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In nationwide innovation battle, Baltimore area lags on patents

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Dr. Luis Diaz is an oncologist at the Johns Hopkins School of Medicine, a researcher with patented findings and the co-founder of a small, fast-expanding company.

"We've grown from no employees to one employee to four employees and now we have 12," said Diaz, chief medical officer of the Baltimore-based Personal Genome Diagnostics.

The Baltimore region is a top performer in research but is merely middling when it comes to patenting innovations, a critical next step in the progression Diaz made to job creation.

State and local leaders have been trying to spark major change for a while now. But a report released last week by a Washington think tank suggests that these efforts haven't taken hold yet.

The number of patents granted in the Baltimore region was basically flat over the past decade, while the nation as a whole saw a spike of 60 percent, according to the Brookings Institution. The region ranked 116th out of the nation's approximately 360 metro areas for patent applications between 2007 and 2011 on a per-capita basis.

"It's not patenting at the same level of intensity as many other metropolitan areas," said Jonathan Rothwell, co-author of the "Patenting Prosperity" study, a nationwide look at innovation that linked higher patent levels to lower unemployment and other economic positives.

Judy Britz, executive director of the Maryland Biotechnology Center, started by the state in 2009 to spur growth in the research-heavy industry, said patents aren't the sole measure of a region's success in innovation.

"At the end of the day, a patent is a document," she said. "What you need is an entire community and a culture and the investment wherewithal in order to take those ideas and turn them into products, and if you start looking at the workforce in the state … [you see] that the intellectual capital is here to be able to drive those inventions."

Companies don't always need patents, either. Some turn to copyrights and trademarks for protection.

But while patents can be counted up, it's much trickier to quantify success further along in the effort to turn ideas into products. And Britz is quick to note that patents are usually a necessity for biotech companies, which might need years — and a great deal of money — to turn breakthrough research into an approved drug.

Rothwell, a senior research associate at Brookings' Metropolitan Policy Program, thinks the Baltimore region's industry specialties help explain why patent growth has lagged the nation. The local economy is heavy on services — such as finance — that aren't research-and-development dynamos.

The region's main advantages on the innovation front are its academic powerhouses and federal labs. Four of the area's five biggest patent recipients in 2011 were either academic or military, Brookings found. Stanley Black & Decker — No. 1 on the list — was the lone company.

The Johns Hopkins University — No. 2 — has pulled in more R&D funding than any other U.S. academic institution for more than 30 years straight. Little wonder then that many of the state's efforts to translate innovation into jobs have focused on Hopkins and other large universities.

"We have historically been a research-focused region, not necessarily an innovation-focused region," said Rob Rosenbaum, executive director of the Maryland Technology Development Corp., the state's 15-year-old effort to spark growth in high-tech fields. "We have to shift this culture … because that drives job growth and tax base."

Among the new projects managed by the agency, known as TEDCO:

•The Maryland Innovation Initiative, launched last fall to spur more entrepreneurial activity at and collaboration among five universities, most in Baltimore. The state kicked in $5 million for proof-of-concept grants this fiscal year, with an additional $800,000 from the universities.

•A patent assistance program, newly restarted after years of lying dormant, that gives startup companies matching funds to help pay for patenting costs when they license technology from universities or federal labs in Maryland.

•A planned fund of $20 million to $50 million for investing in fledging companies using technology from universities in Maryland or nearby states, one of several new funds in the startup phase. Young companies have long complained about a lack of venture capital in the region.

The universities are putting more emphasis on entrepreneurship, too. Last year the University System of Maryland's Board of Regents — as part of an effort to improve "Maryland's competitiveness in the innovation economy" — changed the system's tenure and promotion policy so creating intellectual property is counted as a plus.

Hopkins and its Applied Physics Laboratory, meanwhile, applied for more than 600 patents in 2011 — topping all but two of the dozens of U.S. universities, university systems and research hospitals that participated in the Association of University Technology Managers' latest survey.

Aris Melissaratos, senior advisor to the president on technology enterprise development at Hopkins, came on board six years ago to make commercialization a priority at an institution with a culture of freely exchanging ideas — emphasis on the "free."

He sees success in the numbers: The university's portfolio of active patents grew by nearly 50 percent in the last five years, to more than 2,100. Hopkins research launched 61 startup companies over the same period, and the university's royalty revenue from licenses jumped from $7 million to $16 million.

"On the other hand, because we do so much research, that's a very small number," Melissaratos said, referring to the royalties. "Ideally, you want that number to be an order of magnitude larger. That's my goal. … I think that's possible. The reason why we're not there is, up until 10 years ago, we didn't pay attention to any of this stuff."

Phil Robilotto, assistant vice president of the University of Maryland, Baltimore's Office of Technology Transfer, which recently doubled its licensing officers from two to four, said he also sees improvement on his campus. The number of "disclosures" — faculty telling the office about research with commercial potential — hit 130 last school year, up from the usual 90, he said.

"I really would expect to see a lot of positives coming out of the region in the next couple of years for sure, given all the effort that's been placed on it recently," Robilotto added.

Not all the startup companies spawned by local universities are built around patents. Analytical Informatics, a Baltimore healthcare software company spun out of the University of Maryland, Baltimore about a year and a half ago, has none.

Chris Meenan, the four-person company's co-founder and chief executive, has a "weird, visceral" dislike of software patents — and not just because it takes several years and thousands of dollars to get one. He's part of the open-source movement in the tech sector that values a freer flow of ideas and code.

"There's a lot of people, especially in software, that are patenting everything, like business processes," he said. "I'm trying to solve problems in health care, so it's hard if Microsoft holds patents on every idea. Or Google. How are you supposed to innovate?"

Still, he figures the absence of intellectual-property protection is a turnoff for venture capitalists. So Analytical Informatics' software is copyrighted. So far, Meenan says, the feedback he's getting is that a copyright is "not as good as a patent, but it's still something." And his company made the cut to round two — the current round — of the state's new InvestMaryland Challenge for seed and early-stage funding.

Personal Genome Diagnostics does have patents, licensed from Hopkins. Diaz, the Hopkins oncologist, helped start the company two years ago based on cancer genome sequencing he and others at the university were doing — "seeing what makes cancers tick."

"We started getting requests all over the world: 'Can you sequence my patient's tumor?' " he said. "It's not something that can be done in our academic lab; we're just not set up for that. So we spun off PDGx."

The company has outgrown its space in the biotech park next to Johns Hopkins Hospital. It's in the midst of moving to Canton.

Dr. Victor Velculescu, a fellow co-founder and Hopkins oncologist, said he's seen definite growth in entrepreneurial efforts in his two decades at the university. What strikes him as lacking in Baltimore, compared with big patent regions like Silicon Valley, is a culture steeped in venture capital and startup business expertise.

He was an undergraduate at patent powerhouse Stanford University in California and remembers seeing venture capitalists and entrepreneurs on campus all the time. Personal Genome Diagnostics didn't need venture capital to launch, he added, but many startups do.

Diaz, for his part, declares himself "a little bit bored" with the West Coast and Boston biotech hubs. He thinks Baltimore is more creative. He has high hopes for the area, not just his company.

"It would be absolutely wonderful if this were just one of the many companies that could develop here … in the biotech field," he said. "Because I think it would bring not only jobs but a lot of excitement to the area as well."

jhopkins@baltsun.com

twitter.com/jsmithhopkins

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