Tag Archives: non-practicing entities

EFF’s narrow position on university tech transfer is “wildly misguided”

The Electronic Frontier Foundation (EFF) is attempting to paint a scarlet letter on universities with public funding who benefit from sharing discoveries with those best-equipped to monetize them.

The organization’s suggested sanctions for those schools that out-license research has been described as “preposterous,” and its condemnation of licensing specialists “wildly misguided.”

This is according to Richard Epstein, a highly respected professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School, in a recent Forbes piece.

Epstein say that the EFF equates all non-practicing entities (NPEs) with so-called patent “trolls” looking to game the system. In fact, a relatively small percentage of NPE suits are filed by those “black hat” businesses with a18063d135cfa169c2f96cce4d167ccdquestionable patents seeking a nuisance settlement.

Recently, the Electronic Frontier Foundation published an extraordinary request to research universities as part of its “Reclaim Invention” campaign: please stop putting your patents into the hands of insidious patent trolls.

EFF, writes Epstein, seeks to put teeth in its proposals by asking state legislatures to enact statutes “to bar state-funded universities from transferring patents to patent-assertion entities, broadly defined and branded as trolls”.  It proposes that these transfers be null and void if they do not meet statutory criteria, and suggest that the universities in question be punished by a forfeiture of research funding and student financial assistance.

In the eyes of the EFF, universities should exercise a higher sense of social responsibility and only sell or license their patents to those companies that “will actually do something with them.”  In its view, universities should resist the temptation to license their patents to the highest bidder. Really?

Its manifesto linking patents and NPEs with important research that is less likely to be shared for the logo_fullbenefit of the community can be found here. EFF sees patents and those who choose to share them through licensing as roadblocks, not bridges.

Blunt Condemnation

Epstein is blunt in his condemnation of the EFF’s proposal: “The first error lies in EFF’s over broad claim that equates NPEs with patent trolls; the second error is to assume that universities have some particular expertise in licensing these patents to potential end users; and the third in its wholesale condemnation of patent enforcement through litigation.”

The Forbes piece can be found here; the EFF “reclaim invention” proposal here. Both are worth reading.

The path of innovation is complex. A short-sighted position regarding who should benefit most from public research funding is self-deafting.

Image source: forbes.com; eff.org

Responsible Patent Licensing is focus of Wall Street event

Not all patent licensing businesses are alike.

“NPE 2016: The Business of Responsible Licensing,” scheduled for March 22 at the Convene conference in New York, will differentiate patent monetization companies by examining their business models, strategies and the managers who run them.

The conference will focus on the non-practicing entity (NPE) industry, including both public and private companies. In 2015, the NPE 2016 brought together leaders from the licensing company sector and the wider corporate IP and investment communities to discuss the challenges and opportunities of running a patent licensing business, especially in today’s challenging climate.

NPE 2016 is the only gathering that examines how NPEs operate and contribute to the innovation and the economy.

3J6A3349Moderator-led panel discussions with audience Q&A at the end of each will be featured. Sessions are designed to focus on the specifics of building and running successful NPE, as well as on the opportunities available to investors.

Beyond Monetization

This year’s sessions will consider licensing best practices, building and managing a patent portfolio, licensing dos and don’ts, litigating in Europe once the Unified Patent Court has been launched, licensing opportunities in new sectors and moving IP commercialization beyond monetization.

Last year’s attendees included:

• NPE executives
• In-house counsel and legal directors
• Private practice lawyers
• Licensing executives
• Patent brokers
• IP policy professionals
• Investment professionals

IP CloseUp readers who use the promo code IPCLOSEUP before February 19 are eligible for a $150 discount off of the full $895 registration.

For more information about NPE 2016 or to register, go here.

For he full program, go here.

 

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Image source: convene.com; iam.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 

“Patent Investor” tracks licensing company shares & developments

A new weekly is the first to feature in-depth coverage of public intellectual property monetization companies (PIPCOs). 

I’ve been following The Patent Investor for a few weeks, wondering what news it could provide beyond what I already know and hear about the PIPCO space.

