Tag Archives: IP Watchdog

Bank of America is granted (another) blockchain-type patent

Bank of America was granted last week a patent on a “cryptocurrency transformation system” that comprises a platform to manage exchange rates between various currencies, transfer requests, and customer accounts.

The timing could not be better. The price of a bitcoin as of December 12 is $17,756.96, up from $1,000 on January, and the premium on cryptocurrency and blockchain patents is sure to rise, too.

“Enterprises may handle a large number of financial transactions on a daily basis,” reported ETHnews, citing the bank’s patent. “As technology advances, financial transactions involving cryptocurrency have become more common. For some enterprises, it may be desirable to exchange currencies and cryptocurrencies.”

Blockchain-type Patents 

It is interesting to note that inventors from four different states are shown on the patent –  Georgia, Colorado, Florida and North Carolina, BofA’s home state. This may give some indication of the seriousness which it is taking the patent.

Top Assignees

According to an article in IP Watchdog, the four top assignees in the blockchain/cryptocurrency area are Bank of America, Mastercard, Paypal and CapitalOne, all financial entities. They followed by technology-based businesses IBM, Microsoft, Amazon and Apple.

Both groups appear to be pursuing leverage.

It is estimated that the Bank of America has filed more than 20 blockchain patents over the past four or five years. Its interest is unclear, but it may well simply want to prevent patent disputes by holding key patents.

For a copy of the new patent, issued on December 5, go here.

 

Image source: uponarriving.com; ipwatchdog.com

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; 

Quinn: Patent PERPs are the real bullies of the licensing world

A disturbing article by IP Watchdog’s Gene Quinn asks “Who are the real bullies of the patent world?” It’s not patent trolls. They are far less of a problem than Patent PERPs – Practicing Entities that Refuse to Pay.

The founder and editor of IP Watchdog, one of the leading IP blogs, pointed a finger at reluctant patent licensees today in “A Patent Owner Defending Property Rights is NOT a Bully,” an article that attempts to reveal who are the real villains of patent licensing.

Exhibit One in Quinn’s indictment of the twisted rhetoric that surrounds patent licensing is Colleen Chien, a Santa Clara University law professor and former senior IP adviser to President Obama. Professor Chien wrote in the The Wall Street Journal recently, “that small businesses may want to simply ignore letters they receive from patent owners alleging infringement of a patent.”

Ignore the Nuisance

“This is rather astonishing for several reasons,” says Quinn. “First, a patent is a right granted by the federal government that is supposed to imagesbe legally presumed to be valid. A recently departed senior adviser to the President who is advising potential infringers that they should just ignore notices telling them they are infringing speaks volumes about how the Executive Branch views patents and patent owners. Once upon a time patents and inventors were very highly regarded in our society, today they are seen as a nuisance that can and probably should be ignored, even by the White House apparently…”

“A patent owner that seeks to prevent another from infringing is NOT a bully, period. A patent owner that takes action to prevent infringement is merely protecting the property right they have been granted; a right purposefully granted by the federal government after a lengthy examination process. It should be self-evident to everyone that you cannot be a bully when you are standing up to protect a right you have been given. It is utter nonsense to even suggest that a patent owner seeking vindication from the trampling of rights could ever in any fair way be characterized as a bully…”

PERPs are Perpetrators 

“Frankly, if we want to be perfectly honest about the state of the industry, we would be talking about those Patent using Entities that Refuse to Pay (PERPs),” concludes Quinn. “Thanks to the confluence of patent reform and Supreme Court precedent the people who are getting bullied the most are patent owners. These PERPs simply ignore all inquiries even from those with large portfolios and valid patents that are being infringed. They engage in a game of efficient infringement, or so it is called. Efficient infringement is such a sanitary way to say – willfully stealing without paying.

“With the deck so substantially stacked against the patent owner, companies know that if they simply ignore all inquiries, both legitimate and those smaller number that are extortion, they can willfully infringe patented technology without having to pay anything. lady-justice-head-sand-ignoranceSo why pay? That is efficient infringement; a cold business calculation that results in the patent owner being screwed.”

Negative Right

Efficient infringement means that given the risk-reward of using someone else’s invention, it is economically viable for most companies, in many industries, to infringe patents at will most of the time. It’s like a parking violation. First, they have to catch me breaking the law. What are the chances? And if they do, paying the price of the ticket is often easier (and cheaper) for large companies than obeying the law.

