Monday, October 7, 2013

Lee: Patents and the University

How do universities treat patents, and how does patent law treat universities?

These are the main questions addressed by Peter Lee, Professor of Law at University of California, Davis, in his new article, "Patents and the University," forthcoming in the Duke Law Journal. Lee has written several articles on the effects of patents on university research and a more recent article examining the role of patents in university-industry technology transfer. Now Lee provides a comprehensive history of the relations between patents and universities, generally. In Lee's telling, this relationship is characterized by two parallel developments: increased use of patents by universities, on the one hand, and "internalization" of universities and university research into patent law, on the other.

Bayh-Dole and the changing position of universities towards patenting has been covered by scholars like Rebecca EisenbergBhaven Sampat, David MoweryRichard Nelson, and Arti Rai. Others have argued that United States universities are a so-called "cultural commons," and are thus "protected by a host of formal and informal legal rules and exceptions." But the idea that universities have received exceptional treatment in patent law and doctrine, specifically, has not, so far as I know, been extensively developed - making this Lee's thesis to prove.

1. Summary of the Article

As a relative newcomer to this area, I found it worthwhile to read Lee's article in detail. But for those who haven't read it, I'll do my best to summarize his major arguments and evidence.

In the first part of the article, Lee contends that, historically, the relationship between universities and patent law was characterized by "mutual exclusion." Despite the practical focus of American colleges and universities in the nineteenth century, Lee argues, "academic norms often discouraged patenting. Furthermore, when universities first entered the patent system, they did so to advance uniquely noncommercial values." After reviewing several cases of university patenting that did occur - such as Frederick Cottrell's decision to patent his invention of an electrostatic precipitator at UC Berkeley in 1907 - Lee concludes that university patenting in the early twentieth century reveals "deep anxiety over blending academia and commerce as well as a commitment to utilizing patents to serve the public interest."

In the parallel strand of this argument, Lee contends that, in crafting evolving patent law doctrines, courts unconsciously if not intentionally stressed the "exceptional" status of academic science and the scientists responsible for it. Along with the classic "experimental use" exception to patent infringement, formulated by Justice Story to excuse "philosophical experiments" unlikely to effect patent holders' pecuniary interests, Lee's main example of exceptional treatment for academic science is patentable subject matter. For example, Lee cites Justice Grier's dissent in O'Reilly v. Morse, stating that "principles of nature" cannot be patented until they leave the "laboratory of the philosopher." Lee also highlights a Second Circuit opinion from the first half of the 20th century, stating that "[e]poch-making 'discoveries of 'mere' general scientific 'laws,' without more, cannot be patented," and that, in any case, "scientists like Faraday care little for monetary rewards..." Thus, Lee's account implies, courts' exceptional treatment of academic science in determinations of patentability was due at least in part to courts' perception that scientists are not motivated by the commercial norms underlying patents.

Lee then describes a transitional period around 1980, during which "patents entered the academy." Noting that some universities were already patenting prior to this time, he nonetheless cites data showing that university patenting grew more than 480% between 1980 and 2005. Lee describes a variety of contributing factors for this increase, including not just the Bayh Dole Act (1980), which allowed universities to take title to patents on federally funded research, but also economic policies increasingly focused on commercialization, more university-industry partnerships, the dramatic growth of the biotech industry, and the Federal Circuit's emergence as a favorable forum for patent holders.

In the next half of the paper Lee describes how, following these developments, the wall dividing patents and the university further eroded. Universities established sophisticated technology licensing offices and began linking tenure decisions to number of patents in order to push researchers to patent their work. Universities also started to aggressively license and enforce their patents. Meanwhile, Lee argues, universities' exceptional status in patent law also eroded, as courts re-positioned universities as repeat players with the same commercial focus as everyone else. Lee's evidence for this trend (which he calls "internalization") includes Chakrabarty's expansion of eligible subject matter to include "anything under the sun," and the lower threshold for "utility" epitomized by In re Brana, which allowed a patent on compounds showing therapeutic effects in mice even though the compounds hadn't yet been tested in humans. While Lee does not argue intent or causation, he suggests that, in crafting these doctrines, courts implicitly "relied on (and reinforced)" the conception that, since so many products of university science can be patented, and since universities rely on their patents for a "not insubstantial revenue stream," universities can no longer expect special treatment, such as a liberal experimental use exception or an exception to the statutory bar for public disclosures made in academic presentations over a year before filing.

