4

Evaluation of Intellectual Property Strategies to Improve
International Competitiveness of Japanese Companies-- Study on Intellectual Property Statistics --It is important to objectively evaluate intellectual property systems and corporate
intellectual property strategies based on statistical data. This study aims to statistically analyze
what influence intellectual property strategies receive from the changes in intellectual propertysystems and the trends in technology markets. The changes in intellectual property systems
such as the shortening of the examination request period, changes in fees, and the alterations to
the invention compensation system are evaluated by use of econometric techniques. This paper
also analyzes how corporate licensing strategies and blocking behavior vary depending on thecharacteristics of technology markets, and what effects the diversification of patent application
fields has on corporate values.
These analyses provide useful information for improving the efficiency of corporate
intellectual property activities in response to the changing patent system and technology
market.

I

time to review the Intellectual Property
Strategy Indexes (revised version) (tentativetranslation).
In order to establish the new Intellectual
Property Strategy Indexes, the first purposeof this study is to empirically analyze, basedonstatistical
data,
how
companies’
intellectual
property
strategies
areinfluenced by the changing intellectual
property systems and environment that they
face. In particular, this paper conducts
empirical analyses on the intellectual
property strategies of Japanese companies
from various perspectives, with focus on
their patent portfolio strategies, coveringsuch procedural phases as patent application,
examination request, and registration. This
paper also analyzes how companies exploit
their intellectual property rights throughlicensing for example. The second purpose ofthis paper is to study the intellectual
property indexes currently used in othercountries in order to obtain information
useful for the establishment of the JapaneseIntellectual Property Strategy Indexes.
The third purpose of this paper is toreview and change the questions asked in

Introduction

In order to evaluate intellectual property
policies, one has to analyze statistical data
objectively. Similarly, it is important for allcompanies to objectively evaluate theirintellectual property strategies in order toimprovethemandstrengthen
competitiveness.
Understandingsuchimportance, the JPO (Japan Patent Office)publicized the Intellectual Property Strategy
Indexes(revisedversion)(tentativetranslation) in December 2000 in an effort topromptcompanies
toimprove
theirintellectual property strategies. In recent
years, the Japanese intellectual propertysystems have undergone various reviews andchanges including a reform of the employee
invention system and shortening of theperiod in which examination may berequested (“examination request period”).
Such evolution of the Japanese intellectual
property systems must have caused
corporate managers to reconsider how toevaluate
theirintellectual
property
strategies and what intellectual property
strategies to adopt. This suggests that it is1
IIP Bulletin 2007

higher rate of examination requests. In
Japan, the companies subject to the analysis
have only seen a slight increase in thenumbers of their patent applications. The
average number of applications increased
from 260 to 305 from 1986 to 2002. In
contrast, the number of inventions included
in one patent application jumped fivefold.
This increased the value of each patent andgradually and greatly boosted the rate of
examination requests over a long time;(2) The legal change to shorten theexamination request period is applicable toany application filed in and after October
2001. This change resulted in a sharp rise in
the examination request rate. The change
had an especially significant effect on thecompanies characterized as follows: (a) any
company that used to file examination
requests for its patent applications in theseventh year, (b) any company that has a low
research-and-development-intensive
ratio
and owns relatively low-quality patents. An
industry-specific analysis reveals that theexamination request rate showed almost no
increase in the pharmaceutical industry,
which may be characterized by a high degreeof uncertainty in patent value. The main
reason for this little increase in theexamination
requestrate
among
pharmaceutical companies is considered tolie in the fact that the patents ofpharmaceutical products remain uncertain
for a long period of time (excluding any
company that is faced with a high degree of
uncertainty in patent value that cannot be
reduced in the third year while the degree of
uncertainty will be substantially reduced in
the medium run); and(3) The alterations made to the fee system
in 2004 (an increase in the examination
request fee and a decrease in the annual fee)put some downward pressure on the numberof examination requests submitted in 2005
for patent applications previously filed. In
fact, the examination request rate decreased
by about 2.5% over the first 18 months.
According to the preliminary results of across section analysis across technical fields,
about 1.2% of the 2.5% decrease is estimatedthe questionnaire for the “Intellectual
Property
Activity
Survey,”which
isconducted by the JPO with the aim ofgrasping corporate intellectual property
activities, in such a way that the survey
results would help devise the quantitative
Intellectual Property Strategy Indexes.
The outlines of this study will beseparately presented in this paper. I would
like to end this section by briefly describing
the insights gained from the analyses
conducted in Section II.
In Section II of this paper, empiricalanalyses are conducted to identify the factors
affecting corporate intellectual property
strategies and the effects of system changes.
Those analyses are conducted based on the
results of the “Intellectual Property Activity
Survey” and the IIP Patent Database by useof econometric techniques. While someanalyses fail to produce definite results at
this stage due to data limitation, all of theanalyses are useful for those who are trying
to make corporate intellectual property
activities more efficient in response to thechanging patent system and intellectual
property environment or trying to pursue an
ideal patent system itself.
(Sadao Nagaoka)

