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Gene-editing break-through: can a collision of science, ethics and (patent) ownership be avoided?

The USPTO decided in February that the rightful intellectual property owner of CRISPR in eukaryotes, a time-saving tool that makes it cheaper and easier to edit gene sequences, should be Feng Zhang, Ph.D., and The Broad Institute of MIT and Harvard, not Jennifer Doudna, Ph.D., and the University of California, Berkley, who had conducted the earlier research.

However, Doudna and her team, which included Emmanuelle Charpentier, now with Max Planck Institute in Berlin, are on track to obtain a European patent for CRISPR. They recently filed an appeal against the USPTO’s decision, setting the stage for a showdown.

CRISPR will allow an organism’s DNA to become “almost as editable as a simple piece of text.” Using CRISPR, scientists will have the capacity to alter, insert and delete genes in plants, animals and, even in humans.

The implications are very big indeed, both in terms of science and profits, and, especially, ethics. Universities and businesses stand to generate potentially billions of dollars. Medical research will never be the same.

[For a good description of how CRISPR-Cas9 works, go here. ]

The battle lines are being drawn to determine the rightful owner of aspects of the development: Berkeley and Dr. Charpentier vs. Broad Institute/MIT and Harvard. It could mean an eventual pay-out of billions of dollars.

World-Changing

In 2012, Cal biochemistry and molecular biology professor Jennifer Doudna and microbiologist Emmanuelle Charpentier, now of the Max Planck Institute, changed the world. They invented CRISPR-Cas9 (as opposed to eukaryotes, which is any organism with a nucleus enclosed in membranes), a gene editing tool that uses a protein found in Streptococcus bacteria to chop up and rearrange viral DNA with precision.

“The implications of the technology were immediately apparent, astonishing, and perhaps just a wee bit scary.” 

“The implications of the technology were immediately apparent, astonishing, and perhaps just a wee bit scary,” reports California Magazine. “Ultimately, CRISPR applications might be developed to wipe out genetic diseases, produce bespoke bacteria that could pump out everything from hormones to biofuels, and engineer exotic animal chimeras.”

It is one thing to use an editor to eliminate genetic mutations, such as those found in sickle-cell anemia, writes the Wall Street Journal, however, “it is quite another thing to edit the germ line—that is, to make changes that would be passed on to future offspring.

“Would it be permissible, Ms. Doudna asks, to lower an unborn child’s risk of Alzheimer’s disease? If so, would it also be permissible to edit for greater intelligence or athleticism or even, say, for a particular hair color? While all such uses would ultimately require regulatory and institutional review, it is the notion of building a social consensus that is particularly fraught.”

The three main researchers involved in these patent cases have developed their own companies that focus on CRISPR: Doudna developed Intellia Therapeutics, Zhang developed Editas Medicine and Charpentier, now at a Director at Max Planck’s Infection Biology, developed CRISPR Therapeutics. So, both universities and businesses stand to benefit.

These university-based cases often result in sharing through cross-licensing. Remicade, for example, a highly successful biologic for treating auto-immune responses like Crohn’s disease which has generated over a $1 billion so far, has multiple university participants, but is primarily owned by NYU.

Who Benefits?

Yet another question that is raised: Is it right for highly endowed universities like Harvard to get richer as a result of government-funded research? Almost 70% of university research is provided by the U.S. government. Harvard’s 2016 endowment was $36.4 billion.

With the potential impact on society so great, patents may play much more than a financial role. They depending who controls them, they may turn out to be the lynch-pin for ethical application of advanced gene-editing.

In the most interesting chapters of her new book, “A Crack in Creation,” Ms. Doudna wrestles with her ambivalence about the tool she has helped create. She concludes that she no longer feels comfortable operating inside her “familiar scientific bubble”: She must take on a role as a public citizen and address not just the power of gene editing but the ethics of it. At stake, she believes, is “nothing less than the future of our world.”

Image source: bloomberg.com; rsb.org.uk

Drops (& gains) in patent grants to top holders reflect changing times

Every picture tells a story. So does each increase or decrease in the number of U.S. patents major businesses receive over the prior year.

The recently published IPO Top 300 patent recipients for 2016 encourages scrutiny. While overall grants were up 1.6% over 2015, there were several unexpected swings, and a number of notable gainers and losers.

Only four of the top ten U.S. patent recipients in 2016 were foreign-based companies, down from 2011, when eight out of the top ten recipients were non-U.S. It is difficult to tell if that change reflects more filing on the part of U.S. companies or less interest on the part of foreign filers. Probably, the latter.

Those receiving fewer patents in 2016 over 2015 include Toshiba, -33.3%, GM Global Technology, -14.8%, Johnson & Johnson, -14.1%. Broadcom, -24.3%, Blackberry, -28.1%, and DuPont, -35.5%. ABB Ltd., down 142%, was still granted 317 patents. NXP Semiconductor, which was acquired by Qualcomm in the fourth quarter, was down 70.3% in U.S. patents received.

