Thursday, February 19, 2015

          Feldman and Lemley: Licensing from Patent Demands Generally Does Not Lead to New Innovation

          UC Hastings Professor Robin Feldman has coauthored a dramatic new study with Stanford Law Professor Mark Lemley that refutes one of the common justifications for patent trolls: licensing does not facilitate innovation - no matter what type of entity asserts the patent.

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          Professor Robin Feldman testifies before Congress about patent trolls, also known as non-practicing entities. Feldman is a national thought leader on this subject.

          A commonly offered justification for patent trolls, or non-practicing entities (NPEs), is that they serve as a middleman facilitating innovation, bringing new technology from inventors to those who can implement it.

          However, UC Hastings Professor Robin Feldman and Professor Mark Lemley of Stanford Law School find in their new study “Does Patent Licensing Mean Innovation?” that this justification is not supported by the evidence.

          Feldman and Lemley surveyed people involved in patent licensing to see how often patent licenses spur innovation or technology transfer. “We found that very few patent licenses from assertion actually lead to new innovation,” Feldman says. “Most are simply about paying for the freedom to keep doing what the licensee was already doing.”

          “Surprisingly, this is true not only of NPE licenses but even of licenses from assertion by product-producing companies and universities. Our results cast significant doubt on a common justification for patent activity.”

          “The study underscores the need for comprehensive patent reform,” Feldman concludes. “The problem isn’t confined to NPEs; it is everywhere.”

          Key Findings

          For the so-called middleman justification to be true, patent trolling must facilitate the use of the patented inventions. To evaluate this claim, Feldman and Lemley surveyed 188 people who negotiate patent licenses to see whether the deals they strike lead to new products, technology transfer, or other markers of innovation.  

          A key finding was that licensing as a result of requests from NPEs appears to be largely unproductive:

          • When companies took a license as a result of a patent request or lawsuit from an NPE, 92% reported that those licenses rarely, if ever, led to new products or services.
          • When companies took a license as a result of a licensing request or lawsuit from an NPE, 99% reported that those licenses rarely, if ever, included any technology transfer, transfer of personnel or consulting arrangements, or joint ventures.


          Surprisingly, the results were also dismal when the licensing requests or lawsuits came from product-producing companies and from universities:

          • When companies took a license as a result of a patent request or lawsuit from a product-producing company, at least 70% reported that those licenses rarely, if ever, led to new products or services. And at least 88% reported that those licenses rarely, if ever, included any technology transfer, transfer of personnel or consulting arrangements, or joint ventures.
          • And when companies took a license as a result of a licensing request or lawsuit from a university, 86% of respondents reported that those licenses rarely, if ever, led to any new products or services. And at least 95% reported that such licenses rarely, if ever, included any technology transfer, transfer of personnel or consulting arrangements, or joint ventures.

          These essential results held true both for computer and electronics companies and for life science companies.

          The authors conclude that their results, if generalizable, suggest that licensing from patent demands is not serving much of an innovation promotion function at all — no matter what type of party initiates the licensing demand.

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