Group that recycles patents wants to boost innovation in wider area; Racine's CATI aims to take on projects in metro Milwaukee

BYLINE: JOHN SCHMID, Staff, Milwaukee Journal Sentinel

The United States may have gaping trade and budget deficits. But it has an apparent surplus in at least one essential commodity: the patents, ideas and raw technologies that lie at the heart of the 21st century knowledge economy.

The Center for Advanced Technology and Innovation, an offbeat business incubator in Racine, has figured out a way to recycle patents that go unused by the companies that developed them. Evidently, enough companies sit on surplus "intellectual property" - ideas from the lab that never fit into the business strategy - that CATI has collected tens of millions of dollars worth of unused patents from companies such as Kraft Foods Inc., Boeing Co. and Caterpillar Inc..

CATI - pronounced "cat eye" - licenses the patents to entrepreneurs who start businesses without needing to invent technologies. In its five years of existence, it has started five companies and used only half of its patent portfolio.

"Lots of firms perhaps don't have an R&D infrastructure to create new products," said CATI Executive Director Matthew Wagner.

The idea has gained national attention. The State of Delaware recently agreed to pay CATI $212,000 to replicate its iconic job incubation model. At least two other states are in similar talks, said Wagner. The International Economic Development Council gave CATI its 2006 award for Technology-Based Economic Development.

A recent start-up is Alliance Enterprises of Racine, which uses patented technology developed at Kraft Foods to make cheese with 90% less cholesterol. Another is Yokit Inc., maker of an instant yogurt snack, developed originally by S.C. Johnson & Son Inc.

Yet CATI is wrestling with a change in its unconventional incubator model.

One year ago, Washington lawmakers eliminated a tax break for companies that donate unused patents. Companies abruptly pulled back on their donations.

CATI adapted, Wagner said, by testing out a new model that continues to rely on spare patents. Rather than owning the patents in the future, CATI wants to become a broker that will match up entrepreneurs with companies that retain ownership but agree to license the "legacy intellectual property."

"It certainly changed how we work," Wagner said. "We can become a facilitator of licensing instead of the direct owner."

Another challenge is funding. Throughout its start-up years, the non-profit group relied on grants from state and federal agencies, but it aims for self-sufficiency as early as 2008, Wagner said.

Separate from the five start-ups, CATI created new royalties in October when it licensed a pair of pesticide patents to the U.S. operations of European chemicals giant Bayer CropScience. And if other states sign contracts to replicate the model, like Delaware did, that would represent further steps toward CATI's economic self-sufficiency, the director said.

After an eventful 2006, CATI sees new challenges and opportunities in 2007.

One objective, Wagner said, is to export the CATI model to Milwaukee, closer to the economic center of southeastern Wisconsin. Although Milwaukee is far closer to Racine than Delaware is, its plans to import CATI's strategy are moving at a more deliberate speed, Wagner said.

"We have a unique model that can position the Milwaukee region as a leader in technology transfer," Wagner said.

Metro Milwaukee, hard hit by global competition, has been casting around for innovative strategies. But before planners can incorporate CATI, they want to know how it will fit into the Milwaukee 7, a year-old organization that's trying to yoke seven southeastern counties into a cohesive bloc with enough scale to compete globally. Their main aim is the unprecedented alignment of 254 governmental units spread over seven counties that have no meaningful history of collaboration. The M-7 encompasses Kenosha, Milwaukee, Ozaukee, Racine, Walworth, Washington and Waukesha counties.

Julia Taylor, president of the Greater Milwaukee Committee, a civic group that's spearheading the M-7's creation, says she aims to carve a role for CATI.

"Our interest in the future is not replicating what's going on elsewhere but collaborating," Taylor said. "CATI is a very important resource."

The CATI model should work well around metro Milwaukee, Taylor said. Research institutions in metro Milwaukee are awarded four patents for every one generated in or around Madison, home to one of the nation's leading research universities, according to a recent M-7 study. Milwaukee's patents come mainly from private sector employers such as Rockwell Automation and GE Healthcare and not so much from its universities, the M-7 researchers say.

Wagner, 38, evidently relishes challenges.

When he's not running CATI, Wagner works on his doctorate in urban studies at the University of Wisconsin-Milwaukee, where he wants to specialize in African-American entrepreneurship. Milwaukee's inner city, census figures show, has one of the densest concentrations of African-American poverty in the nation. Wagner reckons inner-city entrepreneurs can use CATI patents.

"There are some talented entrepreneurs," he said. "You need to start small and build with successes."

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