Special Report: THE NEXT BIG THINGS

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Los Angeles has long been a breeding ground for inventions. The laser, e-mail and the artificial heart were all born here.


So what’s the next big thing?

To find out, the Business Journal combed through 1,868 patents issued to individuals, businesses, universities and hospitals in Los Angeles County over a recent 12-month period. Despite the boom in digital media, the data tells the story of a Los Angeles that still depends on the traditional technological backbones of the area for its innovation academia and aerospace.

“Los Angeles has a history of being innovative,” said Ross DeVol of the Milken Institute. “Digital media is an area of strength, but we continue to see innovation in aerospace. It’s a combination of the new and the old.”

The most avid patent filer is Caltech. Each year the university applies for about 200 patents; it is issued an average of 120 a year. Caltech towers over the other two big local universities about 45 patents each were issued to USC and UCLA in the past year.

Aerospace giant Northrop Grumman Corp. came in as the second most patent-rich institution. It holds about a third of patents granted to filers in the city of Los Angeles over the past year. Its patents protect inventions mostly having to do with sensors, electronics and wireless communications systems applied to rockets, submarines and airplanes. The company’s breakthroughs come about thanks to its government contracts calling for cutting-edge technology.

But it’s not all rocket science. For years, Northrop Grumman has built the technological foundation for Hollywood studios. A pioneer in data processing and media storage, Northrop licensed those technologies to movie studios and TV networks and the like. Many of those went on to win awards for technical and engineering development from the Emmy Awards, and did so nearly every year since 1948. For example, facets of technology that run TiVo are based on Northrop-developed technology, as well as that of the picture tube for the Sony Trinitron color TV.

“There was a time when the movie industry was nowhere in regards to technology,” said Dave Barakat, vice president of programs, engineering and technology at Northrop Grumman. “It was just not cost-effective for them to invest in technology. Guess who could afford the investment? Our industry. The government spends what it needs. We helped other industries leapfrog ahead.”

Between Caltech and Northrop, new technologies were focused mainly in the categories of renewable energy, biotech, telecommunication and defense radar systems.

There are, of course, dozens of patents filed by individuals. Some are quirky, ranging from a device that tilts a toilet to a cat-scratcher box. (See page 26.) In California, grouped together, individual filers have consistently topped the list of patents granted to any single company, university or other institution over the past five years. In 2007, there were 2,055 individually owned patents granted. Hewlett-Packard, the company with the most patents, was granted 514.

Patents are, of course, only as good as they are enforceable in court. But most individual patent holders probably never give much thought on what it would take to enforce their patents, said Morgan Chu, partner at Irell & Manella.

For example, there are people who hold patents on how to use a golf putter. “How will the patent owners enforce them?” Chu asked. “Will they hide in the bushes at a golf course, and wait until they see someone make an infringing putt? What are the royalties if the golfer missed the putt?”


Not always the answer

Patents are certainly not the only way to measure innovation. In the world of digital media, especially, where much of its technology runs on open-source platforms, new ideas are often not patented. Some are simply kept as trade secrets and some software-related inventions are copyrighted. Copyright covers content, while patents protect ideas.

A USC spinoff called Project: Possibility is a collaborative effort among computer scientists with the goal of creating open-source software for people with disabilities.

“They don’t want to be patented. They want people to build on it,” said Krisztina Holly, executive director of the USC Stevens Institute for Innovation. “What we look for here is societal impact. Is this really going to change the way people live? And sometimes patenting isn’t the answer.”

But in other cases, patents remain a time-honored tool for protecting ideas, and the number and types of patents granted in any region can serve as a barometer of innovation.

By that standard, the top three inventing cities in L.A. County in the past year were Los Angeles, with 398 patents; Pasadena, 251; and El Segundo, 205. Together, they account for nearly half of all patents issued in the county. Northrop Grumman has a third of the patents issued in the city of L.A., Caltech has half of those in Pasadena, and toy company Mattel Inc. is the holder of a quarter of the patents issued in El Segundo.

The number of patents granted in Los Angeles County accounts for less than 10 percent of the total of 19,741 patents granted in California.

Patents granted in the L.A. area have decreased considerably over the past decade.

From June 1997 to May 1998, 699 patent applications from Los Angeles were approved, compared with 300 less from the same period in 2007-08.

That doesn’t mean innovation is slowing down in the city, said Bob Steinberg, patent attorney at Latham & Watkins.

“I’m sure companies are creating things here, but they may be less inclined to file patents,” Steinberg said. Common startups in Los Angeles, such as digital media and Web 2.0 firms, may have an innovative business model or proprietary technology that can’t be patented.

