U.S. Government Accountability Office Report on Unwanted University Tech Transfer Risk

The U.S. Government Accountability Office has released a report titled, “CHINA Efforts Underway to Address Technology Transfer Risk at U.S. Universities, but ICE Could Improve Related Data,” concerning recommendations to better track visiting scholars, students and researchers from outside the United States.  The published report is incomplete because some of it has been deemed too sensitive to disclose.  Notably, the published report points to a failure of law enforcement agencies, including Immigration, Customs and Enforcement (ICE), to track certain relevant data concerning the risk that unlawful technology transfer may occur involving federally funded university research.  The report is available, here, and states, in part:

According to federal internal control standards, management should use quality information that is, among other things, complete and accurate to achieve the entity’s objectives, and process relevant data into quality information within the entity’s information system. The U.S. government has identified research in sensitive fields, facilities and locations of expected work, and employment and employment history as potential risk factors for the transfer of technology. Improving the completeness of employer information in SEVIS could enhance ICE’s management of the OPT program and provide the U.S. government with more information on who is employing foreign students and, therefore, whether certain individuals may have access to technology.

Since 2016, oversight bodies at the five U.S. grant-making agencies in our review—NIH, NSF, NASA, DOD, and DOE—have investigated an increased number of researchers for potential violations related to the security of federally funded research at U.S. universities, according to agency data. These include grant fraud and compliance violations related to failures to disclose potential sources of foreign influence on researchers, such as other support for individual research endeavors, significant financial interests, or other conflicts of interest. These investigations have often involved undisclosed affiliations with the PRC, such as receiving PRC research funding. However, agency officials emphasized that decisions made to initiate an investigation or during the course of an investigation are not based on individual characteristics such as nationality or visa status, which is information that none of the five agencies in our review consistently collect. Agency data indicate that investigations have resulted in agency and university actions to address research security risks related to foreign influence. However, little information is available about civil and criminal cases related to potential transfer of university research because DOJ does not systematically track all cases specific to U.S. universities or federal grant funding. Further, officials from grant-making and law enforcement agencies we spoke with noted that it is challenging to assess the more general extent and negative impact of technology transfers to foreign countries. Amid agency efforts to address this type of national security threat, university faculty, officials from university and Asian and Asian-American associations, and others have highlighted the importance of balancing protection of federally funded research against potential adverse effects of these efforts. . . .

As a result of investigations initiated from 2016 through 2021, grantmaking agencies—particularly NIH, which accounted for about 73 percent of the individuals under investigation in our review—addressed a number of violations that could threaten the integrity of university research. As of October 2021, 94 percent of NIH investigations into researchers of concern had uncovered at least one compliance violation that NIH deemed serious, such as a failure to disclose foreign conflicts of interest (e.g., foreign affiliations, grant funding, or talent recruitment program participation), according to NIH data. As a result, NIH reported that at least 76 percent of individuals under investigation were no longer associated with grant-funded research or other grant-related responsibilities, primarily through resignation or actions taken by grant recipient institutions, including termination or exclusion from grant-funded research. In addition, NIH officials noted that because many of their investigations remained ongoing, they expected the number of actions taken in response to violations to rise. . . .

In this context, U.S. agencies and others have identified factors that indicate the types of foreign students or scholars who may pose a greater risk of transferring technology from U.S. universities. ICE already maintains information in its SEVIS database related to several of these factors, including country of citizenship and level of education. However, ICE has not completed a required assessment to understand whether it needs to update SEVIS to better capture information related to students and scholars who may pose a greater risk for technology transfer. Furthermore, data related to other risk factors already required in SEVIS, such as employer information, are incomplete. More complete data, and a better understanding of the information needed to identify students who present the highest risk for the potential transfer of university research, could strengthen U.S. government efforts to identify and assess risks to U.S. research and development.

Free WIPO Symposium on Geographical Indications

WIPO is holding its worldwide hybrid symposium on Geographical Indications on June 14-16 in Tbilisi, Georgia.  There are six interesting panel topics.  Here is one:

TOPIC IV – Governance and Quality in Geographical Indications Owing to their nature of collective brands that can be used by a community of individual producers, the success of geographical indication products will depend largely on effective governance and quality control structures. This panel will review and discuss various approaches to this subject and the challenges that exist on the way.

