Empirical studies of innovation Lecture 4. Prof. Bronwyn H. Hall

Transcription

1 Empirical studies of innovation Lecture 4 Prof. Bronwyn H. Hall Jena Summer School 2012

2 Outline Overview of patents History US/EPO comparison Some current policy questions and problems Patent floods Patents as indicators Patent counts Citation counts Compexity (c) B H Hall 2012 Jena lectures 2

3 Overview Two major research areas with very different aims and interests Normative patent policy and IP strategy Eit Existence and design of patent t system length, breadth Firm strategic choices secrecy, patenting, litigation, licensing Enforcement and administration; interaction with antitrust Positive i patents and citations i as indicators Patents as measures of inventive output (rather than input) Citations as measures of importance Citations as measures of knowledge spillover can identify the recipient as well as the source (c) B H Hall 2012 Jena lectures 3

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5 Brunelleschi s s patent on Il Badalone (1) The Magnificent and Powerful Lords, Lords Magistrate, and Standard Bearer of Justice: Considering that the admirable Filippo Brunelleschi, a man of the most perspicacious intellect, industry, and invention, citizen of Florence, has invented some machine or kind of ship, p,by means of which he thinks he can easily, at any time, bring in any merchandise and load on the river Arno and on any other river or water, for less money than usual, and with several other benefits to merchants and others, and that he refuses to make such machine available to the public, in order that the fruit of his genius and skill may not be reaped by another without his will and consent; and that, if he enjoyed some prerogative concerning this, he would open up what he is hiding and would disclose it to all; And desiring that this matter, so withheld and hidden without fruit, shall be brought to light to be of profit to both said Filippo and our whole country and others, and that some privilege be created for said Filippo as hereinafter described, d so that he may be animated more fervently to even higher h pursuits and stimulated to more subtle investigations, they deliberated on 19 June 1421; (c) B H Hall 2012 Jena lectures 5

6 Brunelleschi s s patent (2) That no person alive, wherever born and of whatever status, dignity, quality, and grade, shall dare or presume, within three years next following from the day when the present provision ii has been approved in the Council of Florence, to commit any of the following acts on the river Arno, any other river, stagnant water, swamp, or water running or existing in the territory of Florence: to have, hold, or use in any manner, be it newly invented or made new in form, a machine or ship or other instrument designed to import or ship or transport on water any merchandise or any things or goods, except such ship or machine or instrument as they may have used until now for similar operations, or to ship or transport, or to have shipped or transported, any merchandise or goods on ships, machines, or instruments for water transport other than such as were familiar and usual until now, and further that any such new or newly shaped machine, etc. shall be burned; Provided however that the foregoing shall not be held to cover, and shall not apply to, any newly invented of newly shaped machine, etc. designed to ship, transport or travel on water, which may be made by Filippo Brunelleschi or with his will and consent; also, than any merchandise, things, or goods which may be shipped with such newly invented ships, within three years next following, shall hllbe free from imposition, requirement, or levy of any new tax not previously imposed. (c) B H Hall 2012 Jena lectures 6

7 Bit of history Badalone patent; Venetian patent law 1474; monopoly grants in the UK during 15 th 17 th centuries Modern patents: UK 1718 US constitution (1790), followed by France 19c other European countries, Japan, India 1883 Paris convention national treatment and creation of priority date (original filing date used in all countries, if filed within 12 mos after first filing) 1995 TRIPS equalizes patent t rights iht worldwide for 148 signatories and 31 observer countries WIPO now has about 200 member states (c) B H Hall 2012 Jena lectures 7

8 Current situation Major offices: USPTO (US), EPO (Europe), JPO (Japan), KPO (Korea), SIPO (China) Patent Cooperation Treaty (PCT) of countries as contracting signatories. i Anyone in these countries can file an international application that specifies the office which should conduct the search (saves money) To get protection in a member state, patent still has to be granted ga tedby that atstate As of 2007, 87% of apps go to USPTO, EPO, or JPO for search (c) B H Hall 2012 Jena lectures 8

9 Institutional similarities: US and EU Requirements for Utility Patent: US Available for processes, machines, manufactures, or compositions of matter Novel Useful Non obvious Requirements for Utility Patent: EU Patents have been available from the European Patent Office (EPO) since 1977/1978 Novel Industrial Application Inventive Step (c) B H Hall 2012 Jena lectures 9