What I discovered is that TPI regularly contains news of developments and trends useful to those interested in or affected by patent licensing businesses – especially the publicly held kind. Editor/reporter Dan Lonkevich goes beyond news releases and news about PIPCOs reported in the business press, to provide the relevant facts that investors need to make informed decisions, and those on that defendants in NPE disputes may wish to be aware of.

He is also not afraid to report bad news or delve into SEC filings, nor is he reluctant to portray a company in a less than favorable light – essential for a credible investor newsletter.

Lonkevich previously worked as the senior editor for The DealFlow Report, a unit of The Street Inc. Prior to that he was a reporter for Bloomberg News in New York. While at Bloomberg, he covered the insurance TPI_Mastheadbusiness, mergers and acquisitions and oil and gas companies. Prior to that, he worked as an associate editor for The National Underwriter and was a reporter for Bestweek, a newsletter  covering the insurance business published by insurance rating company A.M. Best Co.

The Patent Investor, which began publication last year, looks at the publicly listed businesses involved that license and sell patents, and the performance of their shares. TPI differs from Intangible Investor, a column that I write for IAM magazine, which considers PIPCOs, as well as a broad range of indirect investors or IP stakeholders, including operating businesses.

The website describes the newsletter as “uniquely and solely devoted to covering the patent monetization business, unlike more mainstream business and legal publications. It is intended to be of interest to investors, inventors, entrepreneurs, attorneys and investment bankers who work with the growing number of patent monetization companies.”

At $899 for an annual group subscription ($299 for individual subscriptions) TPI, while good value, is not for everyone. However, the cover of each issue, with the first paragraph of key stories, is available for free. Those interested in a sample issue or subscription can receive one.

To see the cover of the latest issue or for a sample, go here.

TPI’s article archive can be found here.

Image source: thepatentinvestor.com

Acacia shares off 20% on poorer than expected 3Q results

Acacia Research Corp. (NASDAQ: ACTG) was slammed in after-hours trading yesterday and is off 20% by noon today. The S&P 500 Index gained .66%.

The company reported that revenues were $12,994,000, as compared to $37,192,000 in the similar prior-year quarter. Its non-GAAP net loss was $11,458,000, or -$0.23 per diluted share, as compared to non-GAAP net income of $5,050,000, or $0.10 per diluted share.

The public IP licensing company, or PIPCO, reported revenue of $13 million in the period, which did not meet Street forecasts. Three analysts surveyed by Zacks expected $32.8 million.

Acacia Research shares have fallen 48 percent since the beginning of the year. In the final minutes of trading on Thursday, shares hit $8.79, aacacia_logo_lg fall of 42 percent in the last 12 months.

“Consistent with Acacia’s strategic shift towards a smaller number of higher valued marquee portfolios, our portfolio intake pipeline remains filled with deep and promising patents in the technology, automotive and energy verticals as inventors and companies seek out the best partner to navigate the increasingly complex patent licensing environment,” said Matthew Vella, Acacia Research Corporation CEO and President on today’s earnings call.

A transcript of today’s call can be found here.

Acacia’s third-quarter earnings release can be found here.

Image source: acaciaresearch.com

Can a Publicly Held Patent Buying Service Solve the ‘Troll’ Problem?

An article in Fortune by a former litigator examines a possible market solution for what he calls “the nation’s most pressing legal challenge.”

Taking on the Trolls in the current Fortune is worth reading for what it hints at – a possible market based solution for a growing business problem, patent disputes – as well as what it leaves out, a balanced discussion of what has caused the increase in NPE suits.

The article is written by Roger Parloff, perhaps the best legal journalist in America. Parloff undercuts his profile of Rational Patent Exchange (NASAD: RPXC), a patent buying service which to date has acquired rights on behalf of its clients totaling more than $500m, as a possible NPE solution by drawing upon misleading data and making snide remarks about inventors.

