CALIFORNIA INVENTIONINDEX | JUNE 2025

June 2025: 2.04% (B+ grade)

California inventionINDEX June 2025: 2.04% (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).

The California inventionINDEX for June 2025 stands at 2.04%, a moderate figure when viewed in the context of its 12-month history. While this latest score reflects a small dip from May 2025’s 2.33% and April’s 2.42%, it remains above several previous months, notably November 2024’s 1.88% and August 2024’s 2.02%. This suggests that although innovation activity slowed slightly in June, the overall trend continues to show a relatively steady performance. The consistency around the 2% to 2.5% range indicates a stable innovation climate in California, without sharp declines that might suggest systemic weaknesses.

Notably, California reached its highest recent score in October 2024, when the inventionINDEX peaked at 2.78%. That high point reflects a period of intensified intellectual property generation, possibly driven by sector-specific breakthroughs or favorable state-level policies. Maintaining proximity to that high watermark in the months that followed-such as January and December, both above 2.5%-suggests a resilient innovation pipeline. However, the gradual decline since January 2025 signals a potential plateau, which could reflect longer development cycles or reduced filings in specific technology areas.

A higher inventionINDEX typically correlates with increased research output, robust startup activity, and a favorable environment for technology investment. When sustained, it may enhance the region’s competitiveness, attract talent, and encourage venture capital inflows. These outcomes reinforce California’s reputation as a national leader in innovation, particularly in fields like biotechnology, software, and green energy. High scores may also support stronger economic growth and job creation in knowledge-intensive sectors.

A lower score can suggest a cooling of innovation activity, which may result from economic uncertainty, reduced R\&D budgets, or shifting market priorities. If this downtrend persists, it could challenge California’s dominant position in the national innovation landscape. Policymakers and industry leaders may need to monitor such trends closely, ensuring that short-term fluctuations do not evolve into long-term decline. Sustaining high inventionINDEX levels is essential to maintaining the momentum of innovation that has long been central to California’s economic identity.

Discussion:

In June, the California inventionINDEX scored a positive sentiment which was lower than the previous year’s average and underperformed 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.

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