Here are five ways to use a patent:
- Nonuse Don’t practice the claimed invention and exclude all others
- Troll Don’t practice, demand payment if others practice the claimed invention
- Flip Don’t practice, and exclusively license, assign, or sell the patent
- Practice Practice the claimed invention while excluding all others
- Share Practice and allow others to practice the claimed invention
Each of these methods has its own variations–some with significantly varied effects. Let’s look at each of these approaches and consider university patent management practices. The first three patent uses involve non-practice. Now let’s turn to the two university management practices that involve university practice of an invention–that is, the value includes the value of using the invention, not just manipulating patent rights. First, Practice itself.
Practice
We arrive at what perhaps is the primary and original method of using a patent. One practices the invention to derive a benefit from doing so, while using the patent to exclude others who would cut in on that benefit by creating copy-cat services that break apart the market even before the inventor can establish his (or her) own products in the market place.
University administrators, however, for the most part do not consider the university to be a proper place to develop or practice patentable inventions, other than for “noncommercial research and education.” Thus, they don’t see that the primary method of using a patent much matters unless they can find someone else–other than the inventor–who will step in and adopt the patent as cover for practicing the invention. What is odd in this thinking is the disregard for whether a patent is at all necessary for someone to choose to practice a university-based invention. That is, a university exclusive license is akin to a private re-issue of a patent, but now as a franchise rather than in recognition of the rights of an inventor having made an invention. The company receiving the exclusive license is not the inventor, just an operator.
The assumption that gets added is that all inventions require “development” before they can become “commercial products.” This assumption may well be true, but it is not generally relevant: many inventions don’t require “development” before they can be used. The practice of the invention and the inclusion of that invention in a commercial product may be entirely distinct things. And using an invention in a commercial context may be in turn entirely distinct from the commodification of a product for mass market distribution. That mass market distribution should be an exclusive goal of an inventor is one thing–it may well be a desirable goal. But that a university should adopt a strategy of displacing all other uses in favor of an attempt at commodification and turns such an attempt into a public virtue rattles the brain.
When federal patent law was first established in the U.S., there were few big companies, let alone public stock corporations. Inventors might use their patented inventions as the basis to form a company to make a new product, but companies did not hire hundreds of technicians obligated to assign their patent rights to the company for disposition. Patent law was a matter of securing personal rights for inventors operating in a marketplace of mostly regional companies that provided services. The changes that have come about–especially the dominance of corporations with national and international operations–have changed the reasoning and outcomes of patent law.
Universities, not being corporations, held out for some time in resisting the methods of patent acquisition, control, and disposition that corporations employed. University patent policies aimed to make a distinction between public mission and monopoly control for profit; that somehow the university’s ownership of patents should win the admiration and approval of the public; that these patents were for the public’s benefit, not for any single private interest, not to create monopolies that could raise prices and dictate availability and prevent competition or benefit from nonuse.
Thomas Piketty, in Capital in the Twenty-first Century, presents a dichotomy between two economic forces. One is a desire for a return on capital investment. The other is the benefit obtained from a growth in production. Bet on the affairs of others, or be a productive worker. Piketty argues that if the returns on capital are greater than the returns of work–the growth of the econony, then capital will dominate and those with capital will get an even greater share of capital available to a society. In essence, there is then more money to be made betting on others than in doing anything directly. Much the same thing happened in the mortgage meltdown–there was more money to be made in investing in mortgage-backed securities than in making loans to people wanting to purchase a home. Take most of the upside, shed most of the risk to the government, to the public.
Patents play in this same environment. Can one make more profit from practicing one’s invention or speculating on one’s patent? Practicing an invention to produce something of value, and selling that something in a market for a profit–that’s hard work. If it is easier to create the impression in the mind of investors that the patent is valuable, just imagine the profits rather than the hard work and risk, then there will be more money to be made on dealing in patent rights than in transferring an invention for “development.” Flip transactions will be more attractive than practicing what one has invented. And speculative deals will be more attractive than ones in which someone wants to practice an invention for the gain that comes with production.
Now university administrators reason that they acquire patents from inventors so they can license the rights exclusively to a company that takes on the attributes of an inventor and will practice the invention and so produce new, beneficial products at reasonable prices. (Though I’m stretching it–I expect many university administrators do not care about reasonable prices; whatever the market will bear is reasonable.) By taking ownership from inventors, however, administrators transform how an invention can be practiced. If an inventor owns his (her) invention, then she (he) can practice it (assuming there are no background patents); but if the university owns the patent, then the inventor can only practice the invention with the permission of university administrators. Once those administrators license the patent exclusively to a company, then the only place an inventor can practice the invention, short of working for the exclusive licensee, is at the university (or perhaps other universities, for research only).
It’s then rather an empty gesture for university administrators to reserve rights for research and educational purposes. What’s the point of studying an invention that one can’t use outside the university? The invention becomes “strictly academic.” At best, one might use an invention to figure out how to work around it–that is, to undermine the effect of the exclusive license granted in the first place. Most thoughts of “technology transfer” from another university ends with an exclusive license from the originating university. The only pathway available for improvements and new applications runs through the exclusive licensee of the originating university.
So it is actually a huge change to take invention rights from inventors, only to hand those same rights exclusively to a company. The justification–that the company will develop and practice the invention and so benefit the public–ignores the idea that the inventors cannot develop and practice the invention, cannot teach anyone else how to do so, and are left conflicted between an interest in a share of royalties (usually a minority share) from the existing license and designing around the patent to regain freedom to practice (often a possibility, especially in engineering fields). When a university takes ownership of patent rights on a compulsory basis, it does not represent the interests of the inventor. If it furthermore does not have policies that distinguish university-held patents from any ordinary patent, then the university also does not represent any particular public interest. Finally, by taking ownership with the intent to flip a patent to an exclusive licensee, a university disrupts its own prospects for practicing the invention and the prospects for its inventors to practice their inventions, as well as the prospects for any other researchers at any other universities to develop the invention and transfer it to their industry contacts.
Universities generally do not support the practice of an invention combined with the exclusion of all others. But they do create licensing strategies in which they reserve patent rights for companies that are willing to do so, and the universities draft their exclusive licenses to make it difficult to anything but–sublicensing is made difficult, dedication to a standard or to the public is impossible, cross-licensing is nigh unto impossible, and refusal to enforce patent rights can be second-guessed by the university. So universities take patent rights from inventors, who might be expected to practice their inventions, and seek commercialization partners who will exploit the patent to create commodity products while excluding all others and so maximizing (so the theory goes) the financial return to the university.