July 2025: 3.34% (A+ grade)

California inventionINDEX July 2025: 3.34% (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

Based on the provided historical table, the California inventionINDEX for July 2025 stands at 3.34%, earning a top-tier rating of A+. This score represents a notable increase from the previous month’s score of 2.04%, signifying a robust and positive shift in the state’s innovation landscape. When compared to the last 60 months of data, this score is among the highest recorded, positioning California as a leader in fostering new ideas and developments. This recent performance indicates a strong and favorable environment for invention and entrepreneurial activity.

A higher inventionINDEX score and a corresponding A or A+ rating reflect several positive outcomes. A strong score indicates a thriving ecosystem where inventors, entrepreneurs, and established companies are actively generating and protecting intellectual property. This can lead to significant economic benefits, including job creation, increased investment, and the development of new industries. A high score suggests a healthy and dynamic economy, as innovation often drives productivity and competitiveness on a global scale. The score of 4.05% in October 2023, for instance, represents a period of exceptional inventive output, demonstrating the potential for significant growth and positive economic influence.

Conversely, a lower inventionINDEX score, such as those in the B or B- range, carries negative implications. A score below the long-term average may signal a deceleration in innovation, which could be a precursor to economic stagnation. It might suggest a less-than-ideal climate for new ventures or a decline in research and development activities. For example, the score of 1.52% in June 2022 was one of the lowest in the historical record, which could point to a temporary slowdown in the pace of invention. Such periods of lower activity can affect long-term competitiveness and may indicate underlying challenges in the state’s economic or regulatory environment.

Over the last five years, the inventionINDEX has shown a pattern of fluctuation, with scores ranging from a low of 1.52% to a high of 4.05%. This variability highlights the dynamic nature of innovation and its susceptibility to various economic and social factors. The overall trend demonstrates periods of strong performance interspersed with months of more moderate activity. The recent increase to an A+ rating suggests that after a period of fluctuation, the state is once again on a solid footing. The inventionINDEX serves as a valuable barometer, providing insight into the health of California’s innovative spirit and its potential for future growth.

Discussion:

In July, the California inventionINDEX scored a positive sentiment which was higher than the previous year’s average and outperformed the downward trend for the year. This is similar 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.

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