©2017. Published in Landslide, Vol. 10, No. 2, November/December 2017, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
Tech transfer offices that operate in the black are more of an exception than the rule. In fact, according to a report from the Brookings Institution, as much as 84 percent of the tech transfer offices were in the red in 2012, which was an improvement from a 20-year average of 87 percent.1 With these numbers, it can be argued that but for the requirement placed on universities vis-à-vis the Bayh-Dole Act, most tech transfer offices would have shut down or at least seriously decreased in size. The single largest ticket item in costs associated with a typical technology transfer office is legal fees for outside counsel (except for those with a large in-house practice). Consequently, for most offices the usual response to submissions of invention disclosures (RoIs) from university inventors, especially those who are not yet well regarded by the university, is that without a sponsor to pay for the patent costs, the office is unable to help. Additionally, in any university the number of inventors who submit invention disclosures as compared to the overall number of faculty is very small. Consequently, this lack of interest in processing invention disclosures beyond a few token provisional patent applications will result in a futile disinterest by those few inventive individuals, and soon the office will become the processing center for a few well-connected inventors with big sponsorship.
Of course, where a university that once cashed in a lottery check in the form of a blockbuster invention, and continues to reap the benefit of that invention in the form of milestone payments or royalties, is temporarily immune to these challenges, as its tech transfer offices enjoy an infusion of cash that can be used to fund new innovations. However, once the royalties dry up, the once-thriving office finds itself with its peers. This dismal vision of tech transfer offices should be contrasted with prolific tech transfer offices, in which each inventor is received with open arms, and each invention is moved through a well-defined process to be protected and commercialized. At the center of the process is the existence of an in-house legal practice. This article outlines formation and management of this in-house legal practice.
Recognizing the Need
Given the early stage of development of technologies that come from universities, it is exceedingly difficult to identify gooses capable of laying golden eggs among the many technologies that come through the doors of a tech transfer office. Therefore, professionals in those offices are reluctant to invest precious resources on inventors who have not had moderate to major past success in commercialization (creating a chicken and egg dichotomy). Furthermore, there is a real need to assist inventors with their inventions by adjusting the path of invention, even if ever so slightly, to improve commercialization chances of the invention, including patenting.
In a typical tech transfer office that lacks a robust in-house legal team, technology-based advice is absent. As a result, what comes in is what is protected with little to no adjustment to improve chances of success. While inventors excel at inventions, they know very little about the current state of patent law. Where inventors can be guided at the conception stage with knowledge and tactics provided by the tech transfer professionals to improve chances of commercialization, the result is a significant improvement of the ecosystem of entrepreneurship and commercialization. However, a degree of trust, rooted in time and expertise, is needed between the inventors and the office professionals prior to such collaborations.
Recognizing these challenges, perhaps not in every case but in most cases, results in the inescapable conclusion that an in-house legal practice works as evidenced by the following benefits. Such a practice provides myriad of added values. These include: (1) realizing a significant cost savings for the operations of the office; (2) incorporating a well-defined operational process from intake throughout the life of the invention; (3) gaining trust between inventors and the office professionals, in all facets of the operation; (4) moving from a role of facilitator to a roll of collaborator; (5) establishing a center of excellence and a hub of knowledge; and (6) increasing job satisfaction for all involved. This approach results in improved output by the office to move its operations from the red to the black.
Legal fees for preparing a nonprovisional patent application are reported as $8,548 for a minimal complexity application (10-page specification, 10 claims), $15,398 for complex biotechnology/chemical cases, $11,482 for relatively complex mechanical cases, and $13,684 for relatively complex electrical/computer cases.2 For a tech transfer office that files a mere 100 nonprovisional applications, the initial patent preparation costs alone will be upwards of $1,500,000. Including prosecution costs of legacy cases (office action responses for the technology categories above range from $2,244 to $4,4483) one can easily double that number to $3,000,000.
In contrast, legal fees for organizations with a robust legal team are significantly lower. In 2012, the Purdue Research Foundation reported that 280 nonprovisional US, international (PCT), and foreign applications were filed with a total nonreimbursed cost of $4,550,000.4 In 2016, 326 nonprovisional US, PCT, and foreign applications were filed with a total nonreimbursed cost of $1,410,000; during that time a team of one (initially, the author was the only attorney) to six patent practitioners including patent attorneys and agents were added to manage the intellectual property of Purdue University. Therefore, while the number of applications increased by 16 percent, the cost associated with filing these applications and other costs associated with prosecution and maintenance decreased by 70 percent. The cost of employing these individuals is a small fraction of overall cost savings.
