Patent Licensing in Universities – Extracting value from research investments

Universities in the US encourage researchers with innovative minds to pursure their inventions and invest into patenting promising inventions expecting to generate profits by licensing the developed technology to interested companies. The technology transfer offices of the universities usually get many invention ideas from their researchers and have to decide which ones to invest further time and resources into. Many have already build valuable patent portfolios as a result of academic research and innovations which have become continuous sources of licensing revenue most of which is a lot more that research and legal investments made and so is used to further catalyze the innovation assessment and investment process. Here is an excerpt published by Forbes in a 2008 article on Stanford University:

Stanford University’s fertile breeding ground for breakthrough technology may have spawned the likes of Hewlett-Packard and Google, but little Stevens Institute of Technology in Hoboken, N.J., really knows how to get serious returns on its research and development.

To wit: In 2006, the school took in $4.5 million in research-related income (including licensing revenue and returns on equity stakes in start-ups) while shelling out $28 million on research–a 16% yield. That same year, Stanford pulled in $62 million against a $700 million investment; return on investment (ROI): 8.7%.

While perhaps thousands of universities globally develop valuable IP during the course of their academic research, very few file patents to protect it and fewer still are able to effectively capitalize by licensing their patents. Many US universities hold multiple patents that have failed to find licensees. Many of these are presently marketed by publishing invention details in journals, industry and trade newsletters, conference magazines (AUTM), using agents or brokers. While the culture of investing in research and filing patents has developed and matured in many US universities, being able to spot revenue opportunities within the patent portfolios already held by universities can be accelerated with strong patent analysis support. Much of similar kind of analysis is undertaken by Patent Licensing and Enforcement Agencies (See previous blog) and IP brokers.

Many universities expect not all their patents will be licensed. In fact most rely on a few blockbuster patents to bring home the revenue. Usually only 0.6% of licenses generate in excess of $1,000,000 in annual royalties.

Clearly there is need for universities to be more aggressive on the patent portfolios held by them. Assertive licensing and identification of infringers is important. However a change in research approach is required and universities need to analyze the technology areas their inventions lie in and gather data that can be used to back  their assertive licensing strategies. By improving their internal  patent analysisactivities, universities can:

  • Understand the market place and discover licensing opportunities and spaces in the market for research and technology even before filing for patents
  •  Discovering licensing revenue opportunities and spotting companies that are infringing their IP or those who would like to

In short, these universities can use IP intelligence to work smarter , make fewer more lucrative investments in research, targeting select research areas, knowing where the opportunities lie and filing for patents specifically for IP which they are more certain will yield revenues. Good analysis will effectively help achieve better ROI on their IP investments. Even if a small percentage of the Universities out there follow in the footsteps of the those with large patent licensing revenues, the impact will be big. Only time will tell if they do.

IP Intelligence for Patent Licensing & Enforcement Activity

Most companies hold on to their patents as a defensive means to protect themselves from competition gaining an upper hand from their innovations and development efforts. Their ability to drive maximum revenues for the business comes from their ability to have exclusive access to their innovation and fend off the competition for a stipulated time giving them a clear head start. Then, we have the Patent Licensing & Enforcement Companies (PLECs) who either acquire patent portfolio or partner with the patents holders and then look to license their technology with a completely offensive strategy. They drive revenues from assertive licensing via legal notices or even going to the extents of filing law suits against those who infringe on the patents. Due to the nature and amount of damages being awarded by the courts it may appear that Patent infringement cases can be even more profitable and less cumbersome than manufacturing products and getting them out to market. So it’s little surprise that this is a growing business model. Intellectual Asset Management Magazine online stated in a 2008 article that the IP awards and settlements market in the US is $3.4 billion annually.

Small innovators can see PLECs as a necessity to help them license their patents and take on a large companies who may be potential infringers while traditional R&D houses see these as Non-practicing Entities (NPEs) or in some cases as Patent Trolls i.e., those that buy up patents only to benefit from suing companyies having established products in the market. While there are both arguments for and against these intermediaries, they are very much a part of the innovation industry as licensing as well as return on patent investments become a concern for many. As long as businesses and inventors will need help in these two areas, there will be a market for those who can help provide this support.

Whether you are on the side that is looking to license and protect your patents or the side that needs to steer clear of PLECs, patent trolls and other businesses who may have patent portfolios that overlap yours, your intelligence will primarily come from patent databases in addition to secondary online information such as company and products literature.

In a previous post titled Unlocking value from your IP using Patent Citation Intelligence  we discussed at length ways to discovering licensing options to maximize revenue. Searching for infringing companies is not too different from searching for potential licensees. The process of assertive licensing usually involves demonstration of infringement and so technologies present in your patent sets need to be matched with either the claims of the other party or the infringement must be evident from the products functioning or product literature. Tools to fast search, lookup, rank claims help save a lot of time as part of this process.

Analyzing patents for infringement and being able to navigate around potential infringement suits are two sides of the same coin where information in patent data can come to the rescue. For both parties who need to enforce patents and those that need to safeguard their development activities against potential law suits, you should create a list of those working in the same domain who may have a need for the technology in question or those who may benefit from using the technology. The same set of companies form a watch list which PLECs analyze closely to look out for a infringement.