10 United States patent challenges United States patent challenges Reexamination post issue (during the lf life of the patent) Ex parte, requestor rights limited A barrier to pursuing litigation ex post <1 percent of patents; half are from owner Cost: $10 100K depending on complexity AIA inroduced post grant review like the EPO no evidence yet Litigation for validity or infringement Approximately 2% of patents; may be rising faster than patenting Costly: estimates of patent suits run $1 5M, or $500K per claim; some as high as $20M in biotech, $48M for Polaroid. Patent afforded d a presumption of validity ld Judge and/or jury may have limited expertise (e.g., recent Google/Oracle decision) (c) B H Hall 2012 Jena lectures 10

11 EU (EPO) patent challenges Opposition post issue (within 9 mos.) Inter partes, adversarial, usually competitors ~8 percent of patents Cost: 13 22K$ Litigation for validity or infringement in national courts separate litigation in each of several nations in which the patent was claimed (some spillover effects, no systematic analysis available) German example ~0.8% of patents Proceedings delayed if opposition proceedings No jury; 3 judge panel plus a technical expert Cost $45 450K Community (unitary) patent almost a reality, will change this (c) B H Hall 2012 Jena lectures 11

12 Policy basics A patent creates a property right over intangible knowledge assets the right to exclude others from using the assets well known tradeoff between incentives and monopoly power non rival nature of knowledge asset social cost to granting the property right, because more than one firm can use knowledge simultaneously less well known: more complex issues due to strategic use of patents and patent litigation cumulative and overlapping innovation interaction with other incentive systems such as open science and publication priority Hysteresis in industrial development under different patent systems (c) B H Hall 2012 Jena lectures 12

13 Costs and benefits of the patent system Effects on: Benefit Cost Innovation creates an impedes the incentive for R&D combination of new ideas & inventions; raises transaction costs Competition facilitates t entry creates short-term t of new small monopolies, which firms with limited may become longassets; permits knowledge trade term in network industries (c) B H Hall 2012 Jena lectures 13

14 Does the patent system increase innovative activity? The important question for social welfare Prior literature has reached some conclusions about the answer to this question See Hall and Harhoff 2011 survey (on the course website) for detailed references. (c) B H Hall 2012 Jena lectures 14

15 Conclusions from the literature 1. Introducing or strengthening ga patent system (lengthening the term, broadening subject matter coverage, etc.) unambiguously results in an increase in patenting and in the strategic uses of patents. 2. It is much less clear that these changes result in an increase in innovative activity, although they may redirect such activity toward things that t are patentable t and/or are not subject to being kept secret within the firm. (c) B H Hall 2012 Jena lectures 15

16 Conclusions from the literature 3. If there is an increase in innovation due to patents, it is likely to be centered in the pharmaceutical and biotechnology areas, and possibly specialty il chemicals. 4. The existence and strength of the patent system DOES affect the organization of industry, by allowing trade in knowledge, which facilitates the vertical disintegration of knowledge based industries and the entry of new firms that possess only intangible assets. (c) B H Hall 2012 Jena lectures 16

17 Penrose and Machlup on the existence of the patent system If national patent laws did not exist, it would be difficult to make a conclusive case for introducing them; but the fact that they do exist shifts the burden of proof and it is equally difficult to make a really conclusive case for abolishing them. [Edith Penrose (1951), The Economics of the International Patent System, Baltimore: John Hopkins University Press.] If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it. [Fritz Machlup (1958), An Economic Review of the Patent System, Study No.15 of Comm. on Judiciary, Subcomm. on Patents, Trademarks, and Copyrights, 85th Cong., 2d Sess.] (c) B H Hall 2012 Jena lectures 17

18 Some current policy issues Increase in patenting rates and consequent increase in patent office workloads worldwide, traced to Subject matter expansion (business methods/genome) Nonobviousness (novelty) standard falling? Increased strategic use (harvesting existing i innovations) i Globalization patents being taken out in more jurisdictions University patenting (esp. research tools) Does university it patenting ti encourage commercialization? ili Negative effects on open scientific research? Cumulative and overlapping innovation the patent t thicket t and increasing i transactions ti costs to innovation Many of these policy problems are not new and can be found in literature of the 19 th century (c) B H Hall 2012 Jena lectures 18

