15 Universities Have Formed A Company That Looks Remarkably Like A Patent Troll

from the feeding-the-trolls dept

Imagine this: a limited liability company (LLC) is formed, for the sole purpose of acquiring patents, including what are likely to be low-quality patents of suspect validity. Patents in hand, the LLC starts approaching high-tech companies and demanding licensing fees. If they don’t get paid, the company will use contingency-fee lawyers and a litigation finance firm to make sure the licensing campaign doesn’t have much in the way of up-front costs. This helps give them leverage to extract settlements from companies that don’t want to pay to defend the matter in court, even if a court might ultimately invalidate the patent if it reached the issue.

That sounds an awful lot like a patent troll. That’s the kind of entity that EFF criticizes because they use flimsy patents to squeeze money from operating companies, rather than making their own products. Unfortunately, this description also applies to a company that has just been formed by a consortium of 15 large research universities. 

This patent commercialization company has been secretly under discussion since 2018. In September 2020, it quietly went public, when the University of California Regents authorized making UC Berkeley and UCLA two of its founding members. In January, the DOJ said it wouldn’t challenge the program on antitrust grounds. 

It’s good news when universities share technology with the private sector, and when startup companies get formed based on university research. That’s part of why so much university research is publicly funded. But there’s not much evidence that university patenting helps technology reach the public, and there’s a growing body of evidence that patents hinder it. Patents in this context are legal tools that allow someone to monopolize publicly-funded research and capture its promise for a private end.

While larger tech companies can absorb the cost of either litigating or paying off the patent assertion entity, smaller innovators will face a much larger burden, proportionately. That means that that the existence of this licensing entity could harm innovation and competition. When taxpayers fund research, the fruits of the research should be available for all. 

With 15 universities now forming a consortium to license electronics and software patents, it’s going to be a mess for innovators and lead to worse, more expensive products.

Low-Quality Patents By The Bundle 

Despite the explosion in university patenting and the growth of technology transfer offices (essentially university patent offices), the great majority of universities lose money on their patents. A 2013 Brookings Institute study showed that 84% of universities didn’t make enough money from their patents to cover the related legal costs and the staffing of their tech transfer office. Just a tiny slice of universities earn the majority of patent-licensing revenue, often from a few blockbuster pharmaceutical or biotech inventions. As many as 95% of university patents do not get licensed at all.  

This new university patent licensing company won’t be getting any of the small number of impressive revenue-producing patents. The proposal sent to the UC Board of Regents explains that the LLC’s goal will be to get payment for patents that “have not been successfully licensed via a bilateral ‘one patent, one license’ transaction.” The universities’ proposal is to start by licensing in three areas: autonomous vehicles, “Internet of Things,” and Big Data. 

In other words, they’ll be demanding licensing fees over lots and lots of software patents. By and large, software patents are the lowest quality patents, and their rise has coincided with the rise of large-scale patent trolling.  

The university LLC won’t engage in the type of patent licensing that most actual university spinoffs would want, which are typically exclusive licenses over patents that give it a product or service no one else has. Rather, “the LLC will focus on non-exclusive sublicenses.” In other words, they’ll use the threat of litigation to attempt to get all competitors in a particular industry to pay for the same patents. 

This is the same model pursued by the notorious Intellectual Ventures, a large patent troll company that convinced 61 different universities to contribute at least 470 different patents to its patent pool in an attempt to earn money from patents. 

What about the Public Interest? 

The lawyers and bureaucrats promoting the UC patent licensing scheme know how bad this looks. Their plan is to use patents as weapons, not tools for innovation—exactly the method used by patent trolls. In the “Pros and Cons” section of the memo sent to the UC Regents, the biggest “Con” is that the University of California “may incur negative publicity, e.g., allegations may arise that the LLC’s activities are tantamount to a patent troll.” That’s why the memo seeks to reassure the Regents that “it is... the expectation that no enforcement action will be undertaken against startups or small business firms.” This apparently nonbinding “expectation” is small comfort. 

The goal of the patent-based LLC doesn’t seem to be to share knowledge. If the universities wanted to do that, they could do it right now. They could do it for free, or do it for a contracted payment—no patents required. 

The real goal seems to be finding alleged infringers, accusing them, and raising money. The targets will know that they’re not being offered an opportunity—they’ll be under attack. That’s why the lawyers working with UC have promised the Regents that when it comes time to launch lawsuits against one of the “pre-determined targets,” they will steer clear of small businesses. 

The university LLC isn’t going to license their best patents. Rather, the UC Regents memo admits that they’re planning to license the worst of them—technologies that have not been successfully licensed via a “one patent, one license” transaction by either UCLA or UC Berkeley. 

