Poynder on Point
By Richard Poynder
The patent information industry was created by innovative folks who were inspired
by the potential of the Information Age. Then the big corporations took over,
and the obsession shifted to ROI and marketing budgets. Now there's a new generation
of creative entrepreneurs, such as Alan Engel, CEO of Paterra, Inc. Like Derwent
Information founder Monty Hyams before him, Engel is building a business from
his kitchen tablein his case, machine translation of Japanese patent
documents. Competing against the big boys is tough, says Engel, and small vendors
really need to stand up to them.
Q: How did you get into the patent information business?
A: Out of desperation. I spent 3 years at DuPont as a research chemist. Within
days, I had a stack of Japanese patents on my desk, but I could only read the
figures. So I decided I had better learn Japanese. Later, I did a post-grad
with the Japanese government.
Then in 1992, when the Japanese Patent Office released a CD-ROM of patent
documents in text format, I got hold of an alpha copy. I wasn't sure what I
was going to do with it, but one of the interesting things I noticed was that
although anyone could buy the CD-ROM, the JPO wasn't selling back copies. So
I started subscribing and built up a collection. I also began learning how
to program computers, which eventually led me to machine translation.
Q: So your business is based on a software program you wrote that translates
the JPO data into English?
A: Right. My wife and I started Paterra in 1996, and we announced the service
on PIUG [the Patent Information Users Group mailing list] in February of that
Q: Is it a fully automated service?
A: Initially, there was always manual intervention. We would get an order,
run it through the translator, look at it, see what terms were missing, put
those into our glossaries, rerun it, and then do some post-editing. In 1999,
however, I automated the service. Users now just go to the Web site, place
their order, and the documents are translated and delivered automatically.
Q: And you have just launched a current-awareness service called Protys?
A: Yes. Last year, I rewrote the program so that it could automatically index
the data as well as translate it. This has allowed us to develop Protys, which
is an alerting update database covering 5 weeks of Japanese patents with a
lag from publication of less than a week. As a result, users can now also run
SDIs on the data.
Q: How much do you charge?
A: It's all pay as you go. A basic machine translation costs $39 per patent.
Running an SDI on Protys costs $9, which provides a list of titles. Then, to
look at the abstract costs $2 per record, to view the context is $9, and images
are $6. To download the full document is $25.
Q: What about competitors? Both Derwent and the Japanese Patent Office offer
machine-translation services in this area. Are there others?
A: There are about five players in the Derwent niche, including GLTaC in
Michigan and Nick Spencer of U.K.-based Rising Sun Communications. Derwent,
by the way, charges around $400 per document, which includes pre- and post-editing
and has a 5-day turnabout.
Q: So a customer can pay Derwent $400 and wait for the translation or pay
you $39 and get it online immediately?
Q: Can you say something about Paterra's sales and its customers?
A: I can't give you any sales figures. What I can say is that we have over
200 corporate clients, numbered amongst which are eight of the 10 largestand
25 of the 75 largestchemical companies worldwide. I can also say that
if you compared what our top four clients spent on us last year with what they
would have spent for human translations, you would see a $4 million difference.
So there is a huge cost incentive for most of our clients.
Q: It seems like a tough market for smaller players, however. At a recent
ACS Meeting, you described the odd events surrounding the USPTO's decision
to offer a single-source contract for machine-assisted translations to Derwent.
A: In May 2000, I got a call from the PTO asking for a trial password. I
gave it to them and they placed orders for about 50 documents. What I didn't
realize at the time was that despite ordering them, they didn't download those
documents. Then in June, they announced a single-source contract to Derwent.
The announcement was made on a Monday and the contract [was] awarded on the
Wednesday. It was only on Thursday, my logs showed, that the PTO started downloading
the documents they had ordered. In short, they hadn't looked at our product
before giving the contract to Derwent.
Q: What did you infer from this?
A: I don't have a public interpretation, but I know that the Federal Acquisition
Regulations specify some fairly strict rules governing single-source contracts.
Basically, you can only do it in very special circumstances. So I hired a procurement
lawyer and we worked up a protest. Just before we filed it, we called the PTO
and asked, "Do you want to compromise, or do we protest?"