Multiple Factors

Depending on the company and industry the grant losses can be attributed to several factors, including reduced R&D budgets; a lower regard for the value of patents due to changes in the law and decisions in the courts; reduced concern over patent counts; and the desire on the part of more companies to obtain fewer, better quality patents.

“It is difficult to attribute reasons or trends as to why a company may have had more or less patents issued from one year to the next,” Brian Hinman, Chief IP Officer for Philips told IP CloseUp. “Patents issuing in 2015 may still be reflecting the impact of the patent application filing surge just prior to enactment of the AIA hence the decline in 2016.  

“We also may be seeing the impact of more companies deciding to maintain their innovation as trade secrets especially in light of enactment of the DTSA [Defend Trade Secrets Act].”

It should be noted that some companies choose to spread their patent grants among multiple entities, obscuring the actual number received. Companies which had been actively filing software and business method patents in previous years, are likely to be doing less of that, now that those types of patents are more difficult to obtain and uphold.

Notable Increases

On the upside, among the top 21 recipients, Intel was up 30.1%, Taiwan Semiconductor & Manufacturing, 28.6% and Ford Global Technologies, 27.6%.  Amazon, 15th on the overall patent recipient list for 2016 with 1,662 grants, was up 46.3 % over 2015. This may reflect a new seriousness about entering or acquiring other businesses.

Other notable gainers include Nokia, up 73.8%, GlobalFoundries, up 136.5% and Hyundai Motor Co., up 39.1%. (GlobalFoundries acquired IBM Microelectronics in 2015.)

Among financial institutions, Bank of America was up 20.8%, having received 279 patents.  Perennial annual U.S. patent leader IBM, was up 7.8%, receiving 8,023 patents, the most of any company.

For the complete list of top 300 patent recipients, go here 

For an interactive list of top 50 assignees, go here.

Image source: statista.com; wikepedia.com; public.tableau.com

Up to $600 billion in U.S. IP is stolen annually by foreigners, says report

An IP Commission study finds that foreign sources, especially China, are responsible for the bulk U.S. theft.

Counterfeit goods, pirated software, and theft of trade secrets together represent a “systematic threat” to the US economy of between $225 billion and $600 billion annually, according to the findings of a 2017 research report from the bi-partisan IP Commission, The Theft of American Intellectual Property: Reassessments of the Challenge and United States Policy.

The massive theft of American IP—from companies and universities across the country, from U.S. labs to defense contractors, from banks to software companies—threatens the nation’s security, says the report.

The research, and update of a 2013 report, is the work of the bi-partisan IP Commission and was published by the National Bureau of Asian Research (NBR) NBR conducts advanced independent research on strategic, political, economic and other issues affecting U.S. relations with Asia, including China and Russia.

The Intangible Investor in June’s IAM features a full perspective on the report, “Foreign sources responsible for most IP theft.” Subscribers can find a copy here.

Pioneering Research

Kudos to the IP Commission for establishing a beachhead in the global war to combat IP theft and cyber crime. Its pioneering research provides American and other lawmakers, businesses, investors and the public, with data about IP infringement that are cannot be ignored.

However, the report falls short. Identifying and stopping infringement, including cyber-espionage, should not be restricted to sources outside of the U.S.  The IP Commission’s research zeros in on foreign counterfeit, trade secret and copyright violations. It does not account for increasing domestic patent infringement and copyright abuses, which have profoundly affected the software, recording and other industries, and impacted U.S. jobs.

To be fair, this IP Commission’s focus is foreign IP threats, and it is a daunting task to estimate the financial impact of domestic invention theft on U.S. businesses – not just what gets reported in the press about settlements and licenses.

But speaking to a range of IP attorneys and holders, it becomes clear that much IP abuse comes from domestic IT businesses, Internet providers, streaming services, individuals and others that know they are unlikely to be caught infringing rights or will have to pay for a license. By the IP Commissions own admission, IP theft is less benign than it might appear.

The theft of American IP is not just the ‘greatest transfer of wealth in human history,’ as General Keith Alexander put it; IP theft undercuts the primary competitive advantage of American business—the capacity for innovation.

Inspiration and a Challenge

The IP Commission’s timely report is a challenge to IP holders, and lawmakers alike who are concerned about innovation and commerce. It is a call to examine the source, type, and level of domestic IP rights theft, including patents, on SMEs, inventors, and universities, and how they affect the economy now and are likely to in the future.

The full 24-page update, The Theft of American Intellectual Property: Reassessments of the Challenge of the United States Policy, is well worth reading. Visit  www.ipcommission.org.

The original 2013 report, Report of the Commission on the Theft of American Intellectual Property, is also available and useful for comparison. 

Image source: ipcommission.org; linkedin.com

Startup mentored by Brody/Berman and Center for IP Understanding (CIPU) is LES Business Plan Winner

Takachar, a small business working with farmers in Kenya to develop an inexpensive, ecologic method for turning biomass (waste) into fuel, is the Global Winner of the 2017 Licensing Executives Society (LES) Business Plan Competition.

