As Congress eyes patent reform, it meets opposition from universities

Lawmakers are currently considering two key proposals that crack down on so-called 'patent trolls' – companies that buy up patents exclusively to pursue litigation against companies that use the technology – but they've faced questions from a variety of industries, including patent-savvy universities.

Denis Balibouse/Reuters/File
A visitor looks at Apple patents displayed at the World Intellectual Property Organization headquarters in Geneva in March 2012. A new report finds that tech firms faced an increasing number of patent suits by companies that hold patents but don't make products, despite efforts by Congress and the courts to crack down on frivolous patent suits.

The second in a two-part series on universities and patents. Read part one: Behind $234 million Apple suit, an aggressive university patent office

In Congress, patent reform has long been a contentious issue, perhaps ever since the Constitution included protections for the “Progress of Science and useful Arts” in 1787.

But with the growth of technology in recent years, long-running disputes between tech companies, biotech firms, and even research universities about how best to tackle thorny issues of intellectual property have also animated legislative debates.

Lawmakers last updated patent legislation in 2011 with the America Invents Act, which was spearheaded by Sen. Patrick Leahy (D) of Vermont after a nearly-decade-long battle. Now it’s set for another update, as legislators particularly aim to crack down on so-called “patent trolls” – companies that buy up patents exclusively to cash in by suing firms that make use of the patented technology.

One House bill, the Innovation Act, introduced by Rep. Bob Goodlatte (R) of Virginia in February, has particularly generated criticism from research universities, which often hold patents generated by the work of their researchers and affiliates. They say the bill is overly broad and could discourage legitimate lawsuits by patent holders instead of just cracking down on patent trolls.

“Not every patent holder seeking to protect its patent from infringement is a troll. Indeed most are not,” wrote Robert Brown, the president of Boston University and James Clements, the president of Clemson University, in an editorial in the Wall Street Journal in April. "Yet the Innovation Act starts from such a presumption, sweeping legitimate patent holders, including universities, in with trolls, making it considerably riskier and costlier for all patent holders, not just patent trolls, to enforce their patents against violators."

Many universities are particularly critical of a provision in the Innovation Act that requires the losing party to pay the winning party’s legal fees, saying that puts an unfair burden on university researchers and small inventors. Another so-called “joinder” provision, could make universities part of lawsuits filed by other parties – including patent trolls that operate under shell companies – if the university owns the original patent.

This could potentially force universities to pay attorneys fees for cases they did not initiate and discourage them from pursuing their own patent claims, Mr. Brown and Mr. Clements wrote.

“Universities’ research and creation of intellectual property are not about making money. Their mission is to achieve breakthroughs that advance society,” they added. “And any net revenues they do generate go back into education and research, the fundamental missions of the university.”

Rep. Goodlatte’s bill has also been criticized by some presidential candidates, such as former Hewlett Packard CEO Carly Fiorina, a Republican. “If the Innovation Act were law tomorrow, Thomas Edison would be a patent troll,” she said during a speech in Washington, DC, in March. “Some of our greatest inventors would be patent trolls under this law. Our universities would be patent trolls. We are fixing problems that don’t exist.”

Another Senate bill, the STRONG Patents Act, aims to respond to these concerns by including more targeted enforcement focused on patent trolling, according to its sponsor, Sen. Chris Coons (D) of Delaware.

Balancing the concerns of various industries is a key concern for lawmakers, observers say.

“What often happens in legislative efforts [involving] patents is that what benefits and is rational for one industry has unintended consequences for another, “ says Aaron Cooper, an intellectual property attorney at the law firm Covington & Burling who was involved with the America Invents Act while serving as chief counsel on the Senate Judiciary Committee, where Sen. Leahy is the ranking member.

“What’s difficult to navigate is why one side is pushing what they’re pushing, and they think [the other side is] out to get them,” he adds.

Tech companies such as Apple often favor stricter patent regulation, while pharmaceutical companies have other concerns, particularly due to the number of patentable technologies in their respective products, Mr. Cooper says.

“If you look at your iPhone, there are probably hundreds of thousands of different patented technologies that are contained in that one mobile device, but if you look at a pharmaceutical product, there are probably two or three,” he adds.

Universities have gotten caught in the midst of this dispute – though there is some speculation that they can behave more like patent trolls themselves. University technology transfer offices – which negotiate patent rights – can sometimes pursue more aggressive litigation, such as the University of Wisconsin’s recent victory against Apple.

But many institutions reject this contention. Technically, they note, they are what’s called non-practicing entities – companies that hold patents but do not develop and market products based on them.

“I think universities are at times unfairly labeled, universities are essentially non-practicing entities, and there’s a good reason for this,” says a higher education official who represents a large number of research universities, who asked to remain anonymous in order to discuss ongoing legislation. “The university mission is to disseminate knowledge, what they’re not in the business of is making products, and you might not even want them doing that." Many institutions feel both the House’s Innovation Act and the Senate’s STRONG Patents Act are overly broad in targeting patent trolling.

While some universities do pursue litigation, many others do not meet their operating costs each year, a 2012 Brookings Institution report found.

Walter Valdivia, a fellow at Brookings’ Center for Technology Innovation, who wrote the report, says universities are not patent trolls – a process he likens to extortion.

But, he adds, their pursuit of patent litigation through large technology transfer offices has aligned them more closely with for-profit entities, such as biotechnology and pharmaceutical companies that seek monetary gain from patent suits.

“It is very unfortunate that universities, in the desire to win the lottery of blockbuster patents, they have found themselves in the awkward position of aligning themselves with the for-profit sector, and patent trolls that are finding ways to exploit the law, to circumvent the law,” he says. “I wanted to present a bit of a critique of the position of the university believing that aggressive enforcement is the way to ensure patents.”

The second in a two-part series on universities and patents. Read part one: Behind $234 million Apple suit, an aggressive university patent office

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