A 2006 EETimes article speaks about how a small company avoided going bust from patent enforcement:

Patriot Scientific Corp. had spent nearly a decade trying unsuccessfully to establish a new microprocessor architecture when it decided it needed to do some soul-searching. It hit paydirt when that process revealed its real products: patents.

The six-person company netted more than $24 million in 2005 from Advanced Micro Devices, Casio, Fujitsu, Intel and Hewlett-Packard by licensing seven U.S. patents it considers fundamental to CPUs. And it’s just getting started.

“Hundreds of companies have been put on notice as potential infringers,” said David Pohl, CEO of the Carlsbad, Calif., company, which hopes to collect royalties on sales of all microprocessor-based systems–sales that are estimated at $200 billion a year. “Virtually every electronic product that a consumer or business comes into contact with is touched by this portfolio.”

The extract above demonstrates how important it is to be able to identify potential licensors for a patent as well as knowing who potential infringers are- an activity that has been mastered by PLECs. While identifying companies such as AMD, Casio, Fujitsu, Intel and HP may be more obvious, being able to identify and list the hundreds of smaller companies which in this case could benefit directly from the microprocessor architecture requires an even more efficient process. Whether relying on a third party company to which the task of enforcement is delegated or done in-house, the ability to create a solid watch list and keep a close eye on infringement activity relies heavily on having good intelligence at the push of a button. Being able to view graphical representations of relationships by citation data, being able to track the use of a certain technology within various industries and also to compare phrases within the patent text of a group of similar patents to detect similarities help facilitate the process.

As the ecosystem of patents filed grows and the list of competitors or possible infingement liabilities is on the rise , it can become increasing difficult to track all the developments and cover all bases without the support of good analysis tools. Luckily patent data analysis tools have advanced in leaps and bounds giving businesses the tools needed to protect their business interests through protecting their most valuable assets – their IP. Licensing and enforcement activity is todays vanguard for a IP portfolios held by businesses and we can expect to continue seeing developments in this space.

Unlocking value from your IP using Patent Citation Intelligence

Historically, the interest in unlocking patent value by licensing has picked up momentum when IBM declared more than 1 Billion USD revenues purely from patent licensing.  This is why even after having successful products, companies with 50 or more active patents are looking at ways to unlock greater value from their IP portfolios. Nowadays, dedicated licensing teams are common across all technology driven mid to large sized organizations.

Seen in black and white from a business’s perspective, patents are filed to protect intellectual property and buy limited time to capitalize on the innovation. It offers some protection from competition and provides some space for the business to get it’s products out to market as soon as possible and make the most of what is developed. Within the stipulated time frame if a business isn’t able to capitalize on the patents, they could virtually lose out on their advantage which is why it makes sense to license the patents while they are active.

The raw material for effective licensing comes from patents itself. The balance information is mostly available on the internet. Patent Intelligence plays an important role when it comes to being able to quickly locate possible out-licensing opportunities.

So what are the different ways to go about gathering intelligence ?

The licensing-101 method is to look up the forward citations and then further analyze who owns those patents and then screen the patent claims to see if the innovations are incremental over your patents.

A more powerful and effective method is to look at more than just the forward citations and build a more comprehensive licensing set for analysis. This involves going multiple generations forward (atleast 2-3 generations) and going at least 1 or 2 generations backward and then going forward from them as well. Invention companies and universities, that invest in actively locating licensing candidates for technology IP held know the value of why it important to go back and then go forward. Usually when you do that you are in a better position to locate alternative areas of science where your technology may be applicable. This is also necessary if you have a technology  in search for a problem.

So as part of this method, if you have a source portfolio say P and you want to undertake a more effective licensing analysis then you should build a portfolio that contains (g+1)((g-1)P, (g+1)((g+1)((g-1)((g-1)P)))) where (g-1)P is a set of all backward citations of P and (g+1)((g-1)P) is a set of all forward citations of that set. Add to this atleast 2 forward generations of P and  atleast one generation back from the immediate forward generation i.e., (g-1)((g+1)P) and you now have a more effective set for analysis.

Typically it is not uncommon to run into a licensing set that has between 4000-10000 records. And once you have such a set, you can proceed with the next phase of analysis required to locate most relevant licensing candidates. This would include:

  • Advanced keyword searching though the licensing set with highlighting across full/text and claims
  • Similarity searching (quickly comparing overlaps in text portions between records)
  • Clustering is important since many a time you are not sure about all the technologies or keywords you want to  search. Its better if important topics both big and small were directly located across the set and presented to you to review and relate. This is exactly what clustering does.
  • Co-citation based clustering (i.e., grouping together documents that’s share a high level of common forward and backward citations) of records to see which are the most technologically linked records with your portfolio
  • Ranking and marking patents as you proceed with identification (to avoid going through the same record twice)
  • Classifying the licensing set across various US/IPC and ECLA classifications and even your custom categories to see the spread of the records in different product or business lines
  • Finally you will also have to update the latest ownership information of the patent. US Assignments information can help to an extent, but in  many cases companies try to hide the ownership by having obscure holding company names and private LLC’s that are setup as a vehicle to own and operate the patents. A fair guess would be that 30% of all patents fall in such type of ownership. Ironically these are usually the more relevant lot. So in such a situation, once you discover that they are good licensing potentials then further time needs to be invested in online research, inventor look-up, corporate tree and any other method to pinpoint the exact ownership.

