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CSIR looks to profit from patents stock

CSIR looks to profit from patents stock
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First Published: Sun, Oct 05 2008. 11 52 PM IST

Updated: Sun, Oct 05 2008. 11 52 PM IST
In a significant policy change and an ambitious attempt to monetize its inventory of patents, the Council of Scientific and Industrial Research, or CSIR, India’s largest publicly funded research and development body, plans to transfer at least 3,000 patents to a separate, professionally managed company.
The proposed holding company will monetize the patents in a variety of ways—spinning off subsidiary joint ventures and licensing intellectual property, or IP, to professional firms such as Intellectual Ventures Llc., that buy and trade patents, said CSIR director general Samir Brahmachari.
The inventory, the country’s single largest stockpile of patents, has a potential commercial value of $1 billion, Brahmachari claimed. It was unclear how CSIR arrived at this valuation.
Though CSIR has 3,016 patents in force (1,770 foreign, and 1,246 Indian patents), a single patent can be counted more than once, depending on the number of countries where it is granted. A patent filed in the US may have a different royalty structure than the same patent in India and, as a result, the revenue streams on it vary between countries. “Individually, the number might be around 1,000,” said a CSIR official who didn’t want to be identified.
The Union cabinet on Friday discussed the proposal when it took up a report by R. Kumar, an emeritus scientist at the Bangalore-based Indian Institute of Science, on how CSIR could better monetize its patent stockpile and prevent other entities from infringing it.
Union minster for science, technology and earth sciences Kapil Sibal said the cabinet had only discussed the report and not cleared any suggestions made by it.
“But...we need to look at new approaches for it to maximise its IP profitability. For example, we have to cut down expenditure on filing patents that will not add value. We need professional strategies for that,” Sibal said.
Kumar, who had submitted that report to then CSIR director general R.A. Mashelkar in 2006, said he was “unaware of subsequent decisions on it”.
Though a prolific patentee, CSIR doesn’t generate much revenue from its patents. In 2004-05, the latest period for which data is available, CSIR filed 50 patents and generated Rs4 crore in royalties and licensing. However, it also spent Rs10 crore in filing for the new patents and in maintaining existing ones. In 2007, it filed 98 patents, but no figures on revenue and expenses were available.
CSIR technologies include a process to manufacture baby food from buffalo milk. Its anti-malarial patented drugs Elubaquine and Arteether are exported to 48 countries and the organization has also patented a technology for oral delivery of insulin and a Hepatitis B vaccine.
“CSIR, being a publicly funded body, also has a lot of intangible wealth, say, a vaccine developed by it that may be distributed free—and save millions in health care—in spite of the R&D (research and development) expense incurred,” said Sujith Bhattacharya, a professor at Jawaharlal Nehru University and principal author of a 2003 report that analysed patent trends in India. “So, it’s hard to put a number down, and anyone who does that would throw himself open to several questions on that valuation.”
Sibal said international IP companies, which buy patents as well as advise on the underlying value of an organization’s patent portfolio, such as Intellectual Ventures and Iceberg Transactions Ltd, a UK-based company, were in the process of examining CSIR’s patent portfolio.
It is for the first time that such an evaluation of CSIR’s patent portfolio is being carried out. While Mint has reported on Intellectual Ventures’ interest in CSIR’s patent portfolio, it didn’t get an immediate response from Iceberg Transactions to queries about its assessment of the patent stockpile.
“We are ready with the document (detailing how CSIR plans to implement the proposal) and will present it to the prime minister later this month for discussion,” said Brahmachari. Prime Minister Manmohan Singh is the president of CSIR.
The proposed holding company to which the patents will be transferred will likely be called CSIR Tech, said the CSIR official who didn’t want to be identified but is familiar with discussions around the plan.
“It’s a very good idea, but good only if well managed,” this official added. “The National Research Development Corp., another government enterprise, was specifically mandated to commercially manage CSIR patents. But go through its track record and it hasn’t been a money spinner.”
Though CSIR already has an IP management cell, Brahmachari said a much bigger, separate entity was necessary to effectively manage the patent inventory. “The current set-up guides scientists in the procedure for filing patents as well as giving a broad direction to what research sectors should scientists be trawling for attractive IP. We need a bigger, professionally managed entity, and even hire CEOs who can turn the IP into successful joint venture companies,” said Brahmachari.
Rather than merely invent a product or a process, and spend money filing for patents and paying maintenance fees, companies prefer to buy patenting in a strategic manner. That involves buying smaller patents held by other companies, which could add substantially more value to the primary patent.
For instance, a phone company that that holds patents on software that integrates email services in a mobile phone could also buy design patents from another firm that restrict the size and shape of handsets that enable application of the software, and thus have a virtual monopoly on such a product.
“I think it’s a promising initiative. From what I gather, this will possibly free CSIR from a lot of government restrictions,” said N. Balakrishnan, associate director at the Indian Institute of Science. “The government can’t take risks beyond a point, with its investments in R&D, but a separate company will be far more flexible and, hence, could bring in much better returns.”
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First Published: Sun, Oct 05 2008. 11 52 PM IST