MOOCs and Consequences

When institutions started offering online courses around the turn of the 21st century, there was a flurry of patent litigation as developers of the software and systems that supported those courses—such as learning platforms, authentication systems and assessment tools — vied with each other for market dominance. After a while, these cases receded, as more and more of the technology needed to put courses on the web became freely available, and institutions increasingly custom-built their own learning management systems to meet their specific needs.

The recent proliferation of massive open online courses, popularly referred to as MOOCs, contains the seeds of an unanticipated — but potentially costly and disruptive — second wave of patent litigation. Given the cost of defending an infringement action — let alone the damages and injunctive relief that might result from an adverse decision — this is a risk that must be understood and guarded against.

It should be clear by now that there is absolutely nothing new about MOOCs. Online courses have been available for well over a decade, and every year brings improvements in quality, ease of use, and interactivity — not only between learners and teachers, but among the learners themselves. The Open Courseware Initiative at MIT dates back to 2001, and that was long preceded by the distribution of video courses by New York University in 1957 (through what was charmingly named “Sunrise Semester”) for their early morning broadcast schedule. Over the ensuing decades, millions of learners have taken e-learning courses since that seminal time, first via television and then via the Internet. And as online learning has become more and more common, a host of legal and regulatory issues have arisen — from determining the intellectual property rights of faculty to the ability of states to regulate cross-border e-learning, where the only connection with an institution is the presence of a student with a computer, typing away in the privacy of her own room.

So why the concern now that MOOCs may pose a special risk of encouraging patent infringement litigation? The answer, of course, lies in the numbers. Enrollment in specific online courses has historically numbered in the dozens, hundreds, or sometimes even into the thousands. But the MOOC phenomenon has resulted in hundreds of thousands of individuals signing on to take part in this “new” education sensation. It is not at all far-fetched to expect that a single MOOC may register well over a million persons at a time. And in patent litigation, these numbers can mean money, big money.

Patents and Patent Wars
It is worth taking a moment to review what patents are all about. The patent laws of the United States provide that a person may obtain a patent for the invention or discovery of “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” The metes and bounds of each patent are described by the specific “claims” of the patent. Many patents cover a physical system or apparatus, where the claims set forth the individual elements that make up the patented invention. Other patents cover particular processes or methods, in which case the claims comprise a specific set of steps that make up the patented method. While the patent is in force (typically for a period of 20 years after the filing date), all others are prohibited from infringing the patent — i.e., they are prohibited from making, using, selling, or offering to sell the patented invention within the United States. The penalty for infringement of a U.S. patent is an award of “damages adequate to compensate for the infringement,” which must be no less than a reasonable royalty, and sometimes may even equal the patent holder’s lost profits. In certain cases, a court may issue an injunction that orders the infringer to cease the infringing activities.

The United States Patent & Trademark Office has issued over 8M patents since it was established in 1790. While the vast majority of patents are never litigated, the United States has seen its share of “patent wars” throughout the past two centuries. When popular new products or entire industries have sprung up, litigation over relevant patents has often followed. The long list of such skirmishes includes patent wars over telephones, sewing machines, airplanes, antivirus software, smart phones, and countless other products. The educational services field has already seen at least one high-profile skirmish — the multiyear patent dispute between Blackboard and Desire2Learn over patents related to Internet-based learning management systems.

A MOOC Patent War?
The emergence of MOOCs has the potential to trigger a more expansive patent war involving many combatants, in which universities become either combatants or civilian casualties — or both. Like most online courses, MOOCs require the use of interrelated technologies to develop and deliver content to participants. As a result, the use of these systems may implicate literally thousands of patents. Video is transmitted via the Internet through an authenticated, encrypted connection, and countless entities hold patents related to data transmission, Wi-Fi, the compression of audio and video content, security encryption, or user authentication. Email and real-time audio and video chatting, as well as mundane features as simple as allowing participants to enter data in dialog boxes, have been — and currently are — subject to vigorous patent assertions. And of course, the key to the significant transformative nature of MOOCs is the ability to measure what the participant has learned — the assessment of outcomes or competencies. And, yes, there may be innumerable patents that relate to performance assessment and measurement that might be asserted against a university or MOOC provider.

The potential for astoundingly high participation rates in MOOCs is what drives the threat of universities finding themselves the target of patent infringement actions. Consider the hypothetical case where a patent owner asserts that each time a university administers a MOOC-related competency test with real-time feedback to the learner, the university infringes a patent. If a million people enroll in the MOOC, and only one in 10 stick it out to take at least one competency examination, then there are at least 100,000 potential acts of infringement — exponentially increased, of course, by however many tests are incorporated into a single MOOC. And when all of the technologies involved in providing MOOCs are considered, it is clear that the risk of MOOC-related patent infringement issues can be considerable.