II

AnalysisoftheIntellectual
Property Strategies of JapaneseCompanies

1

Analysis of the filing of examination
requests by Japanese companies
The following are the findings of ananalysisofthecompany-specificortechnical-field-specific panel data on thefiling of examination requests by Japanesecompanies:(1) The primary cause of a long-term
increase in the rate of examination requests
filed by Japanese companies is considered to
be a rise in the average number of patentclaims. Both cross-section analysis and/or
chronological analysis show that companies
that filed a large number of claims orincreased the number of their claims have a2

IIP Bulletin 2007

using the length of the period from theapplication date to the examination request
day as an induced variable and obtained thefollowing results. First, we confirmed that aforeign application for the same invention
had the effect of shortening the examination
request period for the corresponding patentapplication filed in Japan. While we expectedthat the number of claims and the scope of
patented technology would reflect the
subjective value of the applicant, out attempt
to correlate those factors with the length ofperiod preceding the request for examination
failed to identify any clear correlation
between the two. However, the (objective)
value index created based on the number offorward citations had a meaningfulcorrelation with the length of period
preceding the request for examination. Thesefindings have led to the conclusion that thehigher the patent value as well as the degreeof certainty of the patent value, the earlier
an examination request tends to be filed.
Furthermore, we estimated the influence ofthe type of applicant on the length of theperiod preceding the request for examinationand found that, before the shortening of theexamination request period, the period
preceding the request for examination
tended to be longer if the applicant is a
private company, while such correlation
seems to have disappeared since the revisionof the system. Although having tried to finda correlation between recent pro-patent
policies and the filing of examination
requests in the public sector, to which
universities and public research institutions
belong, we were unable to find any
meaningful correlation. Another finding isthat the period preceding the request for
examination tends to be longer in the case ofa listed company or an applicant who files alarge number of applications. The reason forthis tendency is that the richer a company isin its supplementary assets, the more likely
the company can generate profits bycommercializing a patented invention even if
the invention is low in quality. As a result,
such a company has an incentive to patent
an invention even if its economic value isto be attributable to the revision of thesystem of examination request fee. The
simultaneous reduction of the patent fee had
an effect of raising the examination request
rate. However, we were unable to evaluate
the effect by cross-section analysis acrosstechnical fields.
The shortening of the examination
request period is expected to prevent
companies from leaving patent applications
unexamined. Those companies used tomaintain those applications with little
patentability just for the sake of showing
their technical advantage to other companies.
As shown by the empirical analysis
conducted in this chapter about the filing of
examination requests by companies, theshortening of the examination request period
has the effect of prompting companies to file
examination
requestsforrelatively
low-quality inventions, which has the effectof increasing the examination request rate.
The theoretical analysis explains why it
always brings about such an effect.
Therefore, the shortening of the examination
request period could increase the risk ofraising the number of patents and the ratioof low-quality patents. On the other hand, ahigherexamination
requestfee(compensated by a lower annual fee) would
enhance the quality of examination requests,
setting off the above-mentioned negative
economic effects caused by the shortening of
the examination request period. These two
important system reforms complement eachother.
(Sadao Nagaoka, Yoichiro Nishimura, Isamu
Yamauchi, Koichiro Onishi)

