The aim of this manual is to provide basic information about patent data used in the measurement of science and technology (S&T), the construction of indicators of technological activity, as well as guidelines for the compilation and interpretation of patent indicators.

The statistical properties of patent data are determined by their legal characteristics and by their economic implementation, as these influence which inventions are protected, by whom, what information is disclosed (hence made accessible to statisticians), how important patents are for industries, etc. This chapter provides an overview of the legal and economic foundations of patents. It describes the basic concepts necessary for the use of patent as indicators of science and technology (S&T).

To obtain a patent for an invention, the individual or institution which owns the invention (an enterprise, or a public or private institution such as a university or a government body) has to file an application at the patent office. An applicant who wants to have patent protection in multiple countries can file for a patent in each country separately, file a patent application at a regional office, or file a patent application at the international patent office and request entry into the national stage in each country in which patent protection is sought.

To compile patent statistics, certain methodological choices have to be made. The challenge faced by statisticians is to select the relevant variables for compiling statistics among many alternatives. The methodological choices made significantly influence the statistics derived and their interpretation. Patent statistics can only be meaningfully interpreted if there is adequate knowledge of the criteria and methodologies used to compile them.

Many uses of patent data for research and policy analysis require relating them to a meaningful unit of analysis or classifying them according to particular criteria. By relating or classifying patents in this manner, information can be obtained on these specific units or on the economic or social relevance of certain variables. Analysis may require relating patents to the entity that filed them, to the individual who made the underlying invention, to a particular field of technology, a particular industry, a particular region or a particular institutional sector.

The use of patent and non-patent citations as indicators of innovation has increased dramatically in the last decade. As citations indicate the S&T precedents in inventions, they make it possible to track knowledge. It is possible to identify the influence of particular inventions or particular sets of inventions and map their diffusion through the economy. In particular, the number of citations a patent receives has been found to reflect, on average, the technological and commercial importance of a patent, and thus helps to deal with the problem of the heterogeneity of patents’ value.

Inventive activities are increasingly organised at the international level (OECD, 2007). Inventions made by researchers residing in one country can be funded and owned by foreign companies, companies from different countries can join their resources to sponsor research, and researchers from different countries can co-operate on inventions, etc. Alliances across different geographical locations are formed to obtain research synergies and complementarities and to acquire new technological competences. The advent of global value chains, differences in research and development (R&D) costs, increased flexibility in handling cross-border R&D projects (owing to information and communication technology – ICT), and major policy changes (such as stronger intellectual property rights or the tax treatment of R&D) have all favoured this trend. Given the importance of these changes and their implications for the technological capacity of countries, it is important to quantify the intensity and geographical patterns of these activities.

The term “patent value” has several different meanings. It can mean the economic “private” value to the holder, defined as the discounted flows of revenue generated by the patent over its lifetime. It can mean the “social” value of the patent, that is, its contribution to society’s stock of technology. The two concepts are closely related, as the revenue generated should be commensurate with the technological contribution, but they are not identical, as part of the social value is not appropriated by the patent holder (there are externalities): the published knowledge for instance can be used by other inventors and/or competitors to improve on the initial invention.