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U.S. patent litigation awards are highest since 2014; two cases accounted for 64% of the total damages; half were under $10M

$1.4 billion dollars was awarded last year in patent damages, the most since 2014.

Two cases were responsible for about two-thirds of that amount or $900 million, according the Lex Machina 2018 Litigation Report, leaving less than $500 million among 16 cases.

The biggest year for patent damages in the past decade was 2012, the heyday of patent value, which saw just under $4 billion awarded.

Sources told IP CloseUp the top 20 awards typically represent only a fraction of the actual infringed value of patents in a given year, and it is not clear how much of which of the awards have been paid.

Reasonable Royalties

Even though 2018 saw around the same quantity of cases awarding damages as in the previous five years, there was a greater total amount of damages awarded. The large increase in damages from the previous years is attributable to large jury awards of reasonable royalty damages.

Particularly, in Virtnex Inc. v. Apple the jury awarded plaintiff over $500 million in damages and in Kaist IP v. Samsung the jury awarded $400 million in damages.

Excluding these two cases, the total amount of damages awarded in 2018 was approximately $498 million. Looking at jury awards, Samsung was involved in three significant jury cases that awarded damages in 2018.

While ANDA cases did not yield jury awards in 2018, several healthcare/pharma/life sciences research companies were involved in significant jury trials, including Boston Scientific and Ariosa Diagnostics, as well as medical device producers such as Hologic and Minerva Surgical.

Half Under $10M

Among the top patent awards under $100 million, six were over $10M and nine or 50% of those reported were under. No data was provided on the number or amount of settlements or the cost to obtain them.

For the full report, go here. 

Image source: Lex Machina

 

U.S. Trademark head, PTAB Chief Judge to speak about IP eligibility – $100 discount for IPCU readers

Intellectual property and IP law are in a constant state of flux. For those interested in keeping up with recent changes the 11th annual Corporate IP Counsel Forum is time well-spent.

Corporate speakers include Seagate Technology, MasterCard, American Express, Raytheon, NCR Corporation and SAS Institute. Law firms include Ropes & Gray, Fish & Richardson and Finnegan Henderson.

Mary Boney Denison, U.S. Trademark Commissioner and Mark Powell, Deputy Commissioner of International Patent Cooperation, USPTO, will address “Recent Innovations in Technology and the Resulting Effects on Eligibility.”

IPCCF is being held at the Westin New York Times Square, March 28-29.

This year’s highlights include:

  • Judiciary, in-house, and external counsel perspectives
  • Procedural changes at the PTAB
  • Venue and litigation strategy in the wake of TC Heartland
  • Legal implications of AI
  • Employee trade secret theft
  • Round table break-outs including, understanding blockchain, combating counterfeits & promoting diversity

IP CloseUp readers use code CLOSE to receive a $100 discount. 

For the conference agenda, go here.

For the full list of speakers, go here.

To register, please visit this link.

Image source: uspto.gov; inta.org

 

 

FAANGs dominate value and valuation says a new book by an intellectual property expert

Facebook, Amazon, Apple and Google, referred to at the Big Four, plus Netflix, “dominate society, technology and IP value and valuation,” according to a new book by a well-known expert in the field.

In the concluding chapter of his recently published IP Valuation for the Future (ABA Books), Wes Anson suggests that several large tech companies, for better or worse, wield a disproportionate amount of influence over IP rights.

“These numbers tell you about the social impact and control that the Big Four [FAAGs] have over not only the stock market and technology, but over the development of IP, social media, new apps, and new forms of (online and offline) technology, in turn, exerting IP domination and concentration.”

The numbers Anson is referring to include Facebook’s monthly users, 2.1 billion; the 65 million households served by Amazon every month; the five top social media apps owned by Facebook; and the 92% of Internet search controlled by Google.

Anson, who is the author of several books on IP value, says that the size of the FAAGs, plus Netflix, make it virtually impossible to accurately calculate all of their IP as a whole. Moreover, the long shadow cast by these businesses also makes it more difficult to value IP owned by others, as well.

