Welcome
IP Law News

Universities Get Creative to Avoid Patent Litigation Pitfalls

Nov. 4, 2019, 9:45 AM

Universities upset at businesses that rip off their patented technologies often face a tough decision about whether to spend money on litigation that could be going to fund education.

Fortunately, schools are finding there are other options.

Some are partnering with businesses on research and development to avoid patent fights. Others are seeking litigation financing to fund high-stakes battles. And still others are eyeing litigation in overseas venues that are more favorable than U.S. courts.

Universities are turning to such creative approaches to pursue licensing fees for their patents because litigation in the U.S. is rife with financial and legal risks. Among the most grave is the possibility of getting their patents killed through an administrative review procedure at the Patent and Trademark Office.

Academic institutions are also afraid of getting embroiled in legal battles because they may tarnish their reputations as educators, they said.

“Litigation is not the primary business, so you’re always hesitant to use dollars that actually should be used for other purposes for the purposes of litigation,” Paul Ragusa, an intellectual property partner at Baker Botts LLP, who works with university clients, said. “It’s a Catch-22.”

Public and private universities have become innovation powerhouses in recent years, inventing everything from artificial intelligence technologies to ways to decode DNA. Patent licensing revenue at U.S. universities generated $2.25 billion in 2017 compared with $483 million two decades earlier, according to data by the Association of University Technology Managers and the Biotechnology Innovation Organization released in June.

“With more and more universities having huge revenue streams from licensing and with the cut in funding, especially in state institutions from government, universities are looking more and more to their tech transfer offices as a revenue source,” Edward Hsieh, a patent attorney at Lowenstein & Weatherwax LLP and a former technology transfer officer for the University of California at Los Angeles, said.

‘Backyard’ Partners

The University of South Carolina prefers to strike research partnerships with companies that have manufacturing plants in their own backyard, Chad Hardaway, director of the university’s technology commercialization office, said. Boeing Co. has invested $5 million to develop inventions with the university to improve Boeing products, and the school has relationships with BMW and Mercedes-Benz, Hardaway said.

The university hasn’t found the need to file a patent-infringement lawsuit so far, Hardaway said. “It’s very tricky because as a university you have alumni that work at those companies that are infringing, board members that are executives of the companies that are infringing,” he said.

The school uses artificial intelligence and patent claim searching tools to find other companies’ patents that block its own, Hardaway said. The university can then begin a dialogue: “Hey, we’re doing similar things. Why don’t we partner together?” he said. “One thing we’re very aggressive on is corporate partnerships.”

State-owned institutions, such as the University of South Carolina, are vulnerable to patent validity challenges after a federal appeals court in 2019 ruled that state universities don’t have sovereign immunity from such reviews. That’s another risk factor that discourages state schools from litigating patents, attorneys said.

Universities aren’t as aggressive as corporations when it comes to launching patent litigation fights, attorneys said. But bigger universities with deep pockets “can easily afford intellectual property litigation of all sorts, and take risks if they want to,” Christian Liedtke, a partner at Acuminis PC, said.

The University of Minnesota’s licensing arm has filed about a dozen infringement lawsuits since the early 90’s, according to Bloomberg Law data. “We believe it’s the last resort, or the only resort, if licensing isn’t possible,” Rick Huebsch, head of the University of Minnesota’s tech commercialization group, said.

Patent disputes are “typical when you look at big universities and often those kinds of cases settle,” Michael Falk, Wisconsin Alumni Research Foundation’s chief operating officer and general counsel, said.

“It’s just part of the course of business that when you are talking about major areas of technology, there’s lots of valuable rights and money on the table,” Falk said.

Fighting Overseas

Another creative approach in university patent litigation is filing in overseas venues, betting that positive outcomes can lead to a settlement over patent claims in the U.S., attorneys said.

Wisconsin Alumni Research Foundation’s effort to enforce its patent rights in Zemplar, vitamin D medication, over the years has involved some litigation in German courts, Falk said.

German courts are considered favorable because they grant injunctions in patent suits, which are hard to get in the U.S. The cost of patent litigation is also cheaper, Liedtke said.

But U.S. patent claims would have to be enforced in American courts.

“If you have an infringement claim in Germany, you could sue on the German claim in Germany and try to broker a global settlement,” Liedtke said. “But that’s a slightly creative approach, given that patent rights are territorial.”

Third-Party Funders

The University of California at Santa Barbara is using investors’ cash to pay for its patent-infringement fight with Walmart Inc., Amazon.com Inc. and others—a novel approach for schools seeking to defend their intellectual property rights in court.

The university in July sued the companies for allegedly using its LED filament technology without permission after licensing discussions fell through. To pay for the litigation, it accepted an offer from Longford Capital, a litigation finance firm.

“Particularly, in the university sector, litigation financing is a relatively new mechanism,” Sherylle Englander, director of technology and industry alliances for U.C. Santa Barbara, said. “To a certain extent, we are gaining experience with it through this case.”

Russell Genet, a director at Longford, says he’s in discussions with other university representatives and has made presentations on enforcement opportunities at the Association of University Technology Managers conference this year.

Litigation funders conduct intensive due diligence of patents, infringing products and merits of a case before signing on a university and a law firm, Seth Levy, an intellectual property partner at Nixon Peabody LLP who is representing UCSB in its patent fight, said.

“There are that many more players kicking the tires,” Levy said. “When a litigation funder is involved, there’s good reason to think the patents are much stronger and the claims are meritorious because otherwise the funder wouldn’t fund it.”

But not all universities are rushing to sign up funders. The University of Minnesota will wait until a few other schools have tried litigation financing with good outcomes before having discussions with third-party funders, Huebsch said.

“If they have a proof point with several universities, we would think about,” he said.

Universities working with litigation finance companies is in a nascent stage, Genet said. “It is a new phenomenon, and universities are starting to figure out how they can make it work.”

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bloomberglaw.com

To contact the editors responsible for this story: John Dunbar at jdunbar@bloomberglaw.com; Rebecca Baker at rbaker@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com