Stuff is happening in Washington DC, despite the loggerheads on budget and Obamacare. Chris Gallagher sends notice that Sen Hatch has introduced a new bill, SB 1612, “to combat patent trolls” as the press release describes it:
WASHINGTON – U.S. Senator Orrin Hatch (R-Utah), current member and former Chairman of the Senate Judiciary Committee, today introduced legislation to address the growing threat of so-called “patent trolls.” Patent trolls purchase existing broad patents and then threaten businesses of infringing on those patents, in search of a financial settlement or litigation. Hatch’s legislation, the Patent Litigation Integrity Act (S. 1612), gives judges more opportunity to shift the costs and expenses of litigation, and gives defendants the opportunity to request a bond up front to prove the party seeking a claim on the patent has the adequate resources to turn over to the prevailing party if that party is successful in defending its claim.
“Patent trolls are a drain on the innovation in our country and their practices need to end,” Hatch said. “Many small businesses in Utah and throughout the country simply don’t have the resources to fight back against the predators in our patent system, and my bill gives them adequate resources to fight back. Fee shifting without the option to seek a bond is like writing a check on an empty account, and that’s why it’s important to include both in any legislation dealing with patent trolls. It’s my hope the Senate will act soon to put a stop to the patent trolls draining the innovation in our country and weakening our economy.”
A one-page summary of S.1612 can be found HERE.
Various comments are available, such as here and (by EFF) here. University patent management activity has increasingly come to participate in the activities that the Hatch bill aims to address. It does not take more than a few to do it, and they draw in the rest. Technology transfer–which generally means moving technology from a place that practices it to a place that doesn’t–is a long way from patent litigation to prevent someone from practicing a technology, with the remedy being a huge payout. There is nothing in Bayh-Dole that requires “enforcement” of patent rights, or that requires universities to make money even from patent licensing, let alone to make money from patent licensing by making industry fear their lawsuits, or to make money by preferring to create and preserve monopolies. And of course, there is nothing of this sort in the standard patent rights clause authorized by Bayh-Dole. The standard patent rights clause is all about “practical application.”
Furthermore, since universities have abandoned voluntary arrangements with regard to invention ownership and assert ownership-by-policy-fiat, basing ownership as a condition of employment, or use of resources, or participation in research–universities cannot even argue that they have a contractual obligation to inventors to try to make money–the money isn’t consideration (or so the policies read) for the assignment of rights. Universities claim to have purchased the inventions (there’s that language in the press release to haunt them) from the inventors for whatever the policy stipulates, such as continued employment. The royalty sharing policy stands independently, as an administrative gesture. While the percentages might be enforceable, these policies are crafty in not requiring the university to use its best efforts to secure paying licenses. Some policies even disclaim such an obligation, for instance Rutgers:
The University reserves the sole right to enter into licensing agreements concerning income on inventions, discoveries, improvements, reductions to practice and related intellectual property that enhance the mission of the University and serve the people of New Jersey. These agreements may include terms, such as nonexclusive and royalty-free, which could influence or even obviate licensing income.
So what is the motivation for universities to litigate patent positions, or to threaten to litigate such positions, or to remain silent and not disclaim such litigation (and therefore derive benefit from others doing the litigating for now)? It isn’t federal law. It isn’t a negotiated agreement with inventors to represent their interests. It isn’t their patent policies, which they argue (at times) are enforceable contracts with their employees and (at other times, when it suits them) they argue are administrative statements, more like “guidelines.” Either way, their patent policies don’t require them to make money–it’s just stated as an aspiration, along with general hope for the public good–which also isn’t something that the policies actually require.
Here’s Stanford administrative statement on objectives:
The mission of the Office of Technology Licensing (OTL) is to promote the transfer of Stanford technology for society’s use and benefit while generating unrestricted income to support research and education.
Here’s the University of Illinois statement of purpose:
The first purpose of this intellectual property policy is to provide the necessary protections and incentives to encourage both the discovery and development of new knowledge, its transfer for the public benefit and its use for development of the economy; a second purpose is to enhance the generation of revenue for the University and to provide financial and reputational benefits for the creator(s); and a third purpose is to preserve the University’s freedom to conduct research and to use the intellectual property created by that research or pursuant to an institutional initiative.
(What a strange mix of purposes within purposes–I count about five purposes in the first purpose, three in the second, and two more in the third, for ten purposes in the space of three. We won’t go into the four objectives that follow.) Tracing through the common thread, the policy objectives are to take patent positions, seek profits for the university and share some with inventors (offset by “reputational benefits” for inventors), while preventing anyone from owning rights privately. Nothing there about using best efforts to make money, or entering into contracts with inventors to do so. It’s all voluntary. Institutional freedom (from accountability) rather than academic freedom (from institutional self-interests).
So it’s not an obligation to faculty inventors that is driving the need for money from patents, such a need that technology transfer takes a back seat to patent arbitrage and infringement litigation. There appears to be no driver for the administrative desire for money at any cost. Not law, not contract, not university mission. The driver must be purely the love of money itself–and licensing programs charged with coming up with that money or being, ahem, restructured.
There is good money in shakedowns. Most of us choose not to indulge. We would rather have community and be a bit less well off for it. University administrators, however, have come to construe seeking money from patents as a greater good than even the community for which the money supposedly is being sought. The program of patent management has to show huge profits or, well, it’s “suspect” or “on the bubble” or “has not delivered.”
In any of these sorts of rationales, it is clear that patent management is not an activity aligned with university mission. Outside the university, most anything goes. But from within the university, running a licensing program for money rather than purpose means the university is involved in shakedowns. That is not technology transfer, nor is it promoting use of inventions, nor is it economic development. It’s just trolling industry with patent rights that are worth more as a threat than as an opportunity. It’s the consequence of claiming by policy and accumulating way more inventions than one can possibly deal for opportunity, and in desperation figuring going the threat.
The Hatch bill aims to make it more difficult for trolls to sue for infringement if they have no product, no development, nothing but patent rights. Universities, if they had developed patent programs that really put innovation first, ought to be fully supportive of the Hatch bill, ought to be arguing that they have no interest making money from companies that have developed independently what the universities hold patents on. If technology transfer, not patent arbitrage, were the university goal, then the ways of making money with patents would be focused on providing services to industry, not making threats against industry whether directly or through troll proxies. That’s a tough pill to swallow for folks who think that a patent is a patent and litigation comes with the territory and when you have someone cornered who is too stubborn to settle, it’s a good time to sue.
No doubt the workarounds will be quick to form, with trolls acquiring tiny companies with a “barely any” product, and using that as the position from which to bring their litigation. University startups without any other future will be fair game, and even a modest equity play with a troll will return patenting costs and more, creating the prospect of a new source of revenue for all those lost patents held by university administrators.
University folks might not like the Hatch bill, and there are good reasons not to like what is going on with the bill. But the university administrators focused on big money at any cost have it coming, having chosen to make their institutions predators in the patent system.