The Bayh-Dole Act of 1980 allows small businesses and non-profit organizations such as universities to retain ownership of inventions made with federal funding and profit through the licensing of patents.[1] Since then, universities have been a powerhouse in research and innovation in the United States, with total expenditures in R&D reaching over $75 billion in 2018.[2] Despite these significant investments, many universities face unique difficulties in capitalizing on their patents to generate revenue. Concerns over reputation, limited funding, and the risk of challenges to the validity of their patents all deter universities from bringing lawsuits for patent infringement.[3] As a result, many universities have begun to employ creative solutions to protect their intellectual property rights.
There is often an inherent incongruity in requiring academic institutions to proactively litigate against the infringement of their patents. Patent litigation is complex, expensive, and can even damage a university’s likelihood of obtaining patent licenses going forward.[4] Many universities lack the internal resources to undertake such an endeavor and cannot rely on federal funding, which has remained relatively flat over the last fifteen years as overall university investment in research has increased.[5] Administrations also fear that devoting such a significant amount of their limited time and money to litigation will cast doubt on their commitment to education and academia, with some expressing concerns about being labeled a “patent troll.”[6] To further complicate matters, many schools have alumni at the companies that infringe on their patents, and damaging such connections could reduce the amount of donations they receive.[7] A final deterrent to engaging in patent litigation is that doing so could open a university to patent validity challenges from an infringer. Even state universities are vulnerable to such claims, as a recent Federal Circuit decision held that sovereign immunity cannot be applied as a defense against inter partes review petitions.[8]
Despite these barriers to patent litigation, current U.S. patent law often imposes a prudential standing requirement that the university holding the patent participate as a named plaintiff in the action. Where a university has not licensed a patent, or issued a non-exclusive patent, the university alone is able to bring a lawsuit against an infringer and can rely on no other party to do so.[9] Even when there is an exclusive licensee who also has standing to sue, many universities are bound by license contract provisions that require them to participate in any such litigation.[10] This effectively forces universities to engage in litigation in order to enforce their patents and pressure companies to obtain a license.
To overcome these hurdles, universities have recently begun to employ creative strategies such as third-party litigation financing. In July of 2019, the University of California, Santa Barbara brought patent infringement actions for the importation and sale of LED lights against major retailers such as Amazon, Target, Ikea, Walmart, and Bed Bath & Beyond.[11] All attorneys’ fees and litigation expenses are funded by Longford Capital Management, a litigation finance firm, as part of its University Initiative to help universities “realize the full value of their research and development activities, without burdening their budgets.”[12] In return, Longford Capital will receive an agreed-upon portion of any award that UC Santa Barbara eventually receives. Third-party litigation financing such as this has grown more prominent in the U.S. over recent years and is expected to continue to rise.[13] Many universities are waiting to see how cases such as UC Santa Barbara’s turn out before they begin working with litigation funders themselves.[14] This strategy, however, does not address the incongruities inherent with university patents. A long-term solution may require a legislative amendment to the Patent Act that would allow universities to opt out of participation in patent enforcement actions.[15]
Footnotes:
[1] 35 U.S.C. §§ 200-212.
[2] https://www.aaas.org/programs/r-d-budget-and-policy/rd-colleges-and-universities.
[3] https://news.bloomberglaw.com/ip-law/universities-get-creative-to-avoid-patent-litigation-pitfalls.
[4] Jacob H. Rooksby, Innovation and Litigation: Tensions Between Universities and Patents and How to Fix Them, 15 Yale J.L. & Tech 318 (2013).
[5] https://www.aaas.org/programs/r-d-budget-and-policy/rd-colleges-and-universities.
[6] https://news.bloomberglaw.com/ip-law/universities-get-creative-to-avoid-patent-litigation-pitfalls; https://www.law360.com/ip/articles/1222483/why-litigation-funders-are-getting-into-university-patents?spotlight=1
[7] https://www.law360.com/ip/articles/1222483/why-litigation-funders-are-getting-into-university-patents?spotlight=1
[8] Regents of the Univ. of Minn. v. LSI Corp., 926 F.3d 1327 (Fed. Cir. 2019).
[9] Tensions at 319.
[10] Id.
[11] The Regents of the Univ. of Cal. v. Target Corp., No. 2:19-cv-06572; The Regents of the Univ. of Cal. v. Amazon Inc., No. 2:19-cv-06571; The Regents of the Univ. of Cal. v. Ikea of Sweden AB, No. 2:19-cv-06573; The Regents of the Univ. of Cal. v. Bed Bath & Beyond Inc., No. 2:19-cv-06574; The Regents of the Univ. of Cal. v. Walmart Inc., No. 2:19-cv-06570.
[12] https://www.longfordcapital.com/university-initiative.
[13] https://www.burfordcapital.com/insights/insights-container/2018-litigation-finance-survey/ (finding 32% of surveyed attorneys said their firms or companies had used litigation finance – a 237% increase from 2012).
[14] https://news.bloomberglaw.com/ip-law/universities-get-creative-to-avoid-patent-litigation-pitfalls.
[15] Jacob H. Rooksby, Innovation and Litigation: Tensions Between Universities and Patents and How to Fix Them, 15 Yale J.L. & Tech 318 (2013).