Tech Industry and Universities Clash Over Proposed Patent Restrictions

The courts are cracking down on what they perceive to be abusive misuse of intellectual property laws. Their concern, now mirrored in new legislation, is that so-called 'trolls' using expansive interpretations of  IP rights, are engaged in what amounts to intangibles hostage taking in order to gouge revenues from property they neither created nor intend to develop except as a legal launch pad.

This trend has enjoyed widespread support, even from politicians in locales like the state of Utah, once infamous for supporting the practice. But research universities and medical institutes are now expressing concern that the new rules will not just discourage patent trolling but may harm the innovation process by assigning extended financial responsibility that could be ruinous.

The good news is that the general trend is away from the robber baron era of IP. The challenge is in finding a reasonable basis on which rights can still be protected but innovation can be encouraged. JL

Aaron Stanley reports in the Financial Times:

At issue, universities say, are “loser pays” legal fee-shifting and joinder provisions, the latter of which could render them liable for damages incurred by third parties that own patents developed at a university if the third party cannot pay the costs on its own.
As Congress revives a proposed crackdown on patent “trolls” that collapsed last spring, a scuffle is breaking out between Silicon Valley firms pushing to curb frivolous patent litigation and top US universities that claim such reforms would limit their ability to license inventions and invest in research. The Consumer Electronics Association — which represents more than 2,000 technology companies — sent a letter this week to the presidents of nearly 150 universities, including Yale, the Massachusetts Institute of Technology and Johns Hopkins. The CEA is urging the universities to drop their attempts to block the Innovation Act — a proposed law that would limit trolls’ ability to bring bogus infringement lawsuits and send harassing demand letters.

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But the universities, which led a broad coalition of industry groups to block similar proposals from passing the Senate last year, say that the tech industry’s proposals would do little to deter trollish behaviour and would make it more difficult and expensive for legitimate patent holders to defend their property.

“[The proposed legislation] would significantly increase the overall risks and costs of legitimate patent enforcement for universities, start-up companies, licensees of university research, and all other patent holders,” the Association of American Universities and the Association of Public and Land-Grant Universities said in a response letter to CEA dated April 8.
At issue, universities say, are “loser pays” legal fee-shifting and joinder provisions, the latter of which could render them liable for damages incurred by third parties that own patents developed at a university if the third party cannot pay the costs on its own.
“Mandatory fee-shifting and involuntary joinder — are especially troubling to the university community because they would make the legitimate defence of patent rights excessively risky and thus weaken the university technology transfer process,” the 150 universities wrote to the Senate Judiciary Committee in February.
But the CEA insists that these provisions as laid out in the bill would rarely, if ever, apply to universities and research institutions.

Further, the CEA and other allies such as Google, Apple and a coalition of users that claim to have been hurt by patent troll demand letters point out that most patent troll victims lack the resources to defend themselves in expensive patent litigation — the average cost of a single case that goes to trial tops $5m, according to the Internet Association. The end result is a business model built on extortion that costs the US economy $1.5bn per week and continues to worsen.

But research institutions remain on edge over what they say are overly broad reforms that seek to address abusive behaviour that could be more easily remedied with more targeted measures or better enforcement of existing laws.
“It’s very rare for us to go and sue somebody, but to put us in a position where we can’t legitimately have that conversation — where we’re lumped in with the patent trolls — just doesn’t make any sense,” said Jim Rogers III, head of Mayo Clinic Ventures, which holds the clinic’s intellectual property.