US 20090307148 A1
A method for generating an index of securities includes selecting index constituents and weighing the selected index constituents by a measure (“an intangible asset measure”) of quality and/or value of the intangible assets of constituent entities. The index constituents can be selected from a set of potential constituents based on an intangible asset measure of each constituent in the set, and the selected index constituents may then be weighted by a desired measure or methodology or weighted equally, or by an intangible asset measure. Another method for generating an index of securities includes combining groups of constituents, which are selected based on an intangible asset measure, to be index constituents and weighing the index constituents by a desired measure or methodology. The groups of constituents may be stocks of existing indices having assigned weights in the existing indices based on intangible asset measures of the stocks. These assigned weights of the stocks may be used in a calculation of the weights of the index constituents which correspond to these stocks.
51. A method for generating an index of securities through a computer system, comprising the steps of:
selecting a group of index constituents from a set of potential constituents by instructions stored in the computer to determine a selected group of index constituents;
weighing the selected group of index constituents based on an intangible asset measure of each potential constituent in the set executed by instructions stored in the computer to determine the index; and
displaying the index on a display unit.
52. The method of
53. The method of
54. The method if
55. The method of
56. The method of
eliminating from the set of potential constituents a group of companies that do not own one or more intellectual properties executed by instructions stored in the computer, wherein the one or more intellectual properties are selected from the group consisting of patents, trademarks, copyrights and trade secrets.
57. The method of
ranking each potential constituent in the set of potential constituents by size from largest market capitalization to smallest market capitalization executed by instructions stored in the computer to determine ranked positions;
ordering each potential constituent in the set of potential constituents by style from lowest price-to-book to highest price-to-book executed by instructions stored in the computer to determine ordered positions; and
dividing each potential constituent of the set among boxes of a grid according to the ranked positions and the ordered positions executed by instructions stored in the computer.
58. The method of
categorizing each potential constituent of the set by a ratio of the intangible asset measure to a tangible asset measure of each potential constituent executed by instructions stored in the computer, wherein the ratio is arranged from a highest ratio to a lowest ratio to produce an intangible asset ranking;
picking one or more constituents in each box of the grid to be the group of index constituents executed by instructions stored in the computer.
59. The method of
60. The method of
61. The method of
62. The method of
63. The method of
64. The method of
65. The method of
66. The method of
categorizing each potential constituent of the set by a ratio of the intangible asset measure to a tangible asset measure of each potential constituent executed by instructions stored in the computer, wherein the ratio is arranged from a highest ratio to a lowest ratio to produce an intangible asset ranking;
picking one or more constituents to be the group of index constituents based on the intangible asset ranking executed by instructions stored in the computer.
67. A computer system method for generating an index of securities, comprising the steps of:
selecting a first group of constituents from a first set of potential constituents based on an intangible asset measure of each potential constituent in the first set using a processing device of the computer system;
choosing a second group of constituents from a second set of potential constituents based on an intangible asset measure of each potential constituent in the second set using a processing device of the computer system;
combining the first group of constituents and the second group of constituents to formulate a group of index constituents; and
assigning a weight to each index constituent of the group using a processing device of the computer system to determine one or more weighted index constituents; and
displaying the one or more weighted index constituents on a display unit.
68. The method of
picking a third group of constituents from a third set of potential constituents based on an intangible asset measure of each potential constituent in the third set, wherein said combining step further includes the third group of constituents to formulate the group of index constituents.
69. The method of
70. The method of
71. A computer system method for issuing a contract for an intangible asset index, comprising the steps of:
selecting index constituents from a set of potential constituents by instructions stored in at least one processing device to determine a selected group of index constituents;
weighing the selected index constituents based on an intangible asset measure of each potential constituent in the set executed by instructions stored in at least one processing device to formulate weighted values of the selected index constituents;
determining the intangible asset index executed by instructions stored in at least one processing device;
issuing by the at least one processing device the contract based on the intangible asset index, wherein the value of the contract is based on the weighted values of the selected index constituents; and
displaying the contract on a display unit.
