Needed: Patent reform in a world market

At present, European patent offices continue to be underfunded or understaffed, and university budgets often are so stretched that patents take a back seat because they don’t yield a guaranteed income.

“Patents are of central importance to spin-out companies, forming a key part of their offering. Given this, it is imperative that there is appropriate infrastructure to support patenting in Europe,” said Neville McClenaghan, co-founder of Diabetica Ltd., a University of Ulster spin-out that won an ACES Academic Enterprise Europe Award in Stockholm in December. “Patents are the lifeblood of our company,” McClenaghan added. “The primary focus of our efforts is to generate new patentable discoveries and innovations, and seek strategic partnerships or licences for these technologies to facilitate their being translated into products to be taken forward to market.” Diabetica, a diabetes treatment company, has a number of patent families in the UK, Europe and the United States.

His comments came at a roundtable meeting in Stockholm on 3 December, among a gathering of European technology entrepreneurs and academic researchers. The session was organised by the Science|Business news service and the Unit for Bioentrepreneurship at Karolinska Institutet in Stockholm. It was co-sponsored by the US Department of Commerce’s Market Access and Compliance Office of Europe, as part of a continuing effort to improve the policy environment for small and medium-sized companies.

Of course, policy aside, good organisation at the university and company-level can help the patent process. McClenaghan said his company and university worked primarily through a single patent attorney to help expedite patent filing and issue. Because Europe has a first-to-file system rather than first-to-invent as in the United States, McClenaghan would recommends filing early to protect your stake and interests with a solid data set and as broad a set of claims in the filing as possible. “It’s important to file as early as you can, and then the clock starts ticking, after which you have a 12-month window in which to add more data, as appropriate,” he said.

Filing first in US

For other innovators, filing in the United States first provides more bang for the buck. Paula Carey, commercial director for Carbon8 Capture Ltd, a University of Greenwich spin-out and ACES finalist, said Carbon8 has had difficulty in Europe, but was successful filing in the United States.

“We’ve had a patent granted in the States for nearly five years. It’s harder going through the system in Europe. It very much depends on the examiner,” she said. “Our problem in Europe is the examiner we’ve had doesn’t understand what we are talking about.” The examiner asks questions unrelated to her company’s technology, an experience echoed by other entrepreneurs.

The university has funded the cost for Carbon8’s patent, which it owns and whose cost has exceeded £50,000. But now that the company has formed, it’s more difficult to get the university to step up and pay for additional patents.

“As a company, we have to be careful to ask the university to file on our behalf,” Carey said. “It’s hard work to persuade the university that they should be filing.” She added that the university wants to save money, so it hasn’t filed to sufficient countries to give her company enough coverage.

Peter Andrekson, co-founder of PicoSolve Inc., a spin-out of the Chalmers University of Technology, went straight to the United States to get patents. “We started in the United States because there’s more competence there,” he said. “You get much more for your money if you start in the United States. It’s by far the largest market, and we made the decision, having submitted there, whether to move on to other countries.” Andrekson admitted his company has no orders for its optoelectronics products from its home country of Sweden, but does have revenue on four continents.

PicoSolve invested $20,000 to get three patents granted in the United States. “We find that patents are expensive in Sweden,” he said, adding that it costs about 50 percent more in Sweden than in the United States for a patent filing. After the United States, PicoSolve filed with the Patent Cooperation Treaty.

There’s more to IP than patents

While patents can help attract investors and protect intellectual property, entrepreneurs find they must consider obtaining patents as part of a broader business strategy. “We do realise IP isn’t just about patents, but in fact it’s largely about know-how,” Andrekson said. “You don’t want to publicise the key components of your IP publicly as a patent would be. So there are different strategies going forward.” He added that it is important early on to make an extensive freedom to operate analysis to be able to go into business and discover potential competition.

Matt Miskimin, director of transactions at the US IP merchant bank Ocean Tomo LLC covering Scandinavia, said statistics show the frequency of patent filing in Scandinavia has fallen off. But that doesn’t mean Sweden and other countries in the region are losing their inventive spirit. “The patents are being filed elsewhere,” he said.

Adel Sharif, founder of Surrey Aquatechnology Ltd., a Surrey University spin-out, said the US patent filing was more rigorous in the case of his company than filing in Europe. “If you can pass in the United States, you can pass anywhere else in the world,” he said.

