October 2025: 1.16% (B- grade)

Alabama inventionINDEX October 2025: 1.16% (B- grade)

The inventionINDEX measures innovation output by comparing GDP growth with patent production growth. 

Anything over C grade is positive sentiment; anything under C is negative outlook/sentiment. Using that sentiment, it is possible to observe trends over time, and also compare states/countries. In doing so, we can predict which states have the best chance to recover economically from the pandemic (or any other economic incident that may occur).

Alabama inventionINDEX Scores – Last 12 months

The Alabama inventionINDEX for October 2025 stands at 1.16%, earning a B- grade. This score indicates a positive sentiment, though it is slightly lower than the previous month’s A+ rating of 1.53% and also below the average observed over the prior 12 months. When compared to October 2024’s score of 1.74% (A+), it suggests a notable decline in the innovation output for the corresponding month year-over-year. This recent performance contrasts with the slight downward trend observed in the preceding 12-month period, indicating a potential shift in the state’s innovation trajectory.

A higher inventionINDEX score and a corresponding A or B grade signify robust innovation output, which is generally linked to positive economic indicators. Such performance suggests a healthy environment for patent production and GDP growth, fostering economic recovery and resilience. States with consistently higher grades are better positioned to navigate economic challenges, as innovation often drives new industries, job creation, and overall prosperity. This positive sentiment can attract investment, stimulate research and development, and ultimately contribute to a dynamic and forward-looking economy.

Conversely, a lower inventionINDEX score, particularly those falling into the C or D grade range, implies a less favorable outlook for innovation. A score below C grade indicates a negative sentiment, suggesting that the growth in patent production may not be keeping pace with GDP growth. This can have several negative implications, including a slower economic recovery, reduced competitiveness, and a potential decline in research and development activities. Such trends might signal underlying economic weaknesses or challenges in fostering an innovative ecosystem, which could hinder long-term economic growth and stability.

Over the past 60 months, the Alabama inventionINDEX has experienced fluctuations, with periods of strong performance (multiple A+ ratings) interspersed with lower grades (C- and D+). For instance, January 2024 saw a peak of 2.15% (A+), while November 2024 and October 2022 both registered 0.86% (D+). These variations highlight the dynamic nature of innovation output and the various factors that can influence it, such as economic conditions, policy changes, and global events. Understanding these historical trends is crucial for assessing Alabama’s long-term innovation health and for informing strategies aimed at sustaining positive sentiment and fostering economic growth.

Discussion:

In October, the Alabama inventionINDEX scored a positive sentiment which was lower than the previous year’s average and underperformed the upward trend for the year. This is in contrast to the prior 12 months, which experienced a slight downward trend. 

As the economy continues to stabilize in the post-pandemic era, it remains uncertain whether any backlog of applications still exists or if the department has returned to normal processing timelines. The inventionINDEX could also be affected by lingering consequences from the pandemic, such as company closures, reduced workforces, and limited R&D capabilities, which may still be impacting current operations.

Learn More:

Are you thinking of patenting any of your bright ideas? Did you know your research work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? To find out more, please check out our free online eligibility test.

Swanson Reed’s Alabama office provides R&D tax credit consulting and advisory services to Birmingham, Montgomery, Mobile, Huntsville, Tuscaloosa, Hoover, Dothan, Auburn, Decatur and Madison.

Feel free to book a quick teleconference with one of R&D tax specialists if you would like to learn more about R&D tax credit opportunities.

Who We Are:

Swanson Reed is the largest Specialist R&D tax credit advisory firm in the United States. With offices nationwide, we are one of the only firms globally to exclusively provide R&D tax credit consulting services to our clients. We have been exclusively providing R&D tax credit claim preparation and audit compliance solutions for over 30 years. 

Swanson Reed hosts daily free webinars and provides free IRS CE and CPE credits for CPAs.  For more information please visit us at www.swansonreed.com/free-webinars or contact your usual Swanson Reed representative.