72. A system, comprising:
a computer-readable storage medium that stores instructions executable by at least one processing device, wherein the storage medium includes,
instructions for selecting a group of index constituents from a set of potential constituents to determine a selected group of index constituents;
instructions for weighing the selected group of index constituents based on an intangible asset measure of each selected constituent in the set to determine the index; and
a display unit adapted to display the index from the processing device after the processing device has executed at least one of the instructions.
1. Field of the Invention
The present invention relates generally to methods and systems for generating an index of securities, and more particularly, to a method and system for generating an index of securities whose index constituents are selected and/or weighted by measures of quality or value of the intangible assets of the constituent entities. The present invention also relates to asset management and the application of the methods and systems for generating an index of securities as described herein.
2. Background Art
Indices have been used by investors as market indicators and for constructing investment portfolios, funds, or other products and services linked to one or more indices. Conventional security indices do not evaluate a company's intangible assets and may overemphasize the importance of tangible assets. As the economy has transformed from a manufacturing base manned by laborers to a service base driven by knowledge workers, intellectual capital has emerged as a leading asset class among industrialized countries worldwide.
The term intellectual capital refers generally to the value of a company's intangible assets including such assets as intellectual property, sales & marketing information, assembled work force/management, leasehold rights, and other assets without tangible, physical substance. “Intellectual property assets,” as used herein includes patents, trademarks, copyrights and trade secrets, as well as research and development, inventions, discoveries, improvements, modifications, enhancements, technologies, methods and production/process information know-how, expertise, algorithms, compositions, data, works, concepts, designs, ideas, prototypes, writings, notes, licenses and patent applications.
Calculating the value of all intangibles, both internally developed and acquired, by subtracting tangible book value from the market value of the companies within the S&P 500® index, intangible value as a percentage of market value has grown from 16.8% in 1975, to 79.7% in 2005. In 1975, intangible value made up 73% of the value of the health care sector and 63% of the value of the information technology sector, but less than 15% of the value in almost all other sectors. By 2005, most sectors attribute more than three-quarters of their market value to intangibles.
Traditional measurements used by investors fail to fully capture the extent of the transformation to the predominance of intangible assets over tangible assets. A more purposeful focus on intangibles may benefit investors much more than an analysis of tangible assets, especially since the growth in the value of a stock is more dependent upon the growth of its intangible value rather than its tangible value.
What is needed, therefore, is a method and system for generating intangible asset indices that focus on the value and/or quality of intangible assets, and likewise, investment products based on such intangible asset indices and services relating to their construction.
The present invention provides a method and system for investors to capitalize on the rewards of innovation and technology by investing in intellectual capital equity. As investors make well-grounded assessments about the value of a company's innovation and technology—the intangible value of a company—it may give them the competitive advantage in the marketplace to produce a higher returning and/or reduced risk portfolio. For example, investors may produce a portfolio which consists of the stocks (or other securities) of companies that own valuable patents, which can serve as a proxy for intellectual capital value. A portfolio based on intellectual capital value would allow investors to commit a sustainable and meaningful portion of their assets to a leading asset class of the knowledge economy.
An embodiment of a method for generating an index of securities presented herein includes selecting index constituents and weighing the index constituents in the index by an intangible asset measure of each index constituent. Measures of quality and/or value of the intangible assets of companies or other entities are referred to herein as “intangible asset measures.”
In another embodiment, the method includes selecting index constituents from a set of potential constituents based on an intangible asset measure of each constituent in the set and weighing the index constituents in the index. Any desired measure or methodology may be used to assign a weight to each index constituent. In one embodiment, the index constituents are weighted equally.
Another method for generating an index of securities includes selecting two or more groups of constituents from two or more sets of potential constituents based on an intangible asset measure of each potential constituent in the two or more sets, combining the two or more groups of constituents to be index constituents, and weighing the index constituents. Any desired measure or methodology may be used to assign a weight to each index constituent. In one embodiment, stocks of two or more existing indices are united together to generate a combined index, where each index constituent corresponds to a stock in the two or more existing indices. In another embodiment, the stocks have been assigned weights in the existing indices based on intangible asset measures of the stocks, and these assigned weights of the stocks are used in a calculation of the weights of the index constituents which correspond to these stocks.
