In 1994, Michael Doyle, then the director of a computer lab at UCSF, patented software that allowed doctors to view embryos online — the first “interactive” application on the web.
A few years later, the University of California licensed a patent to a company Doyle created called Eolas, which, claiming rights to the idea of embedding interactive content on web pages, sued Microsoft in a multimillion-dollar lawsuit.
The university, a co-plaintiff in the case, took a $30.4-million cut in what is now widely regarded as a classic case of “patent trolling.”
This week, Congress is marking up legislation in hopes of combating patent trolls — companies that purchase patents not to commercialize a product but to reap licensing revenue.
The UC system holds nearly 4,000 U.S. patents that have led to thousands of inventions and hundreds of startup companies. The University of California leads the nation’s universities in patent development, but pending legislation may change that.
Politicians vs. trolls
Traditionally, researchers apply for patents that give them full ownership of their idea or invention and then sell the rights to outside companies, hoping to take their discoveries from the lab to industry. But when the inventions seem to have little hope for commercialization, “patent trolls” may step into the picture.
Trolls, more formally known as patent-assertion entities, will find and subsequently sue businesses they accuse of infringing patent rights. Serving as a middleman between inventors and businesses, trolls collect licensing fees, a portion of which the inventors may receive.
According to the 2013 White House Patent Assertion and U.S. Innovation Report, suits filed by patent trolls tripled from 2010 to 2012, at which point they comprised 62 percent of all patent-infringement cases.
Experts say that because it costs millions of dollars to ascertain what a patent covers, companies faced with these lawsuits may choose to settle rather than to fight.
In November, Sen. Patrick Leahy, D-Vt., introduced a bill hoping to increase transparency within the patent system and to curb the emerging trend of patent trolling.
The bill would require any patentee who has filed a lawsuit to disclose any financial interests. It also requires the Federal Trade Commission to exercise authority over the misuse of demand letters: notices to companies claiming restitution for breach of license.
Though the legislation is designed to serve as a deterrent to patent trolls attempting to sue other parties, universities worry it will invariably impede their efforts to enforce their own patent rights.
Earlier this month, the Association of American Universities — of which the UC system is a part — signed a joint letter addressed to Leahy outlining its concerns. The letter was also signed by the Association of University Technology Managers, made up of representatives from “technology transfer” offices at many universities who guard university research.
“Much of the legislation that is currently under discussion in Washington goes far beyond what is necessary simply to prevent that abuse of the patent system,” said David Winwood, the vice president for advocacy at the Association of University Technology Managers.
Of particular concern among both universities and members of Congress is the possible addition of a fee-shifting provision, which would require the losing party in a lawsuit to cover fees and expenses incurred by the opposing party.
Carol Mimura, UC Berkeley’s assistant vice chancellor of intellectual property and research industry alliances, explained that the threat of incurring additional fees could discourage universities from filing lawsuits against actual infringers.
“The provision favors large, deep pockets, not the little guys,” Mimura said in an email. “Big companies and deep pockets create a David and Goliath situation that discourages investment, as opposed to encouraging it.”
While the university protects its employees, co-inventors are sometimes undergraduate students who are not protected and would have to pay for the damages. As a result, she said, they may be discouraged from filing patents — and, consequently, inhibited from advancing “innovation.”
Gary Falle, UC’s associate vice president for federal government relations, argues Congress needs to take a more “balanced approach” when addressing patent abuses.
“The UC is the lead in the nation in the number of patents (awarded annually), and we want to make sure that is protected,” said Falle. “We just want to make sure that the patents the university is awarded are able to move into technology, commercialization and innovation.”
Trimming the troll
Yet Robin Feldman, a law professor at UC Hastings College of the Law who researches patent trolling issues extensively, believes the legislation is vital to the abused patent system.
Feldman suggested universities might have underlying incentives in opposing the legislation. She noted that universities, while not filing patent lawsuits directly, may deliberately ally with nonpracticing entities to increase revenue.
“They do appear to be feeding the patent trolls at least to some extent,” she said. “There’s so much pressure on universities to find funding sources, and it is difficult for them to resist the temptation to sell to those who won’t make any products.”
Still, according to Mimura, UC Berkeley only licenses patents to commercial entities in accordance with university patent policy. And, despite what history may suggest, Mimura said the University of California does indeed support patent reform and has even reached out to Sen. Dianne Feinstein thanking her for support of patent reform.
In regard to current legislation efforts, the UC system only wants to shift the discussion in the right direction, Falle said.
“We believe that addressing bad behavior by stopping those who send multiple demand letters in the hope of extracting fees out of fear will be the focus of reform — not shutting down the entire patent system that is the goose that laid the golden egg,” Mimura said.