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Study Finds A Trademark Portfolio Is Best Indicator of Innovation

A recent study concluded that the size of a company’s trademark portfolio provides the most consistent indication of innovation. In other words, the trademark portfolio was demonstrated to be a better indicator than the number of patents or the size of a company’s R&D budget.

The study, “Innovation Worth Buying: The Fair-Value of Innovation Benchmarks and Proxies”, was conducted by scholars at George Washington University. The two authors, James Potepa and Kyle T. Welch, offered this revealing summary:

“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.”

It is well-known that trademarks are valuable as source identifiers and symbols of a company’s goodwill, but the study  pinpointed a value added. The authors noted that “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…” Bearing that in mind, the authors concluded that trademarks may actually be “undervalued.”

Posted by Larry Townsend

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