Where IP is Headed

“This is where the ‘smallest unit of value’ comes into play and where, I believe, the valuation exercise for IP, particularly when it is held by [businesses the size of] Apple or Google/Alphabet or Facebook, is being challenged. It’s the concept of SVU.”

Anson concludes with “we find ourselves with an increase in value of almost all IP groups, with the possible exception of patents. We also find ourselves under the Cloud with the Big Four Companies, plus Netflix, increasing their dominance in content, media, connectivity and communications…

“I hope that this book conveys that this is a time of great change in the world of IP and a time in even greater change of IP evaluation and valuation.”

IP Valuation for the Future can be obtained through the American Bar Association.

For complimentary access to Chapter 14, “The Future of Intellectual Property Valuation,” go here.  

Image source: IP Valuation for the Future (ABA Books)

Convergence is creating new value; IPBC Europe in Paris to explore

The fourth industrial revolution (4IR) presents new challenges and opportunities for European companies.

4IR is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres collectively referred to as cyber-physical systems.

Traditional ways of creating value from intellectual property are becoming unsustainable and a more integrated approach to the management of assets is necessary. A good example is 5G, which is at the forefront of 4IR. (5G performance targets high data rate, reduced latency, energy saving, cost reduction, higher system capacity, and massive device connectivity.)

Golden Opportunity

The Intellectual Property Business Congress Europe, in Paris for 2019, will help IP executives to look beyond patents, trademarks and copyrights to ensure they are factoring trade secrets and proprietary data rights into their strategy.

Europe has a golden opportunity to lead the field in devising new IP strategies for the 4IR age, as well as defining the regulatory and policy environment. IPBC Europe will take place in Paris at the Les Salons Hoche, March 27-28.

Keynotes speakers are EPO Chief Economist Yann Meniere, Ericsson IPR and Licensing VP Mathias Hellman and 2018 Inventor of the Year, Stefano Sorrentino.

For the program, go here.

For the full list of speakers, go here.

IP CloseUp readers use code IPCU200 to receive a 200 Euro discount. 

To register, please visit this link.

Image source: avantex-paris.fr.messefrankfurt.com; events.ipbc.com

 

Taylor Swift relies on clout and class to secure a unique streaming deal for fellow musicians

“With great power comes great responsibility.”

Whether it was Voltaire or Peter Parker (Spiderman’s Uncle Ben) who said it does not much matter. The important thing is the those responsible for generating and using intellectual property – the coin of the realm –  believe it.

Taylor Swift is one of the best-selling music artists of all time. She has already generated more than 130 million streams. But her pop-star status belies her intelligence and vision.

Swift has famously blacklisted Apple for not paying musicians and removed her content from Spotify because of their paltry pay-outs until she got a better deal for musicians. Recently, Swift locked down a highly lucrative record contract with Universal Music Group’s Republic Records, while securing an unprecedented streaming deal for thousands fellow singer-songwriters on the UMG label.

One stipulation of Swift’s new contract states that if UMG sells any of its shares in Spotify, which went public in April, that money must be redistributed to the label’s artists and cannot be recouped. UMG’s 3.5% stake in Spotify has been valued at as high as $1 billion.

Historic Tumblr Post

Swift reportedly prioritized that artists rights over negotiating for ownership of her highly valuable old masters and a bigger cash advance. Largesse of this kind is unprecedented. Swift stated in Tumblr post:

I [also] feel strongly that streaming was founded on and continues to thrive based on the magic created by artists, writers, and producers. 

There was one condition that meant more to me than any other deal point. As part of my new contract with Universal Music Group, I asked that any sale of their Spotify shares result in a distribution of money to their artists, non-recoupable.

