Tag Archives: IP CloseUp

Automobile industry convergence is the focus of Detroit IP conference

Over the past ten years or so the motor car of the 20th century has been transformed from a mechanical conveyance to a high-speed information technology platform.

Cars today draw upon networks of complex inventions and intellectual property rights that are destined for licensing and disputes.  

IP in the Auto Industry: Challenges and Opportunities in a Converging World will address these and other issues at an event that will take place at the Ford Motor Company Conference Center in Dearborn on May 3.

Speakers include Nick Psyhogeos, President of Microsoft Technology Licensing LLC, Kevin Rivette, co-author of Rembrandts in the Attic, and a former Apple, IBM and Nissan advisor, and William Coughlin, President of Ford Global Technologies.

IP CloseUp readers are being offered an exclusive discount of $150 off the full delegate rate. Register here by April 29 for an opportunity to network with over 100 thought and market-leaders. Use code IPCLOSEUP3 to receive the discounted rate of $745.

On April 12, Ford made public plans to build a state-of-the-art world headquarters campus designed by SmithGroupJJR, the same architecture and engineering firm that designed offices for Google, Microsoft and Tesla.

The redesign comes as automakers compete with Silicon Valley and Seattle to hire engineers, designers and other tech-savvy workers who will design the autonomous and electric cars of tomorrow.

Ford’s corporate-campus overhaul comes as Toyota is preparing a new North American headquarters in Plano, Texas, and as General Motors continues a $1 billion renovation of its Tech Center operation.

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“The focus on IP in the auto industry has intensified at all levels,” said Richard Lloyd, conference producer and North American Editor of IAM Magazine. “Issues such as branding, reputation management and counterfeiting are moving up the corporate agenda, while technological convergence means that patent protection and enforcement, licensing and collaboration have become more important than ever.”

IP in the Auto Industry will feature contributions from over 25 industry-leading companies, addressing the following issues:

  • Securing 360-degree protection – featuring representatives from Cooper-Standard AutomotiveHarman International and Tenneco
  • The implications of convergence – FordMicrosoftPanasonicUnited Technologies
  • The impact of new market players – 3LP AdvisorsUnified Patents
  • The development of robust policing programs – Cellport SystemsHarley-DavidsonMotor & Equipment Manufacturers Association
  • Spare parts and the after-market – FordGeneral Motors
  • Managing brand reputation – Dezenhall ResourcesMarx Layne

For the final conference program and the full speakers’ list go here. To register go here.

IP in the Auto Industry is produced by IAM in conjunction with World Trademark Review. 

Image source: autoalliance.org; globebcg.com

Annual report: IP CloseUp visits are up 32% in 2015 to 24,000


2015 was a year of growth for IP CloseUp, as visits increased to 24,000 and subscriptions were up, too.

The busiest day of the year was Christmas Day when there were 482 views of Kearns’ Son Still Fuming Over Wiper Blade Fight.”

The post about the continued anger of inventor Robert Kearns family over his treatment by automobile makers, depicted in the movie, “Flash of Genius,” was the most popular for 2015, with, with 6,760 visits. It continues to be a marshall.11-640x480perennial favorite.

Other popular IP CloseUp posts for 2015 were “For Samsung charity begins at ‘home’; Midland, TX,”

“Leading brands increasingly have the most valuable patents,”

“Silicon Valley: Too big to fail, or too big not to?” and

“Low R&D cost per patent is a poor indicator of Flash_of_genius_post[1]good return.”

The most avid readers were from the U.S., Canada and the UK, followed by Germany, Australia, India, Brazil, the Netherlands and Japan. In all, readers from 131 countries accessed IPCU posts in 2015.

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Thank you readers for making IP CloseUp one of the most respected IP blogs, followed not just by IP professionals, but by investors, business executives and journalists.

Readers: Please keep sending your comments – We love hearing from you!

Image source: ipcloseup.com

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IP Dealmakers Forum will host 200+ patent monetization bigs in NY

The second annual IP Dealmakers Forum, December 7 – 8, will bring together leaders from the finance, legal and business communities to discuss the issues affecting patent licensing, sales and value, and to facilitate transactions.

New this year is a separate workshop for institutional investors that focuses on understanding IP as an asset class. This invitation-only, closed-door workshop will address the characteristics, market size and scope of patents as business assets, discuss practical investment issues, and examine the current investment universe. For additional information, go to here.

Luncheon Keynote

This year’s luncheon keynote is Edward Jung, co-founder and Chief Technology Officer of Intellectual Ventures, which holds more than 70,000 patents.  After leaving Microsoft where he was Chief Architect, Jung founded IV in 2002. As CTO, Jung sets strategic technology direction and new business models for the company. He holds more than 750 patents worldwide with has an additional 1,000 pending in the areas of biomedicine, computing, networking, energy, and material sciences.

