That is to say, your alma mater may end up working with a patent troll, and making money from a patent troll, even if it would be disinclined to go to court itself. To pick only the most prominent example, Intellectual Ventures has now acquired patent rights from at least 60 American universities, according to Paul Basken’s reporting in the Chronicle of Higher Education. (The California Institute of Technology sold exclusive rights to 51 of its patents to the notorious aggregator in 2008.)
In the past, university administrators might have tried to avoid these arrangements. In 2007, officers at a group of 11 major research institutions—including Caltech, the University of Wisconsin, Stanford, and the University of California—signed a document called “In the Public Interest: Nine Points to Consider in Licensing University Technology.” Point 8 suggested that schools “be mindful of the implications of working with patent aggregators.” They “would better serve the public interest,” it went on, “by requiring their licensees to operate under a business model that … does not rely primarily on threats of infringement litigation.”
But the dynamics of the patent business have made these noble goals seem distant. For all the work they do to sell off good ideas, most universities barely make a nickel from their intellectual property. A recent report from the Brookings Institution found that 84 percent of research universities lost money on their patent deals in 2012. In other words, they spent more on filing patents with the government, and on paying staff who try to turn those patents into profits, than they earned from actual licensing arrangements. In fact, it’s often said the system functions like a lottery: Among universities, the top 10 percent of earners take in 70 percent of all the license income. A few might break the bank with a whopper of a deal—or a whopper of a lawsuit—but most end up sitting on a stack of worthless paper.
One administrator told Paul Basken that about 95 percent of university patents go unused and that schools are “looking for newer and better ways to try and license them out.” That could mean they’re seeking deals with well-known patent trolls, or merely selling to the highest bidder. Either way, academia seems on the verge of falling into some increasingly unsavory behavior.
The president of the Association of University Technology Managers says these concerns are not supported by the evidence. Yet in the midst of the ongoing debate in Washington over patent reform, universities have been lobbying in ways that would seem to align them with the patent trolls. They’ve fought troll-busting legislation, like the expansion of an earlier law that made it easier to challenge overly broad “covered business method” patents. And they’ve already forced some legal changes in their favor, says Mark Lemley, Stanford law professor and author of a 2008 paper on universities and patent trolls. Under pressure from lobbyists in 2011, Congress lowered fees for patent applications that happen to originate at universities. Institutes of higher learning now count as “micro entities,” a designation normally reserved for individual inventors.
The nation’s institutes of higher learning may not intend to act like trolls, nor to benefit from others’ patent shakedowns. But they’re working in a system that sets its own rewards. Faced with these incentives, what a university wants and what it does could end up very different.
*Update, May 8, 2014: This post was updated to reflect that in addition to being at Harvard's Berkman Center, James Bessen is a lecturer in law at Boston University.
*Update, May 12, 2014: This post was also updated to clarify that before its patent auction, Penn State put in place guidelines to prevent bids from patent trolls, and to include a quote from a Penn State spokesperson.