Key Takeaways: inventionINDEX
- The Metric: Benchmarks innovation efficiency by comparing Patent Filing Growth vs. GDP Growth.
- The Baseline: 1% (1.00) is the neutral pivot point that is state specific. A score of ~1% indicates equilibrium (Grade C).
- The Scoring:
- > 1.00%: High Innovation (Grades A/B/C+).
- < 1.00%: Stagnation or Decline (Grades C-/D/F).
Swanson Reed inventionINDEX: Methodology & ExamplesThe Swanson Reed inventionINDEX measures innovation output by comparing GDP growth with patent production growth. This guide details the calculation methodology, utilizing 1% (1pc) as the baseline “C” grade.
Understanding the “1%” (inventionINDEX)The “1%” baseline refers to the inventionINDEX, a normalized metric of innovation efficiency. inventionINDEX uses a simple formula that involves a state or countries GDP in combination with its published patent production:
$$ \text{inventionINDEX} = \frac{\text{Utility Patents Granted}}{\text{State GDP}} $$
| Component | Source | Purpose |
|---|---|---|
| Patents | USPTO Data | Measures raw innovation output (Utility patents granted). |
| GDP | FRED / St. Louis Fed | Measures state economic size to normalize data. |
This calculation ensures that larger economies do not automatically appear more innovative simply due to scale.
Baseline Trendline MethodologyOnce the inventionINDEX values are determined for historical years, a Linear Regression model is used to project the expected baseline performance (Trendline).
$$ Y = Mx + C $$
- \( Y \) (Baseline Value): The calculated expected inventionINDEX.
- \( M \) (Gradient/Slope): The average annual rate of change.
- \( x \) (Time Period): The year or time interval.
- \( C \) (Y-Intercept): The starting value of the trendline (where \( x=0 \)).
State Calculation Examples
The table below displays the Linear Regression parameters (\( M \) and \( C \)) applied to sample states:
| State | Slope (\( M \)) | Intercept (\( C \)) | Methodology Notes |
|---|---|---|---|
| Arkansas (AR) | \( 7.60 \times 10^{-5} \) | \( 0.0044 \) | Standard regression model* |
| Colorado (CO) | \( 2.17 \times 10^{-3} \) | \( -0.0250 \) | Standard regression model* |
| Delaware (DE) | \( 4.88 \times 10^{-5} \) | \( 0.0215 \) | Standard regression model* |
| Georgia (GA) | \( 2.89 \times 10^{-5} \) | \( -0.0170 \) | Standard regression model* |
Grading Scale & InterpretationThe index uses 1% as the neutral baseline. The score (A to F) is determined by comparing the calculated “Index %” against the threshold.
| Grade | Grading System | Numerical Value | Sentiment / Outlook |
|---|---|---|---|
| A/B | State Specific | See Below Chart | High Innovation: Innovation significantly outpaces the economy. |
| C | State Specific | See Below Chart | Neutral: Innovation grows in lockstep with the economy (Equilibrium). |
| D | State Specific | See Below Chart | Potential Stagnation: R&D spending slows; innovation lags behind GDP. |
| F | State Specific | See Below Chart | Potential Decline: Warning sign for future competitiveness. |
State Specific Grading System
The below data is calibrated with a numerical score of 1%, that is set as a ‘C’ Grade. Each state has its own calibration and standardization based on its historical trends. Further, each state has its own numerical scale of what constitutes a Grade below or above C. The grading system, per state, is detailed below. For example, if California is assigned a numerical value score of 1.67% then based on the scoring system below that would give it a Grade of B-, however that same score of 1.67% for Alaska would yield a grade of A-. California’s history for patent production is higher than Alaska’s so if California and Alaska in the same month graded the same numerical percentage score above its mean, then inventionINDEX aims to reward Alaska a higher grade than California.