2

Analysis of the filing of examination
requests for biotechnology-related
patent applications
In this chapter, an analysis has been
conducted on the biotechnology-related
patent applications for which priority claims
may be made in Japan during the period
from 1991 to 2002. The purpose of thisanalysis is to identify the deciding factor in
the filing of an examination request. Morespecifically, we estimated a hazard model by
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significantly higher rate of ownership of
non-Japanese patents relative to Japanese
patents.
Third, the exploitation patterns ofJapanese patents are extremely similar to
those of non-Japanese patents, although thedegree of similarity differs from one industry
to another and from one company to another.
More specifically, the similarity lies in therate of exploitation by the patentee, the rateof exploitation by any other party, and theratio of blocking patents. The similarity
exists despite the fundamental differencesthat affect the exploitation patterns ofJapanese patents and non-Japanese patentssuch as the differences between theJapanese patent system and the U.S. patent
system and the differences between domestic
supplementary
assetsandoverseas
supplementary assets of companies.
(Sadao Nagaoka, Yoichiro Nishimura)highly uncertain. This indicates thatapplicants who fall under those categories
use the patent examination period as aperiod to optimize their patent portfolios.
(Kenta Nakamura, Hiroyuki Odagiri)

3Comparative
analysisoftheownershipandexploitationofJapanese patents and non-Japanese
patents by Japanese companies
The number of Japanese patents owned
by Japanese companies is extremely large incomparison with that of their non-Japanese
patents. The reasons for this disparity are
analyzed in this chapter with focus on theimportanceofoverseasbusinessdevelopment, the quality of inventions, andthe patterns of patent exploitation. The
analysis reveals that the exploitation
patterns of the Japanese patents owned by
Japanese companies are extremely similar to
those of their non-Japanese patents. Thissimilarity is considered to be attributable, inlarge part, to the slow progress of Japanesecompanies in their efforts for globalization.
The details are explained below.
First, pharmaceutical companies own
more non-Japanese patents than Japanese
patents. In fact, the number of patentapplications they file with the USPTO islarger than that they file with the JPO. The
pharmaceutical industry is followed by thetelecommunications,electronic,
electric
measuring instrument industries, food
manufacturingindustry,transport
equipment industry excluding the car
industry, and precision instrument industry
in terms of the number of non-Japanese
patents. These industries share thecharacteristic that they operate globally.
Companiesthat
engageinhighly-sophisticatedresearchanddevelopment activities tend to have a highoverseas patent application rate.
Second,acompany-to-company
comparison within industry reveals that acompany that has a higher export rate andconcentration
rateofresearchanddevelopment activities or a company thatlicenses its patents overseas tends to have a

4

Research and development strategies
and corporate financial structures
This chapter analyzes the correlation
between the debt ratio of a company and its
strategic investment such as research anddevelopment costs as well as the results ofintellectual property activities.
It is difficult for any person outside acompany to grasp its research anddevelopment activities since those activities
are internal activities of the company. This
causes information asymmetry in thefundraising activities of the company. In
most cases, the asymmetry has a negative
effect on the debt ratio. However,information concerning the ownership ofpatents, which are the outcomes of researchand development investments, is available tothe public. If the outcomes of research anddevelopment activities of a company and thecorporate activities that make use of theoutcomes contribute to the enhancement of
the technical reputation of the company, acompany that has many important patents
and actively engages in the formation of
corporate alliances by use of patents could
reduce the degree of information asymmetry.
In other words, patents could have a positive
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IIP Bulletin 2007

which would further facilitate the company
to raise funds. These are new estimations
that have not been made in the precedingstudies. These findings suggest that, since
the intellectual property strategies of acompany influence the debt structure of thecompany, we need to take corporate financial
structures into consideration in one way or
another when creating Intellectual Property
Strategy Indexes.
(Fumihiko Koyata, Fumio Funaoka, Joji
Tokui)

effect on the debt ratio.
This analysis was conducted based on
the research and development cost data andthe patent-related intellectual property data
presented in a report entitled “Intellectual
Property Activity Survey” conducted by the
JPO and based on corporate financial data
presented in the annual security reports.
The following are the findings of theestimation
conducted
byaleast-squares-analysis method and panel
analysis method based on data of about 269
companies used as samples:
The ratio of the gross assets to thetangible fixed assets was significant andpositive to the debt ratio;
The ratio of the research anddevelopment costs to sales was insignificant
and negative to the debt ratio;
The number of patents owned by eachresearcher tended to be significant andpositive to the debt ratio;
The number of patents licensed to othercompanies per number of owned patents was
insignificant but positive to the debt ratio;
andWhile investment in tangible fixed
assets noticeable to the public had asignificant and positive effect on the debt
ratio, the index that represents the amountof investment in research and development
activities that the public had almost no
information to evaluate had a negative andinsignificant effect on the debt ratio. The factthat the number of patents owned by eachresearcher has a significant and positiveeffect on the debt ratio supports the
hypothesis that “acquisition of a patent,
which is a tangible outcome of research anddevelopment activities, helps the company toraise funds.” We also found that, if thenumber of patents licensed to othercompanies per number of owned patents has
a positive effect on the leverage, it would
mean that the company not only obtains apatent but also makes use of it by subjecting
the patent to technology transactions such as
licensing. As a result, the research anddevelopment activities of the company would
become more transparent to the public,

