Patents Assume Increasing Global Importance Value Reflected in the Steady Increase of United States and Foreign Issued Patents

Despite fundamental challenges, including increasing hurdles to obtain and enforce proprietary rights, the centuries-old United States patent system is still regarded as a reliable mechanism for inventors and product developers to preserve the legal protections covering their technological achievements.

An enduring value is that patents instill confidence that the necessary legal exclusivity will be available for those seeking to recoup often sizeable investments during their products’ lifetimes. This is evident in the steady increase in issued patents over the years.

In a single year, 1996, the United States and foreign patent offices issued 121,805 patents. A decade later in 2006, the number of patents issued was 196,436, an increase of 38%. There was a 32% difference in the U.S. patents alone issued in 1996 and 2006, that is, an increase from 69,419 to 102,267, respectively. From the inception of patents to the end of 1996, a total of 3,455,886 were issued by the U.S. and foreign countries, while the U.S. alone issued 1,910,390, according to data from the U.S. Patent and Trademark Office.

In April 2005, Massachusetts Institute of Technology’s Technology Review magazine reported that the $150 billion earned globally from patent licensing that year was expected to grow by some 30% a year for the next several years. On that basis, earnings from patent licensing fees could exceed $250 million this year.

The right to patent an invention has its genesis and mandate in the U.S. Constitution. “As patent law evolved, one of the purposes was to encourage disclosure of inventions so that science could benefit and progress—in return, the inventor was granted a limited-term government monopoly,” says Lita Nelsen, director of Technology Licensing at MIT.“The basic premise is that you expose your invention to the public such that interested parties learn from it, in exchange for a monopoly,” says Mike Slessor, managing director, Office of Technology Transfer, California Institute of Technology.

Technology driven businesses are by far the largest users of patents. Contract research and engineering services companies and the technology transfer and licensing operations of research universities, among others, are also involved. Nelsen says that in university licensing, “Patents are used to accelerate the movement of state-of-the-art research into the economy by providing an incentive for companies to invest in early stage, unproven technologies.” She acknowledges that universities in general constitute a small player in the overall patent world, compared to commercial entities. “The fruits of university researchers’ efforts are not products but very early risky development opportunities, which if placed in the public domain will cause people to wait until someone else demonstrates that they actually work,” says Nelsen.

University licensing received a boost from the passage of the 1980 Bayh-Dole Act—before which less than 250 patents a year were granted to universities. MIT had some form of licensing since the 1930s, but prior to the act, universities were not very conscious of patents. “Their policies were either nascent or non-existent, and they may have coped with it on an ad-hoc basis—then once Bayh-Dole came in, there was much more uniformity,” Nelsen explains.This act allows universities to retain ownership of inventions funded with federal research grants.

The universities’ end of the bargain requires them to file for patent protection and pursue commercialization. Hundreds of leading universities operate highly efficient and capable technology licensing offices and, like MIT and CalTech, the patents they acquire and manage come almost exclusively from efforts of researchers within their university. Considerable cooperation exists among universities and their researchers.

“This is a societal mission rather than a competitive business,” says Nelsen.“Our job is to find out if our researchers’ ideas are new, generally via extensive literature searches,” says Nelsen. The next step is to weigh the effort and money to secure a patent, against investor interest, she notes. Most patents are used defensively, to ward off competitors. “Legally, patents are a mechanism to exclude potential competitors. A university has little interest in this exclusionary approach because it is not in competition with the commercial world. “We are, however, interested in getting interested parties to invest early in as yet unproven technologies,” explains Nelsen. “So we give them the right to exclude others.”

MIT’s licensing office has dealt with leading-edge technologies such as light emitting diodes (LED), computer caching of large amounts of data over multiple servers, diagnostics for bladder cancer, agents for heart imaging, superconductors, and advanced battery technologies, among others, according to Nelsen. The office also oversees inventions in laboratory instrumentation. “A number of our faculty members are now working on microfluidics, which is likely to be important in anything from cell counting to chromato- graphy,” says Nelsen. Every year, the MIT technology transfer group sees some 500 technology disclosures from which it acquires about 200 to 300 new patents. It grants about 100 licenses, and starts some 25 to 30 companies a year, some of which are now quite substantial. “In numerical terms, we have had the most impact in biotechnology,” says Nelsen.

