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The California Institute of Technology (Caltech) is a private university in Pasadena, CA, offering undergraduate and graduate studies with a heavy emphasis on science and engineering. In 2015, Caltech spent more than $300 million on research initiatives and it has surpassed that $300 million mark in each year since 2010. The academic institution holds a patent portfolio of nearly 1,800 active U.S. patents, according to Innography’s patent portfolio analysis tools. Through early June, Caltech had earned 94 U.S. patents from the U.S. Patent and Trademark Office. Statistics released by the Intellectual Property Owners Association shows that in 2014, Caltech was tied for 196th overall among U.S. patent grant recipients; during that year, it earned 172 U.S. patents.
On May 26th, Caltech filed a patent infringement lawsuit in the U.S. District Court for the Central District of California which lists, among other defendants, fabless semiconductor Broadcom and consumer electronics developer Apple Inc. (NASDAQ:AAPL). Broadcom, which was acquired this February by Singapore-based Avago Technologies, and Apple are alleged to have infringed upon four patents granted to Caltech between 2006 and 2012. The lawsuit specifically mentions Apple’s use and sale of Wi-Fi products , which incorporate irregular repeat-accumulate/low-density parity-check (IRA/LDPC) encoders and decoders, technology patented by Caltech. Infringing products include the iPhone 5s, iPhone 6s, iPad Air and Apple Watch. Broadcom was a main supplier of semiconductor chips for wireless devices designed by Apple during the period of infringement.
According to multiple reports, the Caltech patents-in-suit are incorporated into both the 802.11n and 802.11ac wireless connectivity standards, which are used by Apple products to communicate digital information. The four patents, each of which is titled Serial Concatenation of Interleaved Convolutional Codes Forming Turbo-Like Codes, are U.S. Patent No. 7116710, U.S. Patent No. 7421032, U.S. Patent No. 7916781 and U.S. Patent No. 8284833. This series of patents protects methods and an apparatus for encoding and transmitting data messages with a simplified design, which can overcome the theoretical Shannon limit on the amount of data that can be carried on a channel.
This latest patent infringement lawsuit is part of a growing trend where universities find themselves forced to file suit in U.S. district courts in order to protect their patent rights. Last October, Apple was ordered to pay $234 million to the Wisconsin Alumni Research Foundation (WARF) for infringing a patent protecting a technology, which improved the performance of computer processors like those found in iPhones and iPads. Although that’s a sizable award, it was much reduced from the maximum $862.4 million for which Apple could have been liable in the case. In October 2009, WARF settled another patent infringement suit over the same processor patent in a case it filed against semiconductor chipmaker Intel (NASDAQ:INTC). During 2013, Boston University filed suit against dozens of tech companies for infringing patented material related to the production of blue light-emitting diodes (LEDs), including such major names as Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE) and BlackBerry (NASDAQ:BBRY). Last September, Reuters reported that academic institutions file anywhere from 45 to 50 patent-related suits filed each year in the United States.
Whenever academic institutions are seen as a plaintiff at court, there are questions that arise as to why a school is diverting resources away from education activities to win a case against private enterprise. The answer is simple. They are forced to sue because those that infringe the patents refuse to take licenses on reasonable terms, they refuse to negotiate, and they refuse even to return calls. They choose to infringe with eyes wide open because they feel like they can. This is the face of what is called efficient infringement.
Recent overhauls to our country’s system of protecting intellectual property have forced universities and other patent owners into a corner where asserting their hard-earned rights are concerned. Last October, The New York Times reported on the rise of “efficient infringement” which has increased in the wake of the 2011 America Invents Act. Tools created by that legislation to challenge patent validity, such as at the USPTO through the Patent Trial and Appeal Board (PTAB), allow major companies with huge amounts of financial and legal resources to ignore reasonable licensing inquiries and to shift the legal burden onto the patent owner by challenging the patent’s validity. Hostility toward patents in the courts has reached new highs, with numerous cutting edge innovations dealing with software, biotechnology, medical diagnostics and personalized medicine all being routinely found patent ineligible. Rather than take patent licenses, or even engage in negotiations, many companies have calculated that they are better served by ignoring patent rights and openly infringing. These efficient infringers dare universities and other patent owners to sue.