A system for generating an index of securities is also presented and includes a computer useable medium having a computer program logic recorded thereon for controlling at least one processor. The computer program logic includes computer program code means for implementing the method presented herein.
Further embodiments, features, and advantages of the present inventions, as well as the structure and operation of the various embodiments of the present invention, are described in detail below with reference to the accompanying drawings.
The accompanying drawings, which are incorporated herein and form part of the specification, illustrate the present invention and, together with the description, further serve to explain the principles of the invention and to enable a person skilled in the relevant art(s) to make and use the invention.
As indicated above, “intangible asset measures” are measures of quality and/or value of the intangible assets of companies or other entities. The index being generated according to a method disclosed herein may incorporate a measure of quality or value of any intangible asset, including but not limited to intellectual property assets. Where a patent-based index (one such example of an intellectual property index) is desired, the intangible asset measure for each index constituent may be a patent rating measure, which can serve as a proxy for intellectual capital value. Patent rating measures may include, for example:
Patent Count: The number of in-force U.S. utility patents a company owns.
Patent Age: The average age of in-force patents within a company's portfolio.
Patent Decay Rate: An estimated obsolescence rate approximating a rate at which the identified patents will lose value over time.
Patent Velocity: The quarterly increase or decrease in the number of in-force patents owned by a company.
Patent Flow: The patent velocity expressed as a percentage of the total number of new patents required to replace the older patents, assuming the estimated decay rate. In other words, patent flow may be the patent velocity divided by an estimate of the number of patents becoming obsolete in a quarter, assuming a given decay rate.
Patent Abandonment Count: The number of patents for which a company fails to a pay a maintenance fee.
Patent Diversification: The diversity of patents within a company's portfolio.
Total Patent Forward Cites: The cumulative total of forward citations to patents within a company's portfolio.
New Patent Forward Cites: The cumulative total of new forward citations to patents within a company's portfolio in a particular quarter.
Average Intellectual Property Quotient (IPQ™) score: A score which provides a gauge for measuring and comparing patent quality/value based on the cumulative characteristics of patents that make them statistically either more or less likely to produce economic returns, similar to IQ scores used for rating human intelligence (median=100). IPQ™ scores are generated by, and publicly available from, Ocean Tomo Patent Ratings, LLC of Newport Beach, Calif.
Patent Maintenance Value (PMV): A particular relative patent value based on statistical probability that a patent or group of patents will be maintained. Ocean Tomo Patent Ratings, LLC generates a PMV called Ocean Tomo Maintenance Value (OTMV). The PMV may incorporate such factors as United States Patent & Trademark Office maintenance data on the patent or group of patents, relative strength/quality scores of the particular patent or group of patents, such as that provided by the IPQ™ score, and data on abandonment of similar and related patents.
Patent Exchange Value (PEV): A relational value of patents in comparison to all patents, as well as patents within the same classification, which is generated by objectively analyzing the same characteristics/metrics and criteria for all patents. Ocean Tomo Patent Ratings, LLC generates a PEV called Ocean Tomo Patent Exchange Value (OTEV).
Moreover, these or other patent rating measures may be selectively combined, placed in relation to each other, or placed relative to other intangible and/or tangible asset information or metrics, to produce additional metrics. For example, change in patent abandonment count, ratio of PMV to market capitalization, or ratio of PMV to research and development expenditures may also serve as patents rating measures.
For the purposes of illustration, a variety of metrics available from Ocean Tomo Patent Ratings have been given herein as example of metrics which may be useful for determining the strength of the intellectual property of a corporation. It will be appreciated that a variety of other metrics (produced by any number of firms) may be used without departing from the scope of the present invention.
