Investigation of HighValue UCLA Patents by Ken Polasko Business Development Officer

1
Investigation of High-Value UCLA Patents byKen
Polasko Business Development Officer
Poster 10
2
Abstract
One of the most difficult decisions for a
technology manager is whether the future
economic rewards for a patent filing and its
associated maintenance are worth the incurred
risk. More specifically, the incurred risk is
the probability that a patent will not recoup its
total cost (legal fees and internal expenditures
required to evaluate, process, license and track
an invention disclosure). There have been many
attempts to define a single parameter (e.g. net
present value, option value, and other
variations) to represent a patents potential
value. If this were possible it would make every
technology managers job (university and
industry) much easier since one could simply
prioritize the patent filings via this single
parameter along with the annual expense and then
draw a line when the portfolios expense equals
the budget. Unfortunately, single-parameter,
patent valuation methodologies have limited
predictive capability.
3
Abstract
There are many parameters that potentially could
influence patent risk/reward analysis. In the
university environment some of the parameters
that might lend some insight into the potential
economic value are citation history,
time-to-first revenue, inventor track record,
government or private funding, and technology
transfer office history. One way to help
understand the correlation/influence of these
parameters on a patents potential is to review
patents that have been historical performers.
4
Background
UCLAs patent portfolio consists of over 400
issued patents. During FY04, UCLA generated over
14M in licensing revenue. Figure 1 illustrates
the growth in patent disclosures and the year of
patent disclosure that we have have arbitrarily
designated as high-value (gt500,000 in cumulative
revenue). Data analysis for this study included
1980 2002. One additional point of note, the
Office of Intellectual Property Administration
was established in 1990. Prior to 1990 the
intellectual property was managed remotely from
the University of Californias Oakland office.
Since the establishment of the UCLA of
Intellectual Property Administration the
disclosure rate has increased at annual
compounded growth rate of 7 over the last 15
years.
5
Analysis
Portfolio Revenue Figure 1 shows the 11
high-value patents representing just 4 of the
portfolio yet account for more than 90 on the
cumulative revenue generated by UCLAs patent
portfolio. Narrowing the criteria even more, the
top 5 (representing 2 of the portfolio) revenue
producing patents account for 86 of the
cumulative revenue. The revenue distribution is
extremely skewed and non-linear as illustrated in
Figures 2 and 3. Fewer than 1 of the patent
portfolio have generated more than 1M in
revenue. However, almost 60 of the portfolio
has generated zero revenue. This illustrates the
challenge of commercializing university research.
From a purely probabilistic view these data
indicates that shepherding potential winners
through the university system is more challenging
than the classical venture capital model.
6
Legionnaires vaccine 3D protein software
Gamma ray detection
Dx Tx of diabetes
Peptides for Dx Tx of diabetes (2)
Controlling glycosylation of proteins
Aneurism treatment
Hip prosthesis
Antigenic compositions
Nicotine patch
Figure 1 UCLA disclosure history and high-value
patents.
7
Figure 2 UCLAs cumulative patent revenue
distribution.
8
Figure 3 UCLAs patent revenue distribution.
9
Analysis
Citations History Figure 4 illustrates the
highly skewed forward patent citation
distribution for UCLAs portfolio. Since this
distribution is similar to the revenue
distribution in Figure 3 one might speculate that
there is some correlation. We reviewed the
forward citation patent history and did not find
a strong correlation between citation number and
revenue, see Figure 5. Two of the eleven
high-value patent families are highly cited (631
80) while another two are not cited and a third
is cited only four times. However, we did find
that revenue producing patents were cited on
average 18 times versus only 7 for the
non-revenue generating patents. We did find
evidence that patent citations are a potential
indicator of interest many years after a patent
issues. In some cases the invention was
initially marketed to a company which expressed
little interest and then 10 years later the same
company cited the patent at a significant rate
over a number of years.
10
Figure 4 Forward patent citation distribution.
11
Figure 5 Revenue versus Citation (minus three
top revenue producers for
clarity).
12
Figure 6 Forward citations versus disclosure
year (minus top citation producer
for clarity). Circle area is proportional to the
revenue.
13
Analysis
Time-to-Money Table 1 shows the time-to-money for
the 11 high-value patents. We not only looked at
the time-to-first-money but the ramp rate or
time-to-500K in revenue. The top 5 performing
patents were licensed sooner and ramped faster
than the next 6 by over a factor of 2. This
indicates that high-value patents tend to be the
ones that are marketed and/or recognized by
industry as solving a significant commercial
problem and a process/organization is in place to
facilitate the intellectual property
commercialized. Funding Source Initially we
hypothesized that industry funding might be an
indicator of future commercial value. Since
industry might direct funding and provide
feedback that is critical to solving a
significant commercial problem. Table 2 shows
that of the 11 high-value patents, 10 were
initially funded by a government source while
only 1 (9) was funded by industry. This
compares with 17 of UCLAs licensed portfolio
being funded by industry.
14
Table 1 Initial patent revenue and ramp rate
history.
15
Initial Funding
Invention
Aneurism treatment Industry Nicotine patch
Government Legionnaires vaccine
Government Dx Tx of diabetes
Government Dx Tx of diabetes
Government Glycosylation of proteins
Government Antigenic compositions
Government 3D protein software
Government Dx Tx of diabetes
Government Gamma ray detection
Government Hip prosthesis design
Government
Table 2 Invention funding history.
16
Analysis
Inventor Track Record/Clusters The portfolio was
analyzed in terms of lead inventor and revenue
generating patents, see Table 3. Inventors that
have multiple revenue generating patents
represent 19 of the total inventor base, but
represent 94 of the total revenue. Nine of the
lead inventors from the top eleven revenue
producing patents had other revenue producing
patents. Interviews with inventors indicate that
in the process of licensing, inventors learn a
significant amount about commercialization and
market opportunities that influence their future
research.
17
Table 3 Revenue generating invention clustering.
18
Conclusions

