CALIFORNIA INVENTIONINDEX | AUGUST 2025

August 2025: 2.28% (A- grade)

California inventionINDEX August 2025: 2.28% (A- 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).

California inventionINDEX Scores – Last 12 months

The California inventionINDEX score for August 2025, at 2.28% with an A- rating, represents a notable shift when compared to the preceding months. This score indicates a decrease from the high of 3.34% and an A+ rating recorded in July 2025. While still within a respectable range, this recent decline breaks a brief upward trend and places the current score closer to the average performance seen over the past year. Observing the long-term historical data, this score aligns with a number of similar ratings, such as the 2.24% in September 2024 and the 2.25% in May 2021, illustrating the score’s cyclical nature.

A high inventionINDEX score and a corresponding A or A+ rating are indicative of a robust and thriving innovation ecosystem. Such scores, like the peak of 4.05% in October 2023, signal an environment rich with new patent applications, strong entrepreneurial activity, and significant venture capital investment. This level of performance reflects a healthy economic climate that attracts top-tier talent and resources, reinforcing California’s status as a global leader in technology and innovation. A higher score suggests that the state’s policies and infrastructure are effectively supporting creators and inventors, leading to tangible outcomes in both technological advancement and economic growth.

Conversely, a lower inventionINDEX score and a B or B- rating can suggest potential challenges within the state’s innovation landscape. Scores such as the 1.52% in June 2022 point to a period of reduced inventiveness. This can be influenced by broader economic factors, a tightening of financial markets, or a temporary lull in new breakthroughs. A lower score may signal a less dynamic environment, which could lead to a decline in competitive advantage over time. While not an immediate cause for concern, a prolonged period of lower scores might suggest a need for strategic intervention to rekindle the state’s innovative momentum.

In summary, the inventionINDEX serves as a valuable barometer for the health of California’s innovative economy, reflecting its dynamic nature. The historical data shows a pattern of consistent fluctuation, with periods of exceptional performance followed by moments of consolidation. The most recent score for August 2025, while lower than the preceding month, is well within the historical range. It underscores the importance of monitoring these scores to understand both short-term trends and the long-term health of the state’s capacity to generate new ideas and technologies. The data provides a clear narrative of the cyclical nature of innovation and its direct impact on economic performance.

Discussion:

In August, the California 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 considerable 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 California office provides R&D tax credit consulting and advisory services to Pasadena, Los Angeles, San Diego, San Jose, San Francisco, Fresno, Sacramento, Long Beach, Oakland, Bakersfield, Anaheim, Santa Ana, Riverside, Stockton, Chula Vista, Irvine, Fremont, San Bernardino, Modesto, Oxnard and Fontana.

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.