As should be apparent, similar rating measures can be constructed for other intangible intellectual property assets for generating an intellectual property index. Likewise, other metrics applicable to other intangible assets involved may be constructed so as to provide a measure of quality and/or value of the particular asset. As should also be apparent, a rating measure may be constructed which combines individual rating measures of several types of intangible assets. For example, a combined copyright and trademark rating measure of a particular company may be its market capitalization less the following: tangible and booked intangible assets, estimated value of other intangible assets other than patents, trademarks and copyrights (including subtraction of non-patented technology value, such as patent applications and in-process research and development), and patented technology value (e.g., the patent maintenance value, described above). Moreover, trademark rating measures, copyright rating measures, and patent rating measures may be combined to provide a composite measure of the quality and/or value of a company's intangible intellectual property assets.
Trademark rating measures may be developed from statistics relating to: number and extent of U.S. and international trademark filings (which may be further categorized based on trademark class and number of marks owned by the company per class, for example); details in the file history of registered trademarks (such as ‘similar’ brands applied in refusals during the trademark's prosecution, a declaration of incontestability (“Section 15” filings), and trademark renewals, for example); periodic information on sales related to a trademarked brand; trademarked brand reputation as reflected in consumer polls; frequency that a trademark is searched on the Internet; number of website domain registrations incorporating a trademark and reported traffic to each website; number and extent of similar trademarks owned by others; and/or actual or estimated corporate revenues and profits by brand. Selection of the most relevant statistics as they bear on stock price may be considered by conducting a regression analysis of historical stock price of a brand. Trademark rating measures may also include, for example: dollar Values of brands of companies, such as the brand values published and ranked annually by Interbrand/Omnicom Group of New York, measures of brand loyalty, the amount of time a brand has been in use, secondary trademark market data, vulnerability of a brand to counterfeiting and/or dilution, and metrics based on the change in recognition of brands of companies between specific time periods. An index incorporating a metric based on change in brand recognition may be constructed to include constituent companies whose brands have increased in recognition, even if these companies do not necessarily have a strong or highly recognized brand as exhibited by dollar value or other measure. Further, a trademark rating measure may reflect relative brand power between multiple brands in a known market space. Still another trademark rating measure may reflect a brand's sensitivity to overall performance of a market segment or performance of other brands in that segment (such as by measuring covariance between brands or between brands and market segment).
Brand-owning companies may be identified by reviewing the registered trademarks and trademark applications using the United States Patent & Trademark Office database (www.uspto.gov) and other worldwide data sources. It may then be determined whether these brand owners are publicly traded companies, such as by comparing the name of the trademark owner to a list of publicly traded companies. Once publicly traded, brand-owning companies and their corresponding brands have been identified, the quality and/or value of these brands (i.e., trademark rating measures) may be measured. The relevancy of a trademark rating measure to a brand-owning company's stock price may be gauged by determining what correlations exist, if any, between the company's stock price and the value of the particular trademark rating measure based on historical data. In this manner, it may be determined which trademark rating measure(s) provide useful yardsticks of the quality and/or value of the brands of publicly traded companies.
A similar methodology may be employed to determine publicly traded companies' ownership of copyrights. Copyright rating measures may be based on, for example, revenues attributable to the sale or licensing of copyrighted material, such as software, videos, films, albums, recordings, newspapers, online resources, or other media. The particular ratings associated with a copyright portfolio may depend on, for example, the distribution medium of the sales of the copyrighted work, objective or objective reviews of the copyrighted work, awards received for the copyrighted work, consumer survey information reflecting the perceived value of the copyrighted work, secondary market data, and/or the vulnerability of the copyrighted work to piracy.
Trade secret ratings may be developed from statistics relating to: research and Development (R&D) spending, size and strength of a patent portfolio, relationship, between past R&D spending and issued patents (for a particular firm or for an industry) relationship between past R&D spending and successful development of commercially viable technology (for a particular firm or for an industry), an independent (objective or subjective) assessment of trade secret value (for example, conducted under a non-disclosure agreement), and/or the vulnerability of a trade secret to theft or inadvertent disclosure.