The keynote topic is Driving Deals Through the Patent Storm”ip-dealmakers-logo-2015

Other speakers, at the New York event which will be held at the Apella event center overlooking the East River, include chief or senior executives from leading IP holders, both NPEs (non-practicing entities) and operating companies, institutional investors, financial institutions and PIPCOs (public IP licensing companies), including

France Brevets, Techquity, EverEdge IP, Finjan, Royal Philips, Gerchen Keller Capital, Fortress, IP Bridge, Northwater Capital, Wood Creek Capital, Allied Minds, WiLAN, American Express, nXn Partners, Bridgestone Americas, Swiss Alpha, Freescale Semiconductor, Ericsson and Marathon Patent Group.

For this year’s IPDF agenda and speakers, go here.

IP CloseUp readers can still save $200 on Forum registration by using promo code “IPCloseUp_Special”.  A special landing page has been created for IP CloseUp reader registration: http://www.ipdealmakersforum.com/ipcloseup/

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Actionable Insights 

“The program is dedicated to providing attendees with actionable insights from successful dealmakers,” says Wendy Chou, co-founder and producer of IP Dealmakers Forum. Session topics include:

  • Boom or Bust: The Public IP Market One Year Later
  • All About Patent Quality – How to Invest in Powerful Patents
  • New IP Businesses, Investing for Innovation & Growth
  • The Evolution of IP Litigation Funding & Insurance Markets
  • 2016 Presidential Election Perspectives on Patents
  • How IP Drives Corporate Reinvention, M&A and Investments

Last year’s inaugural event connected diverse intellectual property monetization experts with public and private market investors, and was attended by approximately 200 investors, IP executives, and advisors. Due to popular demand, expanded space will be provided in 2015 for private one-on-one meetings.

Changing Times

“These are changing times,” said Ashley Keller, co-founder of Gerchen Keller Capital, and a scheduled speaker at this year’s Forum. “As the market shifts, understanding the increased importance of due diligence expertise, the changing perceptions of risk and valuation, and the sources and expectations of those with investment capital, is a prerequisite for anyone who intends to succeed in this arena.”

Image source: IP Dealmakers Forum 

The future of IP will be examined at the 10th IP Summit in Berlin

Uncertainty is putting pressure on patents, trademarks and copyrights. All are facing more scrutiny and a challenging future.  

Scrutinizing these fundamental issues on December 3rd and 4th in Berlin will be more than 600 IP holders, executives and investors attending the Intellectual Property Summit. Organized by Premier Cercle, it will be the tenth edition of the popular conference, held previously in Paris and Brussels.

This year’s Summit will attempt to deconstruct global IP trends and explore the future of IP rights – patents, trademarks, copyrights and trade secrets – as business assets. There will be 100 speakers from Europe, North America and Asia.

Plenary topics include:

  • What is the future of IP in the 21st century?
  • Is your nation ready for open innovation?
  • More IP rights or better enforcement?
  • The future of injunctive relief in Europe?

On Friday, December 4 at 2:20 (14.20), your intrepid IP CloseUp editor, BB, will moderate a panel on Patent Quality – Always Challenging; Never Simple. Panelists will include:

>Valencia Martin Wallace  Deputy Commissioner for Patent Quality  USPTO / US

>Daniel G. Papst    Managing Director  PAPST LICENSING Gmbh & Co. KG / DEU

> Christian Vejgaard   European Patent Attorney  ERICSSON / SWD 

Chair : Bruce Berman Principal  BRODY BERMAN ASSOCIATES / US  

11A Patent Quality – Always Challenging; Never Simple
Defining patent quality
– What is a good patent?
– Distinguishing validity from invention quality and value
– Establishing more reliable patents
– The impact of poor quality

The patent quality session will be followed by a session on patent transactions on which IBM, Samsung, Chipworks and Unified Patents and are scheduled to participate.

This year’s IP summit partners include IP CloseUp and Brody Berman Associates. 

For the full agenda go here.

To register go here.

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Image source: premier cercle; i-mop.biz

Family App Developer Says it’s the Victim of a Patent “Troll” — Research Indicates Otherwise

When it comes to invention rights (patents) it is often difficult to determine who is a victim and who is merely promoting its agenda.

Life360, which markets the world’s largest family tracking app, says it is being unfairly targeted by what it calls a patent troll, Advanced Ground Information Systems Inc.(AGIS).  SF-based Life360, which has raised $50 million from security giant ADT, says it wasting its capital on defending itself from AGIS, a company that makes tracking equipment and software for the military and first responders. But that is only part of the story.

