Last month Pennsylvania State University held an auction to sell dozens of engineering patents to the highest bidder, setting off speculation on whether the move would produce a financial windfall for the university. It also stirred consternation among some in the world of academic research, who feared the auction might create easy pickings for businesses known as “patent-assertion entities.” Such entities, also known as patent trolls or nonpracticing entities, scoop up rights to patents and then use them to assert infringement claims to unsuspecting companies, which often pay to settle rather than incur the cost of litigation.
With Congress now debating bills to curb that activity, and some in the politically potent technology industry painting universities as soft on patent trolls because of their stance on the patent-reform legislation, the last thing academe needed was a high-profile case of a university’s seeming to abet such activity.
Turns out, neither the windfall nor the scooping up of patents came to pass.
While more than 60 parties registered for Penn State’s online auction, the university got just one bid on single pair of patents out of 53 batches. The bidder, a company that Penn State has not named, offered the minimum bid, $10,000. (Penn State set minimums of $5,000 or $10,000 on the patents, depending on when they were due to expire.) The pair of patents deal with activated carbon, a technology employed in pollution control and other filtering technologies. The bidder is a company that works in the field, and the professor who developed the patents is hoping it might even agree to sponsor further work on the technology.
Penn State officials heard from other universities about the risks of attracting patent trolls when they decided to hold the auction. “We were concerned about that too,” said Ronald J. Huss, associate vice president for research and technology transfer. So it structured the auction in hopes of discouraging them from bidding. (For starters, the auction terms stipulated that the bidders themselves must be the ones making use of the patented inventions and also gave the university the right to control any patent-infringement litigation for six months.)
Before the auction, one nonpracticing entity asked Penn State to change those terms. It refused. “Maybe that worked,” said Mr. Huss.
John C. Vaughn, executive vice president of the Association of American Universities, which represents 62 top research universities, said Penn State’s tactics were right on target. At their meeting this week in Washington, in fact, Mr. Vaughn said the AAU’s members had agreed to reaffirm their opposition to universities that sign licenses with patent aggregators “that have the troll business model.”
That stance, said Mr. Vaughn, might also help universities make their case on Capitol Hill, where they are trying to support measures to curb patent trolls without erecting barriers to universities seeking to assert their patent rights when necessary. Universities typically don’t have deep pockets to pursue patent infringement unless the licensee of the patent does it, and he said they are concerned about measures in a patent bill, HR 3309, adopted by the House of Representatives. The bill is designed to deter patent trolls by requiring the loser in a patent-infringement lawsuit to typically pay the other side’s legal costs. Universities oppose the “loser pays” approach because it could make it too risky for them to pursue cases they believe are legitimate.
Universities also oppose some of the disclosures about patent licenses that the House bill, and legislation pending in the Senate, would require. The technology sector “sees our concerns as trying to water down” the bills, said Mr. Vaughn.
As for Penn State, while the auction itself was not a financial success—the cost of creating the auction website was about $30,000—Mr. Huss said his office had learned from it. One conclusion: Since this was a last-ditch effort to license some of the university’s patents, it will probably cease paying annual fees to maintain the ones that didn’t attract a bidder. But perhaps not so fast. Since the auction ended two weeks ago, two companies have gotten in touch. They may be interested in licensing some of the remaining patents.
