Dean of Research, for the Research Incentive Fund. This money can be somewhat akin to a measure of profit.”
The “sort of bad news,” Ms. Ku added, is that $870 million of that total came from just three big inventions: recombinant DNA (1974), functional antibodies (1984), and improved hypertext searching (1996). Of some 8,300 inventions seen by the Office of Technology Licensing, only 20 cases had generated $5 million or more, and only 58 had generated $1 million or more. “And I’m always embarrassed to mention this, but we have about $17.6 million of patent expenses in inventory, waiting for somebody to license. Our university doesn’t count on royalties for operating expenses, and it can’t. The reality is that the big cases almost always end up in litigation, so you never know if you’re going to have income tomorrow.”
Ms. Ku offered a revenue snapshot of one year, 2010, which was their second best year (after the year of Google). The revenue for 2010 was $65.5 million, from royalties generated by 553 inventions. The lowest royalty amount was about $5, “so we’re not always talking about a lot of money.” The office spent about $7.1 million in legal expenses for patents; typically it obtains about 80 to 120 new licenses a year, drawn from about 450 inventions a year. One-half to two-thirds are non-exclusive licenses. “We believe in non-exclusive licenses, because we believe that universities should get a fair share when we contribute our technology to a product in the marketplace. About 10 percent of our agreements are with start-ups, so it’s not a huge number, about 10 to 12 a year.” Some 10 to 20 percent of the licenses are for biological material that researchers use in their research, such as monoclonal antibodies.
She said that with the exception of the Google cash-out, however, equity was not a major factor in the office’s revenue scheme. “And I want to tell you,” she said, “it costs a lot of money to run the office.” It employs 34 people and costs some $5 million a year to operate, not including the $7 to $9 million in patent expenses or the $17 million in unlicensed inventory. Five people work only on agreements with industries that want to sponsor research at the university.
15 Years to Break Even
“The most sobering statistic,” Ms. Ku said, “is that it took us 15 years just to break even. The reality is that most of our inventions require a very, very long-term perspective. We have very early-stage inventions. Most of the research inventions are embryonic, so they need lots of years and time and dollars to develop. So we can’t ask for maximum royalties or even optimum royalties. Our royalties have to reflect that our technology is very early-stage and very risky. What we’re looking for is broad patents, patents that can’t be invented around very easily. These have to be revolutionary, not just evolutionary improvements. So that means that most of our inventions take 5 or 10 years before they can come to the marketplace.”