Q: What was the compromise?
A: That we would also take part in the pilot program. I assumed it was fairly
likely, however, that the solicitation for the main program would be written
in a way that would disqualify us from participationwhich turned out
to be the case since they included a requirement for human intervention. We
had just moved to the fully automated system. So we developed a product that
translation companies could use, then contacted the four companies then under
contract to the PTO. This meant that while we couldn't participate in the main
program, three of the translation partners we contacted could. In the end,
one of these companies got one of the contracts, and Derwent got the other.
Q: So the USPTO stepped back from a single-source arrangement?
A: They had to. If there are two capable companies in the marketplace, they
have to use them both.
Q: We know small players always struggle to compete against large corporations,
but your experience with the USPTO contract and your frequent controversial
postings on the PIUG mailing list suggest some of today's larger vendors may
be unduly predatory. Last year, for instance, you complained that, as a major
sponsor of PIUG's annual conference, Derwent was able to get preferential treatment.
More recently, you publicly charged CAS with trying to gain unauthorized access
to your Web site, an action you characterized as "an unfriendly attempt to
gather information." Do you think the larger vendors are now so powerful that
they are able to behave anti-competitively?
A: I could say I agree with you on that, but the question is, what do I do
about it? As a small company, there aren't too many options. One, however,
is to speak upwhich, as you say, I tend to do. When the CAS incident
happened, I thought: "There is no reason to be quiet on this. It won't benefit
me at all. So don't be quiet."
Q: One reason why other small vendors keep quiet, perhaps, is that they believe
public complaints are counterproductive and may alienate users. As the CEO
of Univentio, Willem Geert Lagemaat, put it to me, "You don't catch flies with
vinegar but with syrup." Does he have a point?
A: I grew up on a farm, and so I know that there are substances that attract
flies better than syrup. It's true that some users might get upset, but I've
learned that many also like you to be spunky. The fact is that it just doesn't
pay to be quiet all the time.
I would note that I find my relationship with CAS and Derwent surprising.
A: I'm surprised that they are so interested in us. The day we launched the
machine-translation service in 1996, we received our first order within an
hour, from CAS. Two hours later, Derwent placed an order. Whenever we launch
a new product or make an announcement on PIUG, I can see from my logs that
within minutes these two outfits will have accessed the site.
Q: Why do you think that such large organizations are interested in a two-person
A: One reason may be that their markets are saturated, and they view any
participation by another company as a threat. The companies that are building
market sharepresumably by taking it from CAS and Derwentdo not
pay as much attention to us.
Derwent, by the way, started its machine-translation business about 2 years
after us, and CAS started supplying machine-translated patent titles in CAplus
about the same time. To my knowledge, our Protys database is the first commercial
online full-text cross-language database, and it competes directly with CAS's
Some independent searchers tell me that they suspect Derwent of trying to
take their clients. This would be consistent with Derwent having few options
for increasing or maintaining sales other than through smaller lines of business.
Q: Given their powerlessness, then, smaller vendors need to shout hard and
loud when they suspect larger players are behaving badly?
A: You have to be strategic about it. You need to ask yourself: Is it appropriate
to shout at this point, or would it be better not to? But I believe other small
companies are being needlessly quiet. I also think that users are being needlessly
quiet. And in the end, we have to rely on the user community to drive this.
They need to see what is in their long-term interests and, if they see something
they are not happy about, they should speak up.
Q: The main patent information user group is PIUG.
A: Right. PIUG is a very interesting organization. It was initially user-based,
and so I think they could play a very constructive role invigorating the interests
of the industry. Unless such groups are user-driven organizationally, however,
they lose their dynamics and their vitality. PIUG is brushing with that danger
Q: By becoming too dependent on sponsorship from the large vendors, for instance?
A: Yes. The danger is that some vendors may start to pull out of PIUG. For
instance, MicroPatent started its own user meeting last year, and my reading
of the current supporter list for PIUG is that MicroPatent is saying, "OK,
we will give PIUG some support, but not a lot." It would be a real loss to
the community if MicroPatent pulled out of PIUG, as it is one of the quality
Q: Large competitors aside, how would you describe the current environment
for smaller patent information providers?
