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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

“All Prior Art” algorithm won’t stop bad patents or actors

Stopping new inventions dead in their tracks by making them “automatically” unpatentable might sound like a good idea to some.

However, programming a computer to disclose an endless combination of dubious inventions is more effective at stopping bad patents in theory, not practice.

At least that is what three experienced patent attorneys told me recently. Publishing millions of pieces of supposed prior art will not stop bad patents (really, unpatentable inventions)  from being issued or make legitimate invention-ownership less difficult to discern.

More Style than Substance

All Prior Art is a project that attempts to “algorithmically create and publicly publish millions of pieces of possible new prior art, thereby making the disclosed concepts unpatentable.”  All Prior Art is trying to take highly obvious ideas out-of-play. Unfortunately, preventing patents from being granted, even those that do not deserve to be, is not a simple fix.

In order to be admissible, prior art must be enabling; i.e. the disclosure must describe how the invention can be produced — not something that All Prior Art addresses.

Cf2sxeUWEAE864bThe brainchild of Alexander Reben is a self-described engineer and artist with a background in robotics and applied math.  Mr. Reben’s random configurations have been described to me as “a mishmash of questionably inventive ideas.” Even if there are millions of combinations, it is highly unlikely that they will serve to invalidate a perspective patent, let alone one that an NPE may be enforcing.

All Prior Art may be more style than substance. Sure, inventions that do not meet the appropriate tests of novelty should be prevented from issuing or invalidated if they are enforced (or, maybe, even if they are not). Even if this scheme were to work, it would weaken the prospects of many inventors, universities and SMEs, and dissuade investment in innovation.

Missing Description

The theory behind Mr. Reben’s invention is that if a computer can spew out enough combinations of prior art — i.e. publish millions of pieces of data that describe inventions — the subject matter disclosures will preempt patent issuance. It’s just not that simple.

The problem is that for any prior art reference to serve as an invalidating disclosure, it has to be enabling. And the fact that no human being has come up with the combination is a pretty good argument against enablement.

The means it must be described so that a “person of ordinary skill in the field of the invention can practice the subject matter based on the reference, without undue experimentation.” (Sanofi-Synthelabo v. Apotex, Inc., 550 F.3d 1075, 1082 (Fed. Cir. 2008).

When it comes to All Prior Art’s prior art, the “description” is missing, according to Bloomberg BNA’s Tony Dutra.

“The virtually infinite number of combinations will generate over 99 percent dreck,” chides Mr. Dutra. “But, like the ‘infinite monkey theorem’ that predicts a monkey hitting typewriter keys at random for an indefinite time will almost surely, eventually type a given text, Reben believes his project will generate at least some combinations that someone, someday might try to patent. It’s that someone [Reben] aims to stop.”

Patent the Universe

NPLThe tech media, notably the DailyDot, encouraged by with the idea of that patents can be neutered, has taken an ill-conceived idea and made it worse with a misleading, inaccurate headline: “One man is trying to single-handedly create every patent imaginable.”

A sister website All The Claims is attempting to achieve a similar objective, but with the use of claims and a more verbose alternative.

“Hard to Take Seriously”

“Bruce, this approach is hard to take this seriously, especially with an admission that most of the inventions generated will be nonsensical,” one patent attorney wrote to me. “Pertinent excerpts from the Patent Office Examiner guidelines illustrate that:

‘In determining that quantum of prior art disclosure which is necessary to declare an applicant’s invention ‘not novel’ or ‘anticipated’ within section 102, the stated test is whether a reference contains an ‘enabling disclosure’… .’”

“To be invalidating prior art as to make a meaningful contribution,” a former USPTO examiner, inventor and Fortune 100 Chief Patent Counsel told me. “If utility is missing, it will not be seen at invalidating. Prior to be taken seriously by an examiner or in litigation needs novelty and utility, or specific application.”

“There are billions of combinations, but so what? There needs to be novelty and utility to qualify as prior art. This scheme might be well intended bu ti hurts the little guy more than the big tech player. I doubt that courts will take it seriously or that automated generation of inventions will have a meaningful impact.”

Trivial Variations

“Is Mr. Reben really attempting to automate the generation of trivial, random variations of existing stuff?” asked another patent attorney. “It is already difficult to patent trivial variations, as they are ‘obvious’.  The term ‘automated generation of patentable’ is kind of an oxymoron. This approach  should be titled ‘automated generation of trivial variations of existing inventions’.”

Non-Patents

So for now, at least, bad patents (really, non-patents) will continue to be issued by the USPTO and other major patent offices in large numbers because they lack the resources to prevent them.

Inter Partes Reviews and other mechanisms will continue to try to eliminate or to help fix erroneously issued patents, and litigation will remain the only reliable, albeit, costly way to determine if a patent is valid and infringed.

If it were easy to solve patent problems algorithmically with a PC, mathematicians would be higher paid than patent attorneys. That’s not likely to happen anytime soon.

Image source: ttconsultants.com

Harvard study: financial patents lag in quality, especially NPEs’

A recently published Harvard Business School working paper found that financial services patents lack quality because they lag their peers in academic citations.

“Financial Patent Quality: Finance Patents After State Street”  findings indicate that financial services patents are questionable with regard to their references to academic prior art. The study’s findings also show that patents awarded to individuals and associated with non-practicing entities (NPEs) cite less academic prior art, and that financial services patents with fewer of these citations are more likely to be asserted in litigation.

The research also shows that financial services patents cite less non-patent pristacked_1200px_130327or art, and especially less academic prior art.

Patents assigned to individuals and NPEs were particularly problematic with respect to academic citations.
Having fewer academic prior art citations, the HBS study indicates, directly correlates to the likelihood of a financial services patent being the subject of litigation.

Not all patent professionals agree that the number or type of citations play a significant role in determining patent quality or the likelihood that a patent will be enforced.

The study team was led by Josh Lerner, a professor at Harvard Business School and co-author of Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What to do About It.

“Financial Patent Quality” concludes that:

  • Financial services patents cite fewer non-patent prior art publications than the comparison groups. This is especially the case with respect to academic prior art publications.
  • Patents awarded to corporations generally cite more prior art, particularly academic research than do those awarded to individuals or associated with NPEs.
  • Citations of academic prior art are strongly related to whether a finance patent is litigated. In particular, financial services patents with more academic citations, one indicator of higher quality, were subject to less litigation.

The HBS working paper was sponsored by Askeladden L.L.C.  as part of its Patent Quality Initiative, an 294628LOGOeducation, information and advocacy effort with the goal of improving the understanding, use and reliability of patents in financial services and elsewhere. Askeladden is a subsidiary or The Clearing House, the oldest banking association in the United States.

According to Bloomberg BNA the study selected finance patents from specific subclasses of the PTO’s classification code 705, titled, “Data Processing: Financial, Business Practice, Management, or Cost/Price Determination.” Most of the claims of the finance patents involve data processing on generic computing equipment and are, thus, likely to be claimed as software algorithms.

To see the HBS working paper, “Financial Patent Quality,” go here.

Image source: hbs.edu 


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