A patent is a negative right – the right to sue to protect an owner’s intellectual property, an invention. A patent suit is a costly and time-consuming process, and defendants know that. Patents are meant to be used (enforced) where appropriate. Quinn is saying that the behavior of those refusing to pay a license (PERPs) – and who invent delaying tactics to avoid doing so – is ethically questionable, legally suspect and damaging to innovation.

For the full IP Watchdog article go here.

Image source: ipwatchdog.com

Google’s patent buying program, an apparent success, is thinly reported

Better than one-in-four of the patents offered to Google for purchase as a result of its Patent Purchase Promotion in May were acquired by the search engine.

The only article we could find about IP buying experiment’s results appeared in IEEE Spectrum, which is published by a professional association of engineers. IP CloseUp has learned that IEEE Spectrum obtained the purchase data directly from Google. A Google search did not reveal other media coverage of the results.

The magazine article, “Google Tries to Keep Patents Out of the Hands of Trolls,” states that the search engine purchased 28% of the patents offered to it. This buy-rate seems high considering the poor quality of most patents being offered to most buyers. It is comparable to that of Intellectual Ventures in the early years (2003-2006) when it bought much of what it was shown, but typically at about $40,000 per patent.

“Google’s Patent Purchase Promotion,” reports IEEE Spectrum, “which the company says received ‘thousands’ of submissions during a three-week window [May 8 – May 27], may prompt similar experiments in keeping patents out of the hands of what it considers the bad guys of intellectual property.”

The experimental program was an attempt to intercept patents that individual inventors, operating companies, and others may have otherwise sold to organizations that don’t make products but rather use the patents to extract license fees from operating companies, which do… The program offered a chance for anybody to sell patents to Google “at a price set by the patent holder.”

“Google wound up buying 28 percent of the offered patents that it deemed relevant to its business, according to Kurt Brasch, the company’s senior product licensing manager,” reported the magazine.

GoogPatSales

The median price of the patents sold to Google, excluding those offered at US $1 billion or more, was $150,000, and the compant paid prices ranging from $3,000 to $250,000.

IP Watchdog and others are less certain about whether the program is designed to thwart trolls and enhance innovation, or to improve Google’s patent position.

The IEEE Spectrum article can be found here.

A summary of Google’s Patent Purchase Program can be found here.

 

Image source: IEEE Spectrum

 

 

“Triumph” book reexamines the case that launched 10,000 patent suits

Polaroid v. Kodak, concluded in 1991 after 15 years, was the first “billion dollar” patent damages award ($909 million).  Until this year, it was the largest satisfied judgment in a patent case awarded by a U.S. court. In current value the award would be almost $2 billion.

You could say that it was the case that launched 10,000 patent suits, many by non-practicing entities.

51YbbsBE48L._SX331_BO1,204,203,200_The Polaroid dispute involved patents covering instant photography, which at the time was among the most valuable technologies. But as one observer pointed out, by the end of the long dispute, the Polaroid-Kodak battle was “little more than two aging giants dueling on the decks of the Titanic.” Digital photography would soon eclipse instant photography, and both litigants were on the road to insolvency.

My review of A Triumph of Genius: Edwin Land, Polaroid, and the Kodak Patent War, by Ronald K. Fierstein, a former Fish & Neave attorney, describes it as a timely book, deftly written and useful to anyone affected by IP rights or who invests in technology.

Triumph is about an infamous case, a bold inventor and two innovative companies that lost their mojo at the apex of their popularity.

My review appears in IP Watchdog. Please click here to read it.

mi_2588914358240374

Image source: amazon.com

Patent quality — Is a “shared responsibility”, says IBM; it does not represent invention quality or IP value

There is a great deal of agreement that patent quality is lacking, but surprisingly little about how to define and achieve it.

Patent quality is typically associated with validity. Good patents are valid upon scrutiny, bad ones invalid. However, the term also refers to the relative importance of an invention and the value of the “negative” right – the right to exclude others from practicing it.

I attended the recent Patent Quality Summit hosted by the USPTO in Alexandria, VA on March 25-26.  Among the challenging remarks were those of Manny Schecter, Chief Patent Counsel at IBM, and the Summit’s first speaker.

He reminded the audience of more than 200 that patent value is a “shared responsibility” between the applicant and the examiner.

Schecter also said that “patent quality is not invention quality of patent value.” Wise words from head of IP of the 20-year leader in obtaining U.S. patents.