A: There are a lot of opportunities, particularly in automated information
handling. Full-text technologies barely scratch the surface today, so as technologies
become available, you are going to see a number of small companies popping
Q: No shortage of opportunities for new entrants then?
A: Right. Whatever influenced the USPTO to start putting its data on the
Web, it has been a very positive development. You now have all this PTO data
coming on to the market as a raw material, and anybody can buy it. So anybody
can buy USPTO data, and anyone can now buy JPO data.
Certainly, I was able to take advantage of Japanese documents becoming available
in machine-readable form. The number of companies that were able to get started
with inexpensive PTO data is rather largealthough MicroPatent has shrunk
their numbers in recent years. And if the EPO were to make its data more available
to small businesses, it could unleash a whole new industry of small businesses.
Right now, Europe seems to be missing that opportunity.
Q: So the patent offices have enabled a new generation of entrepreneurs to
enter the market?
A: Right. They have opened up a whole new industry for smaller companies
and allowed fresh blood into the business. Prior to that, companies like CAS
and Derwent had established products that you couldn't duplicate.
Q: What's striking here is that while you believe the patent offices are
opening up the market, the big vendors complain that their activitiesespecially
the actions of the EPOare a threat to the industry. Their concern is
that by offering patent information freely over the Web, the PTOs will destroy
the commercial market for patent information. Do you not see any threat here
A: Well, the JPO already offers a free machine-translation service, but I
haven't seen much impact on our business. Perhaps because the way it has been
implemented means that it works fine if you just want a handful of documents,
but if you are in an information center and need to pull in a document, look
at it, and then hand it off again, it is very cumbersome. The same applies
to the EPO site: Its preview interface is not user-oriented. Moreover, it doesn't
offer full-text searching. There is plenty that the industry can do to compete
Q: Presumably then, the larger vendors are more threatened by the actions
of the patent offices. I'm told that when the USPTO started publishing patent
applications, Derwent had to recruit 20 more people to index and abstract the
data. This would suggest that they are facing additional costs at a time when
their revenue is likely falling, as users presumably now do some of their searching
directly on the patent office sites?
A: Right. And the question arises: Since Derwent machine translates all its
Japanese patents and then abstracts and indexes them, why doesn't it make them
available online? The only two answers I can come up with are either that they
don't want people to see what they are abstracting, or there are fears that
putting them online would threaten their abstracting people.
I would add that coming into this industry, one of the things that has impressed
me is what an incredible job companies like CAS and Derwent did in their age.
It is really awesome how an organization can take millions of documents, index
every compound, and put it up on a database in a matter of days or months.
It is amazing, but it doesn't have to be the only option.
Q: Presumably, the key moment comes when next-generation search technologies
enable users to obtain comparable results on the full text as are possible
using the indexing of a CAS or Derwent? Or will that never happen?
A: I think conventional indexing will eventually become obsolete.
Q: So CAS and Derwent are in the wrong business for the future?
A: Well, they have to do something. Since CAS is technically capable, it
will probably cope very well, but it will be affected. Derwent is another question.
Q: To come back to Paterra, several people have commented to me that while
you are well-established in the Northeast of the U.S., you are not widely known
outside the area. Would that be accurate?
A: It's true we are light on the West Coast, but around 15 percent of our
sales are in Europe, and this has held steady year to year.
Q: Is there a danger, though, that you could be playing in too small a niche?
By specializing in Japanese patent translations, are you not making yourself
unnecessarily vulnerable? Why not also start offering, say, Russian, Chinese,
or Korean patents?
A: I speak Japanese and Japanese is what I know, so I prefer to stick to
Japanese. We are also a two-person company.
Q: You could get some VC money and expand?
A: Venture capitalists have to get their money back in a few years. We are
able to do what we do because we don't have to worry about outside investors.
Being independent also gives us more freedom to speak out when the situation
Richard Poynder is a U.K.-based freelance journalist who specializes in intellectual
property and the information industry. His e-mail address is email@example.com.