Chapter 6: Comparison of Licensing Performance
Table 14 Comparison between NIH IRP and NHRI and It's Licensing Performance on 2010
NIH IRP NHRI
Research Components 27 21
Government Annual Funding
(in 2010) USD$ 3.223 Billion161
NTD$ 2.241 Billion (Equivalent to USD$
74.7 Million)162
Invention Disclosed in 2010 340 N/A
Patents Applied in 2010 304 N/A
Patents Granted in 2010 134 U.S. Patents 6 Taiwan Patents 12 International Patents Royalty Received in 2010 USD$ 91.6 Million
NTD$ 442.6 Million (Equivalent to USD$
14.75 Million)162
Executed License in 2010 226 2
This study is able to retrieve every licensing performance statistics needed from NIH, but did not receive sufficient data publicly from NHRI Taiwan, making it not possible to evaluate the overall performance of NHRI licensing reputation. It is impossible to see the overall trend as this study only able to retrieve NHRI 2010 royalty revenue. However, the licensing data retrieved on NHRI in 2010 has the most complete information, thus it was used to compare with NIH’s 2010 licensing data.
The disclosure of Invention Number in a fiscal year by NIH gives a fair view of NIH’s research performance as invention number represent the “product” of “research”.
Invention disclosed also indicates how many inventions were being willingly sent for evaluation for commercialization. Disclosed invention will be evaluated by NIH TTO to decide if it is suitable to be patented, and thus resulting in some gap in numbers between “Disclosed Invention” and “Patents Applied” in the same fiscal year.
160 Although National Institute (singular) of Health was established in 1930, it was not until 1960 that it had 10 components, in 1970 it had 18 components and by 1998 it has 27 ICs. To be qualified as a research institutes (plural), this study defines the foundation of National Institutes (plural) of Health was on 1960.
161 See Appendix 5 for FY 2010 President's Budget Request Total NIH Budget Authority USD$ 30,988 Million.
Among the total budget, 10.4% is being channeled to NIH Intramural Research Program, of which is equivalent to USD$ 3,223M (USD$ 3.223B).
162 Exchange rate: USD$ 1 equals to NTD$ 30
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An invention could only apply for a patent in a country. However, an invention could apply for one patent in U.S., one patent in Australia, one patent in Taiwan and etc., meaning that more than one patent could be applied on an invention in different countries. Patents number obtained might not be a best parameter in evaluating an institutes’ research and licensing performance, while invention disclosed is one of the best parameter to be utilized. However, since NHRI did not disclose its annual invention number, this study will utilize local patents obtained in comparing the licensing performance of both institutes.
It is not easy to compare two institutes fairly as there is no equal comparable parameter between two parties. NIH IRP has an older history of foundation and formation of Technology Transfer Office, higher government funding and more research components; thus it seems reasonable to have more patents, higher royalty and be able to execute more licenses in a year. As a result, it is hard to evaluate the licensing reputation based on Table 14. However, a fairer comparison on licensing could be achieved by comparing:
i) How much an institute has to invest to produce a patent on average;
ii) How much royalties could a patent generates on average;
iii) How many patents are required for a licensing deal to happen; and iv) How much return on revenue from institute’s investment on R&D163.
Table 15 Performance Index of Licensing Performance
163 Could also be known on return on investment (ROI) of government spending on research funding.
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In Table 15, only patents granted in institute’s own country is taken into consideration. It is being assumed that only patents granted in institute’s own country represents number of invention being created164. Overseas patents represent a duplication of protection in intellectual property of an invention. It could be seen on Table 15 that both institutes had outperformed each other on different index (Shaded boxes in blue represent outperformed party).
Since the aim of this study is not to decide which party is prevailing in a licensing competition, thus the following indexes were built to give the reader a perception of the licensing status in both institutes. Assumptions are made that both institutes tried their best in applying for patent protection to every invention disclosed and negotiated for the best licensing royalty.
1. Average money spent on research for every patent approved NIH USD$ 24.05M/Patent
NHRI USD$ 12.45M/Patent
NIH has to spend more money on research funding to produce a patent compared to NHRI. In other words, each of NIH’s invention costs more research funding on average. It could be reasonably deduce that i) NIH’s patent in general has better quality or more (claims) in content, assuming that the research output at both institutes are similar, or ii) NHRI has better efficiency on patenting strategy.
164 NIH’s US Patents granted in 2012 was 130; NHRI Taiwan Patents granted in 2012 was 11
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2. Average royalty received for every patent granted NIH USD$ 0.68M/Patent
NHRI USD$ 2.46M/Patent
For every patent granted, NIH received less royalty in revenue compared with NHRI. However NHRI’s data might not be accurate since this study only has one year data on licensing deal, of which was in 2010. If we further analyze NIH data on 2011 and 2012, average royalty received for every patent granted is USD$0.74M/Patent and USD$0.86/Patent respectively.
