University Patent Thickets

Here’s a passage from Walton Hamilton and Irene Till, “What is a Patent” in the Spring 1948 issue of Law and Contemporary Problems:

It is the very purpose of the patent lawyer to flood the office with an endless stream of applications. In the field in which his client operates he wants to lay legal claim to all that is, or may become, a part of the technical process. The arsenal serves the double purpose of an armament to ward off competitors and an array of choice weapons with which to attack them.

The authors then give an example:

A single case will outline the general strategy. The Ethyl Gasoline Corporation took out a single patent on the Midgley process for combining gasoline with tetraethyl lead.

Then, to entrench this patent in a strategic position in a field of industrial use, a host of applications were filed. One patent applied for was for gasoline and a volatile compound of lead other than tetraethyl. Another was for gasoline burned in the presence of a gaseous ethyl compound of a metal. A third was for a compound of tetraethyl lead used as a pellet rather than a fluid.

One group of five patents covered gasoline, tetraethyl lead, and at least one other agent. Four patents covered tetraethyl lead combined with other lead compounds.

A group of eight–all granted on the same day–covered a volatile compound of metals other than lead. Specifically, one patent made use of selenium; another, tellurium; and others, arsenic, cadmium, bismuth, titanium, tin, nickel carbonyl, antimony. One patent was for a phosphorus compound, three· for aniline; three for substances other than organic metal compounds-ammonia, benzol, iodine.

And six were for patent processes for atomizing the antiknock substance. One patent was for adding tetraethyl lead at the time the fuel· is dispensed to the consumer, and thirty-one were made to cover processes for the manufacture of tetraethyl lead or other compounds. Similar patents have been added from year to year.

The end was to exclude all invention–if such mechanical combinations could be called invention–in a field of use dominated by a single simple idea: the mere addition of an antiknock substance to gasoline.

Note that, save for the initial idea, there is hardly a trace of novelty here.

There’s a recent dispute involving much the same thing between AbbVie and Boehringer over competition to Humira. According to Fierce Pharma:

AbbVie argues that Boehringer’s biosim, which won U.S. approval last year as Cyltezo, steps on dozens of its Humira patents. Boehringer claims AbbVie is using a “patent thicket” of overlapping and add-on patents—plus the litigation process itself—as a defense mechanism for its blockbuster.

Boehringer argued not that it wasn’t infringing or that AbbVie’s patents were invalid, but rather something that had to do with public interest in the use of the patent system:

It’s pursuing a defense of “unclean hands,” arguing that AbbVie acted inequitably in pursuing so many patents and that the case should be thrown out altogether.

Boehringer’s argument did not win–the company had to settle with AbbVie like all the others did–but even in its broad outline, such an argument suggests that patenting has become too broad to foster technological development as a social activity–even in the form of each inventor pursuing his or her own best interest and in this way bringing into being an invisible hand that guides society to optimal benefits.

Here’s an article (“A Study of Patent Thickets“) that describes patent “thickets”–mess of claims that make it difficult for anyone to enter an area without taking on substantial liability. And another article (“Are ‘Patent Thickets” Smothering Innovation“) that points out that 250,000 patents might cover a single smartphone. Here’s Stefan Wagner, a European prof:

Large companies are always saying, “There is no problem with patent thickets because cross-licensing is cost-neutral. Everything is fine, and there is innovation and progress.” But what they never talk about is if you don’t bring any patents to the table, essentially you won’t be allowed to enter the market.

Boehringer perhaps had enough IP and a good enough legal argument to get a somewhat favorable settlement and gain access to the market–in 2023.

University patent practice under the influence of Bayh-Dole non-enforcement does much the same thing. One director of a technology licensing office at a major US university once argued that her institution sought to create “claim thickets” for each patent–multiplying the number of patents and claims in each patent so that companies wanting to practice in the area had no option but to take a license. The practice is similar to that of patent trolls, who seek licensing fees across an industry–the difference for universities is that they start out seeking an exclusive licensee, and back into trolldom when they cannot secure an exclusive licensee or when that exclusive licensee encounters competition.

The standard university exclusive patent license has poison pill language that makes cross-licensing all but impossible.

Here’s Harvard:

1.11. “Non-Royalty Sublicense Income” means any payments or other consideration that Licensee or any of its Affiliates receives in connection with a Sublicense, including without limitation, any upfront milestone or lump sum payments, received by Licensee or its Affiliates from Sublicensees or their Affiliates as full or partial consideration for the grant of any sublicense by Licensee in accordance with Section 2.3.1 of this Agreement, other than royalties based on Net Sales. If Licensee or any of its Affiliates receive non-cash consideration in connection with a Sublicense or in the case of transactions not at arm’s length, Non-Royalty Sublicense Income will be calculated based on the fair market value of such consideration or transaction, at the time of the transaction, assuming an arm’s length transaction made in the ordinary course of business.

4.6. Non-Royalty Sublicense Income. [Licensee will pay Harvard nonrefundable, non-recoverable and non-creditable amounts equal to __________ percent (__%) of all NonRoyalty Sublicense Income.]

Stanford uses similar language. Upshot. If an exclusive licensee cross-licenses the Harvard patent, it owes Harvard a royalty on the “fair market value” of the license to rights the licensee receives in return. That could be a huge payment. Takes the wind out of cross-licensing as a strategy.

Here’s Cornell:

(b) With respect to Sublicense granted pursuant to Paragraph 2.2(a), LICENSEE (i) not receive, or agree to receive, anything of value in lieu of cash as consideration from a third party under a Sublicense granted pursuant to Paragraph 2.2(a) without the express written consent of Cornell;

So, any cross-license is subject to Cornell’s permission. In essence, companies are forced to put a value on access to rights, and pay to the university a portion of that value–as cash.

The use of patent claim thickets, and thickets of patents, is not limited to any single university. Add in that federal agencies overlap in the areas of their research funding, and that each agency spreads its funding around. As each university pursues its own patent thicket practice, collectively, and without intention, as if by an invisible bureaucratic hand, they all contribute to make effective technology transfer impossible for any of them. Companies have to design around or ignore or obsolesce or undermine or exclude or block or encircle. Anything but adopt and develop. The primary audience that remains is one of patent speculators–operating variously under the cover of entrepreneurship or venture investment or economic development. The primary value in the license is in holding a patent right that may have future value to someone else greater than what one had to pay to gain control of it.

As universities insist that their patenting efforts are directed at public benefit, it becomes apparent that actual practice–both in individual licensing offices and across multiple institutions–makes that public benefit all the more unlikely. Stuff that makes it through the patent thicket does so not because the thicket provides incentives or unleashes innovation but rather because some accident has happened, someone cheats or breaches contract or dares infringement. University patent practice is parasitic on innovation, not a producer of innovation. Think of university patents held for exclusive licensing as worms eating opportunity–the more patents, the more worms a university has got. The greater its parasitism on technology development.

Repealing Bayh-Dole won’t change university parasitic patent practice. The law has enabled and emboldened that practice. That damage is done and no longer depends on the presence of the law.


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