Magazine article University Business

Thar's Gold in Tham Thar Patents: Why It Pays to Protect Patent Portfolios

Magazine article University Business

Thar's Gold in Tham Thar Patents: Why It Pays to Protect Patent Portfolios

Article excerpt

THANKS TO THE CURRENT recession and ensuing financial crises, higher ed leaders are looking where they have not looked before for the money needed to fulfill their missions. More and more institutions are discovering gold, sometimes lots of it, in their patent portfolios. Some examples:

* 1999: the University of California and Eolas Technologies filed a patent infringement lawsuit against Microsoft. In 2003, the case went to trial, and the jury awarded UC and Eolas $520 million. In 2005, Microsoft appealed the decision, and the Court of Appeals for the federal circuit sent it back to district court to be retried. In August 2007 the parties settled the claim for an undisclosed amount.

* 1999: The University of California filed a patent infringement lawsuit against Genentech. The case resulted in a $200 million settlement for UC.

* 2002: Cornell University filed a patent infringement lawsuit against HewlettPackard. In 2008, the case went to trial, and the jury awarded Cornell $184 million. After Hewlett-Packard announced its intention to appeal the award, the judge reduced the award to $53 million.

* 2003: Texas Instruments and Stanford University filed a patent infringement lawsuit against Conexant Systems. After the patent infringement trial, the jury awarded TI $112 million, with no payment of damages paid until all appeals were exhausted. The parties settled on a $70 million lump-sum payment.

2007: Centocor (a subsidiary of Johnson & Johnson and the exclusive licensee of an arthritis treatment developed and patented by New York University) filed a patent infringement lawsuit against Abbott Laboratories. This June, a jury awarded Centocor and NYU $1.67 billion--the largest patent infringement award in history.

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According to Chris Holman of the University of Missouri-Kansas City School of Law, higher ed institutions filed 139 patent infringement lawsuits between 2000 and 2008. Although most were filed by exclusive licensees, with universities joining them as co-plaintiffs, 51 were filed by universities alone.

The University of California, Coinell, Stanford, and NYU hit pay dirt pursuing patent infringers. Shouldn't every campus leadership team be wondering if their institution is sitting on a gold mine?

CARROTS AND STICKS

More and more colleges and universities are hiring technology transfer managers who are responsible for generating revenue by licensing out university patents to industry. Licensing, however, comes in two varieties: "carrot" and "stick."

A "carrot license" is a license taken voluntarily by a licensee that is not yet using the patented technology and is under no compulsion to license it. A value proposition in carrot licensing is "license our patent because our patented technology is better and you can make more money with it." Carrot licenses tend to be exclusive, as the licensee wants to be assured of exclusivity before investing in developing the patent technology.

A "stick license," on the other hand, is an exercise in assertive licensing, appropriate when the patented technology is already in use by a patent infringer. In this case, the value proposition is "license our patent, or we'll see you in court." Stick licenses are usually nonexclusive, that is, a covenant not to sue. Unfortunately, litigation cannot always be avoided. If the infringer refuses to take a license, assertive licensing turns into patent enforcement, i.e., patent infringement litigation. In reality, every carrot license is a stick license in disguise--if not for the unspoken threat of litigation, who would ever license a patent, which, at the end of the day, is nothing more than a right to sue for infringement?

Technology transfer managers typically do carrot licensing. They promote and market the university's patent portfolio to industry and find businesses to commercialize some of those patents. …

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