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  • Jack Lau

$50,000 to License the Fundamental Patent of Google from Stanford (Back Then)!!! And, yes, Page Rank

In our last blog, we talked about a new DNA editing technology and the patent war between two groups of leading academic institutions. In this blog we try to look a bit deeper into patents from academic institutions. Well, some of the findings surprise ourselves!

For historical, a number of commercial and legal reasons, a US Patent is usually where one must file when an invention is disclosed. The United States Patent Office periodically publishes some statistics on patents and other information.

Given the high profile patents from various universities, we would have thought that there would be a large number of patents owned by the Universities and that these patents would provide a steady stream of extra income to these universities.

Let's look at some numbers. In 1991, only 1307 patents were issued to all US Universities. That year, patent income for the academic institutions was US$130 M. Three years ago, in 2014, 5,898 patents were issued and US$2.2 billion were earned. What do you think? Are these a lot or not?


Now, before we jump to any conclusion, let's look at other patent statistics as a comparison. For the commercial folks, in the year of 2014, IBM was granted 7,481 patents alone while Samsung received 4,936 patents.

So, the entire US university community received less patents than a IBM and nudged out Samsung!

In terms of commercial values of the patents, let's see a few cases:

While these are fantastic income to the Universities and clearly demonstrated the worthiness of a number of patents, a closer scrutiny of the statistics reveal a number of interesting facts:

  • Carnegie Mellon actually spent US$250 M on legal fee though it was awarded US$750 M.

  • Among all the Universities, Stanford has received the most patents. Altogether since the 1970's, Stanford has received cumulatively less than 10,000 patents. And, among all the Stanford patents, only 3 of them received more than US$100 M in patent income, with 77 other generating more than US$1M.

  • And, for the mega income generated by the Universities, out of the top 10, 8 of them are drug related patents. The remaining two are Google's search patent and the University of Florida's sports drink Gatorade.

  • Oh, yes, the original search patent from Google is called the PageRank and it is named after the then Stanford PhD student and later Google founder, Larry Page.

  • Google has thus far paid Stanford US$337M in patent royalty. We must point out that the in the original deal, Stanford was only given US$50,000 by Google for the right to use the intellectual property.

  • It was only after some time later, when they re-negotiate, Stanford was given 1.8 million shares of Google. At current value, these 1.8 million shares would be worth north of US$1.4 billion (based on Alphabet alone).

  • 15% of the schools produced more than 70% of the patent royalty income in 2014.

  • Most of the technology transfer offices of the universities lose money. Only 11% of the offices are in black; with another 16% breaking even.


So, is it fair to make the following observations?

  • Yes, patents can be very valuable.

  • Universities do not own as many patents as we think, as compared to the commercial world

  • It can be enormously costly to maintain patents for Universities

  • To defend patent legally, the cost can be prohibitive for many

  • Most of the valuable patents these days are in the areas of drugs and biochemistry

  • Having a friendly deal with the founders of companies may be the most rewarding and easiest way for Universities.

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