Are Universities Patent Trolls?

Fordham Intellectual Property, Media and Entertainment Law Journal Volume 18 Volume XVIII Number 3 Volume XVIII Book 3 Article 2 2008 Are Universities Patent Trolls? Mark A. Lemley Stanford Law School, Keker & Van Nest LLP Follow this and additional works at: https://ir.lawnet.fordham.edu/iplj Part of the Entertainment, Arts, and Sports Law Commons, and the Intellectual Property Law Commons Recommended Citation Mark A. Lemley, Are Universities Patent Trolls? , 18 Fordham Intell. Prop. Media & Ent. L.J. 611 (2008). Available at: https://ir.lawnet.fordham.edu/iplj/vol18/iss3/2 This Article is brought to you for free and open access by FLASH: The Fordham Law Archive of Scholarship and History. It has been accepted for inclusion in Fordham Intellectual Property, Media and Entertainment Law Journal by an authorized editor of FLASH: The Fordham Law Archive of Scholarship and History. For more information, please contact . Are Universities Patent Trolls? Cover Page Footnote David Adelman, Ann Arvin, Robert Barr, Linda Chao, Maggie Chon, Michael Cleare, Peter Detkin, Rochelle Dreyfuss, Brett Frischmann, Carl Gulbrandsen, Rose Hagan, Joel Kirschbaum, Kathy Ku, Gary Loeb, Mike Mireles, Lita Nelsen, Alan Paau, Arti Rai, David Simon, and Janna Tom This article is available in Fordham Intellectual Property, Media and Entertainment Law Journal: https://ir.lawnet.fordham.edu/iplj/ vol18/iss3/2 LEMLEY_022508_FINAL 2/25/2008 7:22:20 PM Are Universities Patent Trolls? Mark A. Lemley* ABSTRACT Hold-up is a primary component of patent litigation and patent licensing today. Universities are engaged in an unprecedented surge in patenting. At the confluence of these seemingly unrelated developments is a growing frustration on the part of industry with the role of universities as patent owners. Time and again, when I talk to people in a variety of industries, their view is that universities are the new patent trolls. In this article, I argue that universities should take a broader view of their role in technology transfer. University technology transfer ought to have as its goal maximizing the social impact of technology, not merely maximizing the university’s licensing revenue. Sometimes those goals will coincide with the university’s short-term financial interests. Sometimes universities will maximize the impact of an invention on society by granting exclusive licenses for substantial revenue to a company that will A PDF version of this article is available online at http://law.fordham.edu/publications/ article.ihtml?pubID=200&id=2732. Visit http://www.iplj.net for access to the complete Journal archive. * © 2008 Mark A. Lemley, William H. Neukom Professor of Law, Stanford Law School; of counsel, Keker & Van Nest LLP. I am particularly grateful to a large number of people who read this and gave me comments, even though simply asking the question is anathema to many of them. In particular, thanks are due to David Adelman, Ann Arvin, Robert Barr, Linda Chao, Maggie Chon, Michael Cleare, Peter Detkin, Rochelle Dreyfuss, Brett Frischmann, Carl Gulbrandsen, Rose Hagan, Joel Kirschbaum, Kathy Ku, Gary Loeb, Mike Mireles, Lita Nelsen, Alan Paau, Arti Rai, David Simon, and Janna Tom, and to participants in conferences at Washington University School of Law and the Licensing Executives Society/Association of University Technology Managers joint meeting for comments on this topic. Not only don’t they necessarily agree with what I’ve said, in many cases I’m sure they don’t. This is an edited transcript of a speech, and reads like it. 611 LEMLEY_022508_FINAL 612 2/25/2008 7:22:20 PM FORDHAM INTELL. PROP. MEDIA & ENT. L.J. [Vol. 18 take the invention and commercialize it. Sometimes, but not always. At other times a non-exclusive license, particularly on a basic enabling technology, will ultimately maximize the invention’s impact on society by allowing a large number of people to commercialize in different areas, to try out different things and see if they work, and the like. University policies might be made more nuanced than simply a choice between exclusive and non-exclusive licenses. For example, they might grant fieldspecific exclusivity, or exclusivity only for a limited term, or exclusivity only for commercial sales while exempting research, and they might condition continued exclusivity on achievement of certain dissemination goals. Particularly in the software context, there are many circumstances in which the social impact of technology transfer is maximized either by the university not patenting at all or by granting licenses to those patents on a royalty-free basis to all comers. Finally, I think we can learn something about the raging debate over who is a patent troll and what to do about trolls by looking at university patents. Universities are non-practicing entities. They share some characteristics with trolls, at least if the term is broadly defined, but they are not trolls. Asking what distinguishes universities from trolls can actually help us figure out what concerns us about trolls. What we ought to do is abandon the search for a group of individual companies to define as bad actors. In my view, troll is as troll does. Universities will sometimes be bad actors. So will non-manufacturing patent owners. So will manufacturing patent owners. Instead of singling out bad actors, we should focus on the bad acts and the laws that make them possible. I. COMPLAINTS ABOUT UNIVERSITY PATENTS The confluence of two significant developments in modern patent practice leads me to write a paper with such a provocative title.1 1 no. So I don’t give anyone a coronary, the general answer to the question in my title is LEMLEY_022508_FINAL 2008] 2/25/2008 7:22:20 PM ARE UNIVERSITIES PATENT TROLLS? 613 A. The Rise of Patent Hold-up The first development is the rise of hold-up as a primary component of patent litigation and patent licensing. You can call this the troll problem if you like.2 I prefer to think of it as the holdup problem. But whatever we call the problem, it seems quite clear that more and more patent litigation is being filed, and significant money is being made, by non-manufacturing entities— entities that don’t themselves actually make the product and in many cases don’t actually engage in developing the technology very far at all. Many of these entities also engage in tactics that allow them to lay low and then take a mature industry by surprise once participants in the industry have made irreversible investments.3 The hold-up or troll problem is particularly significant in component-driven industries, notably information technology (“IT”), where the problem is compounded by the fact that a product developer such as Intel that must aggregate thousands of different inventions into its semiconductor chip is vulnerable to hold-up by any one of the thousands of inventors. Patent owners in those component industries can capture far more than the intrinsic value of (...truncated)