Hon. Paul Michel, former Chief Judge of the Court of Appeals for the Federal Circuit (CAFC), was candid about how he believes patent quality can be improved. He wants greater onus placed on the examination and examiner. He says that the application process is the first line of offense for eliminating bad patents and facilitating more reliable ones. Better-educated and more empowered examiners who understand likely legal arguments should issued patents be disputed will help. Patents should not be issued in a vacuum.

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Search time and examiner resources are often cited as the key obstacles to issuing good patents. Those USPTO realities are unlikely to change much. What could change are the introduction of stricter parameters for patents to issue, and not wait for the courts or the PTAB to weigh in on issues like validity and enablement (Rule 112), when they could have been addressed much earlier in the application process. This would save multiple parties time and money. Currently, patents are almost always insufficiently reliable both to those who practice inventions and those who may wish enforce them. This may not be inevitable.

Issued patents need to move closer to a slam dunk than a moving target. Examinations and examiners will play a key role in that difficult process. If I hear what Judge Michel is saying, let’s give them a chance.

Information about the Summit, including it’s three pillars and six quality proposals can be found here. Public comments are requested by the USPTO until May 6. 

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An article by Christi Guerrini, an IP Fellow, IIT Chicago-Kent College of Law in the Fordham Law Review, “Defining Patent Quality,” is a nobel attempt to begin to deconstruct the meaning of superior patents, and to go beyond a simple black/white definition defined by the legal parameters of validity.

From the author’s abstract:

“Depending on whom you ask, the state of U.S. patent quality is either dismal or decent, in decline or on fordhamlrev_headerthe upswing, in need of intervention or best left alone. Absent from the ongoing debate about the quality of U.S. patents, however, is much thoughtful discussion about what constitutes a patent’s “quality” in the first place. What features of a patent make it “good” in quality, what features make it “bad” in quality, and whose opinion matters?

“Surprisingly, scholars and policymakers have shown little interest in these questions. Yet their answers are critical to the direction of the patent agenda because they dictate how to measure patent quality and, consequently, how to evaluate the extent of the so-called patent quality ‘crisis’ as well as the effectiveness of quality reforms.

“The broad aim of this Article is to draw attention to the definition of patent quality as an important subject of scholarly inquiry. Its more specific aim is to call for a return to first principles and begin the process of operationalizing the meaning of patent quality. It does so by analyzing the concept using a methodology applied in the business literature of quality management.”

Defining Patent Quality” can be found here.

*****

In “Toward a working definition of patent quality,” which appears in the May IAM, out next week, I consider the challenges to better reliability.

“Patent quality is important because, among other things, a lack of it can impede businesses and require some to engage in unnecessary licensing or lawsuits.

“Bad patents are unreliable and undermine the integrity of the patent system, including the institutions Quality WEB HeaderNEWand professionals that sustain it. However, given the multitude of ways that standards are applied in specific cases, coming up with a universal definition of ‘patent quality’ is no easy feat. The best patents are often in the eye of the beholder.”

For the column I asked four people — an economist and valuation expert, a patent attorney, a former chief patent counsel and a successful NPE — to provide me with a two-sentence definition of “patent quality.” Their responses – thoughtful and startlingly precise – are a good indication that more work still needs to be done on this deceptively important area.

IAM subscribers can find my Intangible Investor column here.

Image source: ipfrontline.com; uspto.gov; fordham.edu

A Few IP Stocks Shined in 2014; Most Declined, Some Significantly

Size helped in 2014 when it came to public IP licensing company stock performance, but it did not assure success.

As a group, the twelve companies in the PIPX Public IP Performance Index out-paced the S&P 500 for the 4Q 2014 9.1% to 4.4%, with Neonode, Tessera and InterDigital leading the way, all with 4Q gains in excess of 30%.  Marathon, under $100M in market cap for most of 2014 and not represented on the graph below, was up 17% for the quarter and 167% for the year.

2014PIPX4QFor the year 2014, however, companies in the index fare much worse, with PIPX companies generating a collective return of just 4.3% vs. 11.4% for the S&P 500. Tessera and InterDigital were notable performers each with 40% returns for the year. Rambus and Acacia were up about 17% each.

Eight of the twelve companies in the PIPX, which is provided to IP CloseUp by Dr. Kevin Klein of Freescale Semiconductor, were down, led by ParkerVision, VirnetX and Vringo. RPX was down 18.5% for the year and WiLAN 11.3%.

