Universities fear proposed patent legislation would impair innovation.

Universities fear proposed patent legislation would impair innovation.

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U.S. universities and electronics companies spar over 'patent troll' bill

New sparks are flying in a timeworn debate over how to crack down on bogus patent lawsuits. Efforts to deter so-called patent trolls—firms that base their business on amassing patents and then suing other firms for infringement—have often put universities at odds with the technology industry. This week, a group of electronics companies sent a letter to more than 120 universities asking them to rethink their opposition to recently proposed legislation aimed at disarming patent trolls—a move that may polarize the issue further.

At the center of the debate is the Innovation Act, introduced in the U.S. House of Representatives in February as a way to make it harder and more financially risky for a company to file a groundless patent infringement lawsuit. Supporters of the bill say it would protect small- and medium-sized companies that often agree to costly settlements when they can’t afford to fight infringement charges in court.

But universities—which since 1980 have been able to license and profit from patents on the inventions of their researchers—fear that measures to deter patent trolls from suing might also make it too difficult to enforce their own patent rights. Compared with high-tech companies, universities are more often on the giving end than the receiving end of the legal threats, says Arti Rai, a patent law expert at Duke University in Durham, North Carolina. The tension has existed for nearly a decade and flared when a bill similar to the Innovation Act stalled in the Senate last year. “It’s a real standoff,” Rai says. “As far as I can tell, there isn’t necessarily a whole lot of room for compromise.”

In February, the group of universities laid out their concerns about the new bill in a letter to leaders of the House and Senate judiciary committees. They find two provisions especially troubling. One would require the losing party in a patent infringement suit to pay the winning party’s legal fees. That could deter patent trolls from suing, but could also deter universities and their startup companies, who have limited funds to pursue complicated litigation, from going after infringers, the letter claims. They also oppose a related provision that would force co-owners of a patent to step in and pay these fees if the losing party couldn’t. This “involuntary joinder” is intended to hold parent companies responsible for the actions of shell companies set up solely to file lawsuits. But universities fear they might be forced to pay fees if they are joined with a company licensing one of their patents.

“We’re puzzled by that,” says Michael Petricone, senior vice president of government and regulatory affairs for the Consumer Electronics Association (CEA), an industry group representing more than 2000 technology companies. “If there is something in the bill that is going to negatively impact you, then you may want to reassess how you’re doing business.” CEA released a letter Wednesday—cast as a plea “on behalf of thousands of your alumni” who own companies—arguing that the controversial provisions are unlikely to hurt universities. According to the bill, fee shifting and joinder would be on the table only when a lawsuit is deemed not to be “reasonably justified in law and fact,” and suits filed by a university wouldn’t fall into that category, Petricone says.

Two major university groups were quick to respond. A joint letter from the Association of Public and Land-grant Universities and the Association of American Universities, some of whose members are among the schools opposing the current bill, says universities stand “united in opposition to the abusive practices of patent trolls,” but will continue to push back on the Innovation Act’s provisions. The bill isn’t clear enough about when fee shifting and joinder would apply, they argue, and it places excessive burden on the parties asserting their patents to prove they are not bad actors.

The letter concludes by “inviting” CEA to support a different approach. Many universities and the biotech industry back a competing bill introduced by two democrats in the Senate last month that would focus more narrowly on deterring demand letters—notices that threaten a lawsuit if a company doesn’t pay licensing fees. But Rai points out that the Innovation Act has “strong momentum” behind it in the Republican-controlled House and Senate.