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US Companies Neglect Patent Opportunities

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Daniel C. McCarthy

US companies are sitting on $115 billion of their own neglected commercial assets, according to a survey sponsored by BTG Inc., a technology transfer company based in the UK. The survey, taken among industries that invest substantially in research and development, such as photonics, estimates that more than 35 percent of patented technologies go unused by the companies that own them. BTG's announcement indicates the dollar figure is a conservative estimate.

Innovation drain
Ian Harvey, the company's CEO, blames corporate mergers as the source of many so-called "orphan technologies" in the US, asserting that commercially viable technologies often are shelved if they don't fit into the core business of two newly merged companies. The survey indicates, however, that US firms guard their intellectual properties most efficiently, patenting only those technologies they believe show potential for product development. Nevertheless, Harvey warns that US companies could see a serious innovation drain if the trend of billion-dollar mergers continues.
Patent protection, however, may make innovation more commercially viable in the first place. "The vast majority of patents go unused, but unused in a very narrow sense. A lot of research and development that gets patented will not necessarily continue into the commercial arena," said Steve Eglash, vice president at SDL Inc. in San Jose, Calif. "The function of research and development isn't to bat one thousand. Companies that lack a number of shelved patents probably aren't taking enough risks in their research and development programs."
Scott Miller, general counsel for Coherent Inc. in Santa Clara, Calif., counters this assertion as well as BTG's claim that US corporate mergers are to blame for orphan technologies. Compared with many of its smaller competitors, Coherent has a substantial track record of acquiring businesses to boost its own product and technology base.
"We've acquired several small companies, of which the intellectual property is an important part of the acquisition. Unless it's strategic or useful, we aren't interested," Miller said. He added that, in his experience, photonics companies that use only two-thirds of their patent portfolio in commercial applications are rare; Coherent is no exception. "A lot more than 65 percent of our patents are on products that we're selling. My sense is that we're not filing a lot of patents on products that don't make it to market."
Jeff Sheldon, chairman of the American Intellectual Property Law Association's Licensing Committee, agrees with BTG's estimated percentage. "Patents are taken out early in the development process to protect the potential of an invention, so I'm surprised the figure is that low for the number of patents that ultimately go unused."
Unlike US businesses, Japanese and European companies that responded to BTG's survey showed a greater tendency to use patents solely to prevent technologies from falling into competitive hands. Japanese companies appear to be the most tight-fisted with their intellectual property. A third of the Japanese firms that responded to the survey reported that they held more than 1000 unused patents; only 7 percent of US firms claimed that amount.

Photonics Spectra
Aug 1998
Businesslight speed

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