• Licensed patents from UCLAs portfolio tend to
  be more highly
• cited than unlicensed patents. However, we
  did not find evidence
• of a strong correlation between citations and
  revenue generation
• history. In addition, we did find evidence
  to indicate that long
• term monitoring of citation activity might
  lead to some later stage
• licensing opportunities.
• The top 5 high-valued patents were licensed
  within a couple of
• years of disclosure and the revenue ramped to
  500K quickly
• relative to other revenue generating patents.
  This seems to
• indicate that UCLAs high-value patents were
  the right
• technology at the right time. If the
  technology was discovered
• prior or post the window of market
  opportunity, the value might
• have been considerably less.

19
Conclusions

• The inventors commercial track record is a good
  indicator of
• potential success. Data show that most of
  the revenue is
• generated by clusters of experienced
  inventors and that success
• builds on itself. Inventor interviews
  indicate that during their
• first commercial licensing experience they
  gained significant
• market and commercial knowledge that assisted
  them in
• understanding and targeting future commercial
  opportunities.
• The principle funding source for high-valued
  patents was the
• government with only 1 out of the 11 patents
  being funded by
• industry. These data are counter to our
  initial hypothesis, but the
• highest valued patents are those that offer
  the right technology at
• the right time, one explanation might be that
  industry is also
• pursuing their own near-term solutions and
  may not fund
• competitive university solutions.

20
Conclusions

• One point to be emphasized is that the
  technology transfer
• officers licensing strategy and office
  resourcing are critical
• elements that shape the eventual outcome of
  the licensing effort.
• The university may have great technology, but
  if the technology
• transfer office is under resourced the
  offices ability to engage
• the faculty, market the technology and come
  to common ground
• in a complex negotiation may limit licensing
  success and revenue
• generation.

21
Acknowledgement
I would like to thank the many talented
professional that have contributed to this work
at UCLAs Office of Intellectual Property
Administration. I especially like to thank Dr.
Andrew Neighbour and Professor Kathryn Atchison
for their support and leadership Professor
George Abe for his keen business insights,
comments and suggestions Cheryl Silverman, Bob
Nidever, Stephanie Horng and Emily Loughran for
their deep understanding of the UCLAs databases,
history, creativity and willingness to lend their
expertise.