Parloff should know better, and so should reporters at some other major media outlets. He dismisses the majority of patent enforcement as frivolous, and suggests the enforcement numbers are skyrocketing for some high-profile (Fortune 500) targets, like Apple, when in relative terms they may actually be down.

“NPEs have their defenders,” chides Parloff, “… the argument continues, but also society at large, by preserving the incentive systems that our Founding Fathers wrote into the Constitution to ensure that the Thomas Edisons of the world would be motivated to provide the rest of us with the maximum possible benefit from their genius.”

Top NPE Targets

According to statistics attributed to RPX in The Ten Biggest Troll Targets, an excerpt from the Fortune article, which “have been relied upon by academics and government agencies,” NPEs filed 3,608 new suits in 2013, up 19% from the 3,042 they filed in 2012. Their suits named 4,843 total defendants, up 13% from the 4,282 sued a year earlier. NPE suits accounted for 67% of all new patent cases filed last year, and 63% of all new patent defendants. 

“Still, the sheer numbers have made many people skeptical,” continues the award-winning reporter and former criminal litigator. “Is AT&T really stealing breakthrough ideas from various Edisons at a rate of more than once per week? Or might someone be gaming a flawed system, bringing dubious claim in favorable plaintiff’s venues and harvesting nuisance settlements?”

Words like “stealing” and “trolls” are inadequate when it comes to patents. They do not help to capture the complexity of the problem, nor do they serve to address the fundamental issue of disputed innovation. It’s difficult to accuse a party of stealing when patents are so unreliable and their coverage difficult to define. At the same time, those who have the capital and experience to monetize legitimate rights should be allowed to.

Bad Actors on Both Sides

Bad actors exist on both sides of patent disputes. There are 140226110436-rpk17-troll-illo-620xasome plaintiffs who rely on the high cost of litigation to settle quickly and there are tens of thousands of  businesses selling products that infringe others’ inventions. From the defendants that I talk off the record it seems most of the patents being enforced are legitimate. Demonizing all enforcers or all NPEs may  help some companies in the short run, but it is only a small part of the story that will have a negative impact on innovation and commerce.

In fairness, most companies want to do the right thing when they can, but the uncertainty implicit in patents (only a portion of those issued are eventually found valid put to the test) and the courts makes doing so difficult. Businesses are frequently blindsided by patents they never knew existed.

One question rarely asked aloud is how thoroughly have they searched for patents that might read on their products?

When these businesses are confronted with quality patents that the products they sell may be infringing, which they can not cross-license and must pay to practice, they are in state of pseudo-shock.  A leveler playing field for innovation rights is a geography that more innovative businesses are reluctantly becoming familiar with. This is a truth that the Fortune reveals. RPX, however, is only one answer. [Taking on the Trolls is available in its entirety in Fortune in print or to digital subscribers.]

More Inventions, More Disputes

There are more NPE suits for several reasons, including (1) there amount of innovation is much greater, (2) invention returns are higher than in the past, (3) more inventions can now be produced by an individual as opposed to big research lab, (4) NPEs are better at bringing suits than top-heavy, risk-adverse large public businesses or individual inventors, and (5) the America Invents Act (AIA) makes it necessary to separate what litigation-costs-prepared-by-rpx-for-pandodailywould have been several defendants in a single suit into separate suits.

How did patent litigation get so expensive? Don’t ask the law firms, ask the defendants. Time (and cash) is on their side.

When the market for trading potentially dangerous patents brings down the risk factors, you may see more companies proactively taking an early license or using buying groups, like RPX, AST or Unified Patents to acquire patents or bust them early, as opposed to rolling the dice and possibly getting embroiled in a suit or numerous suits.

Given the explosive pace of innovation — the USPTO granted 277,835 patents in 2013 alone —  it’s a wonder that invention disputes have led to only a few dozen suits and a handful of trials annually. It’s inevitable that the numbers rise, unless a system of adjudicating disputes can be improved. A single large tech business’ products can draw upon 20,000 or more inventions, some of them fundamental to a successful product. Techdirt reports that some 250,000 patents impact a smartphone.

