The article below appeared in the October 2008 issue of Technology Transfer Tactics.

Buck is trying to secure a business method patent for a technology commercialization model he says is unique. Detractors say the process he describes is already working in TTOs and companies in the U.S. and overseas — the UK in particular. Still, one of those UK companies, which says it does almost exactly what Buck claims to have invented, takes a “never say never” approach to the U.S. Patent and Trademark Office, and notes that a successful application on Buck’s part could alter its plans for working with U.S. clients.

“I do not believe the patent office will grant the application in its current format,” says Mark Fisher, PhD, chief technology officer at Exomedica Ltd., a medical technology developer based in London. “However, we must prepare for the worst-case scenario.” That’s why he’s discussing the case publicly as much as possible — to “draw any patent examiners’ attention to what’s happening in the wider world.” If the Buck patent application is approved, he explains, “it will simply prevent us from establishing Exomedica Inc. as a U.S.-based business in the future.” He adds, however, that the firm might still be able to work with U.S. university-based technology from its offices abroad to avoid infringing in what he sees as the unlikely event the patent is granted.

Still, he says, Exomedica plans to “meet the application head on and prevent its progression to grant, which will save someone significant legal expenses at a future date.”

The patent application in question, #20080201193, appears to be nothing more complex than commercializing university research through a for-profit operating company. (For a complete description of the “invention” and list of claims, go to http://www.faqs.org/patents/app/20080201193). Quoting from the application, the invention is “related to business methods for commercializing technology and, more specifically, business methods designed to commercialize technology from academic institutions, research laboratories or other early-stage sources on a self-sustaining and positive-cash-generation basis.” His method, Buck says, “provides an independent operating company” focused on for-profit commercialization and thus is “distinct from other known technology commercialization models.”

The case for novelty

In making the case for novelty, Buck lists the other “known models for general technology commercialization” including VCs, TTOs, university-affiliated commercialization entities, incubators, management companies, and public commercialization companies. Each one falls short of a profit-focused operating company envisioned by the patent, Buck claims. VCs intend to turn a relatively short-term profit on investor funding, TTOs are administrative offices that do not generally profit on their activities and return their license fees to the university, and affiliated commercialization entities such as Arch Capital — co-owned by Argonne Labs and the University of Chicago — are designed “to generate cash for their affiliated organizations and not operate solely for their own account.”

The closest kin to the application’s method are the public commercialization companies (PCCs) that have recently appeared primarily in the UK and gone public, notably Imperial Innovations Plc and IP Group Plc, spun out of London’s Imperial College and Kings College, respectively. “While a PCC is intended to be a business, which a public listing would require, its technology base is limited; the PCC largely focuses on licensing, and it does not appear to have a plan for profitably conducting a going concern. It does not appear that either of the specified PCCs provides significant incubation help or development activity,” the application states, concluding that “no mechanism has yet been devised to make commercialization itself a sustainable and productive engine for monetizing academic research to support a profitable and growing going concern.”

The operating company concept Buck envisions, the application states, “is in contrast to the traditional one-off model in which a single technology or related group of technologies is commercialized into a business in and of itself.” That is only one commercialization strategy the patented operating entity would employ, the document states. The operation would include a venture fund vehicle to help commercialize early stage research and would also generate fee income from industry customers. Those fees would be used as additional investment capital for new projects and ventures, as would funds generated by “liquidity events” of individual projects.

The case against novelty

According to Fisher and other observers, Buck is describing a number of existing and former entities, including Exomedica. “We set up development vehicles for each technology we get involved in and commercialize each technology from there,” he says. “The vehicle is owned by Exomedica, the originators of the IP and any other investors. Our aim is, therefore, to be self-sustainable from our share of the commercialization value [derived] from each technology in the portfolio.” The Exomedica operation doesn’t sell consultancy services; rather, it shares in the risk of each technology and negotiates its equity share on a case-by-case basis. “It’s therefore very different from any pipeline deal business,” Fisher says, “which is a model that has also found favor in recent years.”

His company’s clients are universities, and the technologies are generally derived from Britain’s National Health Service through “a series of NHS Innovation Hubs — or ‘health service TTOs’ — that cover England, Wales, Scotland and Northern Ireland,” Fisher continues. The firm also accesses disclosures from research institutes and business angel networks across the UK.