A Well-Defined Operational Process
With decreasing costs per application, and employing other measures to increase the number of disclosures, a well-defined process is needed to successfully handle the large quantity of workload. This process includes the following steps: The first step is intaking of disclosures including verification of inventor bibliographical information and funding information, and collecting all germane documents for the invention. The second step involves assigning a patent manager with the proper training and technical background. Third is studying of the disclosure material by the patent manager, performing a short search to identify low-hanging fruit references, and setting up an initial meeting with the inventor(s). Fourth, in the initial meeting: (i) discussing the invention with the inventor(s) in light of the references identified, and (ii) in agreement with the inventor(s) generating a paragraph that encapsulates the invention (similar to an independent claim). The fifth step involves further searching the prior art references in light of the generated paragraph. The sixth step is to hold a subsequent meeting with the inventor(s) to discuss any new references and the need to add new matter to the inventive subject matter to overcome at least potential novelty rejections. The seventh step is deciding with and explaining to the inventor(s) your decision to move forward with protecting the invention, or pass on it. Finally, in the eighth step, if you decided to proceed forward, preparing a patent application, or if you decided to pass to make the title of the invention available to the inventor(s) so that they can do something with it. This exemplary skeleton of a process provides a roadmap that can be scaled up or down depending on the number of disclosures.
Gaining the Trust of the Inventor(s)
Trust is perhaps the most important component for a successful outcome for an invention. Without trust, information is not freely passed between the inventor(s) and the office professionals. When there is trust, inventors accept recommendations of the professionals (whether those recommendations are for a change in direction of the project based on intellectual property (IP) challenges that are expected to be ahead, or based on a negative decision to pass on protecting the invention) without a negative impact. Furthermore, with the inventor(s) having a degree of trust with the office professionals, they are more likely to contact those professionals earlier in the process of inventing, perhaps even at the conception stage, to better formulate a plan for carrying out the invention.
Moving from a Facilitator to Collaborator Role
With trust established, the professionals in the office can slowly change their roles from being facilitators in protecting inventions to becoming collaborators in developing inventions. As facilitators, the office professionals are often viewed as gates or roadblocks to passing the invention to outside counsel for protection. Such a view results in a diminishing frequency of disclosures, chiefly because of the reputation that spreads across the university. This overall environment creates a suboptimal working condition, resulting in a high turnover rate. In contrast, when the office professionals are able to protect a significant number of inventions, establishing the all-important trust, they can begin seeing themselves as collaborators, thereby creating an environment that can result in generation of quality intellectual property.
Establishing a Center of Excellence and a Hub of Knowledge
With an ever-increasing number of patent applications prepared and filed in-house, the office professionals develop proficiencies that can allow them to process a substantial number of inventions in a streamlined manner. In addition, the knowledge gained in this process can be put to good use to help guide the inventions, transforming them from an area where only weak and narrow protection may be available to strong and broad protection. In time, this expertise becomes well known throughout the university, resulting in a large customer base.
Increasing Job Satisfaction
Professionals at most tech transfer offices have a tough job. They are asked to turn every invention that comes their way into a licensable technology with ever-shrinking budgets. Additionally, success rates for licensing new technologies are very low. These issues can result in poor working conditions. Building an in-house legal department for all the reasons discussed above provides a pathway to improve these conditions and thereby increase job satisfaction for the entire office.
An in-house IP legal team can perform myriad functions. The obvious functions include preparing and prosecuting a substantial number of patent applications. The nonobvious functions include establishing a quality control mechanism that can be used to ensure high-quality patent applications are prepared and prosecuted by the in-house team as well as the outside practitioners. Without an in-house legal team, this responsibility falls on the shoulders of individuals who have not been trained properly to carry it out. The quality control can be divided into two categories: (1) procedural, and (2) substantive. In the case of procedural quality control, available automated software can be used to make sure the reference numerals are accurate and claim elements are properly called out in the specification. For substantive quality control, an in-house legal team can ensure the claims are sound from a litigation point of view. They should inquire as to whether the claims require direct infringement or are based on indirect infringement. If indirect infringement is the target of the claims, the team can determine whether anyone in the chain of infringement has committed direct infringement.
Other functions that an in-house legal team can perform include providing support for the licensing team insofar as licensing issues with respect to intellectual property and other legal concerns arise. The IP legal team can bring to bear their educational training from their law school days as well as prior legal experience to assist with unusual areas of intellectual property such as ownership, conditional assignment, multifaceted ownership across a portfolio and pitfalls associated with that kind of ownership with respect to nonstatutory double patenting rejections, and a variety of other IP-related licensing issues.