Moderator: Ms. Valérie Pieprzownik, Expert on Geographical Indications, Food and Nutrition Division, United Nations Food and Agricultural Organization (FAO), Rome

Speakers: Mr. Philippe Bardet, Director, Interprofession du Gruyère, Pringy, Switzerland Ms. Nuria Ackermann, Chief Technical Advisor – PAMPAT 2 Project Tunisia, United Nations Industrial Development Organization (UNIDO), Vienna Mr. René Claude Elogo Metomo, President, Group of Producers of the PGI Poivre de Penja, Penja, Cameroon Ms. Adrienne Thompson, Deputy Director, Registrar, Jamaica Intellectual Property Office (JIPO), Kingston

Here is a link to the schedule.  The program is available online, and the price is quite nice: Free. 

DG GROW seeks to replace established FRAND valuation and licensing practices with top-down rate setting

In case you missed it or were unable to access my paywalled article in IAM on 5th April 2023, here it is with my analysis of the draft Proposal for Regulation of the European Parliament and of the Council establishing a framework for transparent licensing of standard essential patents, including an associated Impact Assessment report (IA) that were leaked ahead of their anticipated public launch on 26 April.

DG GROW is proposing various ill-conceived interventions — processes that have not yet even been designed or properly budgeted, let alone tested. These will upset a standards development and patent licensing system that has been effective in enabling the world’s fastest growing and largest ever technology ecosystem serving more than five billion people and 16 billion connections with cellular worldwide.

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I have feared but anticipated in my publications that the EC might try to build some kind of Ministry of Patent Counting with the purported aim of helping SEP implementers including SMEs in particular in Fair Reasonable and Non-Discriminatory (FRAND) licensing. DG GROW now proposes to do that in spades by building a large “competence centre” bureaucracy at the European Union Intellectual Property Office (EUIPO). No, this is not the non-EU European Patent Office (EPO) that 63% of respondents to a DG GROW survey last year stated they preferred conduct the checks. This EU organisation has no expertise in patents, let alone in SEPs. It was selected because “the body needs to be aligned with the EU’s overarching political values and current policy priorities (e.g. support for SMEs)”,“accountable to the EU Public and European Parliament”, and “subject of a review by the CJEU".

The new centre will become a white elephant, even if it can acquire the required competences and get away with making the industry, and ultimately consumers, pick up the tab.

A recipe for hold-out and short-changing SEP owners

DG GROW’s unconscionable mission, which will undermine SEP licensing and enforcement (eg in Germany), is without legal or evidential support. The status quo purportedly exposes European companies to more litigation than “foreign producers that might fly under the radar", however patent infringement and exposure to enforcement occurs in both the location of manufacture and of sales. Unlicensed products manufactured outside Europe are more susceptible to being excluded through customs seizures as well as injunctions in Europe than are unlicensed European manufacturers. The Impact Assessment presents much anecdotal rather than quantitative evidence that European implementers are systematically and significantly disadvantaged. Rather than racing to the bottom by crushing European royalties and enforcement to level-down with foreigners’ alleged infringing sales, all suppliers in and to Europe should be held to the same high standards of patent protection.

If the reforms proposed in the leaked draft are accepted, this will do more economic harm to licensors, including EU’s leading innovators Ericsson and Nokia — that are highly dependent on SEP income to fund R&D — than it will to speculatively benefit implementers including SMEs who are purportedly those most in need of these changes. DG GROW also complains of “insufficient transparency on SEP ownership and essentiality; lack of information about FRAND royalties; and a dispute settlement system not adapted for FRAND determination”.

And yet, for most European implementers, including SMEs in particular, there is only limited exposure to unexpected SEP licensing or litigation costs because virtually all phones are manufactured outside of the EU and most SEP patents are exhausted in, for example, IoT modules that are also overwhelmingly manufactured elsewhere. The significant exception is cars.

Avanci has very successfully created a solution that is licensing all European manufactures at the modest cost of up to $15 (before the increase to $20) for the vast majority of patents declared essential to 2G, 3G and 4G, while its upcoming 5G program is in the works.

A centre of insufficient competence for DG GROW

DG GROW is unsatisfied with ETSI’s IPR database of declared essential patents. Its declaration process exists only to ensure technology standards are not blocked by unavailable IPRs. Essentiality of declared patents is not checked, let alone updated to reflect whether declared patents end up staying or becoming essential through patent prosecution and to finalisation of standards. ETSI also refuses to participate in commercial matters, such as setting royalty rates — even in aggregate, let alone for individual licensors and licensees — because its members do not want to compromise ETSI’s technically-focused functions, because ETSI does not have that competence and because it would be a violation of competition law.