RPX has a point in saying that law firms are benefiting the most for invention disputes. (The article cites some data to support that.) But despite their whining most large holders can afford to allow things to play out over time. The potential danger of weaker patents and more arduous and costly monetization options is that established businesses will be allowed to determine what innovation is and what is not. Highly disruptive inventions, those that can create new industries, will have a harder time getting through, especially if they are seen as potentially threatening.

Market Solution

Permitting successful technology companies set the patent agenda will inevitably tip the advantage in their favor. With foreign competition just beginning to heat up, it may not be the best time for this to happen. More competitive, market-based solutions for patent disputes, and fewer legal ones, are a natural evolution for a society built on providing more and better ideas, and a healthy way to maintain our inventive DNA. RPX is one among many who can help to provide a step in that direction.

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Image source: money.cnn.com; rpxcorp.com 

Patent Troll “Witch Hunt” Slammed; IP Litigation Tactics, Too

Companies and lawmakers who bash businesses that license patents got a dose of their own bitter medicine this week when their techniques were compared with those of fear-mongering, 1950s anti-communist demagogue Joe McCarthy.

“Villains of the new millennium” is how Jamie Siegel, an Acacia Research Group’s Senior Vice President, characterized the portrayal of non-practicing entities NPEs, also known as patent “trolls,” by those that stand to gain from their demise and who routinely disparage them in the press.

Speaking at the second annual Benchmark Litigation U.S. awards dinner in New York, Siegel was quoted in a story by reporter Michael Loney that appears in the Managing Intellectual Property blog as saying.

“[J]ust as McCarthyism sought to unfairly tag so many with the ‘red’ moniker, Congress, the press, many giant software companies, and even our president, today Jaime-Siegel-retouchedseek to slap the moniker of ‘troll’ on attorneys and business people who are doing nothing more than monetising assets that they own – assets whose very existence is protected by Article 1 Section 8 of our Constitution.” Siegel joined California-based Acacia from Sony last year.

Siegel added that the hysteria around NPEs has been further inflamed by a lack of knowledge, including from the U.S. president. He said Barack Obama showed a lack of understanding when he issued executive directives to change the patent system. Contrary to public perception, he reminded the audience of lawyers, NPEs are good for innovation.

[Gene Quinn in IP Watchdog ran well-linked piece this week that took a deeper look at the sources of NPE-bashing, “Obama on Patents: The One-Sided USPTO Patent Ligation Beta.”]

*     *     *     *     *

In a separate but related development this week, Hon. Randall Rader, Chief Judge of the Court of Appeals for the Federal Circuit (CAFC) provided his strongest and most vocal defense of patent holders’ rights to date.

At a global IP conference in California Law.com reported that he said that  the problem of so-called patent trolls really boils down to a problem of excessive litigation costs. And it’s lawyers who are driving up those costs by spending millions on discovery in search of elusive “smoking-gun” documents.

“You yourselves should be going to your trial judges and requesting restrictions on discovery,” he added. “We cannot tolerate $3 million in discovery expense.

randall-r-rader2While chastising lawyers Judge Rader did not challenge their clients who can afford to pay the exorbitant legal bills and make it increasingly difficult for plaintiffs to file a legitimate complaint. No mention was made of the role recent legislation, which effectively forces holders of even the best patents to sue first to get the attention of an alleged infringer and prevent a declaratory judgement, and negotiate a license later.

“The problem isn’t the patent system. The problem isn’t even trolls,” Judge Rader said, and any effort to single them out will inevitably penalize universities, research clinics and other legitimate contributors to the U.S. innovation system.”

Doug Croxall, CEO of Marathon Patent Group (MARA), a patent licensing and management company, said that “the focus should be on patent quality not ownership. Many companies are unaccustomed to having good patents enforced by knowledgeable parties. We need to embrace good inventions, not fear them.”

Image source: daylife.com/photo/09r76Bpdgh003; patlawcenter.pli.edu; acaciaresearch.com

When NPR Attacks Patents: Stories are Long on Drama, Short on Truth

“When Patents Attack… Part II!” revisits old ground about bad IP actors by relying on half-truths and high drama.