The company, led by Kevin S. Kung, an MIT doctoral student, was mentored in the Business Plan Competition by Bruce Berman, CEO of Brody Berman Associates and President of the Center for Intellectual Property Understanding (CIPU), an independent, non-profit.

Takachar’s unique IP strategy provides farmers free open-source technology, followed by patents licensed to the company exclusively by MIT, trade secrets and trademarks. The goal is to provide affordable franchises in Africa, India and other parts of the world, where economical sources of fuel are crucial to the success of small farms and disposing biomass is a challenge.

The Global LES Business Plan winner receives a $5,000 cash award and in-kind IP support. For more information about Takachar, go here.

Second Global Winner

Berman also mentored the 2016 LES Business Plan global winner, Fruti-Cycle Project, an Ugandan start-up that provides affordable, portable refrigeration for delivering produce to market faster and with less spoilage. For more information about Fruti-Cycle, go here.

“It is a privilege to work with innovative and ambitious young people, like Kevin and Nelson,” said Berman, who has 25 years of IP consulting experience. “They have the right combination of vision, technical skill and tenacity to turn original ideas into businesses that provide timely products and solutions. Takachar and Fruti-Cycle Project are good examples of utilizing integrated IP rights strategies in diverse parts of the world.”

Takachar Strategy

Image source: Takachar

“NPEs generate higher damages awards,” 2017 litigation study finds

The disparity in patent damages awards between non-practicing and practicing entities favors NPEs and is growing wider. 

These findings, counter-intuitive to some, are part of the useful, just-published report from PwC, 2017 Patent Litigation Study – Change on the Horizon.

PwC’s analysis shows the continuation of a trend that began in the early 2000s: significantly higher damages awarded to NPEs relative to practicing entities.

The median damages award for NPEs was significantly higher than PEs in the last 15 years. While this disparity had narrowed to about 1.6x in the 2007–2011 period, in the most recent five-year period, the NPE median damages award climbed to 3.8x the median for practicing entities.

It is not clear if the findings are a result of NPEs owning better quality, more highly infringed patents than PEs, or that NPEs are simply more adept at enforcing them.

“The disparity has perplexed us for some time,” stated Chris Barry, one of the 2017 Litigation Study’s authors and a partner in PwC’s Forensics Practice. “Operating business that asserts patents typically are more interested injunctive relieve – halting a competitor’s product sales – than in generating revenue. Most patent cases are dismissed on summary judgment or settled.”

Higher Success Rate

Over a 20 year period from 1997 to 2016, PE’s have a higher success rate at trial than NPEs at trial, 36% vs. 25%, but a significantly lower recovery rate, $4.9 million vs. $11.5 million. For the 2012-2016 period, NPEs out generated PEs in damages by almost 4 to 1 (see above infograph). 

Among NPEs, universities fare best at trial with median damages awards of $16.3M, as opposed to $13M for NPEs and just $6.7M for individual inventors who enforce.

No information on trial costs was provided, although AIPLA tracks them by the size of the case. There also was no tracking of PTAB results or influence on patent litigation. Many law firms address this, as does Unified Patents.

Despite a handful of large, headline-grabbing patent damages awards – most of which are never paid – patent trials have been flat for almost three decades, with a little more than 100 disputes going to trial annually.

There are an estimated two million plus active U.S. patents.

For the full 2017 patent litigation report, go here.

 

Image source: PwC

 

New book: tech elites’ disregard for privacy & IP must be managed

Can Internet monopolies – adept at providing at providing information – be prevented from violating the rights of individuals, businesses and IP holders, and impeding innovation?

They can if they are regulated like utilities, says Jonathan Taplin in his new book, Move Fast and Break Things.

In 2009, Mark Zuckerberg told Business Insider publisher and former Wall Street analyst Henry Bloget, “Move fast and break things is Facebook’s prime directive to developers. Unless you are breaking stuff,” Zuckerberg said, “you are not moving fast enough.”

Eight years later, this Facebook mantra has taken on a darker meaning. A new book by Hollywood producer and former USC Annenberg Innovation Lab director, Taplin (Mean Streets, The Last Waltz), offers a portrait of technology giants without restraints, routinely violating the rights of creatives, consumers and innovators, and propping up their own shares at the expense of investing in the future.

Subtitled How Facebook, Google and Amazon Cornered Culture and Under-mined Democracy, Move Fast and Break Things dissects the inordinate power of a handful of the popular companies and their founders, and what it means for culture, innovation, and personal freedom.

What Taplin does best is connect the dots by distinguishing between true break-through ideas and the ability to provide and mine data, especially personal information, for profit and dominate markets. The confluence of vision, ego, and wealth is for Taplin a dangerous mix that needs to be carefully watched if not closely monitored. Copyright and patent holders need to be especially wary.

Don’t Ask Permission

“The co-founder of YouTube, Chad Hurley, was a PayPal alumnus, schooled in Peter Thiel’s philosophy,” writes Taplin. “He built his company on the same ‘don’t ask permission’ ethic the Larry Page had embraced… ‘Who will stop me?’ [A phrase which can be found in Ayn Rand’s controversial novel, The Fountainhead.] This became the center tenet of Internet disrupters, from Thiel’s PayPal right up to Travis Kalanick’s Uber.”