‘Non-recoupable’ means that if a recording artist owes UMB money as a result of a cash advance from the label (often the case with younger artists) the proceeds from the sale of Spotify stock cannot be used to pay down the debt. That cash (Swift’s contract states) is to be used expressly for the musicians, many of whom have been paid almost nothing for their Spotify streams while helping build the company’s market value, which has been as high as $35 billion.

Spotify executives have been cashing in some of their valuable shares – why not the musicians who helped to build that value?

She demanded that Apple make sure artists were
compensated 
during Apple Music’s free trials in 2015; and went on a
three-year boycott of Spotify over royalty payouts

IP behavior matters 

“Taylor Swift has been consistent her whole career about protecting the value of music copyrights not just her own,” said David Lowery, lead singer of Cracker and publisher of the Trichordist in the January IAM magazine, here. “IP holders and users both can learn something from her: protecting IP as a matter of principle lifts all boats.”

Swift’s strategy with UMG and Spotify, as well as Apple, is not for effect – it is genuine. Her vision of the future reflects a keen sense of history and an uncanny instinct for survival. Without a truly viable music industry, she suggests, everyone will suffer, even if a handful of top artists may prosper for a while.

For Swift, IP behavior matters. It begins by creating an environment conducive to quality and success.

Let us hope that her bold moves will not go unnoticed by those who generate and own inventions, authored works and other types of creative output. It’s a big IP world and we all have to live in it.

Image source: Irish Times; http://fr.fanpop.com

42% drop in writer income attributed to growth of new media, changing attitudes

Value associated with small content generators and copyright owners appear to be on a similar downward trajectory as independent inventors and patent holders. 

Decline in small book publishing and freelance opportunities for writers has resulted in a 42% decline in income for writers between 2017 and 2009.

The most comprehensive survey of writing-related income of U.S. authors ever conducted, recently published by the Author’s Guild, cites median pay for full-time writers as $20,300 in 2017; $6,080 for part-timers.

The findings included responses from more than 5,000 published book authors, across genres and including both traditional and self-published writers.

Fewer Opportunities

The decline in free-lance journalism and pay has meant less opportunity for authors who write for a living. Many of the best paying publications have dropped their rates or have folded. Content and copyright are increasingly the province of large providers like Conde Nast, whose own fortunes have been declining.

“The decline in earnings is also largely because of Amazon’s lion’s share of the self-publishing, e-book and resale market,” reported The New York Times. Amazon charges commissions and marketing fees for premium positioning, something smaller publishers cannot afford.

The Times quoted a source as saying the “The people who are able to practice the trade of authoring are people who have other sources of income.” This, the article said, creates barriers to entry and limits the types of stories that reach a wide audience.

Devaluation Crisis

“There is also a devaluation of writing in which it is often viewed as a hobby as opposed to a vocation.”

The Authors Guild calls the decline a ” crisis of epic proportions, especially for literary writers.”

SMEs and independent inventors take note: devaluation of creative output has not been limited to authored works.

What and how much audiences are willing to pay for intellectual property rights like patents have declined, as cheap or free-access has grown.

Some see it not only as an attitude towards authors, but as a strategy on the part of some content providers to cut costs and limit competition.

Amazon controls approximately 85% of the self-published market and so most self-published authors have no options other than to accept Amazon’s non-negotiable terms.

“Amazon,” says the Authors Guild, “but also Google, Facebook and every other company getting into the content business, devalue what we produce to lower their costs for content distribution, and then take an unfair share of the profits from what remains for delivering that reduced product.”

Among AG recommendations: “Publishers and self-published authors should be able to negotiate collectively with Amazon, Google and Facebook to equalize the bargaining power.”

For a summary of the Authors Guild survey findings and recommendations, go here.

For the full survey, go to the bottom of the page, here.

Image source: fairhaven.com; authorsguild.org

U.S. patent grants down the most since 2009; China is only nation up

U.S. patent grants were down 3.5% in 2018 over 2017, only the second decline in the past decade, but the largest. 

All nations experienced a decline in grants, except China, which was up 12%.