In a video interview  last week on Bloomberg News, Life360 CEO Chris Hulls, a former Goldman Sachs banker who spent time in the U.S. Air Force, said that “We believe it to be meritless suit from a troll. Life360 is helping people. Our product is one that saves lives, and its ridiculous that we have to defend ourselves in court.”

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In a letter from Life360 to AGIS, Hulls wrote: “Dear Piece of S***, We are in the process of retaining counsel and investigating this matter… I will pray that karma is real and that you are its worthy recipient.”

In the patent world holders and their patents are not always as good or bad, or right or wrong, as they might appear. The “bad” guys in licensing are sometimes bottom-feeders looking for a quick payout given the high price of litigation, but, more often than not, they are legitimate holders of valid patents that are being used without authorization. Infringers sometimes invent four of five-letter words terms for those who expect to be paid for their inventions. Thus, it may be opportune for a a business edit the story to suit its needs. This appears to be the case with Life360.

The Court of Public Opinion currently is a more powerful ally to a patent infringer than it is to a small holder whose rights have been violated. Patent infringement is not a victimless crime. Unfortunately, it is not always clear who the real victim is.

Inventor-owned Patents

Envision IP, a law firm which focuses on patent research, says that it is unlikely that AGIS is a “troll.”

“The four patents it asserted against Life360 list AGIS as the original assignee – so these patents were not purchased or acquired by the company,” said Maulin Shah, Managing Attorney. “The suit is filed in the Southern District of Florida, apparently in AGIS’s backyard, and does not appear to have pursued an
explicitly patent-friendly jurisdiction like Texas, Delaware of the Eastern District of Virginia.” (The suit lists Jupiter, FL the company’s address.)

Envision IP, which conducts invalidity studies, says that the complaint against Life360 is the only patent infringement lawsuit currently filed by AGIS, and it has not asserted its patents against any other companies. (Life360 is one of 25 defendants sued by an NPE called Remote Locater Systems LLC.) Also, AGIS appears to be an active operating company that has been filing annual reports since 2004. “It does not seem that the entity was formed as a shell used solely for patent licensing/enforcement purposes,” says patent attorney Shah.

Additionally, AGIS is represented by Kenyon & Kenyon, a highly respected law firm known for defending large operating companies, like Bosch and Siemens. Kenyon represents precious few if any plaintiffs, and it is highly unlikely that it would agree to represent AGIS if the case were truly meritless. But, then, you never know.

Life360 to the Defense

Life360 Inc. said last week that it will provide legal support for other small companies sued by Advanced Ground Information Systems Inc. So far, according to Envision IP, it does not appear that any logohave. Jupiter, Florida-based AGIS sued Life360 in federal court in West Palm Beach, Florida, in May 2014, accusing the California company of infringing four patents related to mobile-phone communication.

In a Feb. 3 statement, Life360 said that in addition to assisting others who are accused of infringing the disputed patents, it has filed a countersuit (click on View Complaint) in federal court in San Jose, California, accusing AGIS of marking all of its products with its patents regardless of whether the patent contains a claim covering the product. Life360 is represented by the Bergeson, LLP, a Silicon Valley law firm, in that matter. It is unclear who is representing it in defending against the patent suit.

According to PandoDaily six-year old Life360 has now raised a total of $76 million from more than a dozen investors that include Duchossois Capital Partners, BMW i Ventures, Facebook, Google, Expansion Venture Capital, DCM, and Bessemer Venture Partners.

Potential for an Injunction

Perhaps Life360’s greatest fear – and hence its high-profile defense – is that if AGIS can show that it is an operating company, and one that supports the military and first responders,  it can potentially use an injunction to stop Life360 from selling its app, effectively shutting the company down. Much of this could be saber-rattling to enhance the parties’ respective negotiating position. But for Life360 its defense in the AGIS suit may indeed be a bet-the-company-matter.

According to the complaint (page 3), AGIS’s founder, Malcolm Beyer Jr, who is named as an inventor on the asserted patents, is a former Marine, and graduate of the US Naval Academy. He developed AGIS’ patented technology “shortly after September 11, 2001.” The commercial product based on the patents is called LifeRing. (The page explains the product features and provides a market comparison.) 

Whatever the outcome, going public with a “damn-the-troll” defense, as Life360 has, is looking old and worn, even if it can still sometimes work. Allegations like those are outside the merits of the case, and from the preliminary research, will be difficult to prove.

Image source: agisinc.com; articleonepartners.com

InterDigital and Tessera Soar in (for now) a Strong 4Q for Stocks

The stock market continues to defy expectations. Even more surprising, a few PIPCOs have dramatically outperformed it. Smaller cap patent stocks have not fared so well.  