As that New York Times article cited above notes, however, there has been a troubling pattern of associating universities with so-called “patent trolls,” an accusation which is based largely on the fact that, like other non-practicing entities (NPEs), universities don’t manufacture products but license their technologies to others. We’ve been debunking the idea that an academic institution could possibly be the same thing as a patent owner abusing their IP rights by extorting money from small businesses. In a June 2014 interview with then-Association of University Technology Managers (AUTM) president Jane Muir, explained why universities are not patent trolls, saying:
[U]niversities are not the next patent troll because at the end of the day, university tech transfer offices were put into place to ensure that the new discoveries that happen in the research laboratories ultimately get out into the marketplace by way of product and services that improve the human condition. The big difference is with patent trolls. They’re not interested in commercializing discoveries. They’re interested in using those patents to sue legitimate companies who do want to move those products into the market. From the commercialization standpoint that really is the fundamental difference. Patent trolls have no real interest in commercializing.
Indeed, universities work to push as much of their patented innovation into the market so that it will be beneficial to the public. That was the very purpose of Bayh-Dole. Prior to Bayh-Dole, university technology would lay stagnant and not benefit anyone. The government gave universities control of their patents so they could license the technology out and bring revenue in to continue further research. When efficient infringers choose to ignore patent rights and openly infringe they are essentially stealing rights and frustrating the Congressional intent.
Leaving the misguided patent troll conflation argument aside, some tend to raise their eyebrows when they see universities wading into the muck of patent infringement suits, even when those eyes are looking at the situation from the perspective of academia. Reuters reported on an Iowa Law Review study that will be published later this year, which was penned by faculty from both Stanford University and UC Hastings College of the Law. Reuters published a quote from the upcoming study: “The more recent university practice of suing or demanding licenses from existing companies appears much less likely to be driving innovation.”
While we don’t have the full study to critique yet, it must be noted that whether or not university infringement suits drives innovation misses the point entirely. It is no fault of the universities that are forced to sue willful and knowing infringers that litigation is a complete waste of time. The infringers who are engaging in efficient infringement are the ones to blame for the fact that time and money spent in courtrooms fighting over their infringement is distraction them from innovating. Furthermore, efficient infringers who take university technology disrupt the innovation cycle and are to blame for the fact that universities are not innovating as much as they could and should. Had these efficient infringers taken a license to the technology rather than ignored the patent grant in the first place there would have been no wasted time and money on lawyers and legal process, universities would have been paid a reasonable royalty for what was taken and those funds would be reinvested into research and educational programs. The efficient infringers are the ones who need to look in the mirror, not the other way around.
Obviously, patent infringement lawsuits are not filed to drive innovation, they’re filed to protect the innovations made so that fair payments can be received from those who find it more convenient to ignore patent rights and choose to infringe with their eyes wide open. Ignoring license overtures and forcing patent owners to sue is rampant. Getting free riders like Apple, Broadcom and others to pay for what they take so that it can be reinvested into further innovation and educational opportunities is why universities find it necessary to file patent infringement lawsuits. Of course, fairly dealing with university patent owners would be far preferable for everyone involved, but don’t blame universities when the efficient infringers simply circular file inquiries and refuse to return phone calls. Simply put, when an infringer doesn’t care to license at all, what is a patent owner to do?
Much of the media coverage surrounding the recent Caltech lawsuit seems to avoid this idea that Caltech is acting as a patent troll in this case. Still, in light of recent Congressional activities on attempting to pass patent reform, it’s important to note how legislation passed in the past few years has backed universities and other patent owners into a corner as they try to assert their legitimate property rights. Meanwhile, Congress, the judicial system and the wider public continue to flounder helplessly in the patent troll and patent system reform debates almost completely ignorant of the plight of patent owners.
Perhaps in the wake of the Supreme Court’s decision in Halo Electronics v. Pulse Electronics, which now gives district courts discretion to award up to triple damages in certain patent infringement situations. Indeed, the Supreme Court explained that those cases where enhanced damages have been authorized and could at the discretion of the district courts be awarded include cases that can be characterized as “willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.” After Halo Electronics winning triple damages has become much easier and anyone engaging in efficient infringement should be worried. The actions of the efficient infringers are undeniably deliberate, conscious, flagrant and are absolutely characteristic of the actions of classic pirate activity. They take because they can.
How long before an efficient infringer gets tagged with treble damages for engaging in egregious conduct associated with patent infringement? Not soon enough!