The reasons for the declines are unclear. They range from

  • Over-patenting in prior years
  • Uncertainty of newly issued patents
  • Lower return on patents
  • Insufficient R&D
  • Growth of businesses in which patents are difficult to secure, e.g. software, algorithms and business methods

According to this year’s report from patent analytics firm IFI Claims:

  • The USPTO issued 308,853 Utility Grant patents in 2018. This represents a 3.5% decline from 2017’s record year.
  • US companies received 46% of these patents. Asian companies received 31% and European companies received 15%.
  • Chinese companies represent only 4% of 2018 US Grants, but their total of 12,589 US patents is an increase of 12% over 2017.

2017 was the 26th year that IBM received the most U.S. patent grants, 9,100.

Google, Samsung and Sony were down 14%, 16% and 21% respectively. Ford Global Technologies and Huawei were both up 14%.

Samsung: Still Largest U.S. Holder

The world’s largest “active” U.S. patent holders and their subsidiaries convey a somewhat different picture. Samsung is first, according the IFI Claims Ultimate Owner ranking, with 61,608 and IBM is third with 34,376. (Canon is second just ahead of IBM.)

The reasons for the significant difference is unclear. They likely have to do with owners’ perceived need to maintain patents they may not use and whether the patents are being used to out-license for revenue or defensively to mitigate risk and maintain market share.

Image source: IFI Claims Patent Service   

USTR warns of increasing attacks by China on US intellectual property, including cyber-attacks

A report released in late November the Office of the United States Trade Representative (USTR) states that China appears to be stepping up its attacks on U.S. intellectual property.

“China fundamentally has not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed appears to have taken further unreasonable actions in recent months.”

Raymond Zhong in The New York Times reported that “something is unfolding right now that carries higher stakes than any other tech story on the planet.”

Zhong was referring to China having detained the third Canadian citizen in apparent retaliation for the arrest of Meng Wangzhou, a top executive at Huawei, the world’s leading maker of telecom networking equipment. Since, CFO Wangzho’s arrest, Canadian officials have reported that a total of 13 people have been arrested in China. Eight have been released.

It has been long speculated that Huawei’s products can be used for spying by the Chinese government.

The USTR report, released on November 20th, is called UPDATE CONCERNING CHINA’S ACTS, POLICIES AND PRACTICES RELATED TO TECHNOLOGY TRANSFER, INTELLECTUAL PROPERTY, AND INNOVATION.

“In the USTR report the U.S. accused China of continuing a state-backed campaign of cyber-attacks on American companies that were both intensifying and growing in sophistication,” Bloomberg News reported.

Chinese Claims

In response to questions about the report, a spokesman for China’s foreign ministry on Wednesday said U.S. officials should read a white paper published by the government in September that claims China ‘firmly protects’ intellectual property rights.

On August 18, 2017, the Office of the U.S. Trade Representative (USTR) initiated a Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. 3

On the date of initiation, USTR requested consultations with the Government of China concerning the issues under investigation.4 Instead of accepting the request, China’s Ministry of Commerce expressed “strong dissatisfaction” with the United States and decried the investigation as “irresponsible” and “not objective.”5

The primary four points of the report (IPCU’s boldface):

1. China uses foreign ownership restrictions, such as joint venture (JV) requirements and foreign equity limitations, and various administrative review and licensing processes, to require or pressure technology transfer from U.S. companies.

2. China’s regime of technology regulations forces U.S. companies seeking to license technologies to Chinese entities to do so on non-market based terms that favor Chinese recipients.

3. China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and generate the transfer of technology to Chinese companies.

4. China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies to access their sensitive commercial information and trade secrets.7

“Further Unreasonable Actions”

The USTR report concluded: “China fundamentally has not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed appears to have taken further unreasonable actions in recent months.

“USTR intends to continue its efforts to monitor any new developments and actions in this area.”

The full report can be found here.

Since 2014 Chinese venture capital investment in the U.S. totals $31 billion. The report cites analyst that estimate “Chinese investors participated in 10-16% of all venture deals in the United States between 2015 and 2017.”