A handful of patent licensing companies are poised to end 2014 on a resoundingly high note. Early indications are that InterDigital and Tessera Technologies are among those that have likely benefited from the positive momentum generated in the fourth quarter, fueled by a 67-month bull run.

With the S&P 500 up 11.44% at the close of trading on December 9, Tessera (NASDAQ: TSRA) is up 82.39% YTD, and most of that in the fourth quarter. It was up “only” 34.9% through the third quarter. (See TSRA’s performance through the third quarter in the Freescale chart below.)

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Unwired Planet (NASDAQ: UPIP) on the other hand is up 8% YTD after having been up 35.5% at the end of the third quarter, dropped dramatically in the fourth quarter. InterDigital (NASDAQ: IDCC),  up a respectable 35% at the end of the third quarter, is currently at 81% YTD. Another beneficiary of good tidings and market momentum. IDCC, TSRA and, to a lesser extent, Rambus (NASDAQ: RMBS), have been quietly generating credibility for patent licensing stocks. (In a future IP CloseUp we will be analyzing their largest investors.)

Many Nanocaps Suffer

Many of the nanocaps, PIPCOs whose market capitalization does not exceed 100M, continue to be down for the year and quarter. Some like ParkerVision, Vringo and VirnteX have been dragged down by adverse decisions in court. Others, like DSS and Inventergy have had difficulty showing they can turn patent licensing into a sustainable public business. Notably, IDCC, which ballooned to $75.72 on August 7, 2011, a five-year high, has steadily climbed back up to $53.39 after sinking as low as 25 on July 22, 2012. Some patent licensing stocks appear to be more resilient than others. Often that grit is based on (1) cash flow and (2) cash on the balance sheet. (Cash was king long before Lebron.) Stay tuned to see how the year will end for PIPCOs and which companies have been able to take advantage of the still running bull. Tessera

Image source: Freescale Semiconductor; Yahoo! Finance 

Most ‘Trolls’ are More ‘Grey Hat’ than Black, Says Veteraran IP Exec

Bad actors no more define all NPEs than they do all high-tech companies, even though many use inventions without paying.

A nasty dispute involving an angry online entrepreneur shows to what lengths some people are willing to go to fan the flames of anti-patent fire.

FindTheBest CEO Kevin O’Connor, co-founder of web ad firm DoubleClick, decided several weeks ago he would go public with his attack by what he terms patent “trolls” and worse.

Ars Technica reports that “O’Connor wrote to tech sites like PandoDaily telling them of his determination to ‘slaughter’ the troll, the ‘scum of the earth.’ And in August, he pledged $1 million of his own money to fight the troll that went after his company.” PandoDaily, which bills itself as “the site of record for Silicon Valley,” is published by the Application Developers Alliance, and features a section called “Patent Troll Smackdown.” Pando investors include: Marc Andreessen, Peter Thiel and who’s who of Silicon Valley investors.

The founder of FindTheBest, put that money to use by making a claim that the NPE that came after it is so reckless, it has engaged in outright extortion, violating federal racketeering or RICO laws.

Fringe Elements

A veteran IP executive told IP CloseUp that O’Connor’s allegations focus on a few exceptions, not the general rule. “We need to accept that there are bad actors in the patent space, but they are lot fewer than some would like to believe.  We need to agree that demand letters from people like those described in the article about FindTheBest represent a fringe element in the patent world that drags everyone down.

“At least one historical ‘black hat’ patent monetizer I have worked with,” continued the exec, “has actually become more of a ‘grey’ hat, and now includes a number of Fortune 500 companies as clients.  The firm sends out a lot of demand letters, but these usually are notifications of believed infringement of a particular patent without a settlement number associated with them. There is always 100% willingness to litigate any letter. The average settlement size today for this patent licensing business is around $1 million, more than 90% come after significant time in litigation.  Rarely does it send a letter to company that has less than $100MM in revenue.

“What is described in the [Ars Technica] article is far beyond anything even the most aggressive NPE would do.  With use of a RICO action, the sort of ‘shakedown’ behavior suggested by O’Connor as standard operating practice of companies like Acacia, WiLan, IPNav, Mosaid, etc, is simply untrue. I know first hand that they are far more sophisticated in their business practices than O’Connor would lead us to believe.

“It concerns me,” said my source, “that if we don’t identify and isolate the problem, every patent holder wishing to enforce, including operating companies, will be painted with the same brush.”

The Economics of Patent Litigation

The quality of patents held by NPEs that settle disputes quickly are often considered suspect, even by some other NPEs. Many believe that if they had the goods, they would fight to the death.

