Ocean Tomo 300® Patent Index Construction

The Ocean Tomo 300® Patent Index is the industry’s first index based on the value of intellectual property. It is a market capitalization weighted index comprised of 300 publicly traded companies that own quality patent portfolios. The Index was invented by Keith Cardoza and James Malackowski. The American Stock Exchange began to price the Index under the symbol OTPAT on September 16, 2006.

The Index annually reconstitutes after the close of of the last business day of October. The Index divisor was initially determined to yield a benchmark value of 5000.00 at the close of trading December 31, 2004. The Index is patent pending and was created by, and is a trademark of Ocean Tomo Capital, LLC.

Index Methodology

The Index selection methodology is designed to identify six companies within each of 50 style and size groups - value, relative value, blend, growth at a reasonable price (GARP), and growth by decile - with the highest patent maintenance value to book value ratio as determined by Ocean Tomo, LLC, using the Ocean Tomo Ratings™ system.

The Index is designed to actively represent a group of stocks that own quality patent portfolios. The Index constituent selection methodology evaluates and selects stocks from a universe of 1,000 companies using a proprietary, 100% rules-based methodology developed by Ocean Tomo. Utilizing multi-factor proprietary selection rules, Ocean Tomo seeks to identify those stocks offering the greatest patent value opportunities while maintaining broad-based diversification. The approach is specifically designed to enhance investment applications and investability.

Index Construction

  1. Potential Index constituents include all equities trading on major U.S. exchanges that are among the 1,000 most liquid securities.
  2. The potential Index constituents are then narrowed to a universe of companies that own patents.
  3. The patent-owning companies are divided into 50 style and size groups with the highest patent maintenance value to book value ratio (Innovation Ratio) using the Ocean Tomo Ratings™ system. Each group contains an approximately equal number of patent-owning companies.
  4. The stocks in each group are ranked using a 100% rules-based methodology that seeks to identify those stocks that offer the greatest patent value opportunities while maintaining broad-based diversification.
  5. The six highest-ranking stocks in each group are selected (a total of 300 stocks) and are weighted by market capitalization.

Research

Ocean Tomo 300® Patent Index Backgrounder

Ocean Tomo 300™ Patent Index Methodology

Ocean Tomo Ratings™ System Backgrounder