UCLA may be financially and legally affected by a recent Supreme
Court decision giving companies more power to challenge patents
they are paying to use.
If a party patents a technology, outside companies can pay for a
license to use that invention. But sometimes companies will
challenge the legality of the patent, claiming that it is not
valid. Common reasons companies have for challenging patents
include claims that the patent holder actually was not the first to
use the technology in question.
The Supreme Court ruled 8-1 earlier this month that even after a
company has licensed a patent and is paying royalties to the patent
holder, it may legally challenge the validity of the patent.
This decision could have implications for universities such as
UCLA that license patents for technology developed by their
scientists and researchers.
Last year, UCLA licensed about 35 patents, many for medical and
engineering technologies, said Emily Loughran, director of
licensing for the UCLA Office of Intellectual Property.
In 2004, licenses generated over $74 million of revenue for the
University of California system, according to the Chronicle of
Higher Education, which reports news related to colleges and
universities.
Loughran said that in light of the Supreme Court’s
decision, the university will likely change the terms of new
licensing agreements to allow UCLA to immediately terminate the
contract if a company sues.
“We’re going to protect the university’s
intellectual property,” she said. “Our concern is that
licensees could use it as a tactic” to negotiate better terms
of their agreements.
But she said existing licensing agreements do not include such
language, and that UCLA does not currently have plans to
renegotiate those agreements.
She added that so far, no licensees of UCLA patents have
indicated they plan to challenge those patents.
But Mark Grady, a UCLA law professor, said he would not be
surprised to see such lawsuits spring up.
“I bet it will result in a significant increase in
lawsuits,” he said. “There are so many patents out
there … over such trivial things, and not all of these patents
can be valid.”
In the case decided by the Supreme Court on Jan. 9,
pharmaceutical company MedImmune sued biotechnology firm Genentech,
claiming that one of the patents Genentech had licensed to it was
invalid.
Grady said companies often choose to pay royalties for a patent
even if they think it is invalid because it is often cheaper to
license the patent than to pay for a lawsuit challenging its
validity.
The UC, along with six other universities, submitted a brief to
the Supreme Court during the case, asking the court to rule in
favor of Genentech, which maintained that a company does not have
the right to challenge the patent once it has agreed to license
it.
“Universities use royalty revenue to fund further
scientific research and educational programs,” the
universities argued in the brief. “The continued success …
depends on the stability of patent licenses, which would be
threatened if MedImmune’s position were accepted in the
present case.”
But the court finally ruled in favor of MedImmune, a decision
Grady said could affect the way companies and universities decide
whether to license a patent at all.
“It’s going to create less of an incentive (to
license patents),” he said. “Just because your
competitor is a licensee doesn’t mean they can’t
challenge it. I think this is going to affect every industry that
is thick with patents, which is just about every technological
industry.”
But Loughran said she does not believe UCLA will change its
decision-making process based on the Supreme Court’s
decision.
“I don’t think that it should (change
anything),” she said. “We like to operate from the
position that most of our licensees are going to be fair and
equitable.”