Patent trolls have a surprising ally: universities

November 30, 2013

The University of California could be the nation's best-manicured patent troll. (Jay Cross)

An organization called the TPL Group has put together a handy compilation of letters opposing the patent reform legislation that was approved by the House Judiciary Committee earlier this month. Many of the letters come from organizations you'd expect to be oppose legislation weakening patent protection: patent attorneys, the pharmaceutical industry, biotechnology companies and the Intellectual Property Owners Association. But one letter opposing the legislation comes from a surprising source: academia.

The legislation, sponsored by Judiciary Chairman Bob Goodlatte (R-Va.), targets patent trolls, "non-practicing entities" that acquire broad patents not to commercialize them but to earn licensing revenues from others who have done so. When it's pointed out that this definition of a patent troll also applies to some universities, patent reformers are usually quick to clarify that they don't regard universities as patent trolls. But the reality is that some universities do, in fact, behave like patent trolls. And now they're lobbying like them, too.

Billed as a "statement from the higher education community," the Nov. 8 letter is signed by the Association of American Universities, the American Council on Education and four other university groups. "We strongly support the goal of H.R. 3309 to reduce abusive patent litigation and the corrosive impact it has on the US patent system," the groups write. However, the academic organizations argue, some provisions have an "over-broad scope" that "raises the specter of unintended problems and thereby raises particular concerns for universities."

Essentially, the universities are concerned that the legislation would make it harder for patent holders to enforce their patents. And they're right. The line between patent trolls and other patent holders isn't always clear, so any reform designed to make patent trolling more difficult is also going to inconvenience many conventional patent holders — including universities.

But it's far from obvious that that would be a bad thing. After all, while universities don't engage in the most egregious troll tactics, universities' efforts to generate licensing revenue have imposed significant costs on the public that aren't so different from the problems created by patent trolls.

A good example of this is a lawsuit by genetic testing company Myriad Genetics seeking to force a competing breast cancer test off the market. Myriad persisted in its litigation even after the Supreme Court ruled that human genes could not be patented. Joining Myriad as plaintiffs are two universities, the University of Pennsylvania and the University of Utah. If the lawsuit succeeds, the likely result will be less competition and higher prices for breast cancer testing.

Another example: For more than a decade, a troll called Eolas sued major Internet companies claiming to own the concept of embedding interactive content in a Web page. Its co-plaintiff was the University of California, where the patent originated. Internet pioneers, including World Wide Web founder Tim Berners-Lee, have disputed claims that the University of California invented interactive Web content. But Eolas was able to get tens of millions of dollars from leading Internet companies, with UC taking a cut.

Universities' efforts to maximize their patent revenues create other problems, too. For example, Yale researcher William Prusoff developed d4T, one of the first AIDS drugs. Yale licensed his patent to Bristol Myers Squibb, which began selling the product in 1994. But BMS set the price for the drug so high that many people in the developing world couldn't afford it. Prusoff was appalled, telling the Yale School of Medicine Chronicle: "We weren’t doing this to make money. We were interested in developing a compound that would be a benefit to society." Eventually, in 2001, activists persuaded BMS to lower the price in the developing world. But Yale's initial decision to focus on maximizing licensing revenue rather than maximizing benefit to the public meant that the drug was out of reach for many poor people for the first seven years it was on the market.

One of the six organizations that signed the university groups' letter is the Association of University Technology Managers, which represents the "technology transfer" offices at many universities. While the rest of a university works to promote the public interest by creating and disseminating new knowledge, technology transfer offices do just the opposite: enriching the university by obtaining patents that limit the public's access to the fruits of university research.

University administrators seem to regard the revenue generated by technology transfer offices as essentially free money. But as the above examples illustrate, the cash generated by patent licensing efforts is not free. It represents a tax on innovation that raises prices, limits consumers' choices and slows future innovation. For licensing demands to be credible, they must be backed by the implicit threat of a patent lawsuit. And that sometimes puts universities in the awkward position of the Universities of Pennsylvania, Utah and California: filing lawsuits against innovative companies.

Any legislation that reins in patent trolls is also going to reduce the licensing revenue that universities can generate from their patents. But that's not a sign that patent reform is a bad idea. Rather, it's a hint that some universities' aggressive patent licensing efforts are inconsistent with a university's broader mission to promote the public interest.

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Timothy B. Lee · November 29, 2013