Composite intellectual capital ratings may be developed from statistics relating to: measures of the intellectual value of a company's employees (for example, number of invited presentations per employee, published journal articles, number of advanced degrees, and so on); quality of a company's training programs; history of successful recruitment and retention of employees; demonstrated regulatory expertise and/or trackrecord of successful contractual relationships.
Methods and systems for rating/valuing intangible intellectual property assets are described in U.S. Pat. No. 6,556,992 to Barney et al., U.S. Patent Appl. Pub. No. 2004/0010393 to Barney, and U.S. Patent Appl. Pub. No. 2004/0220842 to Barney, the entire disclosures of which are hereby incorporated by reference in their entirety.
In step 212, the chosen set of potential constituents are ranked by their size from largest to smallest size. Market capitalization, sales, net income, or other criteria for what constitutes size, and any combination thereof, may be used to define the size of each constituent.
In step 213, the set of potential constituents are ranked by their style, along the spectrum between being value stocks and growth stocks. For example, stocks with high dividends and low price-to-earnings ratios are value stocks and stocks with low dividends and high price-to-earnings ratios are growth stocks. Price-to-book, price-to-earnings, dividend yield, or other criteria for what constitutes style, and any combination thereof, may be used to define a constituent's style. In one embodiment, the potential constituents are ranked from lowest price-to-book ratio to highest price-to-book ratio.
In step 214, the set of potential constituents are divided into boxes of a grid having a vertical axis which represents size and a horizontal axis which represents style. An example grid 800 having fifty boxes is shown in
In step 215, constituents in each subset (i.e., in each box) are ranked by each constituents' ratio of an intangible asset measure to a tangible asset measure from highest to lowest ratio to produce an intangible asset ranking. Tangible asset measures are measures of the value of tangible assets of a company or entity, and may include, for example, market capitalization (or size), liquidity, price-to-book (or style), book value, or other financial information, as well as other tangible assets, such as number of employees, and any combination or statistics thereof.
In step 216, based on the intangible asset ranking, a number of constituents in each subset is selected as the index constituents. For example, a top percentage or number may be selected from each subset to be the index constituents. Different numbers or percentages may be selected from each subset depending on the desired number of constituents of a particular size or style. If in step 215 the constituents are ranked instead from lowest to highest ratio, then a bottom percentage or number of constituents is selected, provided that the goal of the index is to comprise constituents with valuable intangible assets.
Another embodiment of the method disclosed herein is shown in
In another method for generating an index of securities according to the present invention, index constituents are selected from multiple sets of potential constituents based on an intangible asset measure of each potential constituent in the multiple sets. In this method, the intangible asset measure used to select index constituents may be different for each set of potential constituents. An embodiment of this method is shown in
In step 440, the index constituents are assigned a weight in the index. Any desired measure or methodology may be used to assign weights to the index constituents. For example, the index constituents may be weighted based on market capitalization values, intangible asset measures, or may be weighted equally. In one embodiment, the first and second groups of constituents (and any additional groups of constituents) are stocks of respective first and second existing stock indices. As a result, the index constituents each correspond to a stock in the first or second existing stock indices (also referred to herein as “the existing indices”), and the resulting index of securities generated using method 400 is a “combined index”, or an index which is a combination of indices.
