Biased Findings on Patent Licensing Belie Clear Empirical Evidence

By Ron Katznelson, Ph.D.
February 24, 2015

Time For Truth Message Shows Honest And True

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

 

References:

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.

The Author

Ron Katznelson, Ph.D.

Ron Katznelson, Ph.D.  
Dr. Katznelson is the Founder and President of Bi-Level Technologies in Encinitas, CA. From 1990 to 2005, he was Chief Technology Officer, Founder and Chairman of Broadband Innovations, (formerly known as MCSI), where he led the company’s entry into the digital RF CATV industry. From 1983 to 1989, he was with the VideoCipher Division of M/A-COM Linkabit Corp., later acquired by General Instrument Corp. (GIC), where he served as Director, New Technology Development. At GIC, he directed R&D in the areas of Advanced Television Systems that led to GIC's video compression technology, now forming the core of the MPEG-2 standard and a basis for the Grand- Alliance ATSC High Definition Television standard. His responsibilities also included the management and development of the VideoCipher Division's intellectual property portfolio as well as representation in industry groups and standard bodies.

From 1982 to 1985, Dr. Katznelson was a Professor of Electrical Engineering at the University of California, San Diego (UCSD). He taught courses in Linear System Analysis, Probability and Stochastic Processes.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 7 Comments comments.

  1. Michael Gulliford February 24, 2015 9:42 am

    Agree. Very small and likely skewed sample size to be drawing major conclusions from. Borders on irresponsible. We have a number of clients (start-ups/young companies) whose primary technology is enabled by licenses, and we’re just one entity. But when you limit your sample size to companies with in-house lawyers, you automatically exclude most smaller companies and limit yourself to only larger entities that no longer rely on in-licensing to get products developed/off the ground.

  2. Adam Mossoff February 24, 2015 3:29 pm

    Nice done, Ron. I tweeted on this latest junk science “study” being pushed into the patent policy debates as follows:

    Non-misleading, non-biased title of #patent study: “Did 188 defendants who settled patent lawsuits innovate more? No”

    https://twitter.com/AdamMossoff/status/569925577009836032

  3. John Allison February 25, 2015 10:16 am

    Just like Gene’s original critique, this commentary confuses ex ante licensing of the kind that universities typically do with ex post licensing in response to a demand letter or lawsuit. The object evidence referred to deals with ex ante licensing, and Feldman/Lemley have nothing to say about ex ante licensing. Please read the Feldman/Lemely paper carefully and don’t let your own preexisting biases cloud your thinking.

  4. Ron Katznelson February 25, 2015 7:58 pm

    John,

    You are correct that “Feldman/Lemley have nothing to say about ex ante licensing.” However, my commentary does not “confuse ex ante licensing of the kind that universities typically do with ex post licensing” – it actually stresses the importance of considering both; and I also observed that the survey in question does not cover voluntary ex ante licensees; this can hardly be called “confusion.”

    By the distinction that you (but not the authors) make here, you are giving the Feldman & Lemley’s paper a pass which it does not deserve. Whereas Feldman & Lemley’s survey is limited to only a certain class of ex post licensing, their leap is boundless: they make no distinction between ex ante and ex post licensing in their broad assertions and conclusory policy statements on patent licensing:

    “Our results cast significant doubt on one common justification for patent rights.” …“Our results suggest that universities are approaching product companies, not to create joint ventures or promote the creation of new products, but to seek licenses for already commercialized technology.” p48.

    Here, the authors manufactured negative statements about ex ante licensing activities – “not to create joint ventures or promote the creation of new products” – with absolutely no evidence to support the assertion. Where is the author’s evidence that universities do not approach companies to “create joint ventures or promote the creation of new products”? Where is such evidence when the evidence all around us is that they actually succeed in doing that?

    This baseless assertion is surpassed only by another sweepingly broad conclusion that lacks factual support:

    “And the evidence from our survey results suggests that some of the commonly asserted ways in which patents might encourage innovation – by facilitating new products or technology transfer – are more illusion than reality.” pp50-51.

    I am sorry, John, but these unsupported statements cannot be given a pass on account of a post hoc distinction between ex ante and ex post licensing. As Adam Mossoff states above, the limited survey can at best support the following statement: “188 defendants who settled patent lawsuits do not innovate.”

  5. Brian Metzger March 2, 2015 7:35 pm

    Maybe NPEs are an extension of the inventors legal team. Generally, the US federal labs do not actively enforce their patent portfolio and exercise their right. If inventors and entrepreneurs did their own enforcement after all the investment in prosecution, then would NPEs exist?

  6. Anon March 3, 2015 9:22 am

    New day and old tactics, vis a vis a letter of 51 academics to Congress which implicitly merely accepts what has been debunked time and again.

    There is no shame where there should be shame.

    And we wonder why “law” continues to struggle with “ethics” of its practitioners when the teachers of law show no ethical constraint in pursuit of agendas and plainly tainted data and tactics of self-referential bloated “importance.”

    Academics concerned with teaching law should be held to an even more rigorous standard of ethics.

    Until that day, we shall continue to suffer the onslaught of a philosophical crusade that places the desired end over any sense of acceptable means.

    There is a patent war underway. Fought not with bullets and knives, but the battles are very much real none-the-less.

  7. napoleon monroe March 17, 2015 12:17 pm

    MDDI published http://www.mddionline.com/blog/devicetalk/you-think-patents-innovation-dead-wrong-3-12-15?cid=nl.mddi01.20150317 on the subject study. A rebutal from you would do the medical device industry a great service. Thank you.