BAH –> patents!

It’s perhaps is an indictment of our schools when commentators seize upon random bits of numerical measure, and from that, fashion points and corollary conclusions.  A recent Booz Allen + Hamilton report concludes that more R&D spending does not “necessarily create more valuable innovations” and that the “important innovations don’t involve new patents.”  From the scatter of statistical seeds from which those observations sprang, BA+H erects a rule (set out in bold type) that “Patents generally don’t drive profits (em. del.).” 
Casting aside the devilish details and courtesanal caveats of BA+H, the bold type conclusion of the BA+H report has been seized upon by many of the patent-haters in our blawgoshere to prop up their anti-patent agenda.  A good example is my favorite patent-hater, Mike over at techdirt.com (which really is a fine tech news site).  The last patent that Mike liked probably issued in the late forties (indeed, Mike recently denigrated how few patented inventions came out of Edison’s lab).
So, I read the BA+H Patents report.  My technical training makes it hard to accept any hypothesis based on “no statistical relationship between” factoid A and numeroid B.  Wrapping my mind around separate points, HAVING a statistical relation, is more intellectually engrossing.  When BA+H posits that “we found no statistical relationship between financial performance and either patents counts or patent quality,” my sense is that nothing was proven or even connoted by that missing statistical link.  Would a panel accept for scholarly publication a study based on the lack of relation between two data sets?
At a minimum, the analysis behind the BA+H Patents proposition needs replacement data with statistical relation, data normalized within industry groups, or its premise tossed since it lacks relevant, statistically probative data.Still, once I’d wrapped my mind about the spring inside the BA+H Patents timepiece, to recast the data was an intellectual necessity.  Here’s some wheat germs gleaned from exhibit 10b in the BA+H Patents report.  Taking the premise that more [R&D $] makes more [patents] but not “necessarily” more [moola, jack, gelt, ka-ching, G’s], then focusing on the contrary data, one asks: does spending less on R&D, mean less patents, profits, etc.  Consider only the @20 listed “High-Leverage Innovators” which spent less than @2% of their sales on R&D.  Of these, Conoco spent 0.1% of its sales on R&D, but has over 900 patents (not including those of Phillips).  ExxonMobil’s R&D was 0.2% of sales, and the combined companies hold over 12,500 patents.  Are these petrochemists innovators; do they make tons of money?  Ecolab, which makes cleaning and sanitizing chemicals, applied 1.5% of its sales to R&D, and holds almost 650 patents.  Again, innovator; financially successful?  Indeed, do any of the 92 companies on exhibit 10b hold no patents, need no patents, profit not from their patents?  Read what BA+H says about SanDisk’s profits.
Overall, the surficial points glossed off the BA+H Patents data were that some industries, e.g., medical, spend a larger portion of their sales revenues on R&D, and that companies in the Far East spend a larger percentage than do those in the U.S.  These two points suggest (a) that certain industries that enjoy higher margins, protected by patents, consider greater R&D expenditures necessary and worthwhile, and (b) that the U.S. could fall behind other global economies that rely on IP and R&D budgets to acheive their high profitability.
Those stats are relevant and related.  The notion in the BA+H report that patents play an insignificant role relies on the lack of a “statistical relationship.”
Overall, the surficial points glossed off the BA+H Patents data were that some industries, e.g., medical, spend a larger portion of their sales revenues on R&D, and that companies in the Far East spend a larger percentage than do those in the U.S.  These two points suggest (a) that certain industries that enjoy higher margins, protected by patents, consider greater R&D expenditures necessary and worthwhile, and (b) that the U.S. could fall behind other global economies that rely on IP and R&D budgets to acheive their high profitability.Those stats are relevant and related.  The notion in the BA+H report that patents play an insignificant role relies on the lack of a “statistical relationship.”Overall, the surficial points glossed off the BA+H Patents data were that some industries, e.g., medical, spend a larger portion of their sales revenues on R&D, and that companies in the Far East spend a larger percentage than do those in the U.S.  These two points suggest (a) that certain industries that enjoy higher margins, protected by patents, consider greater R&D expenditures necessary and worthwhile, and (b) that the U.S. could fall behind other global economies that rely on IP and R&D budgets to acheive their high profitability.Those stats are relevant and related.  The notion in the BA+H report that patents play an insignificant role relies on the lack of a “statistical relationship.”

Overall, the surficial points glossed off the BA+H Patents data were that some industries, e.g., medical, spend a larger portion of their sales revenues on R&D, and that companies in the Far East spend a larger percentage than do those in the U.S.  These two points suggest (a) that certain industries that enjoy higher margins, protected by patents, consider greater R&D expenditures necessary and worthwhile, and (b) that the U.S. could fall behind other global economies that rely on IP and R&D budgets to acheive their high profitability.Those stats are relevant and related.  The notion in the BA+H report that patents play an insignificant role relies on the lack of a “statistical relationship.”