Consequently, DG GROW apparently wants to expand administrative scope by edict through the EUIPO with new competences including:

• Registration of SEPs and access to the electronic database established by the competence centre. It seems this will largely duplicate what the ETSI IPR database does for patents declared essential to cellular standards, while also providing updates on patent status.
• Essentiality checks, including peer evaluation. The proposed process is fraught with all kinds of issues that will lend to manipulation, favouritism, bias and also subject checks or patents to subsequent challenges. SEP owners have shunned a system like this in Japan.
• Aggregate royalty determinations. Despite many claiming expertise, there is no consensus on methodology, let alone on applicable figures. The Unwired Planet Decision assumed patent value proportionality only to imply — not set — aggregate figures in cross-checking comparable license valuations due to the uncertainties. Even defining aggregate is debateable: is this total a theoretical maximum that nobody would ever pay, a typical or average figure actually paid after caps and discounts, or something in between?
• FRAND determinations. DG GROW is incredibly abandoning the industry’s prevailing comparable licenses valuation method. Its proposed top-down approach is unsubstantiated and has floundered in the courts. The recent InterDigital v Lenovo Judgment in the UK “f[ound] no value in InterDigital’s Top-Down cross-check in any of its guises”, despite huge amounts of expert work. The entirety of the TCL v. Ericsson FRAND Decision including its shaky top-down valuation was unanimously vacated on appeal. The IA acknowledges “persistent differences of opinion on key aspects of the FRAND concept such as royalty evaluation methods”. The EUIPO’s experts will have to build trust in their top-down competence from the ground up.

DG GROW advocates exemptions from royalty payments for low sales volumes in FRAND licensing. This is appropriate and already common practice in many bilateral and pool licenses. However, while DG GROW calls this “royalty-free licensing”, its ambiguous use of this term, while also referencing examples of Bluetooth and USB standards, dangerously implies reciprocity that prevents counter-parties from generating any royalties. This undermines the business model neutrality in an open and competitive market DG GROW should be preserving.

Disregarding facts

It’s staggering that DG GROW disregards plain facts and maths. No wonder it’s being accused of being so one-sided. While it professes to cherish transparency and balance, and claims to conduct literature analysis, it has not cited any of my articles among the hundreds cited in its IA. This is despite mine being widely cited elsewhere for my seminal research on key SEP issues including aggregate royalties and inaccuracies in patent sampling and essentiality checking. On the latter, in 2021, I identified a mathematical howler in a 2016 report for the EC by CRA that is cited eight times in the IA. CRA hugely understates — by a factor of much more than 10 — the estimated sample size of only 30 it claims provides “quite a good precision”. Neither a rebuttal to my claim, nor erratum has ever been produced. Sample size and time spent per patent are the two biggest cost drivers in essentiality checking.

And, as highlighted by FOSS Patents, DG GROW is also wrong to assert that “false positive and false negative random errors tend to cancel each other out” because more of the former creates systemic bias.

Nevertheless, my findings that accurate samples of several thousand are required have got through. The IA anticipates the need to check 10,000 to 99,500 patents at a cost of €4,000 or €5,000 each for a total of €40-498 million, plus claim chart, office IT, administration and depreciation costs. Ouch!

This empire-building framework defies common sense and smacks of agency capture by Big Tech and Auto lobbyists seeking to minimise licensing charges. It disregards the proven efficacy of standard-essential technology development, established licensing FRAND practices, economic realities and the interests of innovators. Bureaucratised and centralised essentiality checking, patent counting and rate setting will be burdensome and costly. Internal processes and external challenges to what these deliver will only exacerbate existing patent hold-out and further delay licensing payments.

The technology standards ecosystem has evolved and flourished in a free market. European SEP licensing is overwhelmingly a European net export worth billions of Euros per year including major earners Ericsson and Nokia. Its reckless to jeopardise that and saddle the European industry with the additional costs of these proposals. These set a terrible example that will encourage jurisdictions seeking to benefit from erosion of SEP value. Rather than having most of EU’s estimated 1,500 experts in the field check others’ patents at an estimate cost of €500 per hour, it would be more fruitful for them to spend their time innovating and patenting themselves.