19 On patent thickets In the manufacture with which I am connected the sugar trade there are somewhere like 300 or 400 patents. Now, how are we to know all these 400 patents? How are we to manage continually, in the natural process of making improvements in manufacture, to know which of these patents we are at any time conflicting with? So far as I know, we are not violating any patent; but really, if we are to be exceedingly earnest in the question, probably we would require to have a highly paid clerk in London continually analysing the various patents; and every year, by the multiplication of patents, this difficulty is becoming more formidable. [Macfie, R.A., quoted td in Is the Granting of Patents t for Inventions Conducive to the Interests of Trade?, Transactions of the National Association for the Promotion of Social Science 661, 665 (1865) (George W. Hastings, ed.)] (c) B H Hall 2012 Jena lectures 19

20 Today thickets in software There are roughly 634,000 firms in the United States with 20 or more employees. While not all of these firms produce software, many of the 1.7 million firms with 5 to 19 employees do, so we ll estimate the number of firms that create software at 600,000. The number of software patents issued is around 40,000 in a typical year (and growing). That means that there are around 24 billion new patent firm pairs each year that could produce accidental infringement. Even if a patent lawyer only needed to look at a patent for 10 minutes, on average, to determine whether any part of a particular firm's software infringed it, it would require roughly 2 million patent attorneys, working fulltime, to compare every firm's products with every patent issued in a given year. At a rate of $100 per hour, that would cost $400 billion. For comparison, the software industry was valued at $225.5 billion in Mulligan & Lee 2012 (NYU Annual Survey of American Law) (c) B H Hall 2012 Jena lectures 20

21 Hall and Ziedonis (RJE 2001) Overall increase in US patenting since early 1980s And yet, patents still ineffectual for firms in most industries Yale Survey 1982 Carnegie Mellon Survey (CMS) 1994 Firms did not increase their reliance on patents for appropriating returns to R&D between these two surveys. Why did patenting ti rate in the semiconductor industry double between 1985 and 1995? primarily for defensive reasons (c) B H Hall 2012 Jena lectures 21

22 Patent propensity in US manufacturing, (c) B H Hall 2012 Jena lectures 22

23 Summary of interview results Capital intensive manufacturers Strong demonstration effect of TI and Kodak Polaroid cases Ramping up ; harvesting latent inventions If in doubt, patent Safeguard assets; avoid halt in production Exclude before you re excluded Improve bargaining position with other patent owners Gain access to external technology on more favorable terms Secure royalty income Changes (except at TI) in management of patent process Patent advocacy committees ; increased bonuses; targets Design firms Secure rights in niche product markets Critical role of patents in attracting venture capital (c) B H Hall 2012 Jena lectures 23

24 Summary of econometric results Patent production function Patenting proportional to size of firm Until 1984: patents also depend on R&D intensity After 1984: patents depend on capital intensity and not on R&D intensity (c) B H Hall 2012 Jena lectures 24

25 Conclusion Two changes in patenting behavior of semiconductor firms during the 1980s: (1) Response by capital intensive firms to hold up threat. (2) Increased entry by R&D intensive design firms holding patents to ensure their niche markets. However, explanation (1) dominates the aggregate data. Design firms are only 15% of sample at most. (c) B H Hall 2012 Jena lectures 25

26 ICT patent floods This pattern also true of computing, electronics, and instruments more broadly (Hall 2003) Growth accounting of the US patent surge up to 1999 shows that it is entirely due to increases in patenting by US corporations in the ICT sector. This phenomenon has now spread to software and to other countries Mobile bl telephony and the current patent wars (c) B H Hall 2012 Jena lectures 26

27 Recent patent surge (2000s) Work by Fink, Khan, and Zhou at WIPO shows that More than half of the surge is accounted for by multiple filings (rather than new inventions), mainly reflecting globalization Worldwide R&D productivity has declined, except most prominently in the US (software/internet) Patent surge not explained li by a few fields of technology, but there is faster growth for complex technologies especially since the mid 1990s (c) B H Hall 2012 Jena lectures 27

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30 Patents as indicators Because a patent is a property right to knowledge asset, patents can be useful measures of innovative i output Simple counts at the firm, industry, country level over time provide such a measure (imperfectly) weighting counts by the number of subsequent citations that the patents receive improves the quality of the measures Citations from one patent to another an imperfect but useful u map of the links between ee these bits bts of output or knowledge Using patents as indicators requires some understanding of what they mean how and why they are taken out, administered, and enforced, and how this changes over time (c) B H Hall 2012 Jena lectures 30

