Don’t Sell Government-Funded Inventions to Trolls

Federally funded inventions are supposed to stimulate innovation and new business models, but in the hands of patent trolls they do just the opposite.

Research funded by the United States government should benefit everyone. That’s why EFF so strongly supports the idea of writing an open access requirement for federally funded research into the law as soon as possible. It’s also one reason why we recently launched Reclaim Invention, a campaign asking U.S. universities to rethink their patenting policies. It’s crucial that federally funded research be made available to the public so that anyone can read and use it, not just people with institutional connections. But even if the public can read government-funded research, patents on inventions that arise from it can still fall into the wrong hands and undermine the public interest.

Federally funded inventions are supposed to stimulate innovation and new business models, but in the hands of patent trolls—companies that do nothing but amass patents and sue others for patent infringement—they do just the opposite.

The National Institute of Standards and Technology (NIST) recently asked the public to weigh in on the rules that guide how universities patent federally funded inventions. We urged NIST to consider amending the rules to address the problem of universities selling patents to patent trolls.

NIST is working on updates to the federal regulations that guide patents on inventions paid for by the government. 37 CFR Chapter IV is the set of regulations implementing the Bayh-Dole Act, the 1980 law allowing those conducting research with government funds to file for patent protection. The purpose of the Bayh-Dole Act is to encourage licensing of federally funded inventions to companies that can bring those inventions to public use, with special preference given to small businesses based in the United States. (Whether Bayh-Dole was the right way to achieve this goal is beyond the scope of this post.)

The rules provide specific requirements that contractors must include in their agreements with patent licensees, and outlines circumstances in which the government may intervene if a licensee fails to comport with the law’s intent to bring inventions to the public market.

EFF urged NIST to explore ways to tackle the problem of universities selling patents to non-practicing entities (NPE), or patent trolls. Trolls fail to meet the Bayh-Dole Act’s charge to promote active use of government-funded inventions. They almost never play any substantive role in bringing an invention to market (in the overwhelming majority of patent infringement suits brought on by NPEs, the defendant developed the product or service independently).

We asked NIST to consider adding guidelines for grantees that would give preference to licensees that have shown a commitment to research and development in the area of technology the patent covers and who do not have a history of merely using aggressive patent litigation against practicing, independently inventing companies. Such guidelines would work within the confines of the statute, and clearly support its intent to use practicing businesses to produce and develop government-funded inventions.

In our comment, we mention that several universities have acknowledged the problem of universities licensing patents to trolls. Over 100 institutions have endorsed a whitepaper warning of the dangers of licensing to non-practicing entities (unfortunately, many of those same institutions have sold patents to notorious troll Intellectual Ventures).

Some institutions have taken active steps to address the issue. Stanford University’s standard patent license (PDF) bars licensees from suing third parties for patent infringement, unless the licensee is “diligently developing or selling” the licensed invention. We hope to see such policies become the standard rather than the exception. Clarifying the rules to prioritize licensing to practicing companies would be a big step in the right direction.