From algorithms to microchips, biotech to batteries, legal battles rage on, with patent owners seeking millions or even billions of dollars of royalties from those who they say use their protected technology. But private companies aren’t the only players in the high-stakes world of intellectual property. Prominent research universities and the companies they spin off have also chosen to assert their patents in court seeking large payoffs.
Just last month, MIT filed a lawsuit against Micron Technology, a supplier of random access memory chips for several Apple products, on claims that it violated a 1997 laser-cutting patent in the production of the chips. Seeking damages and royalties on all the devices Apple sold that include the allegedly infringing chip technology, MIT stands to collect a massive sum if it is successful.
This is part of a growing trend of research universities going to court to assert the patents they or their spinoff companies control.
The legal basis for university patents
Before 1980, inventions made from federally funded research had to be turned over to be owned by the federal government. But the Bayh-Dole Act passed that year allowed universities to disclose and own intellectual property originating from such grants. Following the passage of the bill, many research universities started technology transfer programs — offices that help researchers patent new developments when appropriate, and which sometimes transfer patent ownership to startups in exchange for royalties or equity.
MIT’s patents
MIT’s Technology Licensing Office serves this function for MIT. Its self-described function is advising students and faculty on whether to patent technology, assisting in the patent filing process, and transferring patents to startups for which it also helps find seed funding.
When, for example, a faculty member comes to TLO with a new invention, the office may advise the professor to file for a patent. The TLO will then pay the legal costs of the filing. If awarded, the royalties from the patent may be split in thirds between MIT, the inventor’s lab, and the inventor after the deduction of fees. Alternatively, if the inventor wants to use the patented technology to start a company, TLO will help find venture capitalist investment for the startup and MIT will take a “small percentage” of equity in exchange for transferring or exclusively licensing the patent to the company. About 27 percent of its licenses were transferred to 16 startups in FY2013.
The office made nearly $80 million in FY2013, mostly from royalties and fees on patents, while it said it spent about $19 million on filing patents, a task for which it says it uses mostly outside patent counsel.
It appears the number of patents issued to MIT has been increasing over the past few decades. The Tech reported the Institute was awarded 126 patents in 1992, by far the most for any university that year. MIT TLO’s own statistics show it was awarded patents at a rate of 140 to 175 per year throughout the 2000s, but this jumped to 199 in FY2012 and 288 in FY2013.
The trend seems to extend to universities well beyond MIT. There were 1,491 patents issued in total to all U.S. universities in 1992. According to the Intellectual Property Owners Association, just the top seven patent-seeking universities combined surpassed that number in 2013.
Legal Battles
MIT’s litigation against Micron over its use of RAM is asserting a patent issued to an MIT scientist and his co-inventor in 2000 but owned by MIT. The move is certainly not unprecedented for MIT, which is listed as being the plaintiff in 32 litigation campaigns since 2000 by RPX, a patent litigation search engine. MIT’s cases cover a wide range of industries.
Companies that have exclusive licenses from MIT account for some of the litigation around MIT patents, even when the company rather than MIT is leading the claim. And while most cases end in settlement, some do go to trial. In 2003, a jury awarded MIT a rare patent loss on its claim that a Lockheed Martin satellite phone system infringed on its speech encoding intellectual property.
MIT is certainly not alone as a university asserting its patents in court. RPX lists Stanford with 14 campaigns as plaintiff since 2000, with all its cases in the biomedical industry. Most notably, Boston University sued many companies in a bid to assert a 1997 patent regarding a step in the production of blue LEDs. While many defendants settled, more suits have continued.
Some universities, in attempts to make unused intellectual property profitable, have turned to selling their patents. But some of these are often snapped up by non-practicing entities or “patent trolls,” firms that exist simply to own patents and collect licensing fees, and which are quick to sue companies that they claim are infringing on their patents.
Trolls are widely criticized as preying upon companies without legal resources to defend themselves, trying to extract fees or settlements by claiming infringement on the sometimes absurdly broad and vague patents they own. A study published in the Stanford Law Review in 2012 found 45 universities had sold patents to a particularly notorious troll, Intellectual Ventures, or its shell companies.
Even if the patents don’t fall into the hands of trolls, some contend that universities seeking to assert old patents in high-stakes court battles are harming innovation and betraying their principles.
The payoff
Does it make sense for universities to engage in this type of technology licensing and transfer? A report from the Brookings Institution suggests that for many universities, the answer is no. It found that for 87 percent of universities with a technology transfer office, the program did not even break even in FY2012. It also found that a fairly stable group of top-earning universities netted more than all other universities combined. MIT had one of the most profitable programs, and was ranked third in the report.
It appears MIT’s TLO is profitable, making nearly $80 million in royalties and fees and spending just $19 million to file patents, but these numbers may not include its settlement wins or patent litigation fees. But even the TLO cautions other universities seeking to replicate its apparent success, “Do not expect to break even for five years or more.”
[In response to http://tech.mit.edu/V135/N5/patentviolation.html I originally expected to mostly focus on MIT’s own TLO/patent history and just re-make their statistics with nicer graphs and visuals, but it turns out that the whole world of university patent lawsuits is interesting enough that I wanted to focus on digesting all the reports and information I found. I hope to expand this with more multimedia elements later.]