“This American Life,” an entertaining weekly NPR news feature, cannot resist using ill-defined “trolls” as a basis to attack the patent system. A more accurate title might be “This American Knife: When Public Radio Attacks Patents!”

Back in July of 2011 “This American Life” (TAL) spent an hour vilifying patent holders who do not practice their inventions, and attempting to convince listeners that they had uncovered a third-party IP monetization scheme that is destroying innovation. The story was largely focused on Intellectual Ventures, the largest patent buyer. “When Patents Attack!” relies on half-truths, questionable sources and a lot theatrics, which makes for good radio, but shoddy journalism.

On May 31 TAL broadcasted When Patents Attack…, Part Two! This time around, the host, Ira Glass, said, TAL’s reporters were urged on by the logo-v5challenge to complete the difficult investigation they had begun two years earlier. Sadly, this piece is should be required listening, like the previous one, especially for those who want to better understand how patent misinformation gets spread around.

The dramatic conclusion to Laura and Alex’s search for information about Intellectual Ventures, and the inventor they claimed they were helping, Chris Crawford. The story turns out to be different from the one Intellectual Ventures originally told.

Separating the Real Story from the Drama

I would rather not go toe-to-toe refuting each claim in the story. However, I will say that presenting facts and partial-facts with insufficient context is extremely damaging to establishing the truth about the real story: patent theft in the U.S.

If you cannot listen to the entire broadcast, please at least catch to the last five minutes. At approximately 50:30 (you can use the play bar to go right there) there is a statement delivered at the Electronic Frontier Foundation meeting in San Francisco by a young medical device inventor who is moved to tears, literally, because he believes that the big bad trolls are inevitably going to destroy his hard work establishing a potentially life-saving invention.

The young inventor explains how he looked up some patents in the heart device area he was working in, saw how many inventions there are and how broadly they are defined and precisely their claims are worded, and determined that he was doomed from the start. Since he believed that he had no chance he refused to develop his brilliant idea and allowed his hard work to be taken away [presumably by trolls, as opposed to medical device manufacturers].

“When Patent Attack…, Part Two!” may be more scurrilous and insulting than Part One. The U.S. Patent and Trademark Office, while far from perfect, has done a generally good job of identifying and codifying inventions. Due to the USPTO’s lack of resources, in relatively rare instances given the millions of issued patents, it is sometimes necessary for the courts to decide what is novel and unobvious, who is an infringer, and how much must be paid in damages. This system may be inefficient, and benefit some businesses more than others, but it is generally fair, even if the enforcer is not practicing an invention or selling products.

Occasionally, it is necessary for the courts to determine what is valid or infringed, but typically it is left to posterity to determine what is “truly” innovative. This TAL story implies that innovation can be readily identified and classified, belittling those inventions that do not fit its definition.

“Too Many” Patents

The patent attorney introduced in Part Two who claims that there are “too many patents” confuses the issue. (Are there too many parcels or real estate? Perhaps he means that they are too easily granted?) Who is in the position to judge that the owner of an invention that meets the appropriate tests of patentability should not receive one because it lacks sufficient meaning? “When Patents Attack, Parts I and II” plays directly into the hands of businesses that would benefit from a weaker patent system with fewer patents that can potentially be used to undermine their leadership. The exclusivity afforded to patents can provide inventors, SMEs, and in some cases investors, the leverage to challenge traditions and provide the kind of positive destruction that stimulates competition and creates jobs. Heck, Apple, Microsoft, Disney, Google, H-P, Xerox and Amazon all were founded in garages or dorm rooms. America needs to encourage other companies to follow in their footsteps.

* * *

“When Patents Attack, Parts I and II” does little to enlighten listeners about how the patent system really works. It does, however, make it easier for companies to justify practicing others’ inventions, while laughing all the way to the bank. God bless (this) American life.

Image source: thisamericanlife.org


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