In one embodiment, stocks are selected for and/or weighted in a plurality of indices based on intangible asset measures of the stocks, and these indices are combined to generate a combined index. Methods 100 and 300 described above with respect to
The weights 542 of indices A, B, . . . n may be any collection of weights that sum to 1. Any desired methodology may be used for prescribing a weight to each index in the combined index. For example, each index may be weighted equally in the combined index. Thus, if three indices A, B, and C were incorporated into a combined index A-C, the weight 542 of each index A, B, and C would be ⅓. In one embodiment, weight 542 used in formula 540 may be calculated using a formula 670 illustrated in
Thus, method 400 may be used to generated a combined index A-C composed of indices A, B, and C, where index A may be composed of stocks weighted based on a patent rating measure, index B is composed of stocks weighted based on a trademark rating measure, and index C is composed of stock weighted based on a copyright rating measure. As such, combined index A-C is as an intellectual property index that includes stocks of companies which have valuable and/or quality patent, trademark, and copyright portfolios. In one embodiment, index A has 300 stocks, index B has 100 stocks, and index C has 100 stocks, and therefore combined index A-C has 500 index constituents which correspond to these stocks. These index constituents may be assigned a weight using formulas 540 and 670, and in such an instance, the weights assigned to indices A, B, and C in combined index A-C using formula 670 would be ⅗ weight, ⅕ weight, and ⅕ weight, respectively. Thus, combined index A-C is constructed so as to be heavily weighted in stocks of companies having strong patent portfolios over other types of intellectual property assets. Other constructions are possible depending on what is desired to be reflected by the combined index and or what products or services are to be linked to the combined index.
It should be noted that a particular company may belong to more than one index which is incorporated into a combined index generated in accordance with a method disclosed herein. For example, the index constituents of the combined index may include index constituent XA as well as XB, and so on, which correspond to stocks XA and XB of company X. Nonetheless, where stocks XA and XB are weighted in their respective indices A and B based on particular intangible asset measures and these weights are incorporated into the weights of the corresponding index constituents (via formula 540, for example), the weight accorded index constituent XA reflects one measure of the value and/or quality of a particular intangible asset of company X, whereas the weight accorded index constituent XB reflects another measure of the value and/or quality of the same or a different intangible asset of company X. Thus, the stock of company X has a greater overall weight in the combined index as the sum of the individual weights assigned to index constituents XA and XB. Of course, it should be apparent that the combined index may be constructed such that a company appears only once in the combined index, or the combined index may be constructed such that it has a decided number of different constituent companies even if a company appears in multiple indices of the combined index.
Any number of derivative products can be created based on the intangible asset indexes described above. For example, future contracts, options contracts, swaps, and so on can be issued and traded based on an underlying index. In one embodiment, an index is created based on the intangible assets of a plurality of publicly traded companies. A contract is issued which pays a value in the future depending on the future value of the index.
One or more computer systems may be used to carry out the methods described herein.
Computer system 700 can include a display interface 702 that forwards graphics, text, and other data from the communication infrastructure 706 (or from a frame buffer not shown) for display on the display unit 730.
Computer system 700 also includes a main memory 705, preferably random access memory (RAM), and may also include a secondary memory 710. The secondary memory 710 may include, for example, a hard disk drive 712 and/or a removable storage drive 714, representing a floppy disk drive, a magnetic tape drive, an optical disk drive, etc. The removable storage drive 714 reads from and/or writes to a removable storage unit 715 in a well known manner. Removable storage unit 715, represents a floppy disk, magnetic tape, optical disk, etc. which is read by and written to by removable storage drive 714. As will be appreciated, the removable storage unit 715 includes a computer usable storage medium having stored therein computer software and/or data.
In alternative implementations, secondary memory 710 may include other similar means for allowing computer programs or other instructions to be loaded into computer system 700. Such means may include, for example, a removable storage unit 722 and an interface 720. Examples of such means may include a program cartridge and cartridge interface (such as that found in video game devices), a removable memory chip (such as an EPROM, or PROM) and associated socket, and other removable storage units 722 and interfaces 720 which allow software and data to be transferred from the removable storage unit 722 to computer system 700.
Computer system 700 may also include a communications interface 724. Communications interface 724 allows software and data to be transferred between computer system 700 and external devices. Examples of communications interface 724 may include a modem, a network interface (such as an Ethernet card), a communications port, a PCMCIA slot and card, wired or wireless systems, etc. Software and data transferred via communications interface 724 are in the form of signals 725 which may be electronic, electromagnetic, optical or other signals capable of being received by communications interface 724. These signals 725 are provided to communications interface 724 via a communications path 726. Communications path 726 carries signals 725 and may be implemented using wire or cable, fiber optics, a phone line, a cellular phone link, an RF link and other communications channels.