Taplin writes that Google, who championed the tagline for its corporate code of conduct, “Do no evil,” controls 88% of online searches and search advertising, while Facebook has 77% market share in social media and Amazon a 70% share of e-book sales. He does not consider Apple a monopoly because its main hardware business has many competitors.

“The tech elites jealous guarding of its own monopoly platforms,” says Taplin, “is built upon a blatant disregard for the artist’s intellectual property.”

“More people than ever are listening to music, reading books, and watching movies, but the revenue flowing to the creators of that content is decreasing while the revenue flowing to the big four platforms is increasing. Each of these platforms presents a different challenge for creators. Google and YouTube are ad-supported ‘free-riders’ driven by a permission-less philosophy.”

Permission-less free-riding, or “efficient infringement” in has also come to dominate other parts of the IP workplace, rendering simple patent licenses more arduous than ever.

Consent Decree

How does Taplin propose we prevent Internet monopolies from violating the rights of individuals, businesses and IP holders, and impeding innovation? You regulate them like utilities.

It would be very difficult for many people and businesses to live without Amazon, Google, YouTube and Facebook, but it is becoming impossible for many who produce intellectual property to live with them.

This is not something that their founders and shareholders want to hear, but it may be inevitable. Europe is more apt to regulate BigTech than the U.S. – and it is not mere jealousy. If Google, for example, is indeed a monopoly, Taplin, a former tour manager for Bob Dylan, asks, would a consent decree like the one that the government made Bell Labs enter into in 1956 work? He believes it would.

Easy Ride is Over

The Guardian, the British daily, said “Move Fast and Break Things is a timely and useful book because it provides an antidote to the self-serving narrative energetically cultivated by the digital monopolies. They have had an easy ride for too long and democracies will, sooner or later, have to rein them in.”

It would be very difficult for many people and businesses to live without Amazon, Google, YouTube and Facebook, but it is becoming virtually impossible for many who produce intellectual property to live with them.

My full review of Jonathan Taplin’s new book can be found here, on IP Watchdog.

For more information or to buy Move Fast and Break Things, go here.

For a free preview chapter (via Google), go here.

Image source: jontaplin.com

 

97% of Europeans regard IP rights favorably; 41% ages 15-24 believe it is sometimes OK to buy counterfeits

When it comes to intellectual property rights Europeans are highly respectful, except among the young, where buying counterfeits has gown.

That is the primary take-away of an extensive European Community survey of attitudes toward IP rights delivered recently. The findings show that 97% of Europeans believe that IP should be respected, and that inventors, creators, and performing artists need to be paid for their work.

In contrast to the overall positive regard for IP rights, however, 41 per cent of young Europeans, ages 15 to 24, said they believed it was acceptable to buy counterfeits if the original product was too expensive. 15% of those surveyed in that age group said that they had intentionally purchased a counterfeit product in the past 12 months, 9% higher than in a similar 2013 study conducted by the European Union Intellectual Property Office (EUIPO).

“European Citizens and Intellectual Property: Perception, Awareness and Behavior,” a 205-page research report, updates the first EUIPO provides further evidence of how IP rights are regarded by EU citizens at a time when encouraging innovation and creativity is increasingly the focus of economic policy.

“In line with the 2013 results, people do not always act in line with their stated position,” said EUIPO Executive Director, Antonio Campinos, in summarizing the findings. “The key 15-24 age group seems to have become less convinced that fake goods are damaging and is buying more counterfeit goods, mainly for price reasons.”

Significant Sample

“European Citizens and Intellectual Property” surveyed people across all 28 EU Member States about their perceptions of intellectual property survey. It consolidates results of more than 26,000 interviews and confirms the global picture assessed in the EUIPO’s 2013 research.

“Even during a period of economic crisis when household budgets have come under pressure,” the report concluded, “the vast majority of respondents agree that it is important that inventors, creators, and performing artists can protect their rights and be paid for their work.”

Eighty-three percent said they prefer to access digital content through legal or authorized services whenever there is an affordable option available, and 71 percent of those admitting to using illegal sources say they would stop, if they could access affordable alternative options.

Confusion is growing about what constitutes a legal source. In 2016, 24 percent of respondents, five percentage points more than in 2013, wondered if an online source was legal, rising to 41 percent among young people.

Half of the Europeans queried believe that strict protection of IP rights may, in fact, curb innovation, and more than half feel that IP principles are not adapted to the Internet.

Neither the 2017 survey and previous study focused on counterfeits and copyrighted content, or examine attitudes towards patents or trade secrets.

An executive summary for “European Citizens and Intellectual Property” can be found here.

For the full 2017 EUIPO IP perception study, go here.

Image source: euipo.europa.eu

PIPX IP stock index down 8.7% in Q1 after being up 11.2% and 20.4%

The PIPX public IP licensing company stock index came back down to earth in the first quarter of 2017. 