Truth be told the evolving economics of patent litigation has made it more impractical than ever to engage in protracted disputes, no matter how strong 418MAQ1DTVL._SY344_PJlook-inside-v2,TopRight,1,0_SH20_BO1,204,203,200_the patents may be or obvious the infringement.  If the holder gets a favorable Markman ruling, defining the scope of the case, it still has several expensive and time-consuming hurdles to surmount before winning damages or attaining a settlement. Defendants today are in a better position than ever to effect early settlements.    

In recent years, many damages awards have been reduced, retried or simply thrown out by the court or on appeal. While a patent infringement may be worth $10 million or even $100 million, it does not mean that the plaintiff will be able to collect that amount. It is a matter of the cost of capital and risk of time and money. For most, IP licensing is a business, not a religious war.

A $1m license or settlement is worth $10m or even $100m only if the stars and planets align. Given the cost of capital, time and the statistical risk of patent litigation (a large percentage of big awards are never paid), it makes business sense for many patent holders whose rights are infringed to take a reasonable settlement and move on. 

50 Shades of Black

Similar in noise-level to Lewis Cheng, Chief Legal Officer of Newegg, another angry online business executive fearful of e-commerce or other patents undermining his (likely unprotected and under-licensed) business, the rhetoric is born more of defensive IP strategy than higher legal authority.

Concludes O’Connor: “There’s a lot of outrageous stories, but everyone’s so damn afraid of coming forward—It’s like going against the Mafia,” he said. But the idea that trolls may retaliate against those who speak out against them is at best far-fetched. . “If they want to try to teach me a lesson, go for it. This will be my retirement. I’ll fight them.”

“Retaliation?” No one I know, or have heard of, has ever suggested it. O’Connor’s spewing this nonsense does more to show the weakness of his IP hand than his courage as an entrepreneur.

Less Than Meets the Eye

According to Forbes, Kevin O’Connor’s DoubleClick survived after the bubble popped despite losing 75% of his customers. The company sold to private equity firm Hellman & Friedman in 2005, which then resold it to Google in 2007 for $3.1 billion. FindTheBest, an online comparison engine he runs, is backed by Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers. O’Connor is co-author of The Map of Innovation, Creating Something Out of Nothing. [I would elaborate, but it seems unnecessary.]

Image source: blackhatworld.com; amazon.com 

Judge Koh Throws Out Damages Award in Apple v. Samsung

Apple’s high-profile and short-lived win against Samsung may turn into the licensing agreement that it should have been in the first place.

On Friday Judge Lucy Koh halved the $1.05 billion award that a San Jose, CA jury provided Apple for Samsung’s infringement of 14 of its patents. Judge Koh also ordered the damages portion of the case be retried, while allowing the infringement decision to stand.

In her decision Judge Koh said that “the Court has identified an impermissible legal theory on which the jury based its award.” Apple is headquartered in nearby Cupertino.

Until now, Apple had appeared to have won a significant victory in the case, even though it failed to win an injunction that would have shut down sales of Samsung’s popular Android phones. The N-CA district court’s ruling is a reminder that Apple’s infringed patents, while worthy, have a lot less damages value than they at first appeared to.

The court’s decision looks to be part of a larger pattern of vacating mega jury awards, such as J&J Centocor (J&J) v. Abbott, $1.7 billion and Lucent v. Microsoft, $1.5 billion. These cases, and many on the list of top all-time patent damages awards, have either been overturned or dramatically reduced.

Why Bother?

Why bother to file a patent suit in the first place if winning a really big damages award frequently amounts to little more than an initial or Pyrrhic PR victory? Perhaps that’s the message the courts want to send — don’t bother. For kungfu-apple-samsung_616Apple the initial positive media coverage may be a sufficient spoil to justify the time and cost. Its limited win sends a message: “If competitors infringe our patents we will pursue them. Money is no object.” It also implies that while Apple may not have as many patents as other tech giants, such as Samsung, Sony or IBM, theirs are strong rights and it will vigorously will defend them. (Microsoft pursued a similar strategy in the 2000’s after a series of costly patent losses and settlements.)

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Back in September I had suggested in IP CloseUp after Apple and Samsung was decided that the result amounts to little more than posturing between the two dominant electronics players hoping to convey the existence of a competitive landscape.  The fact is that after these two companies there effectively is no smartphone landscape, and, let’t not beat around the bush, they would not mind keeping it that way. It’s not unlike organized crime families taking out each other’s capos in a turf war. Does it really matter who wins?

The retrying of damages may result in a local jury finding somewhat higher award than Judge Koh currently suggests, or possibly a lower one. The risk of a new and potentially embarrassingly low revised damages award may encourage Apple to finally agree to a license with Samsung before the retrial concludes, which it might have done in the first place. Although having done so too quietly may have been regarded as collusive by others who wish to participate in the smartphone sales, like Nokia and RIM.

