No-troll covenants

Twitter has announced an Innovator’s Patent Agreement (thanks for the link, Steve) that gives inventors some rights that run with any assignment of patents on their inventions.   Inventors retain a right license with right to sublicense in the event that a patent owner litigates the patents other than for defensive purposes.  Essentially, a no-troll clause.

The arrangement is important for another reason.  It demonstrates how a patent owner, in this case a company, can provide inventors with a degree of control over their inventions.  Inventors do not get extra money for approving litigation, but they do have the opportunity, in the event of breach of the no-troll clause, to grant sublicenses and thereby disable non-defensive litigation.

One would think this would also be something that universities could offer their inventors.  It would be particularly appropriate in the case of inventions licensed to startup companies that then fail and decide they need to sue someone to recover investors’ money.  A university might find itself institutionally interested in such an action, despite protestations that it only does such things in the public interest.

As Archie Palmer’s work makes clear, an early interest in university ownership of patents in research inventions was for a similar defensive purpose–to prevent any one company from rushing to research results, making improvements, and monopolizing those improvements even against the directions of further research, but also preventing others from practicing an invention as described in the published literature. Many university administrators and faculty were concerned that patents on university research were to be used to promote access, competition, and further research.  That is, university patents were in a sense defensive, relative to unacceptable company behaviors with regard to emerging research technology.

The no-troll clause in the IPA would I am confident be unacceptable to most university licensing officers.  If one can’t “enforce” a patent, then why get it at all?  Who will take a license?  Why would anyone pay?

But there are answers to these things.  First, we have Cottrell, who collaborated with DuPont to develop the electrostatic precipitator (isn’t it grand that this whole university technology transfer business–with patents and the like–started at the University of California, Berkeley with a clean-tech invention supported by industry?).   Cottrell formed Research Corporation, which had on its board a who’s who list of representatives from industry.  Proceeds from patent licensing by Research Corporation was to go to the Smithsonian Institute, to support more research.  Why did companies pay royalties to Research Corporation?  It would appear that they did so, and willingly, to reward inventors for making their inventions available in such a fashion, and to develop funds that promoted further research, with further inventions likely available to them on similar terms.  They were creating a private innovation engine, and royalties were the coal that made it go.

Companies pay because they decide to pay.  They pay because they are offered something worth paying for, and that something is not the patent right, but the engine behind the patent right–what the money makes happen.  Perhaps that is something missing in university patent policies, that get all focused on dividing up the money windfalls, but spend next to no time in considering what the money will do.  Typically, it does little of anything–slop funds for administrators, slop research that has no relationship to the companies that have been willing to take licenses and pay royalties.  Here and there, with really big hits or settlements, perhaps a building on campus.

One might think, maybe the focus on the patent right misses the point of the patent right being part of an engine, and that the more the engine is ignored or effaced, the less appealing the whole activity becomes for folks in companies.  Of course, in some cases, the folks in companies also may have become less appealing–at least in some industries.  But that’s another matter.

Even when Stanford was thinking about the licensing opportunities around gene splicing inventions, it recruited the inventors–there was no compulsory assignment–and it went to industry to ask whether patent applications should be filed, and when industry concurred, Stanford kept the patent prosecution open, so everyone could see the claims and progress of the patent application.   Industry paid the licensing fees because folks in companies chose to pay.  How many universities use this approach today?  None that I know of.  It’s all secret prosecutions and nasty surprises for companies, premised on a license or sue approach, which if it isn’t a troll behavior is whatever a troll is before it becomes a troll–sort of a “take a license before we get desperate and go trolling” kind of offer.

