Tag Archives: NPEs
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China is poised to overtake the U.S. as the leading patent system

A few years ago a company whose patents were violated in China had little or no chance of defending its rights. 

Determined to move beyond its role as a low-cost provider of look-alike consumer products, and establish itself as an innovation leader, China has learned from the successes – and mistakes – of other intellectual property systems, especially the U.S. The nation of 1.4 billion inhabitants has rapidly emerged as what is currently among the fairest and most patent holder-friendly systems in the world.

Chinese patent courts second only, perhaps, to Germany in quickly and fairly adjudicating disputes.

A fascinating article in the current IAM magazine, “Defending a patent case in the brave new world of Chinese patent litigation,” details China’s rapid rise from low-cost copier to a patent power, and a nation that has caught the attention of major global technology powers who are often defendants.

Damages awards are relatively small in China, with median awards currently around 35,000 Renminbi or about $5,000, but injunctions, the power to stop a likely infringing product from being sold, are now issued over 99% of the time to winning parties. NPEs, what some U.S. companies refer to as patent “trolls,” are treated fairly as long as they their patents are of sufficient quality and are the companies are generally supportive of Chinese welfare.

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Patent litigation win rates, according to the article, average around 80%. Startlingly, foreign plaintiffs fare better statistically than Chinese. 

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The U.S. effectively ended the granting of patent injunctions in 2006 with EBay v. MercExchange. Now, only operating companies can obtain them in rare circumstances. This removes most of the leverage afforded patent holders. Granted, injunction abuses are a fact of life, and dubious patents have at times been used to enjoin products, costing companies time and money. But without the power to stop a product from being sold, patents have little meaning.

Race to the Bottom

“Largely as a result of the United States’ race to the bottom in terms of patent enforcement, Germany has emerged as a go-to patent jurisdiction, with virtually guaranteed injunctions, quick time to trial and no discovery resulting in a highly efficient system,” writes Beijing-based Erick Robinson, chief patent counsel, Asia-Pacific for Rouse, a global IP strategy firm.

Patent-holder Win-Rates and Median Damages Awards 

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“Enter China. For years the laughing-stock of all things IP related, the Middle Kingdom was ridiculed for the easy availability of counterfeit handbags, software and DVDs. However, over the last 15 years, and especially in the last two to three, China has put together an extremely effective patent enforcement system. Based largely on the German system and all of its advantages, but with selected portions from US law, China has now become a top forum for patent litigation.”

Unlike most countries which enjoin making, using and selling allegedly infringed products in-country, as well as imports, Chinese law also bans infringing exports from leaving the country. So, for example, if the accused device is Apple’s iPhone, not only can sales of iPhones in China be enjoined, but also exports of the devices from China. This would enable a patent owner to achieve an effective worldwide ban, since iPhones are manufactured in China.

Slippery Slope

With U.S. patent protection significantly diminished over the past decade, and China’s on the rise, the U.S. is on a slippery slope when it comes to stimulating R&D, innovation and investment. It is well on its way to becoming a second-rate patent system, and a slip in disruptive innovation, necessary for the creation of new industries, difficult to measure in real-time, has probably started. Certainly, companies and their stakeholders are thinking twice before pursuing or relying upon USPTO-issued patent protection.

It remains to be seen if China, a continuing source of counterfeit goods that are shipped worldwide, is committed to providing its businesses, as well as those outside of the country, with a legal system that can meet the needs of all business holders, and permit fair and timely resolution of legitimate disputes.

High Win-Rates; Low Damages Awards

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China is now the second largest filer in the U.S. and, while its companies have rarely resorted to filing suits in the U.S. against U.S. companies, there is little doubt that it will do so in the future. Technology giants include Alibaba, Xiaomi, Huawei and Lenovo.

China is likely to be more aggressive enforcing its patents than U.S. frequent-filer Japan, which has been reluctant to engage in domestic or foreign patent disputes. (There are some signs that is changing.) Samsung, by far the largest holder of U.S. patents in the world, has shown a greater willingness use its patents for licensing and leverage.

China may or may not be deliberately attempting to embarrass U.S. and eventually surpass its moribund IP system, but the impact is the same. Continued lack of awareness of what IP rights achieve and for whom, and lobbying, has significantly compromised the once-exemplary U.S. patent system. The Chinese are not too new to capitalism not to see this as an opportunity to compete. For the U.S.’ sake, let’s hope it’s not too late to make invention rights a priority again.

Subscribers can access The brave new world of Chinese patent litigation here.

FUTURE POST: What patent experts believe China’s patent-friendly system means for the U.S. – Experts: Void from U.S. patent “train wreck” is being filled by China’s patent system

Image source: IAM magazine

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Symantec acquires Blue Coat, a leading IPR filer with a $289M loss

Cybersecurity firm Blue Coat Systems has decided to opt-out of an initial public offering and sell itself to software security leader Symantec for $4.65 billion. 

What has not been widely reported in the press is that Blue Coat, a relatively small cybersecurity company with a loss of $289 million in 2015, is a leading filer of United States Patent and Trademark Office Inter Partes Reviews (IPRs) that are designed to invalidate patents that are being asserted by Non-Practicing Entities (NPEs) and others.