The Joke’s on Who?

The public spectacle of Apple v. Samsung is a bit laughable. It makes the two companies appear to be enemies when they may, in fact, be helping each other carve up the smartphone space.  IP CloseUp readers already know, Samsung is Apple’s largest parts supplier.

“Samsung turns out to be a particularly important supplier,” wrote The Economist. “It provides some of the phone’s most important components: the flash memory that holds the phone’s apps, music and operating software; the working memory, or DRAM; and the applications processor that makes the whole thing work. Together these account for 26% of the component cost of an iPhone.”

Last year Apple spend $3.9 billion on Samsung custom chips alone, according to IC Insights data.

I guess you could say that innovative IP strategies often are the most effective ones.

Image source: ijailbreak.com; webpronews.com

IP Leaders to Regard “Tipping Point” at Global Business Congress

Opening Session will Focus on Critical IP Developments & Directions

More has happened to cast the spotlight on IP rights in the past 24 months than in the previous 50 years.

With new legislation being enacted, court decisions weakening patents, anti-patent rhetoric, Pirate Parties gaining momentum in Sweden and Germany, and transactions generating billions for sellers, it is difficult to know if IP rights are in fact facilitating innovation and commerce or impeding it.

The Tipping Point, the topic of the lead session on June 25 at this year’s Intellectual Property Business Congresss in Cascais, Portugal, near Lisbon, will attempt to sort things out.

Discussing and debating developments affecting IP rights will be the heads of the EPO, USPTO, LES, Thompson Reuters, the Office of Harmonization, and the Rockstar Consortium (consisting of among others, Apple, Microsoft, Ericsson and Sony).

Moderating the discussion will be your intrepid editor, Bruce Berman. I look forward to seeing many IP CloseUp readers there, as we did at last year’s IPBC in San Francisco. If you are in Cascais, be sure to stop by and say hello, and don’t be shy about asking questions at the session, which will open the Congress.

The Tipping Point will provide those who attend a good opportunity to query heads of important IP organizations about where they think IP is now and where it is headed, and how we can keep it on track. I will have some questions of my own.

The tipping point defined, BTW, “is the critical point in an evolving situation that leads to a new and irreversible development.”

Illustration source: patentdocs.org 

Bold Patent Moves Bolster Facebook, MSFT

Cash Rich, IP-Savvy MSFT Embraces Role of Patent Dealmaker

After acquiring 800 patents and scores of applications and licenses from AOL for $1.1B just two weeks ago, Microsoft has said that it has flipped the bulk of the portfolio, 650 patents, to Facebook for $550M, securing the IP assets and licensing MSFT needs while recouping almost half of its original potentially bargain cost.

It was reported today in Venture Beat that MSFT wanted to partner with FB all along, but that AOL put the cabash on it. IP CloseUp is not buying that.

In a pre-IPO buying frenzy that has to concern some shareholders, FB has a costly portfolio of quality patents to its $1B acquisition of Instagram two weeks ago. You have to wonder if investors believe that despite FB’s lofty market valuation whether it has the firepower to succeed as a major growth company. These recent moves are sure to help. In March, Yahoo sued Facebook, alleging Facebook violated ten Yahoo patents related to online advertising and web communications.

“Stinking Mad”

Sources have told IP CloseUp that Facebook was “stinking mad” that it did not land the AOL patents when they went up for bid several weeks ago, confiding that the failure had more to do with process than cost. MSFT emerges a huge winner, with patents its needs for far less than their true market value (see “Could AOL Patent Sale Have Netted More Than $1B?”) and cash in hand.

You have to wonder how the AOL deal got done. With investor pressure from Starboard Value the company may have been spooked into taking what appeared to a best offer before others were on the table.

“The market was talking about $300M,” speculated one observer. “MSFT may have offered a billion plus if the deal got done immediately.” It did, much to Facebook’s chagrin (and Google’s and Apple’s) and others who may have wanted a shot at controlling AOL’s excellent portfolio, which included original Netscape Internet patents.

A post on the IAM Blog today raised good a question. Will a Department of Justice anti-trust team soon be mobilized to see how recent patent sales are being orchestrated given that some appear to be barely marketed?

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For the patent wars this marks new territory. Smart combatants with cash and guts are well-equipped to play. 

Illustration sources: hubspot.com; heavy-downloads.blogspot.com

Tensions Rise Between USPTO and Court of Appeals

Patent Office is in Defiance of CAFC Mandate on Inequitable Conduct, says former Chief IP Executive

A former head of IP at a Fortune 100 company has told IP CloseUp that the United States Patent and Trademark Office (USPTO) is undermining the authority of the highest patent court, the Court of Appeals for the Federal Circuit (CAFC), over a new standard requiring that the burden of proof for inequitable conduct be on the patent holder, not the infringer.

