Patent Licensing in Universities – Extracting value from research investments

Universities in the US encourage researchers with innovative minds to pursue 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 analysis activities, 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.