31 Measuring innovation using patents some early research Schmookler (1960 (9 book) pioneer in the use of patent statistics Scherer s (1960s) work in oil, chemicals, steel Griliches et al ~1980 (incl. Hall) first large sample work using computerized USPTO data. Conclusions: Patents strongly related to R&D across firms, elasticity close to one Controlling for unobserved differences across firms, elasticity lower (about 0.3) Difficult to determine lag structure R&D very smooth over time within firm Poisson type models patents exhibit overdispersion In the presence of R&D, patents add little explanatory power for sales, profits, market value, etc. Why? (c) B H Hall 2012 Jena lectures 31

32 Patent data today USPTO data available online and at NBER.org EPO data available online JPO data available online (translation at RIETI) Others have used KPO and SIPO data (e.g., Kuen Lee, Can Huang, Christian Helmers, etc.) PATSTAT joint effort of EPO and OECD to publish worldwide patent data quarterly OECD triadic patent families (consolidated) OECD regional patent counts OECD citation database Some links to all this on my website and on (c) B H Hall 2012 Jena lectures 32

33 More on Patstat OECD Triadic Patent Families consists in a set of patents that share one or more priority which are Filed for at the European Patent Office (EPO) Filed for at the Japan Patent Office (JPO) granted by the United States Patent and Trademark Office (USPTO) Primary identifier is family_id The EPO s Worldwide Statistical i Patent Database (PATSTAT, September 2010) is the primary data source. PATSTAT database provides a harmonised and comparable set of information on worldwide patents. Primary identifier is appln_id NB: identifiers change with each edition of the data, so different vintages of data files should not be combined. (c) B H Hall 2012 Jena lectures 33

34 Patent data basics Unit of analysis: Invention use priority filing only, do not count more than once Patent if you are studying patenting strategy or patent office operation, then the appropriate unit is the patent in the particular office Coverage when is patent t published? In most countries, one year after application In the US, 18 mos after application unless not taken out elsewhere (<8% of apps) before 1998, apps were never published (c) B H Hall 2012 Jena lectures 34

35 What information is available? Date of filing; priority tyapplication information o Date of grant, whether granted Applicant (assignee in the US) Inventor names and geographic location Number of claims Detailed IPC classification Citations to prior patents Citations to scientific and commercial literature (c) B H Hall 2012 Jena lectures 35

36 IPC classifications Detailed hierarchical technology classification system. At the highest level: Section Description Share Section Description Share (%) (%) A B Human necessities Performing operations; transporting 13.7 E Fixed constructions F Mech. engineering; lighting; heating; weapons; blasting C Chemistry; 9.4 G Physics 17.3 metallurgy D Textiles; paper 2.3 H Electricity 17.0 Useful categorizations exist, such as OST 30 (more later) (c) B H Hall 2012 Jena lectures

37 What are patent citations? Somewhat like citations in a research paper: References to prior technology, either patents or other scientific literature on which the current patent builds or which it uses Some added by the examiner (the referee ) Some added after the fact (not used by inventor) Some added to avoid infringement (limit scope, defense against suits) Some added for teaching (like survey articles) U.S. differs from Europe in citation behavior See next slide Jaffe, Trajtenberg, Fogarty inventor survey (USPTO cites) About half correspond to some kind of knowledge flow About one quarter to a very substantial flow Remainder are primarily those added by others (not the inventor) (c) B H Hall 2012 Jena lectures 37

38 EPO vs USPTO USPTO most cites from applicant, no attempt to minimize, increased with computer search Average 6 7 cites per patent EPO most cites from examiner, minimize number of cites consistent with adequate coverage; type of cite coded Average 3 cites per patent Result: greater dispersion in USPTO cites means count is more informative i Coding in EPO cites means individual cites can be quite informative (c) B H Hall 2012 Jena lectures 38

39 Code X Y Type of document EPO search codes Particularly relevant documents when taken alone (a claimed invention cannot be considered novel or cannot be considered to involve an inventive step) Particularly relevant documents if combined with one or more other documents of the same category such a combination being obvious to a person skilled in the art A Documents defining the general state of the art (but not belonging g to X or Y) O P T E D L Documents which refer to non written disclosure Intermediate documents documents published between the date of filing of the application being examined and the date of priority claimed Documents relating to the theory or principle underlying the invention (documents which were published after the filing date and are not in conflict with the application, but were cited for a better understanding of the invention) Potentially conflicting documents Any patent document bearing a filing or priority date earlier than the filing date of the application searched but published later than that date, and the content of which would constitute prior art Documents cited in the application (i.e. already mentioned in the description of the patent application) Documents cited for other reasons (e.g. a document that may throw doubt on a priority claim) (c) B H Hall 2012 Jena lectures 39

