Linking R&D spending and patent intensity to legal spending and staffing

R&D spending as a percentage of revenue probably associates closely to total legal spending as a percentage of revenue (See my post of Aug. 13, 2008: R&D spending and its association with total legal spending; Dec. 21, 2005: IP lawyers per million dollars of R&D spend; and July 13, 2008 #3: patents per R&D spend are increasing steadily.). Intellectual property activity needs legal activity and spending, not just because of application costs, even more due to annuities, and mostly from patent litigation. License agreements, joint research vendors, and M&A have more IP elements where R&D is paramount.
The two functions of innovation and counseling came together explicitly for me when I read that one research study treated innovation as a composite measure computed by adding standardized values of all R&D spending and number of patents. (To standardize a number in a group (such as the amount spent by a company on R&D) you subtract the average of the group from the particular figure and divide by the standard deviation of the group. The result expresses all the figures (aka variables) in terms of standard deviations.) Those two functions are highly correlated with each other.

The industries that report the highest concentration of lawyers and legal spending are those industrious characterized by rapid innovation. R&D measures investments in innovation and patents are a partial indicator of innovation outputs. Thus, those industries that thrive on protectable creativity – telecommunications, technology, bio-pharma – have high legal spending.

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