The decline in the number of approved patents may also be attributed to the exodus of corporate headquarters. Recent departures include Nissan North America Inc. and, more recently, Computer Sciences Corp.

In some cases, large companies turn patented products, processes and technologies into new entities and move them to a state with lower taxes.

Carlos Encinas, director for technology transfer at Cedars-Sinai Medical Center, gets frustrated when people measure his performance by the number of patents awarded.

“Every year we laugh at the fact that the issuance of patents doesn’t mean much,” he said. “One year, 30 patents can be issued, and next year you can just have one.” The medical center was issued seven patents, mostly in the areas of oncology, cardiology and gene therapy, in the past year.

He said the best way to keep track of innovation at the hospital is by keeping tabs on the number of invention disclosures the first document that can be defended in court besides a lab notebook. Cedars-Sinai produces 40 invention disclosures for every million dollars the medical center receives in research funding.


School days

Much of L.A.’s innovation is born on college campuses. Which makes sense: Caltech, USC and UCLA the region’s foremost research universities received $1.6 billion in research funding in 2007.

Caltech is the nation’s third most productive university in terms of tech transfers, behind only Massachusetts Institute of Technology and the combined 10 campuses of the University California system, according to the Milken Institute. Stanford University is fourth.

It’s noteworthy that UCLA doesn’t rank highly as an individual campus, said DeVol of the Milken Institute.

“It has not been a leader in generating patents, despite having the best medical research in the country,” DeVol said.

UCLA was issued 42 patents over the past year; USC issued 45.

DeVol said UCLA should be expected to generate more patents because they are the top recipient of the National Institutes of Health grants. Last year alone, the campus received $890 million from the nation’s medical research agency run by the U.S. Department of Health and Human Services.

“This just means that there are some untapped opportunities in Los Angeles,” DeVol said. “And we can expect a large upside if all of our universities filed patents as aggressively as Caltech does.”

UCLA is already on that path, said Kathryn Atchison, vice provost of intellectual property at UCLA. The number of patent filings has increased considerably over the past three years as NIH grants have doubled. Over the past 12 months, the university has filed applications for 256 patents. In comparison, Caltech files about 200 a year.

Most of these are for patents in the fields of engineering, including renewable energy, and in medical research, including biotechnology and bioengineering.

“There’s also a lot more interplay between engineering and health sciences, such as medical devices,” Atchison said.

USC policy is to refrain from filing a patent for every invention its faculty or students creates.

“It’s very expensive and it’s hard to predict the future,” said Joe Koepnick, USC’s senior director of innovation advancement and business development. In other words, why waste time and resources seeking a patent that will most likely have no commercial value?

Caltech, on the other hand, is an aggressive patent filer for precisely the same reason it’s hard to predict the future.

“We have no idea what’s going to be the next great thing. No one has a crystal ball,” said Karina Edmonds, a director of technology transfer at Caltech. “We don’t have very good odds, since less than 1 percent of patents in the country get licensed. But we can’t take for granted that the kinds of technologies we patent, especially those related to medical research, can have huge implications for our society.”

Licensing revenue is a nice incentive, since Caltech brings in about $10 million every year. But most of that revenue comes from one or two “big hitters” among hundreds of patents filed each year.

Those include Grubbs Catalyst, invented by Robert Grubbs, a Nobel Prize-winning chemist and professor Caltech. The patented chemical process called metathesis, which allows for rearrangement of carbon bonds, has been licensed to Materia Inc., a company Grubbs founded. The company uses its own patented technology, along with the technology licensed from Caltech, to develop chemical, pharmaceutical, and plastic products.

Patenting inventions in academia is a recent phenomenon. Universities were traditionally not allowed to pocket revenues garnered from intellectual property developed through government-funded research. The Bayh-Dole Act changed that in 1980, but it wasn’t until years later that universities began to aggressively pursue patents

Columbia University was one of the first to raise hundreds of millions of dollars from its patent portfolio.

“Universities didn’t pay attention to patents for years,” said Chu, the intellectual property attorney, “because their major mission is education, not business.”



Methodology:

To find the hottest inventions in Los Angeles, the Business Journal analyzed the latest patents in the U.S. Patent and Trademark Office database.


The online database does not sort patents by county, but only by city. So searches were done using each of the 88 cities in the county as the criteria. The total came to 1,868 patents issued to filers based in Los Angeles County from June 2007 through May 2008.

The Business Journal ranked the cities by the number of patents, then classified each patent by sector, and counted which companies hold the highest number of patents in each city. They were then counted in the top three cities dating back 10 years, for comparison.

Patents were examined based on the companies that received them, not the individual inventor. This was done to determine how the patents were being commercialized.

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