Peddling Patents for Profit

WANTED: Willing and friendly partner for mutually beneficial, contractual arrangement. Experience preferred, but not essential. Good references required.

No, it's not a personal ad, but it could be a solicitation in the race to make money through intellectual property. Indeed, there's a growing trend toward dealing in patents. Companies may come and go, it seems, but their technology has a life of its own.

A glance at recent telecom headlines shows a case in point, yesterday's announcement that BTG plc (London: BGC) is peddling rights to a portfolio of video- and voice-over-IP patents, terms undisclosed (see BTG Commercializes VOIP Patents ). According to Bruce Bernstein, BTG's global director of patents, the VOIP technology came from a developer that specializes in inventions. BTG's role is to sell those on its behalf.

BTG is an example of a small but growing number of companies that specialize in brokering patents. Among its services, the firm will examine a company's patents, find out what may be of value to outsiders, and in return for a share of future royalties, find suitable customers or business partners. In other projects, BTG has licensed electro-absorption modulator (EAM) technology for BTexact Technologies and dealt in rights to the patents of Communications Research Centre Canada (CRC).

BTG assumes the management of patent paperwork and litigation on technologies it tackles. "Sometimes you have to defend all the work that went into an invention," Bernstein says. BTG also seeks out opportunities to make arrangements with inventors who are looking to commercialize their patents, and it has its own venture funding arm, which made an early investment in Meriton Networks Inc.



BTG's not alone in making its living from patent peddling. Another firm, ipValue Management Inc., offers similar services and has a six-year arrangement to peddle over 14,000 patents for BTexact around the world (see BTexact Licensing Patents). There's also Thinkfire Services USA Ltd. of Clinton, N.J., and Menlo Park, Calif. And there are many small "boutique" firms, like Bramson and Pressman of Conshohocken, Pa.

Firms like these say they're unique in being able to identify and sell valuable intellectual property for companies that can't do it themselves. "Lots of companies don't have expertise in house, or [managing patents] isn't in line with their core business," says Bernstein. He says that in the case of BTexact, for instance, lots of usable technologies had been "sitting on the shelf since the 80s." Now the company is realizing millions in licensing revenues from that property.

When it comes to finding licensees, firms like BTG and ipValue face lots of competition. Big companies, such as ADC Telecommunications Inc. (Nasdaq: ADCT), Hewlett-Packard Co. (NYSE: HPQ), IBM Corp. (NYSE: IBM), Lucent Technologies Inc. (NYSE: LU), and Nortel Networks Corp. (NYSE/Toronto: NT), to name just a few, have special internal divisions devoted to licensing technologies developed in house. The efforts of these large departments often make headlines themselves (see Suing for Revenue?).

There also are university research centers peddling their own patents through established "technology transfer offices." Institutions such as MIT and Stanford have longstanding technology transfer offices associated with their many labs. Then there's the formidable University of Southern California Office of Technology Licensing and the Wisconsin Alumni Research Foundation (WARF) affiliated with the University of Wisconsin at Madison.

These and other academic institutions have made patent-licensing a business in its own right. WARF rakes in "between $30 million and $40 million" annually from all technology licensing, according to John F. Hardiman, licensing manager for WARF's photonics offerings. He says WARF also has taken equity stakes in startups in lieu of royalty payments, creating more competition for the likes of BTG's venture arm.

Corporations often have technologies crucial to developers. Universities have the benefit of offering cutting-edge technology developed by resident geniuses. But BTG's Bernstein says firms like his offer more business savvy and are better able to make commercial successes of new ventures based on the licenses they offer.

Whatever the approach taken, there will be tradeoffs. But one thing is clear: The business of patents is picking up in telecom, aided by a growing awareness of the value of technology in its own right, both to the developer and the licensee.

— Mary Jander, Senior Editor, Light Reading