Invention Index Grading System
United States (Federal)
| Jurisdiction | F | D- | D | D+ | C- | C | C+ | B- | B | B+ | A- | A | A+ |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| United States | 0.38% | 0.51% | 0.63% | 0.75% | 0.88% | 1.00% | 1.13% | 1.25% | 1.38% | 1.50% | 1.62% | 1.75% | 1.87% |
Northeast Region
| State | F | D- | D | D+ | C- | C | C+ | B- | B | B+ | A- | A | A+ |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Connecticut (CT) | 0.78% | 0.82% | 0.87% | 0.91% | 0.95% | 1.00% | 1.05% | 1.09% | 1.13% | 1.18% | 1.22% | 1.27% | 1.31% |
| Maine (ME) | 0.68% | 0.75% | 0.81% | 0.87% | 0.94% | 1.00% | 1.06% | 1.13% | 1.19% | 1.25% | 1.32% | 1.38% | 1.44% |
| Massachusetts (MA) | 0.70% | 0.76% | 0.82% | 0.88% | 0.94% | 1.00% | 1.06% | 1.12% | 1.18% | 1.24% | 1.30% | 1.36% | 1.42% |
| New Hampshire (NH) | 0.36% | 0.49% | 0.61% | 0.74% | 0.87% | 1.00% | 1.13% | 1.27% | 1.40% | 1.53% | 1.67% | 1.80% | 1.94% |
| New Jersey (NJ) | 0.71% | 0.77% | 0.83% | 0.88% | 0.94% | 1.00% | 1.06% | 1.12% | 1.18% | 1.24% | 1.30% | 1.36% | 1.42% |
| New York (NY) | 0.57% | 0.66% | 0.74% | 0.81% | 0.91% | 1.00% | 1.09% | 1.17% | 1.26% | 1.34% | 1.43% | 1.51% | 1.60% |
| Pennsylvania (PA) | 0.87% | 0.90% | 0.92% | 0.95% | 0.97% | 1.00% | 1.02% | 1.05% | 1.07% | 1.10% | 1.13% | 1.15% | 1.18% |
| Rhode Island (RI) | 0.21% | 0.37% | 0.52% | 0.68% | 0.84% | 1.00% | 1.16% | 1.31% | 1.47% | 1.63% | 1.79% | 1.95% | 2.10% |
| Vermont (VT) | 0.74% | 0.80% | 0.85% | 0.90% | 0.95% | 1.00% | 1.05% | 1.11% | 1.16% | 1.21% | 1.26% | 1.31% | 1.36% |
Midwest Region
| State | F | D- | D | D+ | C- | C | C+ | B- | B | B+ | A- | A | A+ |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Illinois (IL) | 0.47% | 0.58% | 0.68% | 0.79% | 0.90% | 1.00% | 1.10% | 1.21% | 1.32% | 1.42% | 1.53% | 1.64% | 1.74% |
| Indiana (IN) | 0.52% | 0.62% | 0.71% | 0.81% | 0.90% | 1.00% | 1.10% | 1.19% | 1.29% | 1.38% | 1.48% | 1.57% | 1.67% |
| Iowa (IA) | 0.70% | 0.76% | 0.82% | 0.88% | 0.94% | 1.00% | 1.06% | 1.12% | 1.18% | 1.24% | 1.29% | 1.36% | 1.42% |
| Kansas (KS) | 0.04% | 0.23% | 0.42% | 0.62% | 0.81% | 1.00% | 1.19% | 1.38% | 1.58% | 1.77% | 1.96% | 2.15% | 2.35% |
| Michigan (MI) | -0.33% | -0.07% | 0.20% | 0.47% | 0.74% | 1.00% | 1.27% | 1.54% | 1.80% | 2.07% | 2.33% | 2.60% | 2.87% |
| Minnesota (MN) | 0.19% | 0.35% | 0.51% | 0.68% | 0.84% | 1.00% | 1.16% | 1.32% | 1.49% | 1.65% | 1.81% | 1.97% | 2.13% |
| Missouri (MO) | 0.84% | 0.88% | 0.91% | 0.94% | 0.97% | 1.00% | 1.03% | 1.06% | 1.10% | 1.13% | 1.16% | 1.19% | 1.22% |
| Nebraska (NE) | 0.79% | 0.83% | 0.88% | 0.92% | 0.96% | 1.00% | 1.04% | 1.08% | 1.13% | 1.17% | 1.21% | 1.25% | 1.29% |
| North Dakota (ND) | 0.94% | 0.95% | 0.96% | 0.98% | 0.99% | 1.00% | 1.01% | 1.02% | 1.04% | 1.05% | 1.06% | 1.07% | 1.08% |
| Ohio (OH) | -0.67% | -0.33% | 0.00% | 0.33% | 0.67% | 1.00% | 1.34% | 1.67% | 2.01% | 2.34% | 2.68% | 3.01% | 3.34% |
