This month’s column is based on my remarks to the Association of University Technology Managers (AUTM) at their annual meeting in San Francisco.
First of all, congratulations! You made TheWashington Post and they even spelled your name correctly. Unfortunately, AUTM was specifically called out in an article titled Patent Trolls Have a Surprising Ally: Universities.The name of another article appearing at the same time Patenting University Research Has Been a Dismal Failure, Enabling Patent Trolls: It’s Time to Stop while long winded speaks for itself. And two innocuous sounding reports from the Brookings Institution Building an Innovation Based Economy and University Start-Ups: Critical for Tech Transfer say that Congress should amend the Bayh-Dole Act to give the federal government control over whether you can grant exclusive licenses, that you have been unsuccessful as most technology transfer offices are not self-supporting, that your business orientation conflicts with the mission of a university and your alleged model of “licensing to the highest bidder” has failed. The New York Times accurately summarized the intended message in its headline Patenting Their Discoveries Does Not Pay Off for Most Universities.
For a profession that keeps a low profile and goes out of its way not to antagonize people, you may wonder what in the world’s going on that you are gaining such notoriety. The answer is that you are in the sights of several groups who do not wish you well. Some want to weaken the patent system for their short term benefit, some believe society would be better off if inventions were freely available without patents; some don’t think it’s moral for universities to work with industry, and others believe they should determine who reaps the rewards of innovation. While operating on diverse belief systems, they all have one thing in common: they don’t like you.
Image taken from US Patent No. 6,655,077 titled “Trap for a mouse”
To paraphrase the famous quote of Ralph Waldo Emerson, if you build a better mouse-trap the world will make a path to your door.
If only it were that easy!
Inventors and entrepreneurs frequently take this mouse-trap quote all too literally, thinking that if they make a better product it will sell and make them rich beyond their wildest dreams. Although inventors hate hearing this, the truth is that the invention is the easy part of the process because it is the only part of the entire cycle from idea to commercial success that is completely controlled by the inventor. Once you invent something market forces and the reality of life takes over. There are any number of reasons why an invention won’t make money even if it truly is unique and superior to available alternative solutions.
As any viewer of “Shark Tank” can attest, the variety of financial arrangements which are negotiated between inventor entrepreneurs and investors is broad. A final agreement is always the result of negotiation between the two parties. Unfortunately, many inventors go into the gunfight with a knife, so to speak, over-matched and under-prepared.
Unless you are a veteran of previous negotiation and thoroughly understand the potential value of your invention, you would be wise to engage the services of an attorney and/or a firm who has previously negotiated financial transactions for similar inventions. You don’t want to leave money on the table, nor do you want to have an unrealistic view of your work. Expert assistance can help you avoid either outcome.
The following descriptions are by no means exhaustive, but represent a sample of the strategies you might employ in order to monetize your work:
The Supreme Court on May 20, 2013, agreed to review a Federal Circuit decision that a patent licensee bears the burden of proof in its action for a declaratory judgment of noninfringement where the license remains in effect to preclude the defendant patentee’s infringement counterclaim. Medtronic Inc. v. Boston Scientific Corp., U.S., No. 12-1128, 5/20/2013.
The question presented in the petition for certiorari is as follows:
In Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, 137 (2007), this Court ruled that a patent licensee that believes that its products do not infringe the patent and accordingly are not subject to royalty payments is “not required … to break or terminate its … license agreement before seeking a declaratory judgment in federal court that the underlying patent is … not infringed.”
The question presented is whether, in such a declaratory judgment action brought by a licensee under MedImmune, the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement.
Recently, it has struck me that many business folks who “negotiate tons of IP license agreements,” fail to understand the difference between covenants, representations and warranties that are “standard” in many such agreements. Well, that is not too surprising. What is very surprising, however, is that many of their lawyers also fail to appreciate the differences as well! Many think the terms are synonymous and thus use them interchangeably. They are not. So, for those of you tired of faking the funk, here is some (either fresh or refresher) “Contracts 101!”
A covenant is a promise by a party by which it pledges that something is either done, will be done or shall not be done.
Example 1: “Licensee shall pay Licensor a flat royalty based on 2.5% of Gross Revenues received from the sale of Licensed Products.”
Example 2: “Company A hereby covenants not to sue Company B under any patent listed in Exhibit A for infringement based upon any act by Company B of manufacture, use, sale, offer for sale or import that occurs after the Effective Date.”
A rather astonishing thing is happening currently in the United States Court of Appeals for the Fourth Circuit. The United States federal government, by and through the Department of Justice, is actually arguing in favor of stripping licenses to U.S. patents away from seven companies so that they can be shaken down by a subsequent acquirer of those patents. Yes, the United States government in its infinite wisdom believes that a negotiated patent license ought to be stripped away from companies who have detrimentally relied on the licenses in making business decisions, advancing their own research and development, and with respect to manufacturing and distributing products.
Collectively you rise as one and say — “that can’t be!” What nonsense are you trying to spew? Sadly, it is true and if you keep reading you will soon understand all the sordid details. But suffice it to say that to call this position of the government anti-patent would be unfair to thoughtfully taken positions that call into question one or more patent rights. Indeed, this position can only be properly characterized as ridiculous, garbage, inane and/or idiotic.
The case is In re Qimonda AG, which arises from the insolvency of Qimonda AG, which is a German semiconductor manufacturer headquartered in Munich.
That fellow seems to me to possess but one idea; and that is a wrong one. — Dr. Samuel Johnson
The Brookings Institution’s new report Building an Innovation-Based Economy draws on “two dozen innovation leaders” for its findings. Only one section, “Increasing Commercialization and Technology Transfer,” names no leaders backing its recommendations, perhaps with good reason.
Brookings wants new regulations imposed on university and federal laboratory patent licensing, presenting theoretical problems with no supporting facts. Brookings lightly brushes aside the Bayh-Dole Act’s thirty-two year record of success. The Act believes that technology creators, not the bureaucracy, best understand how to manage resulting inventions. Those recommending sweeping changes face a high burden of proof that Brookings doesn’t attempt to meet.
How to Write a Patent Application is a must own for patent attorneys, patent agents and law students alike. A crucial hands-on resource that walks you through every aspect of preparing and filing a patent application, from working with an inventor to patent searches, preparing the patent application, drafting claims and more.
Without hesitation I recommend One Simple Idea and think it should be required reading for any motivated inventor. There is so much to like about the book and so much that I think author Stephen Key nails dead on accurate. The book is educational, information and inspirational. For the $14 cover price it is essential reading.
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