“The patent system is a game of haves and have-nots and, unfortunately, the vast majority of Americans do not own patents and see doing so as stifling competition. In fact, the system, if working properly as it has in the past, stimulates competition,” he told IP CloseUp.

“Tensions are rising between the CAFC and Patent Czar Kappos.  After the significant changes to the standards for raising inequitable conduct that resulted from the En Banc CAFC decision in the Therasense case in May 2011, the PTO proposed new changes to 37 CFR 1.56 that specifically included the Therasense standards in July 2011 and received written comments through September but held no hearings.  Upon passage of AIA last September, the PTO now trumpets Supplemental Examination to deal with such issues and has not made any changes to 37 CFR 1.56.

Making Sense of Therasense

“However, Therasense specifically holds that it is the accused infringer’s burden to prove inequitable conduct, not that of the patent owner.  The PTO’s actions in defiance of the CAFC mandate is perfectly consistent with the intended purposes of AIA, which is to take away as much as possible from the Courts, and push dealing with patents back into the PTO where applicants will languish under a Czar-run bureaucratic system.

“I predict that it will become more difficult to get patent infringement cases heard by juries and that good patents will be bottled up in the PTO for years.

“After years of defeat, the supporters of AIA figured out the perfectly ambiguous methodologies for killing patents they don’t want to have to pay to practice.  They bought and paid for the ‘perfect storm’ to weaken the patent system.  And as for job creation, if you believe that one, I have a bridge near you that I could sell you.

The former Chief IP Exec (CIPO) also told IP CloseUp that patent holders should be wary of the latest efforts of those trying to weaken the patent system by sliding a “technical amendment” by Congress that would undo the compromises reached in the passage of AIA. “The proposed change in the estoppel provisions will open the door to serial post grant reviews and make it even more difficult to get a granted patent cleanly out of the grips of the USPTO.

“This could adversely affect a patentee in a post grant review or inter partes re-exam by eliminating the estoppel feature of AIA as it was signed in Sept. 2011,” he added.

*     *     *

Mayo v. Prometheus Further Weakens the Patent System

The same former CIPO, who is also a patent attorney and former USPTO examiner, strongly disagrees with Mayo v. Prometheusa recent Supreme Court decision also with far-reaching implications.

This decision,” he told IP CloseUp, “sets the patent system on a course to find more areas determined to be part of the ‘laws of nature’ and therefore unpatentable. It sets a very bad precedent.  In my opinion determining the correct levels in the blood cells for administering more or less of a drug is not a ‘law of nature.’  It took a lot of research to determine what those levels are and should be entitled to patent protection for the limited duration of a patent.  Does this decision put most medical diagnostic companies out of business? It might.

“This decision could have an enormous impact on not only medical diagnostic tests that have been patentable in the past, but on all forms of inventions that relate to tests for determining characteristics found in nature.  For example, in physics, say I discover a new way of determining how to split certain atoms in a particular way to get a particular result.  Can it be argued that since atoms and their constituent components exist in nature, that such a discovery should not be patentable?

Added Tension

“So we now have the Supreme Court in battle with the CAFC over the last 10 years over the scope of patent law and added to that tension we now have the AIA, which has Commissioner Kappos battling with the CAFC about who really decides patent validity and infringement issues. The PTO will soon be turned into another forum like the ITC. 

“I believe over the next few years, it may become much more difficult to get a patent infringement case to a jury if Post Grant Reviews are pursued by accused infringers.  If the PTO finds a patent valid and infringed, will the Administrative Law Judges have the authority to grant damages in their decisions?

“I am not aware of the AIA granting such authority. The ITC is limited to granting exclusion orders to keep infringing products out of the U.S., but has no authority to grant damage awards.  Currently, only the Federal District Courts have that authority.

“The next step for the anti-patent forces would be to further amend AIA to allow the PTO to grant damages.  There is also talk of NPE’s being excluded from bringing patent cases before the ITC.

“The anti-patent proponents are wreaking havoc,” he concludes, “and are likely to continue to weaken an already beaten-down U.S. Patent System.”

Illustration source: judicialnominations.org; commnexus.org 

Alactel-RPX Patent Licensing Venture is Short on Details

Deal is Said to Worth as Much as 1B Euros

When Alcatel-Lucent announced recently that Rational Patent Exchange (RPX), the defensive patent aggregator, would be presenting its 29,000 patents for license to RPX’s some 50 blue chip clients, it received notable attention. What was not detailed is how the revenues will be generated and sustained.