“CalTech’s licensing office is here solely to help researchers and inventors navigate the post-invention, pre-commercialization stages of getting their technologies to market,” says Slessor. Success stories include image sensor technology that was used in the Voyager and Cassini space missions. “This is at the forefront of low-power, high- performance image sensors,” Slessor adds. Another huge success was the gene sequencer that became a foundation for Applied Biosystems human genome mapping work. Slessor says that his group gets about 200 to 300 disclosures a year from researchers. “For about two-thirds of those we pursue, we get at least a U.S. patent. If there is a good business case, we will seek foreign protection as well.” Over its ten years in existence, the CalTech technology transfer office initiated about 150 start-up companies. This is a hugely important area for technology-driven companies.

Bill Munroe, director of Licensing and Business Development at Beckman Coulter, states, “Patents and intellectual property are an ever growing focus in the field of medical diagnostics. We are certainly very active in trying to obtain patents for the technologies we develop, as well as obtain licenses that are necessary for some of the products we want to introduce. We expend much time and effort to make sure we understand the landscape.” “As we go forward, there will be an even greater need for this, especially when it comes to novel content such as the assays that run on the equipment. Certainly, the fundamental technologies that go into some of the equipment are patented, and you need to acquire licenses to practice some of those technologies.“That is key for getting into certain areas, and is particularly true in the area of molecular diagnostics and hematology where we are very active,” says Munroe. He adds that while patenting technologies is central in the R&D and product development processes, “We don’t make product decisions because of a patent; we make patent decisions because of products.”

Contract research and engineering service companies like Invetech, KMC Systems, Battelle, Stratec and Cambridge Consultants among others provide product development services to large numbers of client companies. “The business model is fee for service,” says Andreas Knaack, director, Instrument Design and Development with Invetech. “This means that we are hired to develop products as fast as possible with the maximum value for money, when you consider cost against product benefits and product features.” Knaack says that Invetech works somewhat differently from a number of contract researchers in that they transfer all patents and other intellectual property to the clients who engage and pay for Invetech’s services. “When a company outsources the development of technology, it is critical that there be a clear understanding of who will own the IP generated in the process,” says Knaack. “We provide the full complement of ideas to our clients, and we work with them to identify the ideas that are worth patenting. This is quite pivotal to our clients. They need to protect their business positions.”

Invetech works on very early research, such as new detection technology in spectrophotometers, as well as with products that are already well defined by clients but which need detailed solutions. Both situations offer opportunities for Invetech to help enhance its clients IP portfolio, according to Knaack. In the future, he sees a trend toward smaller technology— samples, reagent volumes, footprint—and the need for greater throughput with larger instrumentation. In clinical diagnostics, one of Invetech’s areas of focus, he sees more movement toward point-of-care testing, which will require smaller-sized consumables, and more use of microfluidics, nanotechnology and highly sensitive optics.

In the near future, CalTech’s Slessor does not anticipate dramatic changes in the patent arena. “As companies increasingly look for good innovations outside their R&D departments, there will be more pressure on university researchers to come up with ideas,” he says.

Beckman Coulter’s Munroe notes that patents may become harder to enforce in the future. Legal adjustments in the standards for obviousness may provide patent infringers a new basis for arguing that a patent is invalid. Proposed changes such as limiting the number of claims and continuations in patent applications would make it more difficult to obtain patents—and if you do get them, it will be more difficult to enforce them, he notes.“

Assuming that some of the proposed changes to our patent laws do not happen, I do not see any dramatic changes in the next several years. I envisage the continuation of a system that essentially works,” says Nelsen. This is important, she adds, because “patents and intellectual property are becoming increasingly important around the world.”

Bernard Tulsi is a freelance writer based in Newark, Delaware. He may be contacted at btulsi@comcast.net or by phone at 302-266-6420.

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