Patent Portfolio Management: Metrics that Matter
What is the difference between data and metrics? For starters, data is data, but a metric is what is measured with the data. As depicted in the movie Moneyball, Major League Baseball teams have embraced metrics. Batting average, slugging percentage, and on-base percentage are all metrics derived from readily-available, basic hitting data. While a baseball team cannot pick its data, it can and should pick its metrics according to its performance goals. A team that wants to hit for more power will manage by adding more homerun hitters to its lineup. It will then assess its performance by tracking its slugging percentage as compared to past performance, other teams, and historical norms.
Similar to a baseball team, a technology transfer office (TTO) should use metrics as a tool for effective patent portfolio management. What metrics should you pick? You should pick metrics that allow you to assess whether your TTO is achieving its performance goals. The best metrics are tied to data that is objective, consistent, and readily available.
TTOs seeking to cost effectively manage their portfolios should include the following among their performance goals: (1) increasing opportunity (and ultimately revenue) by maximizing invention disclosures; and (2) minimizing unlicensed legacy patent portfolio expenses. Unfortunately, traditional metrics are not always useful management tools to accomplish these goals.
Traditional Metrics
It is important to track the numbers of invention disclosures, patent applications, issued patents, and licensing agreements, as well as the amount of licensing income and patent expense reimbursement received by the university. However, traditional metrics developed from these data do not paint a complete picture of what a cost effective university-based TTO looks like. For example, merely measuring the number of invention disclosures does not reveal whether a TTO is operating at peak performance in this area. It is not a metric that can be used as a management tool because it does not inform what changes need to be made to increase invention disclosures. For most TTOs to recognize their full potential, they need to track more than traditional metrics in order to ensure they are managing in the right direction to achieve their goals.
Metrics that Matter
To help manage toward the recommended performance goals listed above, important data points to capture are those that help a TTO assess whether it is engaging in practices that (1) maximize the submission of invention disclosures and (2) reduce the expenditure on unlicensed patent assets that have little or no value. The following table summarizes data to capture, important metrics to consider from these data, and recommended management goals for high-performing TTOs:
|
Data Points to Capture |
Metric – What the Data Measures |
Management Goal |
Performance Goal |
|
% of invention disclosures for which an inventor interview is conducted |
Level of outreach activity and education of faculty/student inventors |
Conduct an inventor interview for every invention disclosure submitted |
maximize invention disclosures |
|
# of First-time inventors |
Effectiveness of engagement with faculty and performance of TTO licensing officers |
Increase each quarter |
maximize invention disclosures |
|
# of General outreach meetings by department |
Level of outreach activity at the department level |
Conduct formal outreach by department at least 1X per year and informal with faculty weekly |
maximize invention disclosures |
|
Ratio of invention disclosures (ID) to research expenditures |
Success at fostering an atmosphere of faculty entrepreneurship; efficiency of invention disclosure process |
At least 1 ID:$2MM |
maximize invention disclosures |
|
|
|||
|
% of overall patent expenses spent on new patent applications and licensed patents/pending applications |
Efficiency of spending on patent expenses |
Increase each quarter until unlicensed assets >8 years old are an exception and >12 years old almost nonexistent |
minimizing unlicensed legacy patent portfolio expenses |
|
Maintenance fees for unlicensed patent assets that are avoided via selective abandonment |
Level of active portfolio management |
>zero EVERY year |
minimizing unlicensed legacy patent portfolio expenses |
Generating More Invention Disclosures
The level of outreach activity is a key metric for any technology transfer office for a number of reasons. While the primary purpose for conducting outreach activity is to educate faculty, staff, and students on intellectual property (IP) , it is a proven way to generate more invention disclosures. TTO’s should strive to maximize the conversion rate from research expenditures to invention disclosures. Consistent outreach from the TTO to faculty to monitor research activities will ensure that a high percentage of inventions are disclosed.
An effective way for TTOs to educate faculty, staff, and students is to conduct an inventor interview for every invention disclosure that is submitted. Tracking the percentage of invention disclosures for which an inventor interview is given, will help ensure that your TTO achieves this goal. Even if the disclosure is clearly not patentable or commercially viable, it presents a valuable touch point to educate inventors on innovation, introduce inventors to your TTO, and to monitor current research expenditures, which will likely result in increased future invention disclosures.
Positive interaction with inventors will encourage them to submit additional invention disclosures and likely increase the number of new, first-time inventor invention disclosures as positive word of mouth is the best way to advertise your TTO. Measuring the number of first-time inventors provides valuable information on how your TTO is viewed on-campus and whether innovators are likely to disclose their inventions.
A robust invention disclosure pipeline allows for more chances to license technology, to initiate a startup company, and/or to partner with an industry member. The standard rule of thumb is that for every ~$2.5 million in research expenditures, one invention disclosure will be produced. Tracking this ratio will help you assess how well your TTO is fostering an atmosphere of faculty entrepreneurship, and can also be a measure of the efficiency of your invention disclosure process.
Active Portfolio Management
Traditionally, academic institutions did not actively manage their patent portfolios. Rather, they paid all of the maintenance fees for both licensed and unlicensed assets. As their patent expenses ballooned due to increased maintenance fees, they addressed budgetary concerns by filing fewer patent applications – hoping to pick the winners. With a large percentage of the over ten million US patents never generating any revenue, this has been an unsuccessful strategy.
By actively managing unlicensed portfolio assets and being especially judicious before paying 8th year or 12th year US maintenance fees, or paying any foreign annuities beyond the 4th year, the funds saved can be reinvested in protecting and marketing new IP. Depending on particular budgetary constraints, these guidelines may be more or less stringent. For unlicensed technology, some TTOs may choose to only file foreign applications in rare cases.
As shown in the table above, tracking the percentage of your patent expenses that is attributable to either new or licensed IP is a measure of your office’s efficiency and whether it is investing wisely. Measuring the maintenance fees avoided through selective abandonment helps ensure that your portfolio is being actively managed.
Select and Track Metrics
Overall, there is no “one size fits all” when it comes to technology transfer metrics. Each technology transfer office should augment their traditional metrics with metrics specific to its institution. For example, schools with a lower patent expense budget may have metrics focused on the patentability and commercial viability of each invention disclosure. Other universities may be focused on department-specific metrics in an effort to promote innovation. While it is generally advisable to maximize invention disclosures and minimize wasteful patent expenses, the important take away is that every TTO should carefully select and track a set of metrics that will help it achieve the goals of its institution.