The PIPX is weighted by value or market capitalization, so poor performance by smaller companies has less of an overall impact on index performance.2014PIPXyr

Conclusions? 

It is difficult to draw too many conclusions from this, the first year of the PIPX. Investors tended to reward higher value stocks, but size was not a guarantee of performance, with RPX and others down against both the index and S&P 500.

It’s important to recognize that despite uncharacteristic pressure on patent values due to legislative reform and judicial decisions, good assets have continued to hold value. With the recent Rockstar settlements and sale of 4,000 patents to RPX, we could be at or near the pricing bottom, depending on the nature of 2015 patent reform.

A few small stocks bucked the trend, notably Marathon (MARA), which was not on the PIPX list because it was under $100M in market cap for most of the year. It is now at $110M and is being added. MARA ended the year up 167%. I’m pleased to say that Brody Berman Associates, my firm, helped to develop with the company’s early messaging.

Other companies not in the index performed poorly and their results can be readily tracked on he IP CloseUp 30 found here. (Paste the URL onto you home screen or desktop for easy, real-time monitoring of the public IP sector.)

Image source: Freescale Semiconductor

Leading Blogger Unloads on Patent Critics and the Real Bad Actors

Innovation is not threatened by patent “trolls,” says a Virginia IP attorney, but by half-truths about the failure of the patent system spread by businesses looking to defend their turf.

The publisher of IP Watchdog, one of the most widely read blogs in the patent field, went from watchdog to bulldog this week, taking on businesses and lawmakers who falsely deride the patent system.

Gene Quinn, a seasoned patent attorney, says that the patent system is not dysfunctional. It’s many of the most established technology companies looking to stay on top who are.

Silicon Valley’s Anti-Patent Propaganda: Success at What Cost? is required reading for everyone affected by IP, especially those who believe that patent enforcement is ruining innovation and destroying the economy. Patent holders, small and large, NPE and operating company will find the article revealing if not relevant.

Motown Comes to the Valley

Whether we wish to believe it or not Silicon Valley is knee-deep in mature businesses. It is vaguely reminiscent of Detroit’s golden age, when new ideas in the automobile industry and real competition were considered a nuisance. Don’t let the overstuffed patent portfolios of many technology companies fool you: These are not patent friendly businesses and won’t be until they figure out, as Microsoft and Philips have, how to profit from good patents. One wonders if some Silicon Valley tech companies have become too big not to fail

Gene-12-10-2013“This [rhetoric about the failing patent system and rampant litigation] has led the media, the public and members of Congress to incorrectly believe that there is a ‘patent troll problem,’ which has influenced decision-makers all the way from Capitol Hill to the United States Supreme Court, who increasingly seems to be deciding patent cases with one eye firmly on what is a completely non-existent problem…”

“So how has such a factually baseless narrative been able to dominate the discussion? This propaganda was promoted by some of the elite Silicon Valley companies over the years, with Google leading the charge. But Google is a high-tech company. Why would they want to damage the patent system by spreading half-truths and reckless misrepresentations?…”

“Despite what some have been lead to believe, Google is a company that was founded on strong patent protection, having filed two patent applications prior to even obtaining the domain name Google.com. These patents related to Google’s proprietary page rank algorithm. The Google search algorithms, protected by patents, were how Google moved from fledgling start-up to eventually dominate the likes of Yahoo! and Microsoft.

“Simply stated, like virtually every other Silicon Valley start-up Google relied on the exclusive rights provided by patents and now that they are dominant they would prefer the patent system to evaporate so that the next round of dorm-room start-ups won’t be able to challenge Google in the same way that Google supplanted Yahoo! and Microsoft.

“The truth is Google is just one groundbreaking algorithm away from becoming old news.”

Sharing the Blame

Quinn says there is plenty of blame to go around:

“To a large extent Apple, Microsoft and many other Silicon Valley innovators went along with the anti-patent rhetoric perfected by the Google machine because they were facing what they called a ‘patent troll problem.’ This caused even innovation based leaders to throw in with Google and others in an attempt to vilify innovators and a patent system run amok. Such a myopic strategy risked the innovative future of these companies by putting their own patent portfolios in grave jeopardy in order to address the problems they were having with a relatively small number of truly bad actors who were clearly abusing the litigation process.”

