A bad day for innovation: how Boston University’s 1997 patent is hurting research

It looks like Boston University struck gold: after claiming to own rights to some of the most popular devices in America, including the iPhone 5 and the Kindle Paperwhite, the school has persuaded big tech companies like Apple(S aapl) and Amazon(s amzn) to pay the school a tribute of sorts.

In a triumphant blog post, BU announced that 25 companies bought a license for one of its patents from 1997, and vowed to keep suing those that haven’t done likewise. This outcome, according to the university, is a victory for one of its professors and a validation of its intellectual property strategy.

The reality is more complicated — and more troubling. The settlements appear to be the latest example of what a recent Nature article calls “unseemly partnerships” between universities and third party businesses that exploit old patents. And according to one expert, BU’s activities could produce an ugly chain reaction by inspiring other schools to scrounge for intellectual property money at the expense of public research.

Making Apple and Amazon pay for a 1997 “invention”

The BU lawsuits are based on a patent obtained by one of its professors in 1997 for the use of gallium nitride films. The university claims the technology is found in screens produced by Microsoft(s msft), Dell, Amazon and, seemingly, any company that uses blue LED’s. In response, many of the companies settled, according to court records. As a BU administrator explained in the blog post:

“The creation of new knowledge is fundamental to our mission. [Professor] Ted Moustakas created a process that significantly improves the performance of these products. It’s incredibly important for a university to defend its intellectual property.”

The situation, on the surface, looks like a financial and public relations coup for BU: the school can tout its research prowess while also enjoying a new source of revenue. But donors, alumni and everyone else should take a closer at just how BU obtained the money, and how it is being spent.

In a phone interview, a BU spokesperson repeatedly refused to say how much money the school gets under patent deal, including what share of it will go to fund “new knowledge” – and what share will instead go to lawyers and other middlemen tied to the deal. It’s possible, however, to make some guesses by looking at the players involved.

For one thing, BU employed a Texas law firm called Shore Chan DePumpo whose web page touts a variety of contingency fee schemes. The firm refused to provide any details about its arrangement with BU, but it’s a good guess that the two parties entered a joint venture of sorts in which they divide up the proceeds from the patent lawsuits.

The BU deal also involves another familiar middleman: the patent broker RPX, which bought the license on behalf of Apple and the other companies, and which does a brisk business selling patent insurance. Some critics suggest RPX is engaged in a form of extortion, and point out that patent trolling in general is good for RPX’s business.

In this case, the tech companies targeted by BU appear to have decided it was cheaper to use RPX as a vehicle to pay off the university — rather than spending more to challenge the patent. And, as is the case with paying contingency fee lawyers, it’s unclear how enriching companies like RPX contributes to “new knowledge.”

The reality of university technology transfer

“Purdue University.. is losing money from a seemingly unlikely source: its patent portfolio. The Midwestern research juggernaut, ranked among the top-twenty graduate programs in engineering, computer science, chemistry, and agriculture, can’t seem to make a buck licensing the hundreds of patents it receives annually on faculty and student innovations.”

The quote is from a recent scholarly paper that shows how schools regularly lose money from the technology transfer offices that are supposed to be a profit source. The paper’s author, Santa Clara law professor Brian Love, describes the situation as “patent roulette.”

For school administrators, the appeal of patent roulette is the prospect of windfall money wrapped up in the gloss of phrases like “leveraging intellectual property.” But the practice may not only cause a university to lose money. It also inflicts collateral damage on everyone else as a result of expensive patent litigation that is hard to justify from a policy or economic standpoint.

In the case of BU, the school’s behavior is especially hard to justify. Recall that the patent at the center of the lawsuits is 17 years old — if the invention it describes is so important, and is being stolen by dozens of big technology companies (like the school claims), why did BU wait so long to take action? Worse, it may inspire a gaggle of other schools to likewise begin demanding new money for old rope.

“Widespread, aggressive patent enforcement is still a rare activity for universities, but it may not be for long.  Universities are always looking for new sources of revenue and, inspired by rare successes like Carnegie Mellon’s billion-dollar verdict against Marvell Semiconductors, are likely to continue filing suits with greater frequency,” noted Love in a recent email.

For practical purposes, this could mean a growing list of schools knocking on companies’ doors with age-old patents. This is turn will lead to higher prices for consumers and institutions shifting their attention to old patents rather than to new knowledge.

Betraying the research mission

The opportunistic exploitation of old patents has failed to deliver obvious economic benefits to the public. It also appears to be undercutting the public research mission that universities like Boston University have traditionally espoused.

As Love observes, universities’ assertion of old patents can deprive the public of useful knowledge, and can also amounts to a form of financial double-dipping on the part of the schools:

“[F]ederal and state resources support virtually all university research in some form or fashion.  When universities exercise patent rights, they exclude the public from the fruits of research funded from public coffers, forcing consumer to effectively pay twice for university-developed technology,” he wrote.

This may explain in part why some BU alumni, as well as high profile figures like investor and Dallas Mavericks owner Mark Cuban, reacted with anger to BU’s decision to demand that Apple pay it royalties for the iPhone. And for donors to the school, they may have pause to wonder if their gifts are supporting “new knowledge” or if opportunities for real research philanthropy lie elsewhere.

(Image by Solovyova Lyudmyla via Shutterstock)