40 A highly cited patent Next 3 slides show an older highly cited US patent as an example (c) B H Hall 2012 Jena lectures 40

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44 Some facts about U. S. citations More valuable patents tend to be cited more often. One quarter of patents receive no citations. 001% 0.01% receive more than one hundred citations. Lag distribution is skew to the left with a mode at about 3.5 years. Most cites happen by 10 years, but there can be long lags (30 years). Number included per patent has increased recently with the advent of computerized search. (c) B H Hall 2012 Jena lectures 44

45 Figure 3 Citation Distribution Citation ti Distribution ib ti - More than 100 Citations ti Number of Patents Number of Patents >200 Citation Count through Citation Count through 1995 (c) B H Hall 2012 Jena lectures 45

46 Citations and market value Hall, Jaffe, Trajtenberg (2001) do patents weighted by forward citations provide a better measure of patent value than patent counts themselves? Broad firm level analysis previous studies invention or narrow industry specific: Trajtenberg (RJE 1990) consumer welfare for CAT scanners and citations Klock and Shane (AER 1995) market value of citation weighted patents in semiconductors Austin (1993) (993) event studies on citation weighted biotech patents Hirschey et al (1998); Lev et al (1998) accounting based work similar to ours. (c) B H Hall 2012 Jena lectures 46

47 Hedonic regression for market value Log Q it = logq t + γ t K it /A it + t d(k it = 0) where Q it =V it /A it (market to book or Tobin s Q) Interpretation: q t = overall market level l (approximately one). γ t = Relative shadow value of K assets (=1 if depreciation correct, investment strategy optimal, and no adjustment costs). t = Premium or discount for the absence of K assets. (c) B H Hall 2012 Jena lectures 47

48 Exploration of the functional form Include stock of R&D, patents per R&D, and cites per patent. Cites per patent are more important than patent yield itself Increase of one cite per patent is associated with an increase of 3 4% in market value Break up cites per patent into five ranges: 0 to 4, 4 to 6, 6 to 10, 10 to 20, over 20 Only the latter three categories are positive; the other two are zero 50 75% boost to market value if citations per patent average above 20! Timing do citations received before value is measured matter more or less than those received after? Less, although lh h they are useful for forecasting. Predictable and unpredictable citations receive approximately equal weight. (c) B H Hall 2012 Jena lectures 48

49 Self citations Self cites = citations to patents owned by the same firm. More valuable => owning a technology trajectory, cumulativeness is valuable Less valuable => cite whatever is at hand, does not necessarily signify any value Results High self citation share is valuable (worth about twice as much) if firm is small or medium sized, neutral if firm is large. Not having self cites is negative if firm is large, positive if firm is small. (c) B H Hall 2012 Jena lectures 49

50 Using citations to identify complexity Von Gaeve Graevenitz, t, Wagner, and Harhoff (2011) (0 model & empirical work to show that greater technological opportunity will raise patenting in discrete technologies and lower it as technologies become increasingly complex. greater competition in R&D raises firms patenting levels in complex technologies. What is discrete and what is complex? Measured as X/Y citation triples: A B, B C, C A Mean number in a technology area per year (c) B H Hall 2012 Jena lectures 50

51 Complexity measure Technology Median Technology Median Audiovisual technology 120 Medical technology 3 Telecommunications 93 Organic fine chemistry 2 Semiconductors 63 Materials, Metallurgy 2 Information technology 59 Mechanical elements 2 Optics 58 Chemical engineering 1 Electrical machinery, Electrical energy 20 Nuclear engineering 1 Handling, Printing 16 Machine tools 1 Engines, Pumps and Turbines 15 Civil engineering, Building, Mining 0 Macromolecular Chemistry, Polymers 14 Thermal processes and apparatus 0 Transport 14 Agricultural and Food processing 0 Chemical and Petrol industry 10 Spacetechnology technology, Weapons 0 Analysis, Measurement, Control 4 Agriculture, Food chemistry 0 Pharmaceuticals, Cosmetics 4 Consumer goods 0 Materials processing, Textiles, Paper 3 Environmental technology 0 Surface technology, Coating 3 Biotechnology 0 (c) B H Hall 2012 Jena lectures 51