USPTO Advanced Notice of Proposed Rulemaking on IPRs and PGRs

The USPTO has released advanced notice of proposed rule making concerning regulations addressing changes to Inter Partes Review and Post Grant Review practice, including addressing multiple challenges, parallel district court litigation and the institution of proceedings.  The USPTO is inviting comments concerning the proposed rule making.  The USPTO document states, in part:

The changes under consideration provide that, in certain circumstances in which specific elements are met (and applicable exceptions do not apply), the Director, and by delegation the Board,^[1] will exercise the Director's discretion and will deny institution of an IPR or PGR. The USPTO is also considering broadening the types of relationships between petitioners and other entities the Office will consider when evaluating discretionary denial in order to ensure that entities related to a party in an AIA proceeding are fully evaluated with regard to conflicts, estoppel provisions, and other aspects of the proceedings. The Office is also considering whether, in certain circumstances, challenges presenting “compelling merits” will be allowed to proceed at the Board even where the petition would otherwise be a candidate for discretionary denial (as is the current practice under the Director's Memorandum Regarding Interim Procedure for Discretionary Denials in AIA Post-grant Proceedings with Parallel District Court Litigation of June 21, 2022 (discussed below)). In addition, the Office is considering whether to promulgate discretionary denial rules to ensure that certain for-profit entities do not use the IPR and PGR processes in ways that do not advance the mission and vision of the Office to promote innovation or the intent behind the AIA to improve patent quality and limit unnecessary and counterproductive litigation costs.

Recognizing the important role the USPTO plays in encouraging and protecting innovation by individual inventors, startups, and under-resourced innovators who are working to bring their ideas to market, the Office is considering limiting the impact of AIA post-grant proceedings on such entities by denying institution when certain conditions are met. The Office is seeking input on how it can protect those working to bring their ideas to market either directly or indirectly, while not emboldening or supporting economic business models that do not advance innovation. For example, the Office seeks input on to whether to require identification of anyone having an ownership interest in the patent owner or petitioner. The USPTO welcomes thoughts on any additional disclosure requirements needed and how the Board should consider that information when exercising Director discretion.

The Office is also considering additional measures to address the concerns raised by repeated validity challenges to patent claims (potentially resulting in conflicting outcomes and overburdening patent owners). The USPTO is considering further modifying and clarifying circumstances in which the Board will deny review of serial and parallel petitions. As to parallel petitions, the Office is also considering changes to provide that, as an alternative to filing multiple petitions, a petitioner may pay additional fees for a higher word-count limit.

Furthermore, the Office is considering rules related to the framework the Board will use to conduct an analysis under 35 U.S.C. 325(d), which provides that in “determining whether to institute [an AIA post-grant proceeding], the Director may take into account whether, and reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office.”

In addition, the USPTO is considering a rule clarifying that if institution of an IPR is not discretionarily denied in view of any other criteria, the Board shall consider whether to deny institution if there is a pending district court action involving claims challenged in the IPR. In the case of a parallel district court action in which a trial adjudicating the patentability of challenged claims has not already concluded at the time of an IPR institution decision, the USPTO is proposing rules to install Apple v. Fintiv and related guidance, with additional proposed reforms. See Apple Inc. v. Fintiv, Inc., IPR2020–00019, Paper 11, 2020 WL 2126495 (PTAB Mar. 20, 2020) (designated precedential May 5, 2020); Director's Memorandum Regarding Interim Procedure for Discretionary Denials in AIA Post-grant Proceedings with Parallel District Court Litigation (June 21, 2022) (Guidance Memorandum).^[2] The USPTO is considering separate rules for instances in which a trial adjudicating the validity of challenged claims—in district court or during post-grant proceedings—has already concluded at the time of an IPR institution decision.

Purdue Research Foundation receives US $100 Million in Pharma Deal

The Purdue (University) Research Foundation has received US $100 million in a royalty monetization deal.  The Press Release from the Research Foundation states:

WEST LAFAYETTE, Ind. and NEW YORK, April 26, 2023 (GLOBE NEWSWIRE) -- Purdue Research Foundation, a private not-for-profit institute to advance the research of Purdue University, has received more than $100 million from Owl Rock, a division of Blue Owl Capital, for a portion of its royalty interest in Pluvicto (Lutetium 177Lu vipivotide tetraxetan). Purdue Research Foundation secured rights to royalties from Pluvicto as a result of Purdue’s license agreement with Endocyte Corp., which was acquired by Novartis in 2018.

This transaction helps Purdue Research Foundation advance its mission of investing in Purdue University’s innovative technologies and supports the university’s advancement.

Pluvicto is a radioligand therapy indicated to treat patients with metastatic castration-resistant prostate cancer who have failed multiple prior therapies. The therapy is also in development to treat prostate cancer in earlier lines of therapy.