Image source: USTR Update

 

Patent litigation is down 41% since 2015; IPRs are lowest since 2014

Patent disputes are significantly lower since they peaked at 5,874 in 2015.

Litigation tumbled 41% to 3,491 cases in 2018, and was down 14% from the prior year.

While litigation is never good, it is not always bad. Not everyone agrees that the drop in patent suits is a positive sign.

Some see it as an indication that the Patent Trial and Appeal Board (PTAB) is doing its job, eliminating patents that should never have been issued.

Others who are patent owners told IP CloseUp that litigation has become “so costly and arduous, that it no longer pays for many infringed holders to bother.” They also point to the inconsistency of PTAB decisions and multiple opportunities for it and the courts to invalidate patents.

The litigation data was reported this week by Patexia. For the full update, go here.

Additionally, Inter Partes Review (IPR) petitions were down 7% from last year and are at the lowest level since 2014.

Delaware is now the preferred venue for litigation, with 697 cases. Eastern District of Texas, once the top dog for patent disputes, was down to 504 cases in 2018.

Image source: Patexia

 

IP CloseUp surpassed 200,000 views in 2018

In 2018, IP CloseUp broke though the 200,000 view level, generating a total of 207,868 on 373 posts since it was first published. 

Among the most popular posts for 2017:

By far the most read post on IPCU is Kearns’ son still fuming over wiper blade fight”. Since 2014 it has generated 77,844 visits.

In 2018 IP CloseUp was read in more than 100 countries. Since 2015 IPCU has generated 154,653 views.

IP CloseUp has been rated by Feedspot among the top-fifty IP blogs. It began publication as IP Insider in 2011.

To receive IP CloseUp weekly follow @IPCloseUp, connect to LinkedIn via publisher Bruce Berman or by subscribing at the right of this page under the Franklin Pierce tile.

 

Image source: ipcloseup.com

How Spotify can survive the size of Apple, Amazon, Google & YouTube

The streaming genie is out of the bottle. There is no going to back to CD sales or downloading as the primary model for music revenue. For industry leader Spotify, whose stock has dropped from a high of $196 in July to $120, more challenges lay ahead. 

Streaming may be acceptable to celebrity artists with CD sales and negotiating leverage, and who play concerts, but not for more mainstream musicians who have difficulty securing a record deal and receive pennies per stream.

With more than 87 million current subscribers and 191 million active users, Spotify appears to be well-positioned for success. Whether or not you believe that Spotify has gone from music industry slayer to savior depends on you ask and when you look.

The service survived the wrath of Taylor Swift and has settled a class action suit brought by musicians, including Cracker frontman David Lowery, publisher of The Trichordist, for $41 million. (More on how Swift is improving fellow artists streaming compensation in a future IP CloseUp.)

But if Spotify is going to bring the music industry forward it will need to show more than the ability to add subscribers. It must be able to work collaboratively with all recording artists, despite the adverse economics of the music business, and to become profitable in the not too distant future. 

Cash Out

Spotify (NYSE: SPOT) went public in March 2018 with a much-publicized offering that did not raise capital, but enabled some insiders, including investors like Sony Music and Warner Music Group, to take cash out and for the market to broadly value its model. The company’s offering price was $132 and had traded as high as $196.28 in July, but Spotify shares are down to about $120 (as of December 17), below its IPO price, an indication that its shares may not have been as accurately priced as initially believed, or that they can expect to struggle in a bear market.

To go public, Spotify executed an unusual move called a direct listing, forgoing investment-banking underwriters and opting not to raise any money for itself at this time. In the process, Spotify showed confidence in its future and saved tens of millions of dollars in fees while still giving its employees and early investors the chance to cash out at least some of their holdings without diluting the share price.

It’s not clear that streaming – and Spotify agreeing to pay higher royalties to some for their content – will save the music industry or earn the company a profit.