IP CloseUp has learned that the licenses being offered may, in fact, be short-term agreements that must  to be renegotiated when they expire in a year or so. That would mean that, depending on any encumbrances for currently licensed patents, the value to AL may be spread out over time. It also may mean that RPX members not covered by AL patents may find themselves scurrying for patent protection at various times in the future.

Alcatel-Lucent (ALUA.PA) announced it had signed a deal with patent licensing specialist RPX Corp (RPXC.O) that would allow it to generate substantial new revenue from its portfolio of 29,000 patents on everything from fixed and mobile communications to semiconductors and consumer electronics.

Under the agreement, RPX will market Alcatel-Lucent’s patents to its members, which include companies like Google and Intel. By next summer, RPX will present Alcatel-Lucent with the option to sign licensing deals with the individual companies. It is not clear how RPX will be compensated.

Bloomberg BusinessWeek said that “Alcatel-Lucent could generate 500 million euros to 1 billion euros in revenue in 2012 from the patents, according to four analysts.”

Reuters added that “Alcatel-Lucent did not specify how much money it thought it could make from the deals, but Oddo Securities estimated that it could be 1 billion euros in 2012.” 

IAM coverage  hailed it as breaking new ground, and reported that RPX’s stock price was up more than 10%. (AL’s was up about 17% over the five-day period following the announcement.)

An IP transaction expert that IP CloseUp spoke with suggested that AL-RPX will likely generate significant licensing income the first quarter or two, but the billion euro figure will be difficult to attain without almost universal participation of RPX’s membership. Partial or short term licenses could be a launching pad for future litigation.

Alcatel-Lucent CEO Ben Verwaayen said the February 10 investor conference call that coincided with the patent licensing announcement:

“Let me spend 2 minutes to clarify why this is an innovative approach and why I think it’s very important. It’s important because the first thing we are not doing is sell our portfolio. That’s not what we’re doing. It’s important to understand that. We have a position in the telecom market for which it is very important that we have the strongest portfolio in patents in the industry, and we will maintain to have that. 29,000 patents that we have is not just an illustration of a strong past. It is, at the same token, a great basis for a great future. That is not at all at stake.

“But also in that particular market of patents, innovation takes place, and innovation takes place because people think about value very differently than they may have done in the past. So when we are working together with RPX, we discovered that the ability they have to do syndicate licensing, where basically, you’re part of a club, you pay for the usage of it, but you don’t own it because we own it, but you have the same protection as if you would buy it, is a very innovative new way of looking to a patent. And it gives us reach far beyond the classical reach that we would normally have because we don’t run a patent syndicate.

“We don’t run the capabilities in-house to go out and reach out of our industry to other industries for some of the patent reach, but they do. And they have a capability that we find extraordinarily interesting, extraordinarily interesting for 2 reasons. First of all, as Paul will everybody — remind every single time, this is time-limited. This is not forever, so the opportunity to go do something is relatively short-term. Second, we have the capability, if necessary, we are not satisfied, to walk away. And third, it is nonexclusive, so it allows us to do what we’d normally do. It gives us choice, and it gives us an impact that we think is substantial.

“And I think innovation in many different ways of an organization is a sign of strength. So some of the comments I read this morning are really, I think, not really — are really not on the mark. This is about not selling the family silver. This is about getting a creative capability to leverage the assets that you have. And that is what enterprise is all about.”

*     *     *

There are many unanswered questions here. Most importantly, what if RPX clients elect not to take a license? Can they expect to be sued?

Will all RPX members be offered the same licensing deal? Will royalty rates vary by industry? Will those who pay more have the right to shape the agreements that other members participate in? Could the AL-RPX deal serve as a catalyst for patent infringement suits? Will they force some members out of the exchange?

While I personally hope this arrangement succeeds it will not be easy. I have to believe that before the announcement at least a few licensees had been lined up, so the first few deals may not be an accurate indication of future ones. The potential for RPX members competing against each other for favorable terms has to be a concern.

Another IP analyst was even less sanguine about the agreement:

Things are rarely what they appear to be, said he. Alcatel may be granting RPX members a short-term license though a favorable collective bargaining agreement via RPX. Think of it as a special offer “group” discount. But thereafter, they will need to renew directly with AL. It’s actually a very clever marketing tool by AL to encourage members to follow-up with a full and commercial rate license. For RPX, it’s a good PR maneuver and a nice twist on their model that will generate some revenue. How much is unclear.

I’m sensing that there is more of this story to unfold. Will AL, RPX and the operating companies that rely on RPX for protection produce the necessary licenses to keep everyone happy and out of court? Time will tell.

Illustration sources: mobilenewscwp.co.uk; dailyfinance.com

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