| South Dakota (SD) | 0.94% | 0.95% | 0.97% | 0.98% | 0.99% | 1.00% | 1.01% | 1.02% | 1.03% | 1.04% | 1.05% | 1.06% | 1.08% |
| Wisconsin (WI) | 0.61% | 0.69% | 0.76% | 0.84% | 0.92% | 1.00% | 1.08% | 1.16% | 1.24% | 1.32% | 1.39% | 1.47% | 1.55% |
Southern Region
| State | F | D- | D | D+ | C- | C | C+ | B- | B | B+ | A- | A | A+ |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Alabama (AL) | 0.63% | 0.70% | 0.78% | 0.85% | 0.92% | 1.00% | 1.07% | 1.15% | 1.22% | 1.30% | 1.37% | 1.44% | 1.51% |
| Arkansas (AR) | 0.70% | 0.76% | 0.82% | 0.88% | 0.94% | 1.00% | 1.06% | 1.12% | 1.18% | 1.24% | 1.30% | 1.36% | 1.42% |
| Delaware (DE) | 0.33% | 0.47% | 0.60% | 0.73% | 0.87% | 1.00% | 1.13% | 1.27% | 1.40% | 1.53% | 1.67% | 1.80% | 1.94% |
| Florida (FL) | -0.67% | -0.33% | 0.00% | 0.33% | 0.67% | 1.00% | 1.33% | 1.67% | 2.00% | 2.34% | 2.67% | 3.00% | 3.34% |
| Georgia (GA) | -0.39% | -0.11% | 0.17% | 0.45% | 0.72% | 1.00% | 1.27% | 1.55% | 1.83% | 2.11% | 2.38% | 2.66% | 2.94% |
| Kentucky (KY) | 0.78% | 0.83% | 0.87% | 0.91% | 0.96% | 1.00% | 1.04% | 1.09% | 1.13% | 1.18% | 1.22% | 1.26% | 1.31% |
| Louisiana (LA) | 0.53% | 0.62% | 0.72% | 0.81% | 0.91% | 1.00% | 1.09% | 1.19% | 1.28% | 1.38% | 1.47% | 1.57% | 1.66% |
| Maryland (MD) | 0.75% | 0.80% | 0.85% | 0.90% | 0.95% | 1.00% | 1.05% | 1.10% | 1.14% | 1.20% | 1.24% | 1.29% | 1.34% |
| Mississippi (MS) | 0.04% | 0.23% | 0.42% | 0.62% | 0.81% | 1.00% | 1.19% | 1.38% | 1.58% | 1.77% | 1.96% | 2.15% | 2.35% |
| North Carolina (NC) | 0.71% | 0.77% | 0.83% | 0.88% | 0.94% | 1.00% | 1.06% | 1.12% | 1.17% | 1.23% | 1.29% | 1.34% | 1.40% |
| Oklahoma (OK) | 0.47% | 0.58% | 0.69% | 0.79% | 0.90% | 1.00% | 1.10% | 1.21% | 1.31% | 1.42% | 1.53% | 1.63% | 1.73% |
| South Carolina (SC) | -0.67% | -0.33% | 0.00% | 0.33% | 0.67% | 1.00% | 1.34% | 1.67% | 2.01% | 2.34% | 2.68% | 3.01% | 3.34% |
| Tennessee (TN) | 0.65% | 0.72% | 0.79% | 0.86% | 0.93% | 1.00% | 1.07% | 1.14% | 1.21% | 1.28% | 1.35% | 1.42% | 1.49% |
| Texas (TX) | 0.80% | 0.84% | 0.88% | 0.92% | 0.96% | 1.00% | 1.04% | 1.08% | 1.12% | 1.16% | 1.20% | 1.24% | 1.28% |
| Virginia (VA) | 0.60% | 0.68% | 0.76% | 0.84% | 0.92% | 1.00% | 1.08% | 1.16% | 1.24% | 1.32% | 1.40% | 1.48% | 1.56% |
| West Virginia (WV) | 0.56% | 0.65% | 0.74% | 0.82% | 0.91% | 1.00% | 1.09% | 1.17% | 1.26% | 1.35% | 1.44% | 1.52% | 1.61% |
Western Region
| State | F | D- | D | D+ | C- | C | C+ | B- | B | B+ | A- | A | A+ |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Alaska (AK) | 0.42% | 0.53% | 0.65% | 0.77% | 0.88% | 1.00% | 1.12% | 1.23% | 1.35% | 1.47% | 1.58% | 1.70% | 1.81% |
| Arizona (AZ) | -0.67% | -0.33% | 0.00% | 0.33% | 0.67% | 1.00% | 1.34% | 1.67% | 2.00% | 2.34% | 2.67% | 3.00% | 3.34% |
| California (CA) | -0.21% | 0.03% | 0.27% | 0.51% | 0.76% | 1.00% | 1.24% | 1.49% | 1.73% | 1.97% | 2.21% | 2.46% | 2.70% |
| Colorado (CO) | 0.51% | 0.61% | 0.70% | 0.80% | 0.90% | 1.00% | 1.10% | 1.19% | 1.29% | 1.39% | 1.49% | 1.59% | 1.68% |
