DOJ Favorably Reviews University Patent Pool: Novel, Non-SEP Patent Pool Formed by 15 Leading Research Universities, Advised by Sullivan & Cromwell, Receives Favorable Business Review from DOJSullivan & Cromwell LLP - January 15, 2021
UTLP presented a fundamentally different structure, which offers non-SEP complementary patents that likely will be useful to a technology implementer that is hoping to develop an innovative new product or service (e.g., a commercially available autonomous vehicle).
Business Review Letter
Even though the use of an exclusive license diverged from past practice, the Division found that it was appropriate in the context of UTLP. For SEP pools, non-exclusive licenses are viewed favorably because non-exclusivity permits individual licensors to license independently from the SEP pool, where the SEP pool offers only a pool-wide license (i.e., there is no option to license individual patents or subsets of patents). The Division recognized, however, that an exclusive license was necessary in the case of UTLP to serve its public interest goals. UTLP’s efforts to establish a market for university intellectual property would be vulnerable to free-riding if a member could use the infrastructure of UTLP to connect with licensees but then bypass UTLP when it came time to license the technology. Because of this risk, the Division explained that exclusive licensing “can be procompetitive when the arrangement is necessary to prevent free-riding on innovation.”
The Division also considered innovative features of UTLP that reduce the anticompetitive effects that might arise when patents are pooled together. The Division indicated that “menu” licensing—which would allow a licensee to select certain individual patents or subsets of patents for a license—mitigated “tying” concerns because a company “does not have to commit to licensing ‘more technology than they need.’” Similarly, the Division found that UTLP’s novel “safety valves” provided additional comfort because—although UTLP was designed to exclude competitive substitute patents—if competitive substitutes were inadvertently included in UTLP’s portfolios, UTLP contractually would have no ability to leverage licensing of combined substitutes. If patents are shown to be substitutes, a licensee “may license both patents but it will only pay for one,” or alternatively seek to license each substitute patent in a competitive process.  Through these mechanisms, the Division found that UTLP “disincentivize[d] the inclusion of substitutes,” and implemented sufficient safeguards to keep substitute patents out of the UTLP. The Division’s favorable review of this first-of-its-kind contractual solution to potential competition issues presents a solution to be considered in other contexts.
The Division’s conclusion was summarized as follows:
UTLP has the potential to commercialize university inventions that may not otherwise have been licensed or implemented. Taking into account this significant benefit to UTLP’s potential licensors, sublicensees, and the public, and considering the technologies at issue, UTLP’s current scale and scope, the efficiencies associated with the program, and potential harms, the Department concludes that UTLP is unlikely to harm competition.
First, the Division endorsed a view that infringement of intellectual property rights presents a public interest problem, especially when free-riding means that research institutions, including institutions funded by tax-payer resources, will not be fairly compensated for their commercially valuable innovations.
Second, the Division endorsed a view that a benefit produced by collective action to solve a public interest problem may outweigh competition concerns (which may arise at least based on a theoretical analysis).
Third, the Division demonstrated flexibility in analyzing non-traditional patent pool structures, and was receptive to novel contractual safeguards that would ensure that even theoretical competition issues would unlikely become a reality.
Although the Division expressly limited its decision to the University context, and to the three technology areas identified by UTLP (i.e., autonomous vehicles, Internet of Things, and Big Data), the nuanced analysis that the Division employed may signal receptivity to non-traditional methods of licensing that make it possible to bring intellectual property to market in order to serve the public interest.