In the concluding part of the article, Lee notes a potentially disturbing asymmetry to these developments: even though universities now pursue patents and seek to maximize patent revenues, and courts have accordingly rejected "academic exceptionalism" in patent law doctrines, universities still retain their exceptional status in various statutory carve-outs, such as:
  •  the America Invent Act's (AIA's) (2011) complicated first-to-file rule, which retains the historic one-year grace period during which scientists can publish their work without preempting themselves, even though most other countries using a first-to-file system do not allow a grace period;
  •  the AIA's expansion of preferential treatment for universities in the prior user rights defense, which protects the prior user rights of entities (including universities) that can demonstrate that they were commercially using the invention for at least one year prior to the patent filing date, while also creating an explicit "University Exception" to the prior user defense for patents owned by or assigned to universities or affiliated technology transfer organizations; and
  • the AIA's 75% reduction in patent filing fees for applicants under an obligation to license their applications to universities. 
Lee suggests that at least some these carve outs "illustrat[e] classic legislative rent-seeking" and effective lobbying by universities for favorable treatment from Congress. In the final "prescriptive" portion of the paper, he argues that some carve-outs - particularly reduced university filing fees - should be discarded, while others should not. For instance, he supports the CREATE Act (2004)'s safe harbor for joint research agreements - which ensures that inventions produced pursuant to joint research agreements won't be barred from patentability by prior art produced by members of the same team - because cooperative agreements between university and industry "serve as valuable conduits for transferring academic technical knowledge to the private sector (and vice versa)."

2.   A Few Quibbles With Lee's Descriptive Account

As with Lee's other articles, this is thorough and invaluable research for anyone writing on this topic.  Lee effectively uses original examples from case law, statutes, and legislative history. However, there are a few instances where Lee may have sacrificed accuracy to prove his case. Here are three examples.

First, Lee argues that the relationship between universities and patents was once characterized by "mutual exclusion," but that this is no longer the case. However, as noted above, Lee concedes that plenty of university patenting did occur prior to Bayh Dole. Meanwhile, today, some university scientists are vocal about their anti-patent views (think of Francis Collins' opposition to patenting genes), while others see no problem with patents. Can we really characterize this as a paradigm shift from an anti-patent to a pro-patent university culture? I suspect Lee's suggestion that we can will lead to some interesting exchanges.

Second, if courts have rejected "academic exceptionalism" in patent law as widely as Lee claims, then why do state universities not have to pay damages for their patent infringements without consent? In Florida Prepaid (1999) the Supreme Court held that Congress' attempt to abrogate states' sovereign immunity for patent damages under the Plant Variety Protection Act was invalid and that states (including state universities) cannot be sued for patent damages absent "consent" or valid abrogation by Congress under Section 5 of the 14th Amendment. Scholars like Robert Neufeld have argued that states' sovereign immunity from patent damages represents an "imbalance" in the allocation of patent rights between states and private entities. Especially when combined with state universities' own ability to get injunctions along with damages under Ebay (2006), their sovereign immunity from patent damages would seem to represent a major instance of what Lee calls "academic exceptionalism": state universities can't be sued without consent for patent damages but may obtain an injunction as well as damages against infringers of their own patents. Although it could be that sovereign immunity is an instance of government exceptionalism and has nothing to do with state universities' status as institutions of learning and research, I still think the topic deserves more treatment than a footnote on page 45. With respect to Ebay, Lee argues the decision actually supports his argument that modern courts have now rejected academic exceptionalism because it represents “the Court’s lumping together of universities and other inventive entities,” both of which can get injunctions so long as they satisfy the usual four-factor test... But in another footnote, Lee concedes, citing work by Colleen Chien and Mark Lemley, that universities have achieved higher than average rates of obtaining injunctions relative to other NPEs and that this might "represent a kind of academic exceptionalsim."

Third, I am not sure all universities would agree with Lee that the AIA's grace period was "especially beneficial to academic inventors." As Lee mentions, some universities objected to the AIA because they were concerned the grace period would not be enough to protect inventors from preempting disclosures made one year prior to filing. Those universities are likely to be upset in light of the fact that the USPTO's Proposed Rules clarify that most disclosures by third parties will continue to be treated as prior art even when a third party disclosure is preceded by an inventor's own public disclosure. Moreover, the § 102(b)(1)(B) exception can only be invoked if the subject matter in the third party disclosure is substantially identical to the subject matter previously disclosed by the inventor.  Thus, if a scientist shares her results a year before filing for a patent, and someone else makes a similar but not identical disclosure, this could preempt her patent.

3. What Role Should Patents Play in the University?

Quibbles aside, I found Lee's descriptive take convincing and elegant, and - perhaps because I also studied history of science prior to the law - I appreciate his willingness to seek trends and parallels in history, even when it sometimes requires selective use of historical facts. Perhaps wisely, Lee keeps this article mainly descriptive and chooses to avoid a bold stance on whether universities' embrace of patents is normatively desirable. But based on Lee's statements about the benefits of the CREATE Act for collaborative university-industry research and his prior work on university-industry technology transfer, I think Lee would agree that the most valuable potential contribution of patents to the university is as a means of transferring academic knowledge into the private sector and vice versa, not simply as a source of revenues to fund university operations and research. (It's not even clear that patents bring in much revenue for universities.)  Lee leaves open the question of whether patents effectively promote university-industry technology transfer either in theory or in practice. Brett Frischmann has some interesting ideas on this.

All in all, I highly recommend Lee's new article, as well as Transcending the Tacit Dimension, and I look forward to the next one.

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