Venture Capitalists Call Patent Aggregators Negative Forces for Innovation

As universities increasingly consider the possible use of patent-licensing and patent-litigation agencies, a couple of new studies by law professors may help them evaluate the pros and cons.

The studies, by Robin C. Feldman at the University of California’s Hastings College of the Law and Colleen V. Chien at Santa Clara University, both tackle the question by asking venture capitalists for their assessments of so-called patent trolls.

And in both studies, the researchers found that venture capitalists—considered an important indicator because of their central role in starting innovative companies—are concerned about entities that buy patent rights as a litigation strategy, as most are already facing demands from them.

“The strong chorus of discontent about patent-assertion activity was striking,” said Ms. Feldman, who this week posted her survey of 200 venture capitalists on the Social Science Research Network. She reported that 64 percent of the respondents told her they were so concerned about the effects of outside patent aggregators that they would not use them even in the event of the failure of the company holding the patents.

Ms. Chien, who surveyed about 300 venture capitalists and venture-backed start-up companies for a study published last month by the New America Foundation, reported a similar result.

Most venture capitalists, including the small number whose companies have sold patents to outside aggregators, regard them as “harmful for innovation,” she wrote. Ms. Chien, an associate professor of law at Santa Clara, moved last month to Washington to serve as senior adviser for intellectual property and innovation at the White House’s Office of Science and Technology Policy.

Even with such opinions from venture capitalists, universities can still count on suggestions that they give patent aggregators a try. Michael V. Risch, a professor of law at Villanova University who sees value in aggregators, said unwarranted opposition persisted among those—including venture capitalists—who fear lawsuits without fully understanding all the trade-offs.

Still, he acknowledged that the experiences and views of venture capitalists and their small start-up companies were important to consider because much of the groundswell for action in Washington against patent aggregators appeared to be driven by large companies that serve as lucrative targets for opportunistic lawsuits.

Ms. Feldman said 70 percent of the venture capitalists she surveyed had experienced at least one demand from a patent aggregator, and Ms. Chien reported a figure of 75 percent.

“Actual evidence that start-ups are getting hit with patent demands is helpful evidence to have in assessing what to do,” Mr. Risch said. “It’s an important question to ask.”

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