For Q1 the PIPX index was down 8.7% after being up  11.2% and 20.4% in Q3 and Q4 2016. This compares to an up 5.5% quarter for the S&P 500.

The change in value of the component companies over Q4, range from 61.4% for Wi-Lan (WILN) to -40.7 for Marathon (MARA), Xperi (XPER) (formerly Teserra) experienced a 23.2% decline in its share. Finjan (FNJN), whose market cap does not currently qualify it for the Index, and sells cybersecurity products as well as engages in patent licensing, was 54% in the quarter.

Fewer companies are now responsible for the bulk of the performance, as size becomes even greater factor in this capitalization-weighted index and as the value of some companies lags.

After outperforming the S&P 500 in Q3 and Q4 2016, Q1 saw the PIPX decrease, but not as dramatically as in previous quarters. The value of $1 invested in the S&P 500 in Q3 2011 would now be $1.76 while the value of the same $1 invested in the PIPX would be $0.69.

Q1, gains in RPX (RPXC), which named a new CEO, and Wi-Lan shares represented substantially all the positive movement in the index, and was heavily outweighed by large decreases in valuation at Acacia (ACTG), Rambus (RMBS), InterDigital (IDCC), and Xperi carrying the index to a substantial loss.

InterDigital, Xperi, and Rambus continue to make up the lions share of the index because of their market cap,” said Dr. Kevin Klein, Vice President and GM of Products and Licensing at VORAGO Technologies, who compiled the IP stock performance data for IP CloseUp.

“These three companies accounted for 37% of the total value of the index at the inception in 2011, today they make up over 80% of the total value of the index. InterDigital alone now accounts for over 40%, up from 15% at inception.”

Quarterly PIPX Performance, 2011-2017

For the full Q1 PIPX report, go here.

Image source: PIPX IP Stock Index

 

PTAB fairness data is misleading, say more patent holders

Not all patent owners agree the Patent Trial and Appeal Board (PTAB) is a fairer forum for vetting patent quality today.

While some believe that the United States Patent and Trademark Office (USPTO) board is no longer the “death squad” that it was described as by the former Chief Judge of the Court of Appeals, most patents subject to multiple inter partes reviews are, with an uncanny frequency, either invalidated or severely weakened. Few, emerge as clear winners.

The USPTO established the PTAB, an administrative law body, as part of the America Invents Act in 2012 to eliminate issued patents that should not have been granted because prior art way overlooked. IPRs are said to be a patent office “second look,” but while patent office re-examinations (an earlier review process superseded by IPRs) eliminated many patents that should not have seen the light of day, they also strengthened some, making them easier to license. To date, IPRs effectively have been a one-way street, eliminating many patents that should not have been issued but ineffective at identifying good ones.

An article that appeared last week, “How IPR Gang Tackling Distorts PTAB Statistics,” takes the recently reported data to task for misleading about the ultimate effect of multiple IPR filings on a single patent.

“If you use the PTAB published statistics, they’ll tell you that the institution rate was 50% – because only 1 of 2 petitions was granted. That’s true, as far as it goes. But from the patent owner’s perspective, they used to have 10 claims, and now they have 0.  That’s a 100% kill rate!”

“Assume 10 petitions and one institution,” wrote Peter Harter in IP Watchdog. “A 10% institution rate seems terribly biased towards [in favor of] the patent owner. But if all 10 claims get killed, that’s still a 100% kill rate – pretty good for challengers. When both sides think the deck is egregiously stacked against them, it’s easy to see why there’s no middle ground for compromise and improvement. And the way the PTAB is reporting statistics is to blame.”

An article that appeared recently in Law 360, “Inter Partes Reviews Becoming Friendlier to Patent Owners,” argues that holders whose patents are subjected to IPRs today have a better chance of survival than in the past.

“The PTAB also now institutes inter partes reviews less frequently,” writes Law 360. “Looking at all institution decisions made by the PTAB, the board decided to institute trials more than 85 percent of the time in the first year after inter partes reviews became available (2013) according to data from the U.S. Patent and Trademark Office, but only 68 percent of the time in its 2016 fiscal year.”

Statistically Valid

The decline in the institution rate may be statistically valid, but some patent holders argue that it does not tell the whole story. The statistics do not explain that some of the worst, most easily invalidated patents came before the PTAB in the first year of its existence, so the institution rate was destined to go down as it became clearer the weakest patents had been terminated.

Results from a November-December 2016 Bloomberg Law and AIPLA research study asserts that “progress has been made in patent owner attitudes towards IPRs.” However, it really depends on which patent owners you ask: those that have large portfolios that they rarely enforce or those with a small number of quality patents that they wish to license.

Brad D. Pendersen, former chair of AIPLA’s IPR Committee and co-author Bloomberg Law-AIPLA’s Patents After the AIA: Evolving Law and Practice (2016) believes that there is an opportunity for patent holders subject to IPRs to strengthen their patents, despite evidence to the contrary.