To be clear, universities aren’t patent trolls. Universities are centers for teaching, research, and community. But that broader social mission is exactly why universities shouldn’t go off and form a patent-holding company that is designed to operate similarly to a patent troll. 

Patents aren’t needed to share knowledge, and dealing with them has been a net loss for U.S. universities. Universities need to re-think their tech transfer offices more broadly. In the meantime, the UC Regents should withdraw from this licensing deal as soon as possible. Other universities should consider doing the same. The people who will benefit the most from this aren’t the public or even the universities, but the lawyers. For the public interest and innovation, having the nation’s best universities supply a patent-trolling operation is a disaster in the making. 

The fifteen members of the University Technology Licensing Program are expected to be: 

  • Brown University
  • California Institute of Technology (Caltech)
  • Columbia University
  • Cornell University
  • Harvard University
  • Northwestern University
  • Princeton University
  • State University of New York at Binghamton
  • University of California, Berkeley
  • University of California, Los Angeles 
  • University of Illinois
  • University of Michigan
  • University of Pennsylvania
  • University of Southern California
  • Yale University
Republished from the EFF's Deeplinks blog.

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Filed Under: patent trolling, patents, public interest, shakedowns, tech transfer, universities
Companies: uc berkeley, ucla


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  • icon
    Samuel Abram (profile), 18 Jun 2021 @ 11:31am

    Cold Comfort, but…

    I'm actually relieved that my alma mater New York University didn't coalesce into this Patent Troll-tron.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 18 Jun 2021 @ 12:27pm

    The proposal sent to the UC Board of Regents explains that the LLC’s goal will be to get payment for patents that “have not been successfully licensed via a bilateral ‘one patent, one license’ transaction.”

    When I see that I can't help but think that "get payment for patents" says nothing about whether the payer has actually made use of/infringed the patent.

    reply to this | link to this | view in chronology ]

  • icon
    That One Guy (profile), 18 Jun 2021 @ 1:36pm

    Well, they might not have been before this..

    To be clear, universities aren’t patent trolls.

    A statement that is no longer true for at least fifteen of them.

    reply to this | link to this | view in chronology ]

  • icon
    fairuse (profile), 18 Jun 2021 @ 3:16pm

    Software

    Ok, I get it, software patents are low value. Actually they should not exist I have read but get patented anyway. U of Maryland, John Hopkins are not there so maybe they don't want splashed with anything bad if this scheme goes sideways.

    Above my pay grade.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 18 Jun 2021 @ 3:40pm

    Sad to see the creators of BSD and its license signed on to this. At least MIT isn't on there.

    But this is likely not about software... most of those universities have pharmaceutical programs; this is likely about drug patents.

    reply to this | link to this | view in chronology ]

    • icon
      fairuse (profile), 18 Jun 2021 @ 4:43pm

      Re:

      Maryland introduced state law:
      https://www.eff.org/deeplinks/2017/03/were-one-step-closer-reclaiming-university-innovation-tro lls

      "Like the Reclaim Invention Act, H.B. 1357 would require Maryland state universities to adopt policies for technology transfer that commit them to managing their patent portfolio in the public interest, and outlines what that policy should include. The bill would also void any agreement by the university to license or transfer a patent to a patent assertion entity (or patent troll)."

      I do not know status of the bill.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 18 Jun 2021 @ 4:55pm

        Re: Re:

        I worked in the tech transfer office of one of these universities and know this issue very well.

        These offices are set up to divide up patent money between themselves, the inventors (say a nurse who invents a clamp for people on oxygen), and the sponsoring/developing company. It's mostly medical but software is also huge.

        I doubt they'd use contingency-fee lawyers. Not sure they are trolling either, and this is probably set up to deal with rogue employee-inventors who attempt to cut licensing deals on their own.

        They have the power to do this already. Nothing new here.

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 19 Jun 2021 @ 5:38pm

        Re: Re:

        Reclaim Invention Act, H.B. 1357
        I do not know status of the bill.

        Introduced in the 2017 session. Voted down in the appropriation committee 0-26 and withdrawn by the sponsor. I couldn't find anything with a similar name introduced in any later legislative sessions.

        reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 18 Jun 2021 @ 4:57pm

      Re:

      Actually it's more about device patents (clinical business development) and sponsored research that leads to patents (corporations, the university, and the inventor/employee all get a cut). Some universities have separate offices for medical patents.

      When some nurse figures out a better way to help a patient with some minor gadget an amazingly large amount of money comes into play.

      reply to this | link to this | view in chronology ]


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