At the start of his company, the university’s IP office was responsible for the initial filing of six patents in the UK first, and then after one year went to the European Patent Office. He felt that the search by the UK Intellectual Property Office was not as comprehensive as the European Patent Office’s search. Still, after having all three sources check for prior art, he was surprised when he got the results from the United States Patent and Trademark Office.

“The US office found prior art that the previous patent searches didn’t find,” he lamented. Each patent cost about 50,000 pounds for the application, filing fees, legal fees and advisors.

He agreed with Andrekson that patenting isn’t the ultimate protection. “The know-how is far more important to us,” he said, though he added that a patent and IP portfolio can help get investors.

Managing patents

That brings up the question of the value of patents. Diabetica’s McClenaghan said in many instances historically patent numbers have been used as a crude measure of translational research, and some have been accused of using them to fatten resumés. “I guess it is part of the learning process. To some it became stamp collecting, filing as many patents as they could,” he said. “But as the saying goes a dog is not just for Christmas, and as costs can quickly escalate, it is easy to fall into the trap of having a load of dogs without having a strategy of how deal with them. I think it is fair to say that most Universities and spin-outs are wise to this scenario and have moved beyond it.”

To Eleanor Taylor, head of the Proof of Concept Programme at Scottish Enterprise, managing patents is one way to turn them into assets. She pointed to a recent report for government on IP by Paul Wellings, vice chancellor of Lancaster University, that includes a table showing the number of patents held by each university in the UK and the licence income. Miskimin of Ocean Tomo added that fewer than 5 percent of the patents had more than £1 million in income flow.

“Technology Transfer Offices have to actively manage the patents,” Taylor said. “Some universities have less patents but perform better, so arguably they are managing them better.” Looking at how to exploit a patent also can lead to a decision to not carry on with it, she added. “So a managed portfolio works better especially if you begin with the end in mind.”

Patent exploitation is a critical issue, agreed Claes Post, managing director of Karolinska Institutet Innovations AB. His spin-out funding group wants broad patent rights for its future exit strategy, with projects in different Life Science areas are handled. “We consider the future situation to be that the companies continuing developing our interesting projects towards commercial phase will strive for global reach,” he said. “So we go very broadly with patents, and go international.”

It’s a challenge for universities to find a happy medium, even in the United States. Carl Sundberg, investment director of the Karolinska Investment Fund and head of the Unit for Bioentrepreneurship at Karolinsia Institutet, said that of the 100-plus research universities in the United States, perhaps 10 have very well-functioning offices, so in those less well-functioning the scientist is “locked in”. “If a scientist at one such less functioning university could freely go to Stanford that’s fine, but they can’t. That’s the drawback in the US system,” he said.

By contrast, in Sweden the scientists own the IP, but they face the responsibility of finding money to pay for patents themselves. However, they are not locked into a particular university. “The potential problem with the Swedish system is lack of institutional support,” Sundberg said.

“The scientist is not lost in the US system,” according to Paul Corson, the US Department of Commerce’s special advisor on Europe. “But universities are encouraged to take a role in commercialising innovations where the individual scientist often cannot.” When a professor or researcher is employed by a university, the intellectual property generated under the employment agreement usually will become the property of the university. The university may obtain patent protection and identify commercial applications for an invention, Corson explained. If the university fails to file for patent protection and commercialise the invention, the right to the invention may revert to the researcher, under contract.

Another important value in the US system, Corson added, is that it incentivises the commercialisation of federally funded research. A university may choose to retain rights to a grant-based invention, provided that the university files for patent protection and seeks to commercialise the innovation. If neither the university nor the funding agency wants the title to the invention, the researcher may request for the title. The funding agency, meanwhile, always retains rights to use the invention for US government-related applications.

Corson, who focuses on trade policy to promote US exports and investment abroad, said it is important for other countries to be competitive in order to grow the global market. “We’ll play a role based on our vested interests,” he said of US government involvement in patent and other IP issues facing innovators. “But the bottom line is, US innovators benefit when research institutions, as well as those who do the research themselves, are encouraged to commercialise new inventions.”

NOTE: Later this year Science|Business will organise a meeting with the European Patent Office president to discuss issues including how to speed up the patent process. Readers with further thoughts on the issue should email them to [email protected] or [email protected].