“Given the potential gold-plated downstream advantages (in litigation and/or settlement) of surviving an IPR (either at the Decision or Institute stage, at the Final Written Decision stage), and given that one-third of patents survive at the Decision to Institute Stage, it is surprising – but not completely unexpected – that some portion of patent owners are starting to look more favorably on the IPR process.”

It is not clear that most patent owners who license would agree with the “gold-plated” reasoning. If it were true, there would be even fewer patent suits and more owners seeking IPRs of good patents. In fact, it is a bit of a mystery what happens to patents that pass PTAB muster. A significant number appears to move on to district court litigation, and there is little data analyzing if they have greater value or fare any better licensing than patents that are less successful running the IPR gauntlet.

Leading IPR Target

Finjan is an example of an IP holder that engages in licensing whose patents are frequently subject to IPRs. The company has fared surprising well in defending itself at the PTAB, but that success does not seem to have translated into significant shareholder success for the cybersecurity company which also frequently out-licenses its patents.

On March 15, 16 and 17, as reported in The Patent Investor, Finjan won three more IPR rulings, involving Palo Alto Networks. Shares of Finjan (FNJN) currently sell at just $1.54. The company has a micro market capitalization of $35M, $18M on 2016 revenues. Its shares are up significantly over 12 months vs. for the S&P 500 Index, but the company, which lost $12.6M in 2015, showed its first profit in 2016, $350K or .02 per share. Finjan has executed a difficult IP strategy. If successful IPRs have gold-plated its patents, the value has yet to shine through.

Finjan was the fourth most IPR’d patent holder in 2016 and the third most in 2015. It is the most successful company in successfully defending against IPR petitions. Of 47 total IPRs against Finjan patents to date, 32 have been denied institution.

With that track record at the PTAB, one would think Finjan would have a field day licensing its patents, but the IPRs continue to come, and it still must win hard-fought victories in district court litigation. In September, a California jury found that cybersecurity firm Sophos infringed all eight patents asserted in a lawsuit brought by Finjan over software that identifies new computer viruses, awarding the company $15 million in damages.

“We have a portfolio of patents that has been proven durable in light of the increasing number of administrative pathways to challenge validity largely due to two factors,” says Finjan CEO, Phil Hartstein.  “First, our patents were developed jointly and alongside product development of technology that was disruptive to a market.  Second, we do not deviate from the intrinsic record of the assets themselves and vigorously defend our patent rights on the merits.”

Coordinated Challenges

Editor and patent attorney Gene Quinn of IP Watchdog believes that Finjan and other businesses that attempt to out-license their patents are frequently subject to repeated, coordinated attacks.

“At least several patent owners, including Finjan, are routinely subject to serial, harassing IPR challenges,” writes Quinn. “The Patent Office doing something about harassing IPR challenges is long overdue. If the Director is not going to exercise the discretion vested in that Office by the America Invents Act (AIA) hopefully more panels of the Board will take it upon themselves to do just that.

“Patent owner harassment needs to stop. Patent owners shouldn’t have to be subjected to many dozens of IPR challenges before someone recognizes there is coordinated harassment – perhaps even collusion – against certain patent owners who have the audacity to want to be paid for blatant, ongoing, willful infringement.”

23 IPRs Filed on a Single Patent

Zond makes plasma generators, the kind used in manufacturing semiconductors. Pulsed DC plasma generators for magnetron discharge were first introduced in the late 1990s to reduce arcing during for the purpose of improving the quality of thin-film materials. A big breakthrough came in September 2002, when Zond applied for what it describes as a “revolutionary” pulsed technology approach.

Zond is a Massachusetts-based company that wholly owns Zpulser LLC, which commercializes its patent technology by making and selling high-power plasma generators. The patent at issue relates to methods for generating magnetically enhanced plasma.

Over the last three years, Zond’s patents have challenged an average of 12.5 times in IPRs and as many as 23 times.  The patent research firm, Patexia, writes that it is difficult for holders of good patents to survive multiple IPR challenges. In the case of Zond, it has made licensing pretty much impossible.

A study last year, reported in Law 360, showed that Zond’s patents have been challenged in AIA reviews more than those of any other patent owner, including largest patent licensing company, Intellectual Ventures, which owns more than 70,000 patents and took second place on the list.

Zond’s large number of infringement suits, reports Law 360, spurred many companies to band together to challenge the patents in AIA reviews. In addition to Fujitsu and Gillette, petitioners have included Toshiba Corp., Advanced Micro Devices Inc. and Taiwan Semiconductor Manufacturing Co. Ltd.

Were potential licensees and defendants in patent suits lining up against Zond’s patents because they were bad and its case without merit, or did they want to destroy some potentially good patents that would have cost them to license?

For IPRs the devil certainly is in the details, as Patexia’s Pedram Sameni points out in a case study, “Can Patents Survive Multiple IPR Challenges?”

“Some have been suggesting that solely relying on the denial rates reported by the patent office is not enough to conclude that patents are surviving the IPR challenge,” writes Sameni. “Many have called PTAB, the patent death squad. Our study shows that in some cases, patents are challenged many times.

