IDLE CORPORATE IP CAN BOLSTER YOUR TTO'S PORTFOLIO
by David Schwartz

January 2008 Issue of Technology Transfer Tactics

Despite recent legislation removing most of the tax benefit for corporations that donate idle patents, TTOs can benefit by seeking out unused corporate IP, says Ken Anderson, director of entrepreneurial and small business support at the Delaware Economic Development Office (DEDO) in Wilmington. For larger research universities, obtaining idle corporate patents might be overkill if their labs are already pumping out enough IP to drain TTO capacity, cautions Matthew Wagner, executive director of the Center for Advanced Technology and Innovation, Inc., (CATI) in Sturtevant, WI. “However, it can be a sound strategy for smaller and mid-size universities that don’t have an extensive research budget but do have the resources in terms of labs, students, faculty, and cross-discipline connections that can further along a technology,” he comments. “You can take innovation from a slightly different input stream and gain more potential from a licensing perspective.”

Historically, many corporations dealt with idle patents by donating them to nonprofit institutions such as universities. However, in 2004 the American Jobs Creation Act “virtually eliminated patent donations” by removing most of the tax benefits for corporations, says G. Marie Talnack, a technology commercialization professional and a doctoral candidate researching patent donations at the University of Southern California School of Policy, Planning, and Development. Still, typical corporations have patent utilization rates of between 10% and 15%, says Wagner. “So there is a lot of IP remaining, particularly at the very early stages of development. Universities are especially well-suited to target early-stage IP because they have significant research resources to bring to bear to further develop a technology.” The IP may have been victimized by corporate whim or strategic changes, such as a change in leadership or marketing strategy. But that doesn’t affect its inherent worth. Consider this example: DEDO designed the IP Business Creation Program to spearhead commercialization of the phased-in donation of 258 corporate patents that Delaware recently received from two Wilmington-based corporations (chiefly DuPont) as part of a state economic stimulus package, says Anderson. DEDO vetted the patents through a third-party national expert and placed them in three categories: commercializable (92 patents), developable (149 patents), and investigational (17 patents). “Our program is an indicator that companies do have good, valuable IP available in the marketplace, even though the technology might be inactive where it currently resides,” he says. “A recent assessment by an outside third party, using a sunk cost method, assigned a value to our IP portfolio between $21 and $46 million. In that same assessment, the market value of the complete IP set was estimated at $247 million.”

The key for universities to succeed in a donated patent effort is to seek out idle IP that matches their research strengths and may complement existing technologies, Talnack advises. “TTOs have to act as match-makers, if you will, between what corporations have already patented and what their university needs.” Wagner agrees, advising TTOs to market their capabilities to advance a company’s stranded technologies. Though straight donation may be less likely under current tax law, a field-of-use donation or joint venture with the company can still make sense for companies, he adds. A detailed article on turning idle corporate IP into TTO revenues appears in the January issue of Technology Transfer Tactics.