Marketplace of Ideas: Selling Patents Online
Scientists at UC Irvine have isolated a human gene that may play a role in schizophrenia, and the university wants the discovery commercialized.
Because it could lead to a new class of medications for treating this serious mental disorder, UCI applied for a patent and even discussed licensing the discovery with several drug companies.
But none took the plunge.
“The drug companies don’t know how to value this,” said Dr. J. Jay Gargus, one of three UCI professors involved.
So the university, like private interests with more tangible goods for sale, is turning to the Internet and one of a growing number of private online auctions and exchanges for patents popping up around the country--each hoping to use the reach of the Internet to connect universities, corporations and individual inventors with elusive buyers.
Executives at these start-ups say they intend to do for patent rights and other forms of intellectual property what Christie’s and Sotheby’s do for antiques or what Nasdaq or the New York Stock Exchange do for stocks--develop secure markets where buyers can be confident of what they are purchasing and sellers know they will get a competitive price.
These online companies hope that the current rage for e-commerce will carry over to intangible property--creating a booming market in inventions, trademarks and copyrights.
While there are skeptics, several experts in both licensing of patents and online trading believe there’s an opportunity for at least a few of these patent exchanges to succeed.
“It would not surprise me if something like this turned out to be fantastically successful,” said Dan Miller, a vice president at the Kesley Group, a firm that follows online commerce.
Even the doubters acknowledge that several of these firms arrive with impressive corporate pedigrees.
Patent & License Exchange, also known as Pl-x.com, counts a former U.S. commissioner of patents and trademarks, Bruce A. Lehman, as a director. And the accounting and consulting giant Ernst & Young holds a 30% stake in the Pasadena-based company.
One firm, Yet2.com, has the backing of such corporate giants as 3M, Boeing and Monsanto. Its president and co-founder is Ben DuPont, on leave from his family’s business, DuPont Co.
Another firm, Intellectual Property Technology Exchange (https://www.techex.com) was spun out of Yale University. Former J.P. Morgan executive Arthur Sculley sits on its board.
Different Approaches, Same Intention
Each company has a slightly different approach, but what they all agree on is that large numbers of patents awarded to individuals, companies and research centers--160,000 U.S. patents this year alone--are worthless unless they can find their way to businesses willing to shepherd them to market.
But doubters wonder if selling books, CDs and other commodities online to large numbers of eager buyers is inherently different from selling rights to a new device for checking blood sugar or a novel way to clean up a chemical spill. Moreover, patented ideas have limited life expectancies--new patents expire 20 years from the date they are filed, and developing a useful product can prove both expensive and time-consuming.
But it’s not surprising that online patent sales and services companies are suddenly sprouting up: business-to-business Internet services are thriving.
And if these patent companies can make transactions easier and more efficient--whether as auctions or something akin to a computerized dating service that helps buyers and sellers find one another--the best of them might succeed, says Mark G. Edwards, managing director of Recombinant Capital, a consulting firm that tracks licensing deals.
“The auction theme is interesting; it’s been proven with EBay to be a road to greatness,” Edwards said. “But I don’t know whether or not that is reproducible [with patents].”
Nir Kossovsky, president and a co-founder of Pl-x.com, is a former UCLA professor who holds a number of patents himself. As an intellectual property consultant, he was surprised to discover that some clients were looking for new products for their pipelines while others had an overabundance of patented ideas, which they had no interest in developing.
Kossovsky, a physician, said that he saw the potential to create what he described as “a cross between a robust real estate market and an antique market” for patents and other forms of intellectual property, including trademarks and copyrights.
To make the market work efficiently, his firm plans to check the credentials of buyers and sellers and provide both title and patent validity insurance--from Chicago Title Co. and insurer Swiss Re New Markets--to eliminate the most obvious risks in trading intangible assets.
Corporate Vice President Alexander K. Arrow, a physician and a former analyst with Wedbush Morgan Securities, is developing a computer model to provide suggested prices for listed patents. The company, which plans to begin online auctions in two or three months, will get a percentage of each deal; eventually it could charge membership fees to its subscribers.
Company to Offer Invention Inventory
Later this fall, Yet2.com will go live with a service that helps buyers and sellers find one another in a sophisticated online matchmaking. Its chief selling point is an inventory of available inventions from its member companies, including Ford, 3M and Procter & Gamble. But Yet2.com also wants to list government-funded research discoveries, and it has a commitment from the National Institutes of Health to list its portfolio of inventions on the company’s site.
The Cambridge, Mass.-based company will charge access fees to qualified buyers and will get a percentage of royalties--capped at $50,000--from any completed transactions.
Among its members is Monsanto, which over the last year has shifted from a chemical manufacturer to a life sciences company--producing pharmaceuticals and agricultural products, including seeds.
Monsanto is selling rights to a process that uses electrical current to draw pollutants from contaminated soil, pulling them into a narrow zone for treatment or excavation. The procedure, with the trademark name Lasagna, has been field-tested successfully, but it does not fit Monsanto’s new corporate direction, says Jackie Michel, the company’s director of intellectual assets.
Intellectual Property Technology Exchange of New Haven, Conn., grew out of efforts at Yale to develop a one-stop site for companies and venture capitalists looking for promising biomedical technology. It’s been on line for more than 18 months, but was spun out as a private business in July.
Unlike its competitors, it plans to focus almost entirely on the life sciences, said the company’s president and CEO, Jerry Williamson. The service is free, but the firm plans to later collect subscriber fees.
Shortage of Product Seen as Problem
There are other companies in the business as well. One of them, PatentAuction.com, based in Hunt, Texas, has been conducting online auctions of various forms of intellectual property--including domain names and even a movie script--since April.
Manager Byron Donzis says that the site has processed $3 million in deals so far, the biggest involving a pharmaceutical firm. However, he complains of a shortage of quality inventory. “A lot of people are throwing junk out there,” he said.
Universities and other nonprofit research labs are a rich source of patented discoveries. Their technology transfer offices often have their Web own sites, but many are considering the commercial sites as well.
But some university patent officers are skeptical.
Lawrence Gilbert, technology transfer director at Caltech, says the university did list some promising inventions on the https://www.techex.com site, when it was still a nonprofit service at Yale. Among the items listed: an invention by professor Frances H. Arnold that can measure blood sugar continuously for long periods, a process that could prove valuable to diabetics.
But Gilbert believes that university technology--basic discoveries that require substantial investments to develop--are not likely to sell well in Internet auctions.
Caltech, he said, has been most successful in licensing its technology to companies that seek out its prestigious faculty or to start-ups launched by university inventors.
David Schetter, director of UC Irvine’s office of technology alliances, agrees that selling university inventions will never be quite as simple as selling commodities.
“We’re a basic research enterprise,” he said. “And most of what we come up with is in a fairly early stage and not a product.”
Still, UCI is listing its technologies at https://www.techex.com.
Patent holders will jump at opportunities to sell their inventions, said Lorne Olfman, director of Claremont’s School of Information Science.
But, he says: “Who wants to buy the ideas? That is the question.”
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Times staff writer Paul Jacobs can be reached at paul.jacobs@latimes.com.