“The reality is that it only takes one successful IPR to completely kill all the claims of one patent. Therefore, the case-level status is not the best indication of PTAB performance and patent survival rate. While as IPR’s Final Written Decision usually means that some of the claims were invalidated, it does not necessarily mean that all claims were canceled.”

Not the Full Story

If claims still exist, they could be threats. And potential licensees/defendants will go to lengths to “kill” a patent to avoid paying a license or being dragged into court, including teaming on multiple petitions. Repeat IPRs are an efficient way to make a potential infringement suit or royalty payment disappear for multiple parties.

“The statistics that show that the PTAB is becoming fairer for patent holders do not tell the full story,” a prominent NPE told IP CloseUp. “IPRs are frequently unfair fights between several, well-funded petitioners and a single patent owner who has to run the gauntlet, repeatedly.  Surviving an IPR doesn’t mean anything if subsequent challenges can be filed at any time, especially in coordinated fashion.”

Once a patent is challenged multiple times with different prior arts, it is highly unlikely that any of its claims will survive – no matter how good it is.

“The PTAB may not be a death squad, but challenged patents are put in a kind of headlock that can render them useless. Where are the patents that emerge from IPRs generally intact or whose petitions against them for review are not instituted? They should be eminently licensable, but they are nowhere to be found. The ‘normalization’ statistics that are being cited to show that the PTAB is becoming a fairer forum for patent holders are highly misleading.”

Lack of Uniformity

Another patent licensing business, one whose petitioned patents have survived multiple IPRs, still believes that the lack of uniformity among the many PTAB panels and administrative law judges is a major factor in the continued unfairness that has effectively destroyed patent licensing for many companies and independent inventors.

“It’s difficult to predict how the PTAB will rule,” says the executive, a lawyer. “The first year or two that patents were subjected to IPRs there was a lot of low-hanging – really, rotting –  fruit. Those petitions were almost universally instituted, and many bad patents were appropriately eliminated.”

“But anyone can file and IPR and they can keep filing them. Reliable patents don’t seem to emerge from the process, only ‘bad’ ones, which are eventually neutralized. Few patent holders have the time or money to repeatedly defend themselves in IPRs. This has made otherwise licensable patents pretty much worthless and daily infringement, at least to some, an acceptable way of doing business.”

Image source: patentlyO.com; patentacademyonline.com; 

Bloody AC-DC patent war depicted in new novel by Oscar winner

If you thought the 19th Century was a kinder, gentler time for the people responsible for break-through inventions, you would be mistaken – it was not much better than today. 

The bitter battle for the electricity standard between Thomas Edison and George Westinghouse was nastier than a bar room brawl. It has all the drama of a Hollywood movie, which, in fact, it is currently being made into.

Last Days of Night is a New York Times best-selling historical novel written by the Oscar-winning writer of “The Imitation Game.” It tells the true story of the battle between direct and alternating current for the electricity standard, one that involved fundamental patents, lawyers (Paul Cravath, 18 months out of Columbia Law School), lawsuits (312 of them), bankers (J.P. Morgan), a phobic inventor (Nikola Tesla), the press, and electrocutions of animals and a human.

Keen Observer

Last Days of Night is not classic literature. Its short chapters give it the feel of a pot-boiler. However, the book’s is timely for an ability to reveal character – good and bad – in the face of adversity and is a keen observer of the inventive process.

It is no surprise that its author, Graham Moore, won an Oscar for his adaptation of The Imitation Game, the story of British mathematician Alan Turing, who cracked the Nazi’s enigma code, but who was a victim of his time.

Moore is currently adapting Last Days into a major motion picture starring Eddie Redmayne, who won the Best Actor Oscar for his portrayal of the young Steven Hawking in The Theory of Everything. The Last Days movie, with an all-star team in control, has a good shot at achieving what few books and films have: a realistic portrait of the relationship between inventions and the people and systems that drive them.

Deeper Dive

IAM subscribers go here for the May issue, which contains “Book Sheds New Light on an Epic Patent Battle,” a deeper dive into this strangely inspiring, mostly factual, novel that reminds us that the premium on new ideas is as tied to people as it is to capital and genius.

Much to his credit, Graham Moore’s provides a lengthy note from the author, detailing what he condensed in the novel and why. His historical timeline (mrgrahammoore.com) helps readers to separate fact from fiction, for a fuller appreciation of the people and events that helped to secure a bittersweet victory for AC.

To purchase Last Days of Night, go here.

Image source: mrgrahammoore.com

Patent transactions are flat; U.S. asking prices firm at $250K per

The number of patent sales in the 4Q 2016 remained about the same, but the median asking price of sellers of U.S. patents was higher than in recent quarters.

According to data compiled by Richardson Oliver Law Group, a Silicon Valley firm that tracks patent transactions, five of the ten most active sellers were Asian companies, and the most active buyers were led by a variety of operating companies, defensive aggregators, and NPEs. In general, corporate buyers were more active than NPEs.

The median asking price of U.S. patents in the 4Q was $250K; all patents, $150K (see graph below).