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“The quickest way to get less innovation is to destroy the patent system. This should be self-evident to everyone, but sadly there are many intellectually challenged individualspinocchio-concept-250-225 who refuse to believe this objective truth. If patents inhibit innovation then why don’t countries without a patent system have run away innovation? If patents get in the way of innovation why do countries with the strongest patent rights have the most innovation?”

*****

Whether you agree or not with Gene Quinn he is a leading IP voice, unafraid to call it as he sees it in “Silicon Valley’s Anti-Patent Propaganda: Success at What Cost?”

Quinn’s strong words remind us that we live in a still great country with an active if imperfect legal system and a free press that, like patents, sometimes must be used to be fully appreciated.

Image source: ipwatchdog.com

Going Ape for Apps: Samsung is Gaga for U.S. Patents

No company has more Active U.S. patents than Samsung or files more applications.

In fact, outside of IBM, Samsung leads all filers in U.S. patent applications by better than two to one.

According to “The US Patent 100” published by Patent Vest and MDB Capital in IAM, Samsung is the biggest current U.S. patent holder with 45,012 issued and more than 25,457 applications on file. Highly active patentees like Canon, Panasonic, Sony, Toshiba and Microsoft are not even close, with around 10,000-11,000 applications each.

What does Samsung know that others don’t? It’s hard to say. Perhaps they hope that at least some of their patents will read on their competitors’ products and will discourage them from filing infringement suits. This will do little to slow down NPEs, unless, of course, the NPE is a proxy for an operating company. Like Apple and Microsoft before them, outspending the competition on filing and/or litigation defense is a viable strategy for some players.

Might Samsung also believe, similar to the Japanese in the 1980s and 1990s, that it will be difficult to get a fair shake in U.S. courts (see Apple v. Samsung)? Relying on large numbers of patents, quality aside, to increase their likelihood of having some of them read on a potential adversary might discourage a law suit, or may provide bargaining leverage. It has worked for IBM.

Size vs. Quality

Patent portfolio size was of questionable help in Samsung’s much reported dispute with Apple, where it had been directed to pay Apple $1 billion in damages until the award was reduced two weeks ago by Judge Koh to $450 million. But no check has been written yet, and without an 3725709injunction, Apple’s victory is little more than a series of admittedly valuable headlines for it and a write-off for Samsung. Despite Apple’s tough talk, Samsung may find a silver lining by including some of its many patents in a licensing package that Apple would find acceptable. (Some companies see patent litigation as a very expensive form or licensing. It works better for some than others.)

The US Patent 100, similar to data provided in the past by CHI Research, now 1790 Analytics, monitoring patent filing and citation trends, suggests that analysis of the largest, fastest growing and most recognized (cited) portfolios can predict prowess. Certainly, size counts when it comes to patents (both in terms of portfolio breadth and claims), but it counts more to some than others.

IBM, now number two in U.S. patent grants (38,394) and applications (19,138), still has more grants over the past twenty years. Patent Vest suggests that divestitures to Google and Facebook, totally over 3,000, have brought down the number of IBM’s patents in-force. They do not mention IBM’s lapse rate, which I understand is among the highest. (Lapse can mean prudent management or it can mean that IBM didn’t care much about securing the patents in the first place, or does not think they will be very useful to anyone. It also may mean that once their goal of not allowing anyone to own a particular patent is achieved, there is little value in maintaining it.)

So, who has the better patent portfolio? I’m not sure that size, maintenance or citation frequency is very  indicative of quality or success. Those with the biggest portfolios often don’t have the best or most valuable patents. But size does count in court where discovery is costly, and time is money. Whose to say which patents at a given time have value to a particular business.

Who’s Gaming Whom?

It’s ironic that owning ten’s of thousands of questionable patents, those primarily intended to protect market share and slow competitors, is typically more meaningful to a businesses than a handful of well-crafted, timely rights that actually read on successful products.

Deployment of increasingly larger portfolios, like Samsung’s, makes it unclear as to who is really gaming the patent system, and who has the most useful inventions and best quality patents.

China, BTW, is now ahead of the Japan and second only to America in U.S. patent applications. Permitting innovation to become little more than a numbers game is likely to affect its future and the economy’s health.

Mark Cuban ought to think about that. His gutless tirade against “stupid” patents was documented in TechCrunch and dissected in IP Watchdog, and followed by a long stream of angry comments. When it comes to innovation rights, Mark is in no position to determine what is stupid.

Image source: locatetv.com


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