Monetizing University Patent Portfolios During the Economic Downturn

Farella Braun + Martel LLP
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Farella Braun + Martel LLP

[co-author: Sarah Tsou*]

Colleges and universities may be leaving money on the table with under-utilized patent portfolios. The time is right, as the law has shifted in favor of patent owners, both in inter partes review litigation before the Patent Office and in federal courts.

The COVID-19 pandemic has hit every corner of the country’s economy, including universities. Universities that need new revenue streams should strongly consider monetizing their often vast but under-utilized patent portfolios through strategic enforcement and licensing. (Note: We of course do not advocate asserting any IP right that might hinder a coronavirus treatment or cure.)

Fortunately, the cost of licensing and asserting patents is not the hurdle it once was. Universities and others are increasingly partnering with outside counsel and litigation funders to monetize their patents at little or no cost. In most litigation funding arrangements, the funder pays all or nearly all litigation costs in exchange for a portion of any recovery. And recoveries for universities can be enormous. Earlier this year, for example, CalTech won a $1.1 billion judgment against Apple and Broadcom in a case involving wireless data transmission technology. Several years ago, Carnegie Mellon settled its patent infringement suit against Marvell Semiconductor for $750 million.

The law has shifted in favor of patent owners, too, both in inter partes review (IPR) litigation before the Patent Office and in federal courts.

IPR Trends Favor Patent Owners

Since its creation in 2011, the IPR process by which defendants challenge the validity of a patent outside the courtroom has often derailed the vindication of patent rights in court. Now, according to USPTO Trial Statistics, the rate at which new IPR proceedings are being formally initiated (“instituted”) is at an all-time low, falling from an 87% institution rate in 2013 to just 56% thus far in 2020.

Other IPR changes also benefit patent owners. A ruling from earlier this year held that an IPR can be rejected even if it is based on new theories that the Patent Office never considered before. And an IPR may be rejected if there is an ongoing lawsuit nearing resolution These and other changes make it more difficult for defendants to disrupt a patent infringement lawsuit with a non-meritorious IPR.

Federal Court Rulings Also Benefit Patent Owners

Recent federal court decisions have also made the legal landscape more friendly to patent owners. For several years, courts have progressively limited a 2014 landmark Supreme Court ruling that eased the path to invalidating patents as “abstract ideas” that are not patentable. In 2016, for example, the Federal Circuit declined to “broadly hold that all improvements in computer-related technology are inherently abstract” and thus invalid. Other recent cases have held that a patent may survive a validity challenge if it describes a “specific asserted improvement in computer capabilities.”

How to Plan a Patent Assertion Program

Universities can take these steps to prepare for a patent licensing and assertion program:

  • Identify high priority patents: Organize patents by subject matter, date, and history of assertion or use. Certain technical areas are more vulnerable to legal attacks on validity and damages. Earlier priority dates for the given market are generally favored by counsel and funders, as is a successful history of litigation, licensing, or commercialization.
  • Conduct due diligence: Perform initial infringement and invalidity analysis, identify the market impact of patents and potential valuation, and consider relevant witnesses (including inventors).
  • Engage the right partners: Involve counsel and funders early and often. Experienced partners can validate a patent portfolio’s strength as well as provide valuable insight into potential risks and strategic considerations.

Many universities possess valuable patents that are costly to maintain. This may be the right time to start realizing the value of such patents.

*Sarah Tsou is an investment manager & legal counsel for Omni Bridgeway (formerly known as Bentham IMF in North America). Omni Bridgeway provides capital to claimants and law firms to assist them with financing large-scale commercial disputes around the world.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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