As a trend, operating companies represent a higher percentage of overall patent purchases when looking at a five-year sample. The sale of software assets lagged hardware, but not by much, 180 to 234, for some an encouraging trend.  

“Buyers are becoming more comfortable with software risk and understanding what may and may not be ineligible under Alice,” said Kent Richardson, Managing Partner of ROL. 

Sales are flat, which Richardson believes can be interpreted as a sign of relative health, given how badly the case law has gone against patent owners. “Arguably, there should be fewer deals on the market and fewer sales. We won’t know for sure for another 12 months, but it looks like sales rates are climbing back to where they were a couple of years ago.”

Cloud-related inventions are more likely to be technically challenging in terms of patentability, compared with, say, user interface patents. Infrastructure inventions are much more likely to pass an Alice test.

“As a test, we are defaulting to ‘Would it be patentable to the Europeans?’,” concludes Richardson. “It’s not a perfect measure, but it works.”

Available Assets Down, Packages Up

The number of patent assets available in the market dropped 13.2 percent to 2,478 new assets in the fourth quarter from the previous quarter.

The number of patent packages listed rose 3.5 percent to 147 from the third quarter. (This could mean that fewer, better quality patents are being offered for sale.) However, 2,855 assets listed in the third quarter were offered in a smaller number of patent packages.

The median asking price per new asset (U.S. and global) listed by patent brokers was $150,000 in the fourth quarter. That reflected increases of 38 percent from the previous quarter and 80 percent from the fourth quarter of 2015.

Brokers matched buyers and sellers for 28 deals on packages of related patents during the quarter, according to ROL data. Those deals totaled 637 assets, comprising 395 granted or pending U.S. patents, while the remaining amount represented granted or pending foreign patents.

By comparison, 565 assets were sold in 35 brokered patent deals during the third quarter of 2016. In the fourth quarter of 2015, 554 assets sold in 33 patent packages.

For information about Richardson Oliver Law Group, go here.

Image source: RichardsonOliverLaw; Bloomberg/BNA

IP licensing leader Tessera renamed Xperi Corp in rebranding push

One of the leading public IP licensing companies, or PIPCOs, Tessera Holding Corporation, has changed its name to Xperi Corporation, an indication that it has altered its direction. 

The renaming is an apparent effort to place more emphasis on new lines of business outside of patent licensing after acquiring DTS, as well as facilitate the company’s lagging stock price. Tessera reported disappointing results that surprised Wall Street in late February.

The name change was announced on February 22. On February 23 Tessera/Xperi reported that it had missed its Q4 earnings by $.25 per share.

Stalling Stalwart?

Tessera (TSRA), InterDigital (IDCC) and Rambus (RMBS) have been the lead players among PIPCOs, with industry-leading market values of $2.2B, $2.9B and $1.4B respectively.

Tessera/Xperi (58ae87c857fd3-imageXPER) reported fourth-quarter adjusted earnings of 32 cents per share, missing the Zacks Consensus Estimate by 25 cents. Also, revenues of $70 million missed the consensus mark.

Following the weak earnings release, share of the leading chip packaging and interconnect solutions provider slipped more than 13% in the after-hours trading. Over the past year, shares of Tessera Technologies underperformed the Zacks categorized Electronics Manufacturing Machinery industry. While the industry gained 27.66%, the stock generated a loss of 2.13%.

TSRA was 44.65 on February 22 with approximately $2.2B market cap. XPER is 35.55 on March 2 with a $1.7B valuation. A 2015 article the investment weekly Barron’s questioned how Tessera accounted for “recurring” revenues, which the publication said were really patent litigation settlements paid out over time, not royalty income.

In May 2016 Vringo changed its name to Form Holdings (FH).

“2016 was a transformational year with the combination of Tessera and DTS, which today we are excited to have rebranded as Xperi, reflecting our new vision of bringing together digital and physical experiences in smart, connected and personalized ways,” said Tom Lacey, Chief Executive Officer.

Acquisition of an Acquisition

On September 20 Tessera Holding announced its $850 million deal to acquire DTS, a premier audio solutions provider for mobile, logo2014_tagstack-sitehead_232x92_2xhome, and automotive markets. Only a year or so before that DTS entered into an agreement to acquire HD Radio developer iBiquity Digital Corp.

Tessera/Xperi says that its technologies and intellectual property are deployed in areas such as premium audio, computational imaging, computer vision, mobile computing and communications, memory, data storage, 3D semiconductor interconnect and packaging.

“We invent smart sight and sound technologies that enhance and help to transform the human connected experience.”

On February 8, 2016 Tessera’s shares were $26.57. They reached $44.74 on December 12, and excellent year by any standard, but closed flat at $44.65 on February 22. Since then its shares are down by $9 or about 20%.

On Yahoo! Finance, TSRA, the old stock symbol, shows the price of shares at the close of the session on February 22. A Google search of TSRA takes you to the new stock symbol for the company, XPER, which shows an end of Friday price of $35.10.

Image source: HDradio.com; zacks.com

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