In this document, the terms “computer program medium” and “computer usable medium” are used to generally refer to media such as removable storage drive 714, a hard disk installed in hard disk drive 712, and signals 725. These computer program products are means for providing software to computer system 700.
Computer programs (also called computer control logic) are stored in main memory 705 and/or secondary memory 710. Computer programs may also be received via communications interface 724. Such computer programs, when executed, enable the computer system 700 to implement the present invention as discussed herein. In particular, the computer programs, when executed, enable the processor 704 to implement the processes of the present invention, such as the method(s) implemented as described above. These processes may be performed automatically, of invoice some form of manual intervention. Accordingly, such computer programs represent controllers of the computer system 700. Where the invention is implemented using software, the software may be stored in a computer program product and loaded into computer system 700 using removable storage drive(s) 714, hard drive 712 or communications interface 724.
The invention is also directed to computer products (also called computer program products) comprising software stored on any computer useable medium. Such software, when executed in one or more data processing device, causes the data processing device(s) to operate as described herein. Embodiments of the invention employ any computer useable or readable medium, known now or in the future. Examples of computer useable mediums include, but are not limited to, primary storage devices (e.g., any type of random access memory), secondary storage devices (e.g., hard drives, floppy disks, CD ROMS, ZIP disks, tapes, magnetic storage devices, optical storage devices, MEMS, nanotechnological storage device, etc.), and communication mediums (e.g., wired and wireless communications networks, local area networks, wide area networks, intranets, etc.). It is to be appreciated that the embodiments described herein can be implemented using software, hardware, firmware, or combinations thereof.
An exemplary process for generating a specific intangible asset index will be now be described. In particular, this example illustrates a process for generating an intellectual property index of 300 constituents that is weighted by patent maintenance value. The process includes the following steps:
The foregoing example produces an index which represents a spectrum of capitalization/size ranges and styles across a variety of sectors. Companies with more valuable patent portfolios have a larger weighting in the index.
Results for this exemplary intangible asset index based on historical data indicate that for the ten year-period ending Dec. 31, 2005, a hypothetical investment in the stocks in an index created using the present method would have produced an annualized return of 17.6%, which outperformed the Russell® 3000 index by 8.4% on an annualized basis. This exemplary index would have outperformed the broad market as represented by the Russell® 3000 index in 85 out of 85 rolling three-year periods during the ten-year period ending Dec. 31, 2005, and had a standard deviation of 19.2% annualized for the ten-year period ending Dec. 31, 2005.
This exemplary index would have also outperformed the broad market as represented by the Russell® 3000 index in both up and down markets. On average, this index captured 144% of the upside and only 95% of the downside. Thus, when the Russell® 3000 index went up 10%, on average this exemplary index went up 14.4%; and when the Russell® 3000 index fell 10%, on average this index fell only 9.5%.
While a particular form of the invention has been illustrated and described, it will be apparent that various modifications can be made without departing from the spirit and scope of the invention. For example, it will be apparent to those skilled in the relevant art(s), after reading the description herein, that patent rating scores may be obtained from patents issued by other national/regional patent offices (EPO, JPO, etc.) in lieu or in addition to scores for U.S. patents, and combined with publicly-traded equities in such corresponding foreign exchanges to build indices similar to those described herein. Further, in yet another embodiment—as will be apparent to those skilled in the relevant art(s) after reading the description herein—the methodology of the present invention may be used to select the stocks of companies with the best patent portfolios as the constituents of an index and then weigh each stock in the resulting index according to the more traditional measure of market capitalization. Further still, while the present invention is described in terms of creating a stock “index,” it will apparent to those skilled in the relevant art(s) after reading the description herein that the methodology of the present invention can be used to not only create an index, but to actively manage a “portfolio” (i.e., for asset management purposes such as managing a hedge fund or other money fund). Therefore, the breadth and scope of the present invention should not be limited by any of the above-described exemplary embodiments, but should be defined only in accordance with the following claims and their equivalents.