52 Citations validated by the patent system? Next few slides show a patent taken out by inventors at CHI (Computer Horizons Inc) for a method of valuing stock portfolios using patent citations. Cites Hall, Jaffe, Trajtenberg and Griliches (inter alia) as prior art => a narrow patent (c) B H Hall 2012 Jena lectures 52

53 United States Patent 6,175,824 Breitzman, et al. January 16, 2001 Method and apparatus for choosing a stock portfolio, based on patent indicators A portfolio selector technique is described for selecting publicly traded companies to include in a stock market portfolio. The technique is based on a technology score derived from the patent indicators of a set of technology companies with significant patent portfolios. Typical patent indicators may include citation indicators that measure the impact of patented technology on later technology, Technology Cycle Time that measures the speed of innovation of companies, and science linkage that measures leading edge tendencies of companies. Patent indicators measure the effect of quality technology on the company's future performance. The selector technique creates a scoring equation that weights each indicator such that the companies can be scored and ranked based on a combination of patent indicators. The score is then used to select the top ranked companies for inclusion in a stock portfolio. After a fixed period of time, as new patents are issued, the scores are recomputed such that the companies can be re-ranked and the portfolio adjusted to include new companies with higher scores and to eliminate companies in the current portfolio which have dropped in score. A portfolio of the top companies using this method and a relatively simple scoring equation has been shown to greatly exceed the S&P 500 and other indexes in price gain over a ten year period. Inventors: Breitzman; Anthony F. (Cedarbrook, NJ); Narin; Francis (Ventor, NJ) Assignee: CHI Research, Inc. (Haddon Heights, NJ) Appl. No.: Filed: July 14, 1999 (c) B H Hall 2012 Jena lectures 53

54 United States Patent 6,175,824 Current U.S. Class: 705/36; 705/10; 705/35; 705/37 Intern'l Class: G06F 017/60 References Cited [Referenced By] U.S. Patent Documents Jun 1998 Barr et al. 705/36.; Oct 1998 Fernholz.; Aug 1999 Bukowsky 273/278; Nov 1999 O'Shaughnessy 705/36; Mar 2000 Fried 705/36. Other References CHI Research, Inc. Introduces Tech-Line Analysis Tool Technology, Information Today, v 15, n 9, p 66,Oct Deng, Z., Lev, B., and Narin, F. "Science and Technology as Predictors of Stock Performance" (Financial Analysts Journal, vol. 55, No. 3, May/Jun. 1999, pp ).. Griliches, Z. "Patent Statistics as Economic Indicators: A Survey" (Journal of Economic Literature, vol. XXVIII, Dec. 1990, pp ). Trajtenberg, M. "A Penny for Your Quotes: Patent Citations and the Value of Innovations" (Rand Journal of Economics, vol. 21, No. 1, Spring 1990 pp ). Bronwyn, H.H., Jaffe, A. and Trajtenberg, M. "Market Value and Patent Citations: A First Look" (Apr Paper prepared for the Conference on Intangibles and Capital Markets, New York University, May 15-16, 1998, pp. 1-34). (c) B H Hall 2012 Jena lectures 54

55 United States Patent 6,175,824 Claims 1. A computer-implemented method of selecting a portfolio of company stocks for a client which is predicted to have future performance that achieves a predesired financial outcome, the method comprising: (a) calculating a score for a plurality of companies whose stock may be potentially selected to be in the portfolio by using the equation: ##EQU3## wherein x.sub.i are company indicators which include industry normalized patent indicators,.alpha..sub.i are weighting coefficients for the respective company indicators, at least one of the weighting coefficients being non-zero, the weighting coefficients being selected so that companies which receive a high score are predicted to contribute to achieving the predesired financial outcome, and.beta..sub.i are weighting exponents, and that companies which receive a low score are predicted to not contribute to achieving the predesired financial outcome, each company being assigned to a predefined industry; (b) ranking the calculated scores from highest to lowest and generating recommendations of which company stock to purchase for the portfolio based upon the ranking; and (c) displaying the recommendations on a summary report for review by the client or the client's financial manager, or buying amounts of company stock for the portfolio in accordance with the recommendations, or selling amounts of company stock from the portfolio in accordance with the recommendations. Etc. for 62 further claims (c) B H Hall 2012 Jena lectures 55