Russell, a past president of LES USA & Canada, has been doing these “top 10” talks for many years at LES annual meetings. These talks are always a full house, must-see event at LES. As usual, Russell was well prepared and did a superb job for AUTM and its listeners. These “top 10” suggest that courts have recently decided that:
- Standing matters — exclusive licensees need all substantial rights to litigate.
- Licenses may include an implied license to continuation applications.
- Arbitrators yield immense power.
- Beware the scope of integration clauses.
For me, two overarching themes emerged from Russell’s webinar.
- The more things change, the more they stay the same. This year’s “Top 10 Court Decisions of the Year That Affect Licensing” addresses issues that have faced universities for decades.
- What we do and how we do it matters. University licensors have “the power of the pen.” In adjudicating disputes, judges and arbitrators will presume people structuring, valuing, negotiating, and drafting license agreements are qualified professionals with relevant expertise. Meaning, what the agreement says is what the agreement means and the people crafting licenses know (or should know) what they’re doing.
But, herein lies the problem and challenge for university licensing. We know from experience that only a small percentage — perhaps, fewer than 10% — of university licenses will ever generate meaningful results — inventions enabling innovations that change the way people live, work, and play. And, even far fewer — perhaps as few as 1% — generate substantial licensing revenue. Except for the limited number of universities with “home run” licenses, university technology transfer is not a substantial revenue generator. University technology transfer offices are conventionally limited in their resources, both financial and managerial and were so even before the Covid-19 pandemic. Thus, the dilemma: how do you allocate the paucity of time available from experienced licensing professionals to patent license negotiations with the greatest probability of success (however the institution defines and prioritizes success)?
Direct implications for university licensing from Russell Levine’s 2020 AUTM Webinar: “Top 10 Court Decisions of the Year That Affect Licensing.”
1) STANDING — ALL SUBSTANTIAL RIGHTS
Universities typically seek to retain rights to use the licensed patents for internal, non-commercial teaching and research purposes. Universities may also seek to approve licensees’ grant of sublicenses, restrict rights to enforce, limit licensees’ scope of rights to licensed patents, and more. Courts have held that standing to sue requires licenses to convey all substantial rights (including the right to enforce, sublicense, practice, etc.) patents being licensed. Courts have expressed different views on standing and all substantial rights: Can the licensee sue in its own name? Can the licensee sue only with the involvement of the patent owner? Can the licensee not sue? Standing and all substantial rights must be considered by university licensors to avoid becoming involved in licensees’ litigation of the licensed patents.
[Top 10 Case: Infernal Technology, LLC v. Sony Interactive Entertainment America, LLC, 2020 WL 305082 (E.D. Texas 2020)]
2) LICENSED PATENT RIGHTS ARE PRESUMED TO INCLUDE AN IMPLIED LICENSE TO CONTINUATION APPLICATIONS
Beware of this one! Courts have held that unless specified, licensees may have implied rights to continuation applications, including, perhaps, continuations describing improvements not claimed in licensed patent rights and those not discovered and reduced to practice with support from licensees. Specificity in the delineation of the scope of rights granted and not granted is required.
[Top 10 Case: Cheetah Omni LLC v. AT&T Services, Inc., 949 F.3d 691, (Fed. Cir. 2020)]
3.) ARBITRATION (ALTERNATIVE DISPUTE RESOLUTION (ADR)
University licensors should carefully consider whether or not to use arbitration (and/or other alternative dispute resolution mechanisms). There can be advantages to ADR. Arbitrations can be faster than court disputes and timelines for resolution can be specified. Arbitrations can be less expensive. Discovery and depositions in arbitrations can be limited. The characteristics (expertise and experience) of arbitrators can be specified. That said, each license situation poses fact-specific issues to address in deciding whether or not to use ADR.
Parties to a license may designate which issues/license provisions are arbitrability and which are to be addressed by courts. Such delineation must be specific. If not specified, arbitrators have been deemed to have the right to determine arbitrability. That is, whether the issue falls within the scope of the arbitrator’s authority. Arbitrators will resolve questions regarding the scope of arbitration.
Rules of arbitration are set by the various arbitration organizations. University licensees should review rules and procedures of these organizations before agreeing to ADR.
Courts are extremely deferential to arbitrators’ decisions and awards. It is difficult to challenge arbitrators’ decisions even if they have made factual errors.
[Top 10 Cases: Safran Electronics & Defense SAS v iXblue SAS, 2019 WL 5250790 (2nd Cir. 2019); Seattle Genetics, Inc. v. Daiichi Sankyo Co., Ltd., Case №01–19–0004–0115 (AAA 2020); PNY Technologies, Inc. v. Netac Technology Co., Ltd., 2020 WL 1919160 (3rd Cir. 2020)]
4) INTEGRATION/ENTIRE AGREEMENT CLAUSES
Universities often enter into multiple agreements with the same licensee. Integration and entire agreement clauses should specify if other agreements between the parties are to be included or not in the license being negotiated. That is, institutions having multiple agreements with the same counter-party should specify if and which other agreements (e.g. sponsored research, settlements, other licenses) are to be included in the integration/entire agreement provision.
[Top 10 Case: Molon Motor and Coil Corporation v. Nidec Motor Corporation, 946 F.3d 1354, (Fed. Cir. 2020)]
Six of Russell’s “top 10” involve the issues above. Other cases addressed by Russell speak to courts’ enforcing definitions and termination provisions as stated.
 Universities include other not-for-profit research institutions and organizations, including degree and non-degree granting institutions, medical schools and teaching hospitals, government laboratories, and the like.
 I recall that “standing” and “arbitration” were issues in licenses I negotiated in the early 1980s.
 Fewer than half of U.S. university technology transfer programs generate licensing revenues in excess of program operating costs and “only 16% are self-sustaining, bringing in enough income that, after distributions to inventors and for research, there are sufficient funds to cover the operating costs of the program.” How are U.S. Technology Transfer Offices Tasked and Motivated — Is It All About the Money? by Irene Abrams, Grace Leung, and Ashley Stevens. Research Management Review, Volume 17, Issue 1 Fall/Winter 2009. As I have written and said for decades, universities engage in technology transfer for five good reasons: 1. Bayh-Dole mandate; 2. Increase interactions with industry; 3. Promote economic development; 4. Support faculty and students; and 5. Generate licensing revenue.
 I had a decade of personal experience with this dilemma during my decade as the managing director of the University of Pennsylvania tech transfer program.
 American Arbitration Association, JAMS, International Chamber of Commerce, Chartered Institute of Arbitrators and others.