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United States patent number 7,023,435 almost didn’t happen. The application, which covered a way of imaging a surface, was rejected four times by the US Patent and Trademark Office. But the California Institute of Technology (Caltech) in Pasadena, which filed the patent, fought back — and prevailed in 2005. Caltech’s faith in the hard-won patent was not matched by industry: three years later, no one had licensed the rights to the invention. So in 2008, Caltech exclusively licensed it, along with 50 other patents, to a subsidiary of Intellectual Ventures, a company that has stockpiled 40,000 patents from which it collects US$3 billion in licensing income. The firm sometimes uses its patents to sue other companies for infringement, yet it rarely develops the inventions described by its intellectual property. Such patent-assertion entities, sometimes called aggregators, monetizers or ‘patent trolls’, are questionable homes for university inventions. But in the push to get academic research out of the ivory tower — and to make money — university technology-transfer offices are becoming less choosy about their partners. “As universities struggle to find revenue sources, one might worry that the monetization industry will be very tempting,” says Robin Feldman, director of the Institute for Innovation Law at the University of California Hastings College of the Law in San Francisco. There are already signs that this is happening, she adds. Last year, she published evidence that 45 universities around the world licensed or sold patents to Intellectual Ventures shell companies (T. Ewing and R. Feldman Stanford Technol. Law Rev. 1; 2012). Intellectual Ventures, headquartered in Bellevue, Washington, chafes at the term patent troll. The company’s global head of technology, Patrick Ennis, points to its role in launching three start-up companies, and to deals it has struck with Caltech and other universities to sponsor research in exchange for ownership of the resulting patents as evidence of the firm’s commercial activities. Universities often say that the goal of licensing patents is to stimulate the economy by translating publicly funded research into companies and products. But the unstated aim is to make money to fund more research and the technology-transfer office itself, says Melba Kurman, a former technology-transfer officer at Cornell University in Ithaca, New York, who now works as a consultant. The goals are sometimes in conflict. “If the goal is to monetize the patent portfolio, then it would make sense to auction it off to the highest bidder,” says Kurman. “But when these patents cover taxpayer-funded research, that is not an acceptable solution.” Finding a bidder at all can be a coup for technology-transfer officers, who are often saddled with patents that are years away from practical application. Joy Goswami, assistant director of the technology-transfer office at the University of Delaware in Newark, estimates that only about 5% of patents are licensed at most universities. The rest are a drain on office resources, he adds, because of required maintenance and legal fees. Earlier this month, at a meeting of the Association of University Technology Managers in Boston, Massachusetts, Goswami led a discussion on how to unload the 95% of patents that remain unlicensed. One option is to use a broker or auction house that specializes in trading intellectual property. It is a controversial solution that some universities are afraid to touch. “When you go to sell a patent, the university loses any ability to ensure that it’s being managed in the public’s best interest,” says Kelly Sexton, head of the technology-transfer office at North Carolina State University in Raleigh, which licenses out a relatively robust 15% of its patents. Thomas Major, vice-president of IPOfferings, a patent-broker firm based in Boca Raton, Florida, does not understand the hesitation. He spent nine years managing intellectual property at the University of Utah in Salt Lake City, and says that universities would be foolhardy to ignore auction houses. “When I was at the University of Utah, I would have sold those patents in a heartbeat,” he says. Major says that IPOfferings has handled about 20 patents from universities over the past 3 years — roughly 7% of the firm’s total business. James Malackowski, chief executive of Ocean Tomo in Chicago, Illinois, a company best known for its patent auctions, says that universities are increasingly coming to him, and represent nearly 20% of his business. Both Major and Malackowski say that their firms can place limits on who can buy or exclusively license a patent. Even so, Major says that at least one of his university clients abandoned that request after seeing how much a patent aggregator was willing to pay. “In the end, it just came down to money.” Such decisions violate the spirit of a 2007 memo endorsed by more than 100 institutions. Offering guidance for ethical patent licensing, it cites the risks of dealing with patent aggregators. Yet the signatories include Caltech and three other universities that have licensed patents to Intellectual Ventures, according to Feldman’s research: Duke University in Durham, North Carolina; the University of Florida in Gainesville; and the University of Ottawa in Canada.The universitiesdeclined to comment on the patent deals. Caltech mathematician Peter Schröder, one of the three inventors on US patent 7,023,435, is not too bothered. He would be troubled, he says, if Intellectual Ventures were using his patent to harass other companies, but so far he has not heard of that happening. “It’s not giving me heartache,” he says.

Universities struggle to make patents pay