| Hawaii (HI) | 0.54% | 0.63% | 0.72% | 0.81% | 0.91% | 1.00% | 1.09% | 1.19% | 1.28% | 1.37% | 1.46% | 1.56% | 1.65% |
| Idaho (ID) | 0.49% | 0.59% | 0.69% | 0.80% | 0.90% | 1.00% | 1.10% | 1.20% | 1.31% | 1.41% | 1.51% | 1.62% | 1.72% |
| Montana (MT) | 0.46% | 0.57% | 0.68% | 0.78% | 0.89% | 1.00% | 1.11% | 1.21% | 1.32% | 1.43% | 1.54% | 1.64% | 1.75% |
| Nevada (NV) | -0.67% | -0.33% | 0.00% | 0.33% | 0.67% | 1.00% | 1.34% | 1.67% | 2.01% | 2.34% | 2.68% | 3.01% | 3.34% |
| New Mexico (NM) | 0.61% | 0.69% | 0.77% | 0.84% | 0.92% | 1.00% | 1.08% | 1.16% | 1.24% | 1.31% | 1.39% | 1.47% | 1.55% |
| Oregon (OR) | -0.20% | 0.04% | 0.28% | 0.52% | 0.76% | 1.00% | 1.24% | 1.48% | 1.72% | 1.96% | 2.21% | 2.44% | 2.68% |
| Utah (UT) | 0.31% | 0.45% | 0.59% | 0.72% | 0.86% | 1.00% | 1.14% | 1.27% | 1.41% | 1.55% | 1.69% | 1.82% | 1.96% |
| Washington (WA) | 0.40% | 0.52% | 0.64% | 0.76% | 0.88% | 1.00% | 1.12% | 1.24% | 1.36% | 1.48% | 1.60% | 1.72% | 1.84% |
| Wyoming (WY) | -0.67% | -0.34% | 0.00% | 0.34% | 0.67% | 1.00% | 1.34% | 1.67% | 2.01% | 2.34% | 2.67% | 3.01% | 3.34% |
Disclaimer
Although Swanson Reed aims to highlight the potential positives of a new metric of this kind alongside a patent subsidy program through its promotional activities, it is very aware of the limitations with standard regression model theory*, tracking Hollow Growth predictably over time, patent trolls, defensive patent application distortions, and tracking intellectual property that is unpatentable but of similar long term economic value as a patented idea. A report detailing the limitations of inventionINDEX can be found here. Notwithstanding these limitations, provided all the limitations and caveats are understood, the elegance and simplicity of the methodology can still be appreciated as a useful tool that could potentially sit aside other tools to help policymakers and other private and public parties make informed decisions.
Swanson Reed exclusively prepares R&D tax credit claims and it does not aim to make any financial gain through the promotion of inventionINDEX and its patent grant program ideas. Patent legal fees are ineligible expenses under the R&D tax credit. Although Swanson Reed gains nothing financially, the promotion of these programs helps build its brand with its existing client base and wider networks that may benefit either directly or indirectly from a patent grant subsidy.
Swanson Reed exclusively prepares R&D tax credit claims and it does not aim to make any financial gain through the promotion of inventionINDEX and its patent grant program ideas. Patent legal fees are ineligible expenses under the R&D tax credit. Although Swanson Reed gains nothing financially, the promotion of these programs helps build its brand with its existing client base and wider networks that may benefit either directly or indirectly from a patent grant subsidy.