The Main Stream

Spotify was the first company to make streaming mainstream, a simple alternative to both the murky Torrent digital music piracy sites and the more expensive downloads model popularized by Apple’s iTunes.

The brainchild of Swedes Daniel Ek and Martin Lorentzon, Spotify launched as a desktop application in October 2008 and quickly gained millions of users across Europe before spreading to the US.

Spotify represents hope for the patent community, where serial infringers use others’ inventions with much the same impunity that streaming services employ content

“A good example of a tech B-lister is Spotify, which appears to be winning its battle with its biggest suppliers but lives in perpetual danger of being steamrolled by a tech giant,” reported The New York Times.

Perhaps the clearest indication of the Spotify’s awkward status came from Randall Stephenson, the chief executive of AT&T. “Mr. Stephenson has been fighting to acquire Time Warner since November 2016 in an attempt to cobble together some combination of content libraries, mobile networks and advertising tech that is big enough to survive a battle with the Googles and Amazons of the world.”

This is a defining moment for Spotify and big tech. If content it to survive meaningfully, IP rights need businesses, executives and shareholders to step up and look beyond quarterly earnings.

When a $200 billion business like AT&T is jockeying for leverage against Netflix, Google, Apple, and others, how is a university start-up, independent inventor or musician going to compete?
Not easily. 

Yet to be Determined

Despite its subscriber base and public offering, Spotify is far from a financial success. Some believe that to do so it must turn against artists and song writers. That will do little more than make its competitors, especially Apple, look good. Microsoft is among the few players who are big and smart enough to acquire the streaming giant at the right price.

Like AT&T, Spotify’s ability to compete depends on how it fares against much larger, more powerful companies, some with only a passing regard for IP rights.

Leading technology businesses set the tone for how licensing is conducted and how creators are treated, and so far – as far as copyrights and patents are concerned – it has not been a very harmonious one.

Image source: spotify.com; statista.com; economist.com

“Know-go” – negative know-how that can be protected as a trade secret is among IP’s most overlooked assets

Thomas Edison famously said: “I have not failed. I have just found ten thousand ways that won’t work.”

After hundreds of experiments with different materials for a long-lasting light bulb filament, Edison, as much as businessman as an innovator, zeroed in on carbonized thread.

“At that point,” says James Pooley, author of SECRETS: Managing Information Assets in the Age of Cyberespionage, “Edison had two trade secrets: first, the identity of the best material. And, second, the identity of the materials he had tried.”

Negative Know-How

A business’ lack of success, a matter of specialized know-how more aptly called “know-go,” is protected under trade secret law because it is valuable not only to it but to a competitor who wishes to catch-up without spending as much time and money.

Know-how, sometimes known as show-how, is the “secret sauce” that can give an otherwise mundane invention meaning. But the value of negative experience — of what not to do; of repeated failures and near successes — should not be under estimated.

The Intangible Investor in the December IAM magazine looks at “Failure – IP’s most underrated asset.” The full piece can be found here.

Costly Mistakes

A popular television series, “What Not to Wear,” has run for 345 episodes over ten years. The show advises women and men about how to spare themselves the cost, time and embarrassment of fashion faux pas. The value, the show’s loyal followers reason, is not only in identifying the right clothes choices, but in avoiding the more costly mistakes.

Information, data or experience that spares businesses time, cost and potential embarrassment is an asset, often an invaluable one, especially to large, risk-adverse businesses where R&D is at a premium.

Know-go is also attractive to potential acquirers who need to know how far towards a solution a target may have progressed.

Closely related to the concept of negative information is the idea that you can be guilty of trade secret theft (“indirect misappropriation”) even though your product looks very different, or significant investments have been made in your own research.

“Intangible assets of this nature that serve to avoid failure,” says Pooley, former Deputy Director of the World Intellectual Property Organization (WIPO), “can be more valuable than knowledge that enables success.”

Image source: rundlesafety.co.za; wikipedia.org;

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