The overall approach, quite apart from the specific non-troll focus of the Twitter IPA, suggests a way for inventors to have a valuable role in inventions made in university research.   That way starts by recognizing “engines of opportunity” rather than private money-generators from exploiting a right.  This is what university inventors have over the independent garage inventor, who uses patents as a way to get paid for the hard work to develop something outside of an industry shop.  The university inventor, however, has access to engines of opportunity–reasons why industry should pay constructed as programs that royalties will fund that will provide a benefit to society of interest to those paying the royalties.  That engine may be more research.  It may be development and support to industry of the licensed invention.  It may be support for a standard.  It may be a program that benefits people who need access to the invention but cannot pay market rates.  There are any number of such engines that might motivate company officials to want to buy in to a given invention, and want other companies to do the same.

In the jaded, experienced, pragmatic world of patent licensing, such stuff as this is just unicorns and glitter–meaningless idealism.  But it is not just made-up theorizing.  It is how it happened.  There were real industry collaborations, licenses granted, royalties paid, people getting rich, too.  All of it displaced now with a less appealing institutionally self-interested compulsory ownership approach that excludes the interests–and commitments–of faculty and student inventors.  How strange!  As university technology transfer offices become more officious, and formal, and bound by institutional expectations, perhaps it is they that have become less appealing to industry, and in doing so have created the “valley of death” that they so love to talk about.

If one adopted an IPA approach in universities, perhaps one would start by allowing inventors to designate the institutional use of royalties after expenses.  That might create an engine of opportunity that might appeal to industry (and yes, it could easily comply with the standard patent rights clause authorized by Bayh-Dole).  Second, one might include a no-monopoly clause–any patent owner has to offer rights on reasonable and non-discriminatory (RAND) terms, and any exclusive licensee has to offer RAND sublicenses to practice any claims of the patent that are not being actively worked by the licensee.  Third, one might have a reduced no-trolling clause, like Twitter has put in, so that litigation has to be for defensive purposes, or to enforce a standard, or to deal with companies that refuse to take RAND licenses and contribute to the useful engine of opportunity like everyone else.

University patents ought to be something special, unlike other patents.  They should have public commitments baked in, that follow ownership–and exclusive licenses–wherever they go.  Yes, those commitments will not be attractive to some monopolist speculators, and yes, there are variations for the expectations of patents in different industries, and at different times in the development of any given industry.   Universities make a distinctive contribution to the technology life of the country.  Their inventions serve primarily to build the reef (as Steven Johnson might call it), the platform, the commons from which new things arise.  Universities and their inventors do not have to be self-less patsies in this effort, giving everything up to rapacious and ungrateful industrialists.  But neither do they have to be, themselves, navel-sniffing self-interested patent trolls in it for the money and not much else, worse and worse if making noises about public benefit when everyone can see what that game actually is.

In between, there are ways to craft covenants that go with patent title that establish a purpose for a university invention regardless of who the owner is (other than the federal government).  If in a given industry, company officials like the idea of a proposed engine, like the idea of reasonable, like the idea of access to a substantial body of platform technology, and like the idea of reasonable, non-discriminatory, simple access, then maybe also they will be willing to pay modest sums as part of the transaction–not because they fear an infringement suit, but because it is good business.

When we worked on the Phrap licensing program, each company site paid an initial fee to get site-wide access to software technology (as a suite, it was $10,500–but they could acquire parts of the suite, too).  They then paid, if they wanted to, about $4,000 a year to maintain the relationship with the lab.  For that, they got updates, they got questions answered, they got access to the lab’s scientific expertise, and they had, as an industry, a standard platform.  For every $4K contribution, each site was getting a return equivalent to the number of licensed sites–and quickly that was a 20:1 ROI, then 100:1, and then more like 200:1.   The reason to pay was not the IP or threat of litigation.  It wasn’t even to keep the license–because the license was perpetual.  The reason was to support an engine that was creating a platform:  a lab and its commitment to continue its research, respond to inquiries, and make technology available on common terms.  Academic labs paid nothing, and got the benefit of the platform as well.

Universities have spent the past two decades making their patenting work look a lot more like trolling and have forgotten what worked in the past, and why it worked.  It’s time we rediscover what’s distinctive about university licensing work.  Twitter’s IPA is a good place to start.

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