When Your Institution Sues for Patent Infringement

By Jacob H. Rooksby    //    Volume 20,  Number 4   //    July/August 2012

When universities appropriately enforce their patents, they stand to affirm their commitment to research and industry collaborations, not to mention reap sometimes significant financial rewards. For example, this spring a judge awarded the University of Pittsburgh more than $70 million in a patent-infringement lawsuit it brought in 2008 against a medical-device manufacturer. Earlier in the year, Brigham Young University settled a six-year-old lawsuit against Pfizer for $450 million.

Yet such patent-enforcement actions are not without legal and public-relations risks. For example, in the 1990s, a professor at the University of California, San Francisco claimed to invent the first Web browser to support plug-ins. When the university received ownership of the resulting patent, it exclusively licensed it to a start-up company, Eolas Technologies, formed by the faculty member. An initial case against Microsoft for patent infringement filed in 1999 by the university and Eolas scored the university a $30-million settlement.

But the plaintiffs were not as successful in a 2009 case they brought against Apple, Google, Yahoo, Amazon, and other technology companies. In February, a jury invalidated the university’s patent, and some commentators questioned the propriety of the university’s dealings with Eolas, which does not manufacture or sell any product. Instead, the company operates in the expanding secondary market for patents, where parties—pejoratively labeled “patent trolls”—buy, sell, and accumulate patent rights for purposes other than commercialization.

Amidst the increasing incidence of university lawsuits over patents, research indicates that surprisingly few institutions approach patent enforcement systematically, despite the financial and image-related stakes that distinguish patent enforcement from routine forms of litigation. Just as institutions plan ahead for natural disasters and campus-safety threats, they should take precautions against catastrophes involving their intellectual assets. Trustees and top administrators might consider the following questions:

Do we understand why university involvement in patent litigation may occasionally be necessary, and are we prepared to articulate that necessity to various constituents?

Patent litigation is a rare category of legal disputes where universities are more likely to act as plaintiffs than they are to be named as defendants. Effective decision making requires understanding the legal and policy explanations behind this fact.

Who are the key decision makers to be involved—and when—in any decision to sue for patent infringement?

Decisions involving patent enforcement are too important not to rise to the board level. And an institution’s public or private status, as well as the existence of any affiliated patent or research foundation, can influence how, when, and by whom decisions should be made.

What factors should we consider before suing?

Some universities avoid suing donors, research sponsors, or companies that hire graduates or are otherwise politically connected. Yet timorousness can embolden other infringers and jeopardize university relationships with current and prospective licensees. Gauge your institution’s willingness to overlook potentially deterring factors and proceed with enforcement in instances of unquestionable infringement.

What do our agreements with licensees provide concerning infringement litigation?

How is enforcement responsibility apportioned? Who has authority to settle litigation? How will wins or losses be distributed?

Do we set aside a portion of our licensing royalties to help fund patent-infringement litigation?

Litigation is notoriously expensive, even if costs are shared with a licensee. A failure to plan could result in an inability to pursue, thereby undermining research investments. Similar to the annual purchase of liability insurance, setting aside a portion of licensing royalties for potential use in patent litigation can be a wise investment.

Do our licensing practices involve deals with “patent trolls”?

The growing vitality of secondary patent markets may tempt technology-transfer offices to license patents for purposes other than direct commercialization. Consider whether these relationships legitimately further the university’s research goals or gratuitously complicate them.

Sustained and reflective dialogue stemming from the above questions will not end the need for patent enforcement. But it can facilitate thoughtful and comprehensive decision making about it.