According to patent research firm Patexia, Blue Coat is a top-ten IPR filer for 2016, along with Apple, Samsung, Microsoft and GE. The firm filed ten IPRs, a higher numbers than H-P for the period.

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“Blue Coat has been at war with Finjan,” Gaston Kroub of Markman Advisors, LLC told IP CloseUp.  “Like Blue Coat, Symantec has been fighting with Finjan too, so these IPR’s may be of value to Symantec as well.”

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Finjan (FNJN) is among the leading targets for IPRs. It could be that Symantec finds Blue Coat attractive not only for its cybersecurity products, but also for its adversarial position with regard to Finjan and others which could assert their patents against it or Blue Coat.

In a 2015 verdict in Finjan Inc. v Blue Coat Systems, a jury awarded Finjan more than $39.5 million in damages, reports IP Watchdog. The lawsuit alleged that claims from a series of Finjan patents were infringed by several Blue Coat products, including Malware Analysis Appliance (MAA), Content Analysis System (CAS), and WebPulse.

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To help finance the transaction, Blue Coat’s existing majority investor, Bain Capital, will invest an additional $750 million in the deal. The private equity firm Silver Lake, which invested $500 million in Symantec in February, will invest an additional $500 million.

Bain had acquired the company for $2.4B in 2015.

According to The New York Times, “The deal will create a big provider of security products, both the traditional antivirus kind that has long been Symantec’s focus and the newer online protection services in which Blue Coat has specialized. Executives see little overlap between the two businesses.”

“With this transaction, we will have the scale, portfolio and resources necessary to usher in a new era of innovation designed to help protect large customers and individual consumers against insider threats and sophisticated cybercriminals,” Dan Schulman, Symantec’s chairman stated.

In its I.P.O. prospectus, Blue Coat said that it lost $289 million on top of the $598 million in sales for the 12-month-period that ended on April 30. That compares to a $271 million loss on top of nearly $569 million in sales for the same period a year before.

Image source: twitter.com/symantec; patexia.com

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Financial patent summit to focus on IP and cybersecurity, July 20-21

Fintech, or financial technology, is a rapidly growing industry with more than $15 billion of venture capital invested to date and even more on the part of financial institutions.

An array of banks, e-commerce businesses, product developers, and software companies are vying for a leadership role in financial transactions and cybersecurity.

Those interested in IP rights in the context of authentication and transactions should consider attending the 13th annual Patents for Financial Services Summit in New York at the Sheraton Times Square, July 20-21. Many of financial services’ leading patent holders and advisers will be present.

Major Players Attending

IP executives and counsel from top banks and services providers are participating this year, including those at Visa, Time Warner, Royal Bank of Canada, Barclays, TD Bank, Morgan Stanley, JP Morgan Chase, Google, Microsoft, AST, LoT and Red Hat.

Top patenting organizations: exchanges and stocks

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Patent and IP counsel from the financial services industry and patent attorneys from leading law firms will participate in this year’s Summit, says conference producer World Congress, “to discuss recent rulings and strategies to protect patents against NPEs, successfully file patent applications post-Alice, and foster innovation.’

IP CloseUp readers who use the conference code IPCNYC can save $100 off of registration.

New for 2016:

  • Updates on the Alice decision and understand its impact on patent applications
  • Discussion about prosecuting business method patents
  • Analyze recent patent cases including, Halo Electronics, Inc. v. Pulse Electronics; Stryker Corporation v. Karl Stroz Endoscopy-America, Inc.; Media Rights Technologies, Inc. v. Capitol One Financial Corporation, et al., and more
  • Hear in-house counsel views discuss pending legislation, including The Innovation Act, The Patent Act, and The Strong Patents Act
  • Evaluate their impact on PTAB and post-grant proceedings
  • Protect patents from NPEs and understand approaches to successfully defend against trolls
  • Improve patent quality and drive innovation within your organization
  • Explore the interplay between patents and cybersecurity

extThe Summit was approved in 2015 by the New York State Continuing Legal Education Board for 12.5 CLE credit hours in the areas of Professional Practice. In 2016, World Congress are programming for and anticipate approval for 13 CLE credit hours.

The full conference agenda can be found here.

For a list of speakers, go here. This year’s location is the Sheraton Times Square on Seventh Avenue.

To register, click here.

Image source: worldcongress.com; thomsonreuters.com

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The impact of higher patent licensing hurdles may not be fully understood

Most patent holders would agree that licensing patents for revenue has gone from bad to awful — from difficult less than a decade ago, to virtually impossible today.* 

Determining if the courts and lawmakers have facilitated improvements or simply over-corrected for weaknesses in the patent system largely depends on whom you ask, and when.

While obvious to some, the fairness of the U.S. patent system is no longer apparent to all.

In 1996, the days of the first tech bubble, there was some uncertainty regarding patent validity. Patent licensing was not easy back then, but it was viable and still could be conducted on a business basis. Out-licenses could be negotiated without first filing suit, and significant damages awards were occasionally paid, although not as frequently has some would have us believe. The threat of an injunction that would freeze product sales was still a very potent weapon for those considering enforcement.

Things became very difficult in 2006 (high uncertainty), when injunctions became virtually impossible to obtain and NPEs, the businesses that tended to enforce the best patents most frequently, were characterized as a virulent strain of