Jonathan Masur
This week, jurors in Madison, Wis. ruled that the world’s most valuable company, Apple Inc., infringed a patent from 1998 that makes microprocessors in its popular iPhones more efficient.
The verdict in the ongoing trial sets the stage for a damages award that could range from $400 million to $860 million, according to news reports and court documents.
From the high-profile technology company defendant to the sky-high damages figures to the small-town venue with a “pro-plaintiff” reputation, the case carries many of the hallmarks of so-called “patent trolls,” those decried litigants that tech firms have lobbied Congress to eliminate.
But law professors say there is one distinction: The patent holder in this case is not a vague corporate entity like most trolls. It is the University of Wisconsin-Madison’s licensing arm, known as the Wisconsin Alumni Research Foundation (WARF).
The headline-grabbing case highlights a longstanding difficulty facing those who have used the term “troll” to advocate patent reform: Is a troll a certain type of behavior? Is it a certain type of actor? Or is it the natural result of a flawed system?
Answers to those questions vary, and that impacts which policy proposals would best fix a system in which more than half of all lawsuits filed in the U.S. fall under some definition of troll, according to research by Santa Clara University School of Law’s Colleen V. Chien.
“There is a lot of controversy over trolls and how universities fit into that definition,” said Shubha Ghosh, a professor at University of Wisconsin Law School.
Ghosh believes WARF is not a patent troll. He defines a troll as an entity that accumulates patents — typically by purchasing them from companies — for the specific purpose of using lawsuits to recoup their investment.
“I don’t think WARF is doing that here,” Ghosh said. “I don’t think it’s ever done that.”
WARF is the intellectual property warehouse for research done at Wisconsin’s flagship university. Last year, it made $43 million in revenue from licensing that IP, according to the Association of University Technology Managers.
That figure puts it somewhere above the middle of the pack of universities who license their intellectual property, a common practice. Northwestern University hauled in the most licensing money, $361 million, of any school to report to AUTM last year.
“Wisconsin is not doing anything that every other major university in the country doesn’t do,” said Jonathan Masur, a University of Chicago Law School professor who has written about patent reform.
“They’re just more famous now because they’ve been embroiled in this big case against Apple and Apple is trying to brand them as a troll.”
Like trolls, though, WARF also files lawsuits targeting high-profile tech companies.
It has filed three suits a year on average since 2008, according to research firm Lex Machina. It filed a second lawsuit against Apple on Sept. 25, alleging the company’s latest iPhones and iPad infringed the same patent the jury ruled on this week.
In 2009, WARF reached a settlement with Intel Corp. in a case involving the same patent at issue in the Apple case. Court records in the Apple case show Intel’s settlement payment was a $110 million lump-sum royalty.
WARF had asked U.S. District Judge William M. Conley, who is presiding over the Apple case, to exclude the amount of the Intel settlement in the current trial. In a Sept. 29 filing, Conley wrote that WARF’s maximum damages claim was $862.4 million.
The case is playing out in a district court ranked the fourth most favorable for plaintiffs by PricewaterhouseCoopers LLP last year.
Does all this make WARF a troll?
In court records, WARF is sensitive to the term. Its lawyers asked the court to preclude Apple from arguing it is a troll or a “patent assertion entity, non-practicing entity or other similarly pejorative terms.”
Apple’s lawyers agreed “troll” was pejorative but said “non-practicing entity” was descriptive and relevant to its damages argument.
Conley ruled Apple could not refer to WARF as a “troll” but allowed it to label WARF a “non-practicing entity” during the damages phase of trial, which continues today and possibly into Friday.
Masur said he agreed that WARF should not be labeled a troll, especially in a trial setting where it could influence jurors.
Mark Lemley, a Stanford Law School professor well-known for his research on the patent system, makes a similar argument about the effect of the term in the broader policy debate.
In a 2013 paper in the Columbia Law Review titled “Missing the Forest for the Trolls,” Lemley and Intel’s general counsel, A. Douglas Melamed, write that while trolls are a problem, they are also “taking the rap for problems with the patent system.”
Those problems include overly broad interpretations of patents; routinely excessive damages awards; and too many patents covering basic technology in the IT industry, known as “royalty stacking.”
“Practicing entities, as well as trolls, can and do take advantage of these issues,” Lemley and Melamed write.
“Rather than focusing on the trolls — the symptoms — the law should turn its attention to the disease itself.”
As for whether WARF is a troll?
“They are clearly a ‘non-practicing entity,’” Lemley wrote in an e-mail. “But I don’t think we should care that much.”