Exomedica, he continues, “provides financial support off of its own balance sheet to run each development program, and provides business support, project management and commercial intelligence to give each technology the best chance of success. Only when the technology is de-risked and moving toward some form of clinical evidence and validation do we encourage each vehicle to have its own management and begin to put in some executive structure.” The company is funded by “high net worth individuals,” he adds, and is currently undertaking a new funding round targeting more traditional VC and institutional investors.

Each of its vehicles is set up with simple shareholder agreements that enable Exomedica to put up more funds or seek third-party investors. Exomedica “leads the investment strategy even if it is not the main investor down the line,” Fisher notes.

All that leads him to doubt the originality of Buck’s invention, and his firm and other similar models constitute plenty of prior art that would render Buck’s claims invalid. He adds: “Exomedica’s business model has not been kept confidential, and there is plenty of evidence out there that describes what we do. Buck’s ignorance of that in seeking to apply for a patent demonstrates all too clearly how, with any technology, one should seek to identify the patent landscape before filing.”

Buck could seek to license the method to another company, Fisher says, “but it would take a brave organization to take it on, especially given the overwhelming examples of prior art that I believe exist.”

Stranger things have happened

Other tech transfer experts without Fisher’s directly competing interests nonetheless share his skepticism about the patent application’s eventual success — but they share his concerns about it, too. The fact is, they note, stranger things have happened.

“New business models are emerging daily,” says Debra M. Amidon, founder and CEO at ENTOVATION International Ltd., Wilmington, MA. “Whether they are patentable or easily protected in a global knowledge economy is subject to question. But that does not mean one should not try. There is an entire new arena of knowledge markets, which can include IP exchanges and patent pools, networking grids, matching or brokering services, clearinghouses, knowledge banks, and auctions. This is only the beginning,” she comments.

G. Michael Alder, TTO director at Brigham Young University, Salt Lake City, is less willing to give Buck the benefit of the doubt. “It’s not a new idea,” he says. “Emerging Technology Partners of Alabama (where Alder served previously as CEO) followed the same plan from 1996 through 2006. We helped start and started 10 companies [based on] technology licenses from four different universities.”

John Fraser, past AUTM president and assistant vice president for research and economic development and executive director, IP development and commercialization at Florida State University, has a similar feeling of déjà vu. “I suspect that prior art will prevent that business method application from issuing,” he comments. “Buck is in essence describing something that already exists — a for-profit technology transfer company that is a stand-alone entity. A partner and I created one in North Carolina in the mid 1980s and sold it. Also, [University Technologies International] exists in Calgary, Canada, as the for-profit company for the University of Calgary’s tech transfer activities.”

The same goes for Donald H. Baker Jr., managing partner at Safford & Baker PLLC, Bloomfield Hills, MI. There are already foundations that hold entire portfolios for their respective universities doing the very thing Buck envisions, he says, pointing to the Wisconsin Alumni Research Foundation as an example. Other universities have similar outside “holders” of their IP, he adds, and several private companies employ a similar model. “The patent application is very much non-novel and should be disallowed,” he asserts. “The application sounds like a variation in corporate organization, as opposed to creation of something new or beneficial. I think that the business idea is well worth exploring, but the patent spin on it is, to me, unjustified.”

A lesson to be learned

At least one tech commercialization veteran sees a lesson to be learned — and perhaps a valuable potential source of tech transfer assistance — even if the patent application has little or no chance of approval. N. Stephen Ober, MD, MBA, executive director of new ventures in the Boston University Office of Technology Development, notes that the application “highlights an important and relevant issue in academic tech transfer today; namely, the inherent tension universities often face between focusing on financial goals versus other less-quantitative results. I believe that third-party, university-affiliated commercialization entities can assist in addressing some of those issues.”

FSU’s Fraser can’t help but wonder “what if.” Buck may be able to successfully argue that he fills a very narrow niche in the commercialization market, he points out. “But what’s interesting for me is what he will do if at some point a U.S. patent does issue,” Fraser says. “Will he then try to license the concept, like other patent aggregators? There are others out there working in that broad area. I also know of a patent filed for a virtual tech transfer office; again, less the concept and more the mechanics.”

Buck’s agent, Woodbridge, NJ-based Kaplan Gilman Gibson & Dernier LLP, did not respond to several requests for information about him and about his plans for the patent if it’s granted.

Contact Alder at 801-422-6266 or malder@byu.edu; Amidon at 978-988-7995 or debra@entovation.com; Baker at 248-646-9100 or dbaker@saffordbaker.com; Fraser at 850-644-8637 or jfraser@research.fsu.edu; and Ober at 617-358-3813 or sober@bu.edu.