A Patent-Troll Bill with Bad College Grades

The proposed Innovation Act is too broad and could make university research much riskier.

THE WALL STREET JOURNAL, COLUMN
BY ROBERT A. BROWN AND JAMES P. CLEMENTS | APRIL 15, 2015

Universities conduct the majority of this country’s basic research. They have a long history of discovery that has led to new technologies, health advances and other developments often taken for granted as part of everyday life. The CAT scan and MRI, GPS, Doppler radar, the Internet, and hundreds of widely used medicines and vaccines are a few examples.

But legislation now in Congress, the Innovation Act, would change the U.S. patent system in ways that would diminish the benefits of university research, as well as the innovation produced by independent inventors and startup companies. The bill, which passed the House in 2013 but died in the Senate, has the stated intention of protecting the U.S. patent system from abusive practices by “patent trolls.” These are businesses that do little other than acquire patents for the purpose of extracting payments unfairly from other businesses and entities, including universities. They do so by threatening litigation over alleged infringement of the trolls’ patents, in the hope that their victims will pay them to avoid going to court.

Patent trolls are a problem because they cost their victims substantial money and time and clog the patent-litigation system with meritless claims. Accordingly, universities support efforts to curb such bad behavior. However, not every patent holder seeking to protect its patent from infringement is a troll. Indeed most are not. Yet the Innovation Act starts from such a presumption, sweeping legitimate patent holders, including universities, in with trolls, making it considerably riskier and costlier for all patent holders, not just patent trolls, to enforce their patents against violators.

Provisions of the Innovation Act that would undermine this equilibrium include presumptive fee-shifting—also known as “loser pays”—which would require those who lose a patent-infringement case to pay the legal fees of the prevailing party. This kind of fee-shifting regime would deter universities and smaller enterprises—which typically do not have significant resources to devote to expensive and time-consuming patent litigation—from enforcing their hard-earned intellectual-property rights, because of the substantially increased risk.

Additionally, under the “joinder” provision, courts could bring universities into lawsuits filed by the universities’ licensees that the universities neither initiated nor controlled. Universities would then face the prospect of sharing liability for substantial attorneys’ fees and costs and damages.

These provisions are designed to go after the real problem of patent trolls that operate through deliberately undercapitalized shell companies. But they would at the same time seriously disadvantage universities and the startup companies they frequently spin off, as well as independent inventors and other small patent holders.

Universities’ research and creation of intellectual property are not about making money. Their mission is to achieve breakthroughs that advance society. In fact, most university technology-transfer operations do not receive enough royalties to offset their total operating costs. And any net revenues they do generate go back into education and research, the fundamental missions of the university.

Patent litigation is complex, uncertain and costly even under current law. With their focus appropriately fixed on research and education, universities want to litigate their patents only when it is necessary to preserve the value of their patents to the licensees and investors that bring the fruits of those patents to the marketplace. However, the Innovation Act would make universities even more reluctant to assume the risk of defending their patents. If universities were to forgo enforcing their patents, that would send a signal that those patents could be infringed at little or no cost. Potential licensees and investors, concerned that competitors could easily infringe those university patents, would be reluctant to put resources into developing products and processes that are based on them. This would interrupt the virtuous cycle of technology transfer that enables society to reap the benefits of federally funded university research.

In the past year, key Supreme Court and other federal court decisions, Judicial Conference actions, and regulatory steps by the U.S. Patent and Trademark Office and the Federal Trade Commission have strengthened the patent system’s capacity to protect businesses from the abusive actions of patent trolls. This progress suggests that Congress should proceed with caution as it considers broad statutory changes to our strong and productive U.S. patent system.

To be clear, as university presidents we support efforts to address abusive patent practices. But Congress should avoid legislative changes that go beyond what is needed to protect legitimate businesses. As we work to address the abusive practices of bad actors in the patent system, let’s tread carefully to ensure that the ideas and inventions produced by university research continue to be nurtured and supported for the benefit of all.

Mr. Brown is the president of Boston University. Mr. Clements is president of Clemson University.

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