New directions in Technology Transfer

by Jeffery Atik

There continues to be a flow of academic writing and field studies concerning technology transfer, but there are no great breakthroughs to report. That said, there is an observable tiring with neoliberal approaches (which have failed to unlock the puzzle of incentivizing technology transfer). Moving the discussion to more public (if not statist) approaches to technology transfer might restore promise to what has been a disappointing field.

Collaborations do appear to be a promising institutional response; they have been reportedly successfully deployed in achieving advances in approaches to neglected diseases (such as Ebola) and climate change technologies. Collaborations are inherently public-private and can be structured to include (as full research partners) LDC institutions. These collaborations may feature government entities from the developed world, specialized development agencies, NGOs (who often coordinate), and university and state laboratories. They include private firms that carry out much of the focused technological development. As such, the success of a collaboration (as measured by innovation outcomes) depends on an effective design of incentives. Market-based financial rewards (licensing, sale of firms, IPOs) are replaced by funded contract research (similar to what occurs in defense fields) and/or prizes. Disengaging from the market permits research targeting - the ability to focus the collaboration on LDC needs and circumstances. For technology transfer to result, there must be meaningful inclusion of LDC institutions and personnel in the collaboration. LDC collaborators should not be mere observers; they make important contributions, particularly with regard to molding innovation to match the LDC environment where the technology will be deployed.

Extraterritorial Government Use of U.S. Process Patents after Zoltek

The federal government -- and its contractors and subcontractors -- have long enjoyed an effective ‘compulsory license’ for the use or manufacture of inventions covered by a U.S. patent. 28 U.S.C. §1498 relaxes the government’s sovereign immunity and supplies a special remedy to the patent holder. The patent holder may recover reasonable compensation from the federal government for the use or manufacture. Thus, a government contractor can carry out a contract without concern for an infringement action; the government will answer any patent holder’s claims.

The operation of Section 1498 applies to both product and process patents. Section 1498 contains an express limitation to any claims ‘arising in a foreign country.’ This limitation, as well as the territorial limitation found in the basic patent infringement statute [35 U.S.C. §271(a)], and their interpretation with respect to process patents, were the basis of the dispute between Zoltek Corporation and the federal government.

The eventual resolution of the Zoltek litigation by the Federal Circuit [672 F.3d 1309] settles various questions of interpretation concerning the extraterritorial dimensions of the government use ‘license’ with respect to process patents -- but it also leaves a rather worrisome ‘gap’ in the coverage of the basic provisions concerning process patent infringement. Consider these two propositions:

1. In the absence of authorization, where every step of a process patent is practiced in the United States, liability under 35 U.S.C. §271(a) results. However, if any step of a process patent is practiced outside the United States, there is no direct infringement. 
2. Where every step of a process patent is practiced outside the United States and the resulting product is imported into or used within the United States, liability under 35 U.S.C. §271(g) results. 

So here’s the gap (and the facts of Zoltek seem to fall into this gap): if a process patent is practiced partly in the United States and partly outside the United States, there may be no liability. This odd result seems to follow from the text of 35 U.S.C. §271(g), which is triggered by the importation or use of a product.