Tuesday, October 12, 2004

Wall St. Journal on Madey v. Duke University

In Madey v. Duke University (Oct. 3, 2002), the Federal Circuit found only a very narrow scope for the experimental use exception. Stating that REGARDLESS of whether an institution is engaged in an endeavor for commercial gain, as long as it furthers the alleged infringer's legitimate business and is not solely for amusement, to satisfy curiosity or philosophical inquiry, the experimental use exception will not apply. Universities have been in trouble with this decision. Semitool v. Ebara, 2002 U.S. Dist. LEXIS 21939 quoted the Madey case, 307 F.3d 1351, ["Similarly, our precedent does not immunize any conduct that is in keeping with the alleged infringer's legitimate business, regardless of commercial implications."].

The Madey case arose from intra-academic competition and disagreement, but the legal decision may impact industrial/academic interaction. See also, Rebecca Eisenberg, "Patent Swords and Shields," Science, 2003, 299, 1018 ["As universities have become increasingly aggressive as patent owners, they have compromised their claim to disinterested stewardship of knowledge in the public interest." [from L.B. Ebert, "Say Good-Night, Gracie," Intellectual Property Today, June 2003]. As a Bayh-Dole case, the Madey case is somewhat unusual in that Madey himself took ownership in the patents, after the funded university (Stanford) declined.

An article by Bernard Wysocki in October 2004 discusses both the academic competition aspect and the legal implications of Madey.

-->by BERNARD WYSOCKI JR. : The Wall Street Journal-->

The battle pits the university against John M.J. Madey, a 61-year-old former Duke physics professor and the inventor of the device. In the late 1990s, Duke demoted Madey and removed him as director of the free-electron laser lab. Madey quit Duke, decamped to the University of Hawaii, and sued the university in federal court in Greensboro, alleging breach of contract, fraud and other civil claims.

Duke denied the charges, and this might have been just another academic spat except that Madey held the patent rights on two critical elements of the laser he left behind. So, in his suit, he also alleged patent infringement.

Duke figured it had a solid defense. It was following a time-honored "experimental use" exception whereby academics, in the name of research, could infringe on patents so long as they didn't sell the results in commercial markets.

But Madey didn't say Duke was selling anything in the normal sense. Instead, he contended Duke used the laser to further its business interests as a research university. "The Duke free-electron laboratory is a significant enterprise," he argued, that brings in millions of dollars worth of government grants every year. He said the lab was part of Duke's larger purpose of competing with other institutions for faculty, students, recognition, scientific distinction and grant money. "This is Duke's business," his suit said, and therefore Duke had to honor his patents.

Part of the case has been sent back to the lower court, where Duke is claiming a patent exemption for another reason: because it uses the laser to carry out federal contracts. On that issue and others, the lower court has told the sides to get ready for a trial.

Whether Duke ultimately prevails or not, Madey v. Duke is raising a central question: At a time when universities increasingly act like corporations, should they also be subject to the intellectual-property laws that bind businesses and consumers?

These days, big research universities use their formidable powers for far more than teaching and scholarly inquiry. They invest in top scientists, create big labs, team up with companies and spawn commercial spinoffs. They and their scientists lure grants from foundations and federal agencies. The National Institutes of Health alone funded $20 billion of research at U.S. campuses last year.

Duke's fight against Madey isn't universally applauded within the academic world. Although more than 20 universities backed Duke by filing a friend-of-the-court brief with the Supreme Court, some universities with active patent programs declined to join. Among them was the University of Wisconsin, whose efforts to promote inventions and patents go back eight decades. The Wisconsin Alumni Research Foundation manages 800 issued patents and 600 pending ones. It holds stakes in 30 university spinoff companies.

"We believe it's a mistake to say [to industry] you need to pay us for intellectual property but we aren't going to pay you, because we're a university," says Carl Gulbrandsen, managing director of the Wisconsin foundation.

***Background on Madey case**
-->In 1988 he moved to Duke, where he became director of the free-electron laboratory and a tenured professor. The U.S. government paid to ship the laser to Durham, where Duke constructed facilities to house the laser-research program. Madey won about $40 million in government research money from various U.S. defense agencies, including the Office of Naval Research.

Then troubles arose. In his suit, Madey asserted that his Duke superiors wanted to divert research into areas outside the government grants. Duke officials said Madey's superiors repeatedly warned him about mismanagement of the lab. Finally, Duke said in court documents, his "managerial incompetence forced Duke to take remedial measures." Madey says there was nothing wrong with his management.

The university removed Madey as principal investigator on a large Navy grant, according to its court filings. It let him retain top status on other grants and remain tenured.

Madey was infuriated at the demotion. In an interview, he says younger scientists at the lab were shocked. "There's a chilling effect on these youngsters to see a researcher's work taken out of the researcher's hands," he says.

He sued Duke, asking for unspecified damages for using the laser patents without his permission. He also resigned from Duke and took a tenured physics position at the University of Hawaii.

Madey has launched a parallel legal effort to get the Mark III free-electron laser shipped to Hawaii. The big machine is something of a technological golden goose, because whoever has it can use it to bid for and carry out federal grants and contracts. Madey wants it in Hawaii to fulfill an Army contract to develop prototypes of a device to detect clandestine nuclear tests. He says he is midway through the five-year, $49.9 million contract but can't complete it without the laser.

But even the laser's ownership is a matter of dispute. Duke says it owns it. Madey says the primary owner is the U.S. Department of Energy, because it financed key phases of construction, and he has some ownership interest himself because he donated some funds used to build it. The fight has become so bitter that Duke lawyers won't allow Madey anywhere near the device he built, or let him enter the building the university built specifically for him in 1988.

Early last year, the Energy Department, which agrees it is the laser's primary owner, asked Duke for permission to inspect the lab and conduct an "inventory." Duke lawyers shot down the request and warned that neither Madey nor anyone who might be an expert witness in his case against Duke could visit. <--


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