There are two possible explanation to NIH seemingly low performance: 1) NHRI received huge amount of upfront licensing fee at USD$12.4M in 2010, of which making up more than 81% of its 2010 royalty income. However, in FY2010, NIH managed its royalty income from 377 licenses with 84% came from product sales165 (only 16% were upfront licensing fee); and 2) Among 226 licensing deals executed in FY 2012 by NIH, 42% were small businesses, of which most of them were signed under NIH’s Start-up EELA or Start-up ECLA166. The aforementioned agreements allow a start-up company to delay its upfront royalty upon a liquidity event167, lower earned royalty rate, sublicensing royalty rate and delayed or waived minimum annual royalty, thus resulting in less royalty received by NIH.
If this study were to evaluate the performance of running royalty received for both institutes, the upfront fee income would have to be deducted from the annual royalty revenue. This ended up NHRI with USD $2.35M (USD$14.75-USD$12.4) while NIH with USD$ 73.28M (USD$91.6M x 84%168) running royalty in FY 2010.
(After deducting upfront licensing fee)
NIH USD$ 0.547M/Patent NHRI USD$ 0.392M/Patent
After deducing upfront licensing fee for both institute, it is apparent that NIH outperformed NHRI by bringing USD$ 0.697M of royalty for every patent licensed.
165 Annual Report FY 2012 (2012), NIH Office of Technology Transfer, p1, Retrieved from http://www.ott.nih.gov/sites/default/files/documents/pdfs/AR2012.pdf
166 See Footnote 124.
167 According to NIH Website (see Footnote 124), liquidity event includes an IPO, a merger, a sublicense, an assignment, and acquisition by another firm, or first commercial sale.
168 Annual Report FY 2010 (p3) states, royalty on sales accounted for 84% of the $91.6M in royalties collected in FY10.
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3. Licensing cases brought by a patent in average NIH 1.69 License/Patent
NHRI 0.33 License/Patent
An invention would be worthless without patent protection unless it is utilized under trade secret protection; while a patented invention would be wasting an institute’s investment if it were left unlicensed because i) patent management requires money to maintain; and ii) patented invention will be in public domain after the protection period.
Thus, it would be more economically efficient for research institute, if a patent could yield more licensing deal.
On an average of latest 3 years licensing performance, each of NIH patent would yield around 1.47-1.52 licensing deals; while each NHRI patent would only yield 0.18 to 0.5 licensing deals. NIH on average enters into 192 new licensing deals annually while NHRI only enters into 3 licensing deals annually.
If we were to dismiss the factor of invested research funding and only discuss on patenting and licensing strategy, it is very obvious that i) NHRI patenting strategy has not been aligned with the industry’s need; or ii) Taiwan or other countries’
technology acquirer could not adapt to or get in touch with NHRI licensing strategy and practice; or iii) Taiwan’s invention is not pioneer among the field; or iv) Taiwan’s licensing regulation is restricting the licensing accessibility in Taiwan.
Question (iii) above could be answered from some KPIs published by different associations. According to World Economic Forum (WEF), Taiwan ranked 10th on creativity on World Competitiveness Report in 2012; Taiwan also ranked 4th on R&D and R&D basic infrastructure & 5th on Patent and Trademark Rights under 2011 European Business School (EBS) Global Innovation Index169. It is obvious Taiwanese invention is highly inventive and pioneer among peer countries, however this KPI did not further discuss R&D in more detailed fraction, e.g. ICT industry or Biomedical industry.
169 中華民國科學技術白皮書（民國 100 年至 103 年）簡要版（n.d.），行政院國家科學委員會。
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4. Average royalty received for every dollar spent on research NIH USD$ 0.028/Dollar
NHRI USD$ 0.1975/Dollar (After deducting upfront licensing fee)
NIH USD$ 0.023/Dollar NHRI USD$ 0.031/Dollar
It is clear that NHRI outperformed NIH on royalty received per dollar invested on research. Even if the USD$12.4M upfront licensing fee was deducted from the royalty sum of NHRI, it still received USD$ 0.031/Invested-Dollar in FY 2010, slightly higher to NIH’s USD$ 0.023/Invested-Dollar. It is possible that the distribution of funding of NHRI focuses more on translational and clinical research, of which might yield higher royalty in return. However, each Institute and Center of NIH strives to maintain a balanced portfolio of basic, translational and clinical research170. However, by referring to Figure 9, it could be seen that there is a clear rising trend for NIH’s royalty revenue. The licensing activity judging from licensing royalty is clear and convincing to be performing well. It is foreseeable that average royalty received for every dollar spent on research would keep rising for NIH in the future.
170 NIH Intramural Research at the Threshold of a New Era (September 2009), p41.
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