Behind $234 million Apple suit, an aggressive university patent office

The first in a two-part series on universities and patents. Read part two: As Congress eyes patent reform, it meets opposition from universities

Last week, a federal jury ordered Apple to pay $234 million in damages in a closely-watched patent dispute over technology used in processors in the company’s popular iPhone and iPad models.

The amount fell short of what was expected – up to $862 million – with the possibility to increase that amount if the company was found to have misused the patent willfully. Apple has said that it plans to appeal the jury's ruling.

But the recipient of the windfall wasn’t a typical tech company or even a single inventor prevailing over a Silicon Valley colossus – it was the University of Wisconsin’s licensing arm, which asserted that it has owned the patent since a team of Wisconsin researchers developed the processor-enhancing technology in 1998.

The suit, which follows on the heels of a $110 million settlement between the university’s Wisconsin Alumni Research Foundation and Intel in 2008 over the same patent, points to what observers say is still an unusual outcome – universities prevailing over large patent holders such as tech giants, pharmaceutical companies, and other corporations that they argue can rake in millions from innovations by university researchers.

“WARF invests in patenting UW inventions for the benefit of the UW and the public,” the foundation says in a statement after the ruling was announced. “It is important to faculty and to the UW that patented, innovative technologies developed on campus are protected from unauthorized use.”

Since a 1980 federal law that allowed universities to claim patent rights over inventions developed through publicly-funded research – primarily grant funding – nearly all research universities have introduced so-called technology transfer offices that handle patent licensing issues and negotiate with faculty over their research.

University officials say the key goal of technology transfer is to promote the “public benefit of intellectual property” in a way that is consistent with a university’s mission and educational goals, the Association of Public and Land-Grant Universities (APLU) noted in a statement in March. Universities were responsible for 53 percent of national basic research in 2012, the head of the Association of Technology Managers, which represents tech transfer offices, told a Senate Committee in March, adding that this research could lead to new innovations and even new industries.

Technology transfer is intended as a means to protect patented technology created by university researchers and affiliates, not as a money-making venture, the APLU noted in its statement, adding that universities should only use litigation as a last resort.

But while such offices can make thousands of business deals each year with outside companies for the use of their patents, very few of these deals turn out to be profitable, a 2012 Brookings Institution report found.

That year, only 8 universities – the top 5 percent of earners in the study – took home 50 percent of the total revenue from licensing patents, the report found. The University of Wisconsin was ranked 13th, with its technology transfer office filing 33 lawsuits against 31 defendants since 2000, Reuters reports.

“They have the illusion that patent protection is a way to cash in, even though they haven’t seen the millions coming in except for a very, very few elite universities,” says Walter Valdivia, a fellow at Brookings’ Center for Technology Innovation who wrote the report, in an interview with the Monitor.

But in the absence of such blockbuster deals, there have been other issues, including how universities negotiate with their own researchers.

'Bullying and trickery'

In 2006, Galen Suppes won a national award from the Environmental Protection Agency in part for the discovery of a way to turn glycerin – a byproduct of biodiesel – into antifreeze.

The applications were numerous – helping soldiers stay cool in the desert or keeping bottled drinks cold in an environmentally-friendly manner, for example. But when Professor Suppes, who teaches chemical engineering at the University of Missouri, attempted to patent his research for commercial use, the university balked, asserting that it controlled the rights to inventions by university employees.

After he filed a grievance alleging the university wasn’t responding to his concerns about patents, the university instead filed suit against one of their own in 2009, telling Suppes that he had violated his employment contract and subverted the typical process for applying for patents – which are controlled by the university’s technology transfer office.

He eventually counter-sued, saying that he had intended to patent the inventions through a separate company that funded his research, collaborating with a former graduate student who was paid a salary by his company, Renewable Associates, not the university.

“Their solution was to claim all rights to the patents (including the rights of my company as resulting from a company-paid employee being an inventor),” Suppes, who has taught at Missouri since 2001, says in an e-mail. “Their claim was followed by all kinds of bullying, stonewalling, and even destroying my research program ... to get the patent rights through bullying or trickery.”

Missouri’s suit was eventually dismissed by a federal court, which found that it did not have jurisdiction over the dispute, but more than six years later, the legal battle is still ongoing.  Since then, Suppes says he has grappled with the transfer office over other inventions, including a high-speed glider system called the Terreplane that he hopes could be used for land-based passenger travel.

Previously, the university had called the lawsuit a “last resort,” to ensure inventions by researchers employed the university are protected. “It is vitally important to secure for the people of the state of Missouri the full benefits of research done by the University of Missouri,” university provost Brian Foster said, according to a case study by IP Advocate, an organization that works with researchers on intellectual property issues.

Suppes says the university sees patents as a “key revenue stream,” based on the idea that faculty members would form public companies with the university. But that would put researchers who do want to commercialize their research under the control of university administrators, he says.

“A major problem with university control of technology is that the negotiating [party] is a group of technology transfer people and administrators who contributed little to the generation of the technology, and have little to lose by simply letting the technology flounder while moving on to the next project,” he adds.

A start-up model for patents?

Mr. Valdivia, the Brookings researcher, says he also has concerns about how technology transfer offices operate. He argues universities should consider allowing researchers to create their own start-ups within the university to develop commercial applications for their research, instead of leaving licensing negotiations to technology transfer offices, which he says are often staffed at the executive level by former patent attorneys or venture capitalists with a more profit-driven motive.

“My proposition of an emphasis on university startups would imagine a business-oriented person [but] it really would require someone who comes more from the university or that embodies the mission and the values of the university,” he says.

Another ongoing question, as Congress consider patent reform, concerns what constitutes a good-quality patent that’s enforceable and not derivative. Early in the Wisconsin case for example, Apple had attempted to appeal to the US Patent and Trademark Office, arguing Wisconsin's patent was no longer valid, a bid the office rejected in April.

Creating good-quality patents is a concern for nearly all companies, including universities, says Aaron Cooper, a lawyer at the law firm Covington & Burling who focuses on intellectual property issues.

“There’s so much activity in this space and so many people – fortunately, I think, for the country – inventing, there are issues that are going to continue to need to be resolved,” he says.

The first in a two-part series on universities and patents. Read part two: As Congress eyes patent reform, it meets opposition from universities

[Editor's note: This article has been expanded from its original version to include additional data and perspectives.]