A recent paper by Feldman & Lemley demonstrates that detailed and expert academic knowledge of patent law is insufficient. More is required for fully accounting for the actual workings of the patent system and its key business role in technology development.
As Gene Quinn correctly points out in a previous posting, the Feldman & Lemley “survey” sets a straw man of the role of “patent intermediaries” and asks the wrong questions. But more importantly, it surveys the wrong parties and entities; it ignores the most relevant empirical data sources – information on the specific patented technologies associated with the patents asserted or licensed. For example, soliciting responses from attorneys, contract managers, and in particular self-identified membership in advocacy groups such as the Internet Association, the Computer and Communications Industry Association or the Coalition for Patent Fairness is one of the methods for constructing the sample. Were any of these organizations the sponsors of this “survey”? In any event, this hardly reaches the entities and the technologists that actually adopted the associated patented technologies that were licensed. But a more fundamental flaw is apparently involved here.
Exclusive patent rights foster the coordination of patented technology diffusion in a way that protects investments in its development. Unlicensed infringement not only returns nothing to the investors in the patented technology, but it deprives them of market share and associated returns relied upon for making their investment. Without being able to enforce patent rights (including through intermediaries), voluntary licensing and coordination would not take place. Without the enforceable exclusive patent right, fewer investments would be made at the early and risky stages of inventive technologies. Apparently, ignoring these facts created Feldman & Lemley’s flawed straw-man.
Feldman & Lemley arrived at their counterfactual inferences because of a major selection effect: they surveyed only those that engaged in uncoordinated use of patented technologies – infringers and alleged infringers – but not those involved in early coordinated use and investment, or those taking exclusive licenses. For example, none of the thousands of university spinoffs and startup licensees were included in the survey. Apparently, none of the voluntary licensees who sought out the patentees for early adoption and investment in the patented technologies were included in the survey.
Feldman & Lemley’s survey responses are mostly from non-coordinating parties and entities having much less relevance for development of the specific patented technologies. Consequently, for example, the survey’s findings on university patent licensing belie clear empirical evidence that technology licensing (not only by reluctant infringers) of patented technologies contributes to innovation and development: Sampat and Ziedonis (2005) examined patent citations to university-owned patents. They found that citations were elevated for licensed patents. Moreover, most citations occurred after the patent was licensed. That licensing of patented technology increases its diffusion and relevance more broadly is supported by Drivas et al. (2014), who found that citations by non–licensees to patents exclusively licensed (either by geographic area or field of use) by the University of California increased after the licenses were executed. These are objective empirical indicia – not subjective responses to selective surveys by accused infringers.
Finally, even in their own sample, Feldman & Lemley fail to establish the degree to which the entities responding to their survey had received knowledge and basic ideas from studying the published applications and issued patents for which they later took a license. In other words, Feldman & Lemley did not control for knowledge diffusion that took place prior to patent assertion. Their speculation of “independent development” is just that – baseless speculation. The survey had not obtained truthful answers of engineers who developed the accused products as to whether they were aware of the technical aspects of the patented technology.
Unfortunately, this incomplete and flawed survey does very little to illuminate on the role of patents or the actual workings of the patent system.
UPDATED: Tuesday, Feb. 24, 2015 at 9:47am ET
Drivas, Kyriakos and Lei, Zhen and Wright, Brian D. (2014), Academic Patent Licenses: Roadblocks or Signposts for Non-licensee Cumulative Innovation?
Sampat, B. N. and Ziedonis, A. A. (2005). Patent Citations and the Economic Value of Patents. In Moed, H. F., Glänzel, W., and Schmoch, U., Eds., Handbook of Quantitative Science and Technology Research, pages 277–298. Kluwer Academic Publishers, Dordrecht.