"We feel privileged that the agreement with Blue Owl further strengthens Purdue's ability to support Purdue researchers and alumni through enhanced commercialization programs and funding opportunities,” said Brooke Beier, Senior Vice President of Purdue Innovates. “Purdue University researchers discover and develop innovations improving the world, one of the key aspects of a land-grant university. Pluvicto is one example of successful intellectual property protection, licensing and, ultimately, commercialization that we hope will unlock the potential for many more Purdue technologies to make an impact."

Sandip Agarwala, Managing Director and Global Head of Life Sciences, Blue Owl, said: “We are excited to partner with Purdue Research Foundation to assist it in fulfilling its mission of advancing technologies developed at Purdue University. Royalty transactions are a key component of Blue Owl’s broad and flexible investment strategy in the life sciences, and we see Pluvicto as a paradigm-shifting therapy for the treatment of patients with metastatic castration-resistant prostate cancer with blockbuster potential. We are encouraged to see the FDA expeditiously approving Novartis’ Milburn facility to help get this much-needed therapy to more patients.”

SVB Securities acted as PRF’s exclusive financial advisor, Foley Hoag LLP served as special counsel to PRF, and Ricardo Moran of Schwegman Lundberg & Woessner, P.A., served as IP counsel to PRF for the royalty monetization. Ice Miller LLP and Cooley LLP acted as legal advisors to Blue Owl.

Purdue University President Mung Chiang said the royalty interest agreement with Blue Owl Capital strengthens the university’s global reputation in several ways.

“First, the income will add funds for leading-edge research and development of life-saving pharmaceuticals in units such as Department of Chemistry and Purdue Institute for Cancer Research,” he said. “Second, the agreement underscores the impact of the work of legendary Purdue innovator Philip Low, Purdue University’s Presidential Scholar for Drug Discovery and the Ralph C. Corley Distinguished Professor of Chemistry. The initial research into the precision targeted therapy began in his laboratory. And this latest success of Purdue invention demonstrates the promises of Purdue Innovates, the initiative that Purdue and PRF launched this month to further support Boilermaker inventors and entrepreneurs.”

Free Webinar: Rapid Reaction: The European Commission’s Proposed Standard Essential Patents Regulation

 

Free Webinar in Preparation of

The 8^th IP and Competition Forum

5^th of May 2023, 15:00BST = 16.00 CET

Rapid Reaction: The European Commission’s Proposed Standard Essential Patents Regulation

 

The European Commission (EC) announced its Proposed Standard Essential Patents Regulation building on its 2020 IP Action plan, which advocated for promoting transparency and predictability in SEP licensing. The European Union Intellectual Property Office (EUIPO) is to administer a new SEPs regime. The aims to address key aspects of the FRAND debate, such as essentiality checks, FRAND royalty rate determination and offer alternative dispute mechanism services. To what extent does this represent a radical change to the European IP landscape? Join us for a discussion as to what has prompted this proposal, an assessment of its detail and a consideration of what the implications might be.

To find out more, join us at the 8^th IP and Competition Forum on June 20 and 21 2023 in Brussels. Email us at info@oxfirst.com to get involved or check out the website of the 8^th IP and Competition Forum.

About the Speakers

Dr. Roderick McConnell

Patent Counsel, Continental

Roderick is Patent Counsel to Continental Automotive Technologies. With a technical background in image processing and artificial intelligence, he has extensive experience in patent licensing and is a member of Continental’s SEP team. Roderick has written for IPWatchdog on FRAND rate determination and speaks at conferences.

Cyrile Amar

Founding Partner, Frand Avenue

Cyrille AMAR is an attorney at law, member of the Paris Bar. He is the founder of FrandAvenue, an innovative marketplace for licensing professionals, offering a database of about 600.000 standard essential patents and a unique set of tools for FRAND negotiations. Cyrille AMAR has participated as lead or co-counsel to more than 20 litigations about standard essential patents, before courts and arbitral tribunals.

 

Toby Sears

Partner, CMS

Toby is a Partner in the CMS IP team in London. He specialises in advising on patent strategy, monetisation and litigation in the tech sector, advising on large scale international matters. Toby has represented clients in multiple SEP/FRAND licensing disputes in the High Court through to the UK Supreme Court.

 

How to Join

https://oxfirst.com/insights-&-news/rapid-reaction-the-european-commissions-intellectual-property-action-plan/