Beware the Trolls
Perhaps even more vexing is the fact that the threat is likely not to come from the expected educational services or technology companies. While many high-technology patent wars have been primarily fought by the big names in a particular field, MOOC providers may face a type of guerrilla warfare waged by what are called (in polite company) “non-practicing entities” (NPEs). Less politely, they are often referred to as “patent trolls.” NPEs are entities that own patents, but that do not produce or sell products that embody the patents. Rather than seeking to protect their own products in the marketplace, the sole purpose of these entities is generally to seek licensing revenues and/or damages for patent infringement from other entities. NPEs often flock to successful technologies likes moths to a flame, firing off cease and desist letters and filing multiple patent infringement lawsuits against unsuspecting defendants. Often, NPEs aim to leverage the high expense and risk inherent in patent litigation to force targets into quick monetary settlements.

The education/technology convergence inherent in MOOCs makes them an attractive target for NPEs who own patents in a wide variety of areas. Some in the education sector have already begun to surface, while still others are without doubt waiting in the wings. Sadly, the magnitude of this problem is impossible to assess: it is virtually impossible to calculate the number of NPEs that hold (or claim to hold) patents relevant to Internet-based communications, data transmission, encryption/authentication, etc.

Potential Defenses and Steps for Universities to Take
That is not to say that a university is powerless in the face of a patent infringement lawsuit. In fact, in addition to traditional patent defenses — asserting that the patent is invalid, unenforceable, or simply not infringed by the university’s product or service — an institution has several other options, some of which are unique to its status.

First, public universities benefit from the protection afforded state instrumentalities under the 11th Amendment to the U.S. Constitution — they are immune from liability for claims of patent infringement. This means that if a patent owner believes that a MOOC run by the University of Michigan or the University of California is infringing a patent, the patentee would likely have to try to assert claims against a vendor or service provider, but could not sue the university. Private institutions, however, cannot rely on this defense. Second, a vendor or provider of MOOC-related services — other than the university — may have previously secured prior licenses with the patent owner, in which case the doctrine of patent exhaustion may apply. Under the patent exhaustion doctrine, if a seller of a product (the platform, student services, or courseware developer) has a license with the patent owner allowing the seller to sell a patented product, the purchaser or user of that patented product (i.e., the university) generally cannot be sued for patent infringement. Universities must become knowledgeable as to what licenses any relevant MOOC providers or vendors have, as well as to what extent the vendor must  — and, importantly, can — indemnify the institution in the event of an infringement attack.

In some cases, the university’s potential defenses might even depend on the particular type of infringement of which it is accused. In order to be found liable for direct infringement of a patent, a single entity (such as a university) usually must either perform each and every element of an asserted patent claim (for method claims) or own a system that includes each and every element (for apparatus claims). Because MOOCs often include multiple parties (for example, the university, the participant, the Internet Service Provider(s)), it may sometimes be difficult to make direct infringement claims against universities. But due to a 2012 ruling by the United States Court of Appeals for the Federal Circuit, a university might still be liable for indirect infringement — even if a single entity does not infringe all of the claims of the patent — if the presumptive patent holder can prove that the university “induced” or “contributed to” the direct infringement of all the claims by a combination of entities.

Furthermore, even if a university’s MOOC is shown to actually infringe a patent, recent law emanating from the Federal Circuit signals that any potential damages will be highly dependent on the significance of the patented technology to the overall MOOC system. For example, a holder of a patent directed to a certain encryption technology used in the deployment of video by a MOOC would likely be unsuccessful at obtaining a royalty rate based on the overall revenues the university receives from MOOC participants. Similarly, unless a patent owner can prove that its patented technology is what causes users to register for the MOOC — a scenario which seems unlikely in the vast majority of cases — the patent owner probably could not force a university or MOOC provider to shut down the MOOC through an injunction. This lack of leverage for patent owners may tilt the balance of power in the university’s favor in any potential royalty negotiations about the patent, which can lower any patent-related costs.

Lastly, universities and MOOC providers may choose to take a more aggressive, proactive stance against potential patent infringement plaintiffs. Concern over the state of the patent system — specifically, the improper use of patents to impede commerce and innovation — is widespread in the media, among industry experts, and even in regulatory agencies and Congress. During debate over the America Invents Act of 2011 (a statute which amended the U.S. patent laws), some sought to limit the ability of NPEs to assert their patents, and certain incremental measures were indeed implemented. There are also currently pending bills before Congress that would place additional limitations on potential patent infringement plaintiffs — such as invalidating certain types of patents or instituting a “loser pays” fee-shifting paradigm for certain types of questionable patent infringement claims. Given the importance of higher education to the nation’s future, it is reasonable to believe that a lobbying effort to protect university MOOCs from patent infringement allegations promoted (accurately) in the name of the public interest has the potential to be well-received by regulators and legislators.

The annals of successful products and emerging industries are rife with sudden increases in patent infringement claims and protracted litigation, and MOOCs are likely to follow this trend. It is true that universities may not be able to avoid all patent infringement claims and licensing issues relating to MOOCs. But by being proactive and developing strategies to deal with patent infringement claims before they arise, university administrators and counsel can work to successfully minimize their impact on both the university and the MOOC model.

Michael B. Goldstein is a member of Dow Lohnes PLLC, and is co-chair of the firm’s Higher Education Group. Matthew J. Rizzolo is an associate in the litigation group of Dow Lohnes, specializing in patent litigation. Both are located in Dow Lohnes’s Washington, DC office.