An Empirical Study of University Patent Activity

Since 1980, a series of legislative acts and judicial decisions have affected the ownership, scope, and duration of patents. These include: the Bayh-Dole Act in 1980; the extension of the maximum patent term in 1994; and the shift from a first to invent standard to a first to file system in 2011. These changes impacted academic institutions, both directly and indirectly, and have coincided with historic increases in patent activity among academic institutions. This article presents an empirical study of how those three changes to the patent system precipitated responses by academic institutions, using spline regression functions to model their patent activity. We find that academic institutions typically reduced patent activity immediately before changes to the patent system, and increased patent activity immediately afterward, with an especially notable effect among research universities. In other words, academic institutions responded to patent incentives in a manner consistent with firm behavior, by reacting to the preferences of internal coalitions to capture unrealized economic value in intellectual property. The response of academic institutions to patent law changes has profound implications for economic efficiency. Academic institutions are typically charitable organizations, with the charitable purpose of promoting innovation, among other things. Yet, academic institutions have responded to patent incentives by limiting access to innovation, in order to internalize economic value. Specifically, academic institutions typically transfer their patents to patent assertion entities or “patent trolls,” rather than practicing entities, producing externalities and inefficiency in the patent system. This concern is highlighted by the Supreme Court’s recent grant of certiorari in TC Heartland v. Kraft Foods, in order to determine the scope of patent venue. The Court’s decision was motivated by flagrant “forum selling” in the Eastern District of Texas, which currently hears about 50% of the patent infringement actions filed in the United States, few of which have any connection to the district and most of which are filed by patent assertion entities that choose the forum based on its pro-plaintiff bias. Many observers are concerned that the concentration of patent assertion activity in the Eastern District of Texas has increased the cost of innovation. This study suggests that educational institutions may have exacerbated that problem by engaging more boldly in patent activity and ultimately transferring their patents to patent assertion entities.