As you can see that because of the sheer number of records its useful to have the licensing set in a medium that helps you search or slice-n-dice the information quickly. The time factor is always important and being able to get quick patent intelligence can play an important role in identifying opportunities before others, being more informed and thereby being able to negotiate better too. Patent data analysis software can help immensely in your ability to efficiently go through large volumes of patent data and quickly get to the answers you need. You can also go a step further by analyzing patent families across countries, to understand  geographical spread and IP investments of potential licensees. This way you can rank potential partners based on the markets they have a strong presence in.

Software can help analyze complex citation relationships traversing a sequence of generations to help understand a company’s resources and value as a potential partner or licensor. The cost of filing and managing patent IP portfolios is a sizable one and ensuring maximum returns on this is the goal of every business. Investment into analysis tools like Patent iNSIGHT Pro can deliver to a business can help uncover hidden revenue opportunities and discover new revenue streams for underutilized IP portfolios and in the process pay for itself several times over. Good intelligence leads to better opportunities or at the very least, helps one see them.

Quantitative Portfolio Analysis and picking up patents for less

The current economic environment is a good time to be picking up patents at pennies to the dollar either directly from inventors or smaller companies for quickly enhancing the existing patent portfolio and thereby increasing your counter-sue threat to anyone who may sue you for infringement.

One of the popular techniques is Quantitative Portfolio Gap analysis that is used to identify weak areas in a patent portfolio that may benefit from such a strategy.

An important pre-requisite for such an analysis is having a set of technology categories around which your business revolves. These categories bring business sense to your analysis and so how you structure them will have a direct impact on your strategy.  More and more organizations have and maintain a set of well-defined categories around which their products and businesses revolve.

To begin to understand where you have quantitative gaps that can be filled up, a smart way is to categorize the entire prior art that exists in your field along your categories. Although having to categorize competitors portfolios may appear as a daunting task, various text mining and portfolio categorization tools can help accelerate your process. The next step is to compare your portfolio with the key competitors. By comparing the different portfolios quantitatively and you are essentially trying to locate areas where your portfolio is significantly smaller than the competition.

Once you have identified the areas, remove your and key competitors patents from the set and focus on the remaining patents in the category. It’s important to update the Patent Assignment information from the US Assignments database so that you are clear about the current ownership of the patents. Again patent analysis tools can help make this task much easier. Post this, look out for the following:

  • The bottom 20-30% of the Assignees
  • One year only Assignees – Companies whose patent(s) fall in just one year implying that their interest is perhaps opportunistic and not part of any continuous research or product development
  • Old Assignees – Companies whose patents fall only in the earlier years and which do not have any new records say in the last 5 years implying that they aren’t focused any more in this area
  • Universities and Individual Inventors

Patents of interest must be checked for legal validity to filter out those that haven’t expired. For those that have recently expired due to failure to pay maintenance fees make sure you check if they fall under the revival window since such patents can be easily picked up. Finally, you can leverage the services of an IP broker who will help hide your identity while finding if the other party is interested to sell and will further help in structuring the transaction.

Patent in the Gaming Industry

Gaming is perhaps one of the fine examples of how boundaries blur between developing end customer value and protecting IP.

Let’s say your software company developed a radical new rendering engine that can allow pixel perfect resolution and provide a gamer the ability to ‘simulate’ Hi Definition video. However, what you manged to do was that you did this without the need for specialized hardware. So what do you exactly patent and protect. The code, its functionality or its business value?

What you have done would not take any of the software giants much time to achieve. So forget the delicious incentive of your technology buyout. It’s only a matter of time before they hit bullseye. Functionally speaking, your code will do wonders to game buyer. But how do you build a demand for this functionality when you are not interacting with the customer? Finally the business value will be perceived by the customer buying the engine – a gaming company. Will owing copyright to this engine enhance your technology’s value?

What do you protect?

Perhaps you should consider protecting an aspect that you can control and that could fetch you better licensing returns. After all the idea behind patenting my technology is more to do with it’s licensing than the fact that my name gets published somewhere! But how do you know today what you could license tomorrow?

A major challenge for your business is the evaluation of ‘white spaces’ in the patent landscape and ensuring that infringing has already not happened. You don’t want to end up 3 years developing code along an algorithm and realize at the end of it that your patent has not been granted only because someone earlier had thought of something similar. More than that – you would want to make sure your investment remains strong through the gestation of your technology.

One of first steps to solving this is through efficient Patent Searching. By identifying key players and the technology spaces already occupied, you and your investors can get key insight into where exactly your code can make an impact. In fact intelligent analysis of this search can estimate what the Patent Landscape would look like in the future. You could also look at a potential buyout of a semi finished technology that would set the stage for your rendering engine.