECD Patent indicator, available at: https://stats.oecd.org/Index.aspx?DataSetCode=PAT_IND; DANG, J. et al., Patent statistics: A good indicator for innovation in China? Patent subsidy program impacts on patent quality, China Economic Review, Volume 35, September 2015, Pages 137-155, https://doi.org/10.1016/j.chieco.2015.03.012; KELLY, B. T. et als., Measuring Technological Innovation over the Long Run (November 1, 2018). Yale ICF Working Paper No. 2018-19. Available at SSRN: https://ssrn.com/abstract=3279254 or http://dx.doi.org/10.2139/ssrn.3279254; WIPO Economic Research Working Paper series - Measuring Creativity: Learning from Innovation Measurement, available at: https://www.wipo.int/publications/en/details.jsp?id=4016&plang=EN; PAVITT, K. Patent statistics as indicators of innovative activities: Possibilities and problems. Scientometrics 7, 77–99 (1985). https://doi.org/10.1007/BF02020142. [8] Flikkema, Meindert & Castaldi, Carolina & de Man, Ard-Pieter & Seip, Marcel, 2019. “Trademarks’ relatedness to product and service innovation: A branding strategy approach,” Research Policy, Elsevier, vol. 48(6), pages 1340-1353, available at: https://www.sciencedirect.com/science/article/abs/pii/S0048733304001222; Potepa, James and Welch, Kyle, Calibrating Innovation Proxies with an Accurate Tobin’s Q and Appraised Innovation Value (May 23, 2018). Available at SSRN: https://ssrn.com/abstract=2990481 or http://dx.doi.org/10.2139/ssrn.2990481; Seip, Marcel & Castaldi, Carolina & Flikkema, Meindert & De Man, Ard-Pieter, 2018. “The timing of trademark application in innovation processes,” Technovation, Elsevier, vol. 72, pages 34-45, available at: https://www.sciencedirect.com/science/article/pii/S0166497218301172; DRUID-15 Conference notes (2015), available at: https://conference.druid.dk/acc_papers/nv9r3f3sl6p5e0431rj6sxfblv4g.pdf; Cela, M. The importance of Trademarks and a review of empirical studies, European Journal of Sustainable Development (2015), 4, 3, 125-134 ISSN: 2239-5938 Doi: 10.14207/ejsd.2015.v4n3p125, available at: https://www.ecsdev.org/ojs/index.php/ejsd/article/download/292/283; GOTSCH, M., & HIPP, C. 2014. Using Trademarks to Measure Innovation in Knowledge-Intensive Business Services. Technology Innovation Management Review, 4(5): 18–30. http://timreview.ca/article/790; MILLOT, V. (2009). “Trademarks as an Indicator of Product and Marketing Innovations.” OECD Science, Technology and Industry Working Papers. doi:10.1787/224428874418; Mendonça, Sandro; Pereira, Tiago Santos; Godinho, Manuel Mira (2004) : Trademarks as an indicator of innovation and industrial change, LEM Working Paper Series, No. 2004/15, Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM), Pisa, available at: https://www.econstor.eu/bitstream/10419/89486/1/504056689.pdf. [9] See: Townsend, L., in his 2017 blog, available at: https://www.owe.com/study-finds-trademark-portfolio-best-indicator-innovation/. [10] Id. [11] The Conference Board of Canada, available at: https://www.conferenceboard.ca/hcp/Details/Innovation/trademarks.aspx?AspxAutoDetectCookieSupport=1. [12] https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr04522.html. See also the Canadian Intellectual Property Office monthly production statistics, available at: https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/wr03907.html. [13] WILKOF N., The econometrics of IP: The case of patents and innovation, Journal of Intellectual Property Law & Practice, 2014, Vol. 9, No. 2, at page 95.

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