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Published on: 4/14/2004
Last Visited: 4/12/2006
Peter Bloch, COO, Light Years IP
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Dr. David E. Martin, President and CEO of M-Cam, and Mr. Peter Bloch, COO of Light Years IP, explored different aspects of the orphan patent question.
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Mr. Bloch elaborated on the history of patent donations.While allowed since 1954, in the 1990's corporations became more aware of the value of their patent holdings and of the tax benefits of donating unused patents.In response to a growing concern about abuse or even outright fraud, Congress began tightening provisions of the tax code for deduction of donated patents.This has caused concern, as proponents of patent donation believe that donated patents lead to new areas of research and have helped universities bring their research closer to market.
After reviewing the current system of patent donations, Mr. Bloch concluded that it did not work.He pointed to a limited number of successes but did not feel that they offset the costs.Most of the incentives provided by tax deductions are for technologies that are already closest to market and easiest to commercialize.However, ending the program completely could also prove to be a mistake.Instead, a broader look at the entire national innovation system is needed to return the focus to technologies that are more difficult to commercialize, where incentives for further development may produce more public benefit.
The speakers for this policy forum were Dr. David Martin and Mr. Peter Bloch.
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Mr. Bloch is the Chief Operating Officer of Light Years IP, a not- for- profit association focused on adapting modern IP marketing, asset management and licensing techniques to help developing countries earn export income.He is a business strategist and multimedia developer with over twenty-five years of experience in all aspects of startup, management and strategic planning for media companies.For the last fifteen years, he has specialized in working with media technology companies as a strategic planning consultant.As a consultant to the International Intellectual Property Institute, he co-authored a recently published research paper, IP Donations: A Policy Review.
Dr. Martin and Mr. Bloch were asked to explore different aspects of the orphan patent question.
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The next speaker was Mr. Bloch, who gave an overview of the recently published report by the International Intellectual Property Institute (IIPI), IP Donations: A Policy Review.
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Discussions with the IRS, the Treasury Department and donors have led Mr. Bloch to conclude that it is almost impossible to come up with any reliable data on the value of the donated patents.
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As an aside, Mr. Bloch noted that there are other consequences of not having a national innovation policy.For example, government funding of basic research has been declining steadily since 1982.And the private funding of basic research is moving offshore, away from U.S. universities.
A third problem is the process itself.It's the technology that is closest to a commercial application that collects the highest valuations and gets the highest tax donations.Yet, this same technology, because it is closest to market, should be the easiest to license through traditional arrangements and thereby be less in need of the donation process for commercialization.
Mr. Bloch noted that a large company with a new product that is not going to create a billion-dollar market has two choices.They can give it to a research institution that will take it through a little bit more research and then sell it.As a result, the company gets a subsidy in the form of a tax deduction.The alternative would be to license the technology to another company that doesn't need a billion-dollar market.
Why donate rather than license?According to Mr. Bloch, the answer that normally comes back from business executives varies: we couldn't find anybody who is interested; we didn't have the time; it was too complicated; it was easier to donate.He suspects in some cases that it was simply more profitable to donate the patent for the tax deduction than it was to seek a partner to develop the technology.
Mr. Bloch believes that that if the taxpayer is going to subsidize technology commercialization, the subsidy should go to technologies which are promising but more difficult to commercialize.
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Before considering subsidies and tax write-offs, Mr. Bloch stressed that we need to look broadly at what elements should be built into a new program.
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