Building the Practice
Finding the right individuals can be challenging as they must be self-starters and eager to take on difficult tasks. In particular, the subject matter of technologies coming out of a university are more complex than what patent practitioners usually deal with outside of a university environment. Many disclosures are based on a masters or doctoral thesis work, complex and difficult to understand work that borders between fundamental and applied research requiring understanding the underlying theories, and other obscure subject matter. For practitioners who are under a significant amount of time restraints, understanding these difficult concepts can be challenging. The right group of individuals are those who cannot get enough of these challenges and seek them out.
Positions in a legal team in a tech transfer office differ from traditional in-house or outside counsel IP practice positions. In comparison to other in-house positions, the primary difference is the sheer number of technologies that come across the desk. In a typical in-house position, wherein patent applications are prepared in-house, each practitioner is responsible for a line of product and he or she can build a robust expertise in that area. However, in a tech transfer office, practitioners receive disclosures on a wide basis of technologies that are divided only based on broad categories. For example, all disclosures coming from an engineering department may be channeled to a physical sciences practitioner. These may include a disclosure from the mechanical engineering department related to a new thermodynamics invention directed to heat pumps, or to a next-generation cache memory controller used with spintronics memory. The right individual will possess a wide berth of knowledge in many areas. One way to distinguish and divide the position title of a practitioner is based on physical sciences vs. health-life sciences. While at first look these differences may seem to be beneficial to a tech transfer individual, he or she must be aware that skill sets associated with managing a portfolio in a tech transfer office are not necessarily transferrable to in-house positions outside of a trach transfer environment because those skills are not based on product development but rather individual, albeit many, technologies.
Regardless of the division line, a practitioner in a tech transfer office will from time to time receive a disclosure in an area that he or she feels uncomfortable. With the right level of assistance and a genuine desire to learn and expand skill sets, practitioners can take on those difficult projects.
The job duties of an in-house practitioner can also be wildly different to those of an outside counsel. While an outside counsel is concerned with billable hours and assembling a client base made up of a few to tens of entities, the in-house practitioner is concerned with keeping his or her stakeholders, made up of potentially hundreds of faculty members, happy. While the hours at the office may be similar, the rewards are fundamentally different. In one case (the outside practitioner), assembling a wide network of clients can make a practitioner quite valuable with potential for upward mobility in his or her firm or across firms. In a tech transfer office, keeping the stakeholders happy will likely lead to an internal satisfaction that might not transform to similar gains of an outside practitioner (namely upward mobility and/or significantly higher pay). Additionally, an in-house practitioner may at some point find it necessary to move on. As an experienced practitioner, going to a firm may prove to be difficult because the in-house practitioner will not have any clients. These challenges should be noticed by managers. Without such notice, a high turnover rate may occur, resulting in the organization being forced to scale back to a smaller footprint or even revert back to pre-in-house practice days, thereby giving up all the gains discussed above.
Starting an in-house practice within a tech transfer office provides a number of benefits. These include (1) a potential for realizing a significant cost savings for the operations of the office; (2) incorporating a well-defined operational process from intake throughout the life of the inventions; (3) gaining trust between inventors and the office professionals, in all facets of the operations; (4) moving from a role of facilitator to a roll of collaborator; (5) establishing a center of excellence and a hub of knowledge; and (6) a high probability of increasing job satisfaction for all involved. However, the in-house position can present challenges for the practitioners. These challenges include difficulty of the subject matter of myriad areas from which disclosures come. Additionally, another risk is that the in-house practitioners may develop skills that are not directly transferrable to law firms or perhaps other in-house positions in the industry.
1. Walter D. Valdivia, University Start-Ups: Critical for Improving Technology Transfer, Brookings Institution (Nov. 20, 2013), https://www.brookings.edu/research/university-start-ups-critical-for-improving-technology-transfer/.
2. Oversight Hearing on the United States Patent and Trademark Office Before the Subcomm. on Courts, the Internet & Intellectual Prop. of the H. Comm on the Judiciary, 110th Cong. (2008) (statement of Alan J. Kasper, First Vice President, American Intellectual Property Association), http://www.aipla.org/Advocacy%20Shared%20Documents/TES_2008-02-27_110C_PTO-Kasper.pdf.
4. See OTC Metrics, Purdue Res. Found., https://www.prf.org/otc/about/otc-metrics/index.html (last visited Sept. 25, 2017).