To be the lighthouse, not the reef

Judging from the tone of Chris Gallagher’s reporting on S. 1720 and S. 1310, the anti-troll bills working their way through the US Senate, university administrators are not paying much attention to the consequences. If these bills are combined and harmonized with HR 3309, then universities can expect in future patent infringement litigation:

  • Substantially more complex pleadings, which will run up the costs;
  • Being identified by licensees as “interested parties”;
  • Potentially being liable for the defendant’s costs, if the defendant prevails.

The patent is not a perfect instrument. I’m persuaded there is a troll problem with patents, just as there was and continues to be in more limited form a submarine problem and a quality problem, a lack of a working requirement problem, and public policy problem with the scope of patents. There also is a problem with universities and research foundations suing industry in troll-like ways (such as here and here; oh, and here and here and here; and, um, well, here and here, and perhaps we should include here and here and here and here; sigh, and here and here (note the motto under the banner) and here and here, and really, I don’t know what to make of this one or this one, other than that when there’s blood in the water, sharks apparently will attack each other).

There also appears to be a problem with big companies unwilling to accept in-licensing of patents as a way of recognizing independent invention. While at times some industries appear to be receptive to such in-licensing, such as the biotech industry in the 1980s, others have never practiced such licensing. The IT industry goes as far as standards-based licensing and cross-licensing; otherwise, patents change hands by means of acquisition and bankruptcy auction. So the IT industry pushes anti-troll legislation and the collateral damage is that any independent inventor seeking to enforce a patent position is in very expensive and uncertain territory. The situation should spark something out of university administrations. During the AIA debates, I hear that universities opposing patent reform were told they would lose research funding if they persisted, and they promptly got in, sat down, shut up, and held on. Perhaps something along the same lines has already taken place with regard to the current bills.

If these bills pass, university administrations will be forced to rethink the foundations of their IP management programs. They should, of course, be rethinking these foundations anyway, as many of patent administration programs have lost their moral compass as well as their business fundamentals. With the present legislation, administrators will not have much time to take corrective action. Here, then, is a short list of what they will need to do:

  1. Terminate university ownership of patents held for exclusive licensing;
  2. Push all patent work–licensing and litigation–to external agents;
  3. In those external relationships, end all royalty-based arrangements:
    The deal has to be an assignment–cash up front–or
    Money coming back to the university has to be in the form of a voluntary gift;
  4. Renounce by policy future university-based litigation for infringement;
  5. Use methods other than litigation, such as boycott and publicity, to obtain desired corporate behavior with regard to new technology.

The Bayh-Dole Act expressly permits assignments of subject inventions without prior federal agency approval, provided that the assignee has as one of its primary functions the management of inventions (See 37 CFR 401.14(a)(k)(1)). Given that foundations will have the same issue as universities, it may well be that university-foundation research grants will specify an acceptable third party as the designated patent management agent. As for industry-sponsored research, universities may have to revisit whether it is worth making any ownership claim whatsoever. In clinical trials, where the company supplies the protocol, most universities do not assert an ownership interest in resulting inventions. That practice will likely expand to other areas of research. Such a change may not be an entirely bad thing: it may warm up the relationships between universities and industry, undoing another unanticipated bit of damage caused by Bayh-Dole.

I don’t find anywhere in Bayh-Dole, however, that it was the objective of Congress to provide universities with a patent sword by which to attack industry. I don’t think that was the meaning, anyway, of  “collaboration” in “to promote collaboration between commercial concerns and nonprofit organizations, including universities” (35 USC 200). If the purpose is use, meaning practical application, of inventions made with federal support, then there is no such thing as infringement, only success, when companies are using work developed at universities with federal support. The threat of litigation simply means that companies are not willing to acknowledge what the full extent of their use of university-hosted, federally supported work–so we have a lot less information about how important that work has been.

Anti-troll legislation is like old-style anti-witch legislation–if one believes that there are witches, and witches (rather than beliefs about witches) are bad, then it would appear to be fine to put in place a law about them. However, if the effect of the law is to pound away at any number of non-witches, too, while leaving witches (especially the bad ones) relatively free to practice their witchiness, then whatever the legislation claims, it really isn’t anti-bad-witch, but rather anti-other-folks. In the case of the anti-troll legislation, the strong and stupid trolls will be able to continue. The strong ones will keep at it because they have the money for it; the stupid ones, because they do not grasp the hazard. Universities will have to decide if they are going to be strong, stupid, or smart.

University administrators seem to think that they have to join infringement litigation brought by their licensees or co-owners. Here’s recent University of Pennsylvania thinking on the matter of Myriad’s bout of patent litigation, which is not quite troll-like, but still gives one pause for the public policy issues:

“It is a matter of law, not a matter of choice,” Senior Vice President of the University of Pennsylvania Health System Susan Phillips told The Daily Pennsylvanian in July with regards to the Ambry and Gene by Gene cases. “We did not seek out this lawsuit.”

She reiterated those same sentiments with regards to the Quest and GeneDx cases. “We were dragged into it by an agreement,” she said.

The problem is that in fact Penn did “seek out this lawsuit” when it voluntarily agreed in its contracting with Myriad to join litigation initiated by Myriad. Penn, in all likelihood, accepted the terms for the money and now is suing a bunch of companies to shut down public access to low-cost cancer tests. When the new legislation passes, it’s possible that Penn will not only be joined to such litigation, but if its licensee doesn’t prevail, and doesn’t have the cash, courts could come looking to Penn for recovery of the defendant’s costs. And that’s for past agreements. It should make administrative hearts pound deep into the night wondering if that really might happen, and whether there is a better way going forward.

The smart choice is to divest the institutional patent business, with its litigation complexities, conflicts of interest, expenses, and hazard, and focus on doing great research and advocating for fair dealing and innovation. It may be worth noting that institutional patent licensing has not done that well financially, gums up research relationships, disempowers faculty and students to build personal relationships, and gives the public the impression that universities can make so much money at patent licensing that the universities don’t need public money anymore.

By exiting the patent licensing and litigation business, universities cease to be a threat to industry and can once again assume their proper primary role as independent reviewer and resource. In short, universities can again aspire to be the lighthouse, not the reef. That would be a smart move.

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