5

Quantitative
analysisofpatentportfolio management of companies
This
chapteranalyzes
corporate
intellectual property strategies from theperspective of patent portfolio management
by dividing the patent portfolio managementof a company into two phases for theconvenience of analysis. The decision thathas to be made in the first phase is whether
the company should exploit a patented
invention or keep the patented invention
without exploiting it. The decision that has
to be made in the second phase is whether
the company itself should exploit thepatented invention or license it to a third
party. In this chapter, a quantitative analysis
is conducted to identify the factors affecting
the above-mentioned decisions based on
statistical data from in the “Intellectual
Property Activity Survey (JPO)” and the IIP
Patent Database.
Having analyzed the relation between avariable concerning the size of a company
including the amount of supplementary
assets that the company owns and a variable
concerning the degree of congestion andconcentration of patents in a technology
market, we found that the ownership of
unexploited patents had a correlation withthe state of a technology market. Morespecifically, the rate of unexploited patents
tended to be high in the case of a company
that had a high concentration rate andbelonged to a technical field where thenumber of claims was high as a technicalfield. With regard to a decision as to whether
a company should exploit its patent itself or
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IIP Bulletin 2007

license the patent, we hypothesized that thelarger the supplementary assets of thecompany, the more likely the company
exploits the patent itself. Our hypothesis
was proven to be correct. In the meantime,
regarding a technology market, our analysis
results are consistent with those of Rent
Dissipation Hypothesis, that a company thatbelongs to a technology market characterized
by a high concentration rate is likely to
exploit its patents itself.
(Kazuyuki Motohashi)

7

Analysisofaninventioncompensation system, litigation risk,
and corporate strategies
Sadao Nagaoka and Yoichiro Nishimura(“Shokumu hatsumei ni yoru hosho seido no
jissho bunseki (Empirical Analysis of aCompensation
Systemfor
Employee
Inventions),” Tokkyo tokei no riyo sokushin
ni kansuru chosa kenkyu hokokusho (Study
Report on the Promotion of the Use of Patent
Statistics), Institute of Intellectual Property,
2005, pp.26-40) conducted an empiricalanalysis and proved that, in some cases, themain reason for a company to introduce acompensation system is to comply with
Section 35 of the Patent Act and not so muchto give more incentive to researchers. If
Article 35 invariably prompts companies toestablish a compensation system, any
company that exploits a patent should bepayingcompensation. However, many
companies do not pay compensation inreality. For example, a survey conducted by
the Institute of Intellectual Property in 2003
reveals that 26% of large companies and asmuch as 80% of small and midsize companies
do not pay compensation for the patents thatthose companies exploit.
This chapter empirically analyzes
whether a company that is eager to reduce
litigation risk is more likely to introduce aninvention compensation system. The analysis
reveals that the more risk-avert a company
is, the more compensation the company pays.
The analysis also shows that companies that
tend to employ diverse types of researchers,
gain a large profit from patents, or disagree
withinventorsontheamountofcompensation due to information asymmetry
are more likely to pay a large amount ofcompensation. The analysis confirms thatpatents exploited in other countries havelittle effect on the amount of compensation
because it has been uncertain whether
Article 35 applies to those patents. This
reflects that a compensation system is not
used as a system of incentive agreement.
These analysis results are so stable that it
would not change even if the number ofapplications or the number of exploited

6

Influence of the diversification ofpatent acquisition fields on corporate
valueThis chapter conducts an empiricalanalysis on the influence of diversification ofpatent acquisition fields on corporate value.
Several preceding studies show that acompany that has diversified its researchand development activities tends to increase
its efficiency thanks to the economies ofscope. In this chapter, based on theunderstanding that a patent is an output ofdiversified
researchanddevelopment
activities, an empirical analysis is conductedon the correlation between patents andcorporate value (Tobin's q theory).
Few studies have been conducted on theinfluence of the diversification of patentacquisition fields on corporate value basedon the understanding that a patent is an
outcome of research and development
activities. The purpose of this chapter is to
identify, through an empirical analysis, theeffect of the diversification of patentacquisition fields on corporate value.
Our analysis has revealed that the morediversified the fields in which patents havebeen acquired are, the higher the corporate
value. We also analyzed the effect of thediseconomies of scope resulting from theinefficiency caused by the diversification ofpatent acquisition fields, which inevitablyraises costs for patent management andmaintenance. The analysis results showed nostatistical significance but it was indicated.
(Akira Yorisue, Hiroyuki Odagiri)
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additionofquestionnaire.

patents was controlled. The above-mentioned
findings strongly indicate that many
companies operate compensation systems asa means of reducing the risk of litigation
initiated by their employees to seek
compensation, and that little attention has
been paid to the importance of giving an
incentive to researchers.
(Koichiro Onishi, Akiya Nagata)questionstothe

IV Creation and use of the intellectual
property indexes in other countries
Patent statistics, which have been
rapidly increasing in amount in recent years,
provide basic and useful information for
those who are in a position to create indexes
designed to facilitate the formation of
innovation policies, to evaluate cooperateintellectual property strategies, and to
identify technical trends. In view of theimportance of patent statistics, the European
Patent Office (EPO) and the Organization for
Economic Co-operation and Development(OECD) have held joint workshops on patentstatistics.
This section focuses on research on
patent indexes that are a part of theresearch presented in the workshop, “Patent
Statistics for Policymaking,” that was held inautumn 2006. This section describes andintroduces such research to find out whatkinds of intellectual property indexes havebeen created and used in other countries andto gain information useful for theestablishment of the Intellectual Property
Strategy Indexes.
The data attracting special attention
from those in charge of creating indexes arecitation data and patent family data. An
increase in the amount of those statistical
data would enable us to create more accurate
indexes that indicate patent value andtechnical trends in each country. It will
enhance the reliability of the data based on
which a nation or company decides whether
to file an application or exploit a patent andidentifies the innovation trends. Accurate
and high-quality empirical analyses are
expected to be conducted in the future. The
results of those analyses will help us tocreate intellectual property strategy indexes.
(Isamu Yamauchi, Sadao Nagaoka, Kazuyuki
Motohashi)

III Revision of the questionnaire forthe “Intellectual Property Activity
Survey”
The “Intellectual Property Activity
Survey” is an annual questionnaire surveythat has been conducted by the JPO since
fiscal year 2002 for the purpose of grasping
the reality of intellectual property activities
of Japanese companies in order to collectbasic data useful for the establishment of theJapanese intellectual property policies. The
survey provides researchers with a lot of
extremely useful information such as thelicense balance and the exploitation patternsof industrial property rights of each of the
responding companies. Researchers could not
obtain such information without actually
asking questions to those who are in chargeof intellectual property management in thosecompanies. The “Intellectual Property
Activity Survey” will be conducted in 2007
for the sixth time. In the past six years, the
JPO and the research committee under acommission from the JPO have beenreviewing the questionnaire, estimation
method, etc., in an effort to make the survey
even more useful.
Taking into consideration the fact thatthe “Intellectual Property Activity Survey”
for fiscal year 2007 will be a large-scale
survey (complete enumeration and sampling
survey), which is conducted every three
years, this section discusses how to further
improve the questionnaire to enhance theaccuracy of analysis. Based on the discussion,
this section proposes improvements to raise
the response rate, amendments to make thesurvey more useful for researchers, and7
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new

V

CreationoftheIntellectual
Property Strategy Indexes basedon the results of the analyses
conducted in this study

In order to establish new Intellectual
Property Strategy Indexes, Chapters 1
through 7 of Section II of this paper haveempirically analyzed the effects of theintellectual
propertysystems
andenvironment faced by companies on
corporate intellectual property strategies.
Section IV has introduced efforts to establish
and use patent indexes in other countries.
Section V has analyzed how to takeadvantage of these empirical analyses andoverseas efforts to establish patent indexes
in order to establish Intellectual Property
Strategy Indexes with focus on the patentapplications,
examination
requests,
registration and exploitation of patents bycompanies.
The analysis has provided useful
information as to what factors should betaken into consideration when we evaluate
patent acquisition efforts, licensing activities,
internationalization, and the financial
structure of a company from the perspectiveof intellectual property strategy.
(Secretariat)

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IIP Bulletin 2007