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.
It’s no secret that the regulatory environment is challenging for companies that license patents – in our case, patents that are deemed essential to wireless standards and that our company, InterDigital, has developed in-house over the course of multiple decades, and continues to develop today. Some of the companies that dominate the wireless market today had little or nothing to do with the development of the standards that have contributed so much to their success, so they make every effort to devalue standards participation. And many in Washington lend them a willing ear, and take up arms to wage their battle for them.
One of the greatest frustrations for me is that so much of this rests on a bedrock of total miscomprehension of how standards are developed, the enormous cost and risk of investing in standards development, the value that standards provide, and the kind of licensing practices that have made the market successful, benefitting everybody. Late last year in New York, I met with a reporter for one of the primary tech websites in the world, and he dismissed standards development. It became apparent he didn’t understand how the process worked at all. When we asked him how he thought these things got developed, he said that he “figured there must be an engineering organization somewhere that did it.” And this is from the legal correspondent of a major tech website, someone whose articles influence debate!
He didn’t realize that it was private sector companies – companies like ours – that committed significant engineering time and resources, and competed to develop the best solutions, and in so doing committed to licensing them fairly. So – for his benefit, should he read this, and for the benefit of anyone involved in the debate – I’ll describe our company’s story, and draw some conclusions about what should and shouldn’t be done to protect, foster and incent innovation that benefits everybody.
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:
Recently in the news you may have read that some are questioning the success, viability and wisdom of Universities owning patents, pushing back against University patent rights in order to raise a debate over the usefulness of the Bayh-Dole Act of 1980. While perhaps predictable it is rather sad given the unquestionable truth that Bayh-Dole has been extraordinarily successful. The Economist wrote: “Possibly the most inspired piece of legislation to be enacted in America over the past half-century was the Bayh-Dole act of 1980… More than anything, this single policy measure helped reverse America’s precipitous slide into industrial irrelevance.” Economist Technology Quarterly, Dec. 14, 2002. Lofty praise indeed, but the facts back up the claim.
The facts are overwhelmingly on the side of those who know and understand that Bayh-Dole has been a thorough and profound success. Indeed, if you actually look at the facts no one could ever objectively question whether Bayh-Dole is succeeding or has been good. Yet, year after year supposed experts and scholars choose to ignore the objective data and question whether we should go back to the way it used to be — back when no University technology was commercialized due to the enormous red-tape involved.
This isn’t just a philosophical debate. There is a right and a wrong answer, and to think that the New England Journal of Medicine would aline themselves with the clear and objectively wrong answer would be astonishing if it weren’t so predictable. The agenda of those who despite patents and the progress of science thanks to incentivizing behavior knows no boundaries.
Of course it would be wonderful to live in a world where self-interest takes a back seat to humanitarian efforts and altruism on all occasions; where financial incentives are not required to promote the greater social good. That, however, is not the world we live in and the regimes where this economic philosophy has been tried have unanimously faltered or failed. If we want maximum good for society pursuing a path that results in maximum good ought to be the agenda, not some pollyannish pursuit of the impossible because it feels better or fits into some pre-ordained social narrative that some deem acceptable. Failure for an altruistic reason is still failure, and when we are talking about the economy, jobs and hundreds of life saving treatments and cures the right thing is to do the most good. It is truly a pity that some would choose not to maximize social good simply because it means someone else will make money in the process.
“Man Controlling Trade,” outside of FTC headquarters in DC.
The Federal Trade Commission will require Honeywell International Inc. to license patents critical to the manufacture of two-dimensional (2D) bar code scanners, under a settlement resolving FTC charges that Honeywell’s acquisition of rival scan engine manufacturer Intermec Inc. would be anticompetitive.
The proposed FTC consent order preserves competition in the market for 2D scan engines by requiring Honeywell to license its and Intermec’s patents for 2D scan engines to Datalogic IPTECH s.r.l for the next 12 years. Scan engines are used in products such as retail store scanners to translate an image (often a UPC barcode) into a digital format that can be interpreted and analyzed by a computer.
“Although divestiture of assets is the preferred remedy in merger cases, licensing requirements can preserve competition in markets where access to needed technology is the main barrier to entry,” said Deborah Feinstein, Director of the FTC’s Bureau of Competition. “By requiring Honeywell to license its technology, the proposed order gives Datalogic access to the patents it needs to enter the U.S. market immediately and restore the competition lost due to the merger.”
I am frequently asked by inventors whether they should file a patent application and obtain a patent before they submit the invention to a licensing company like Lambert & Lambert.
This is an age-old question, which is really the patent/invention equivalent of the chicken or the egg. Moving forward with a patent doesn’t make a lot of sense if the invention is not likely to be marketable. I always tell folks that the best invention to patent is one you will make money with regardless of whether you ultimately obtain a patent. So I do believe there needs to be market considerations factored into the analysis. After all, the goal is to make money and investing in a business or to obtain a patent makes sense only if there is a reason to believe more money will be made than spent. Having said that, without at least a patent pending you have absolutely no protection unless you obtain a signed confidentiality agreement, which is not always easy to do. But even if you do obtain a signed confidentiality agreement that contract will only protect you with respect to those who have signed the agreement.
Without a patent pending you also don’t have anything to license other than an idea that lacks tangible boundaries. While that is not always an impediment to moving forward, the further you can develop your idea the better. The more tangible the more valuable. So an idea is worth something to some people, but an idea that has taken more shape and is really an invention is worth even more. An invention that has been defined in a provisional patent application is worth more, and of course an issued patent takes away much of the risk and questions associated with whether your invention is new and unique. But now we are getting ahead of ourselves. The business of inventing needs to be considered a marathon — not a sprint. Take things one step at a time, proceed deliberately and invest little by little and only so long as it makes financial sense. See Financially Responsible Inventing. That is why starting with a provisional patent application is frequently the best thing to do.
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.
Typically blog roll links are not helpful to a website's rank. To give some additional "link love" to those we think you might be interested in reading we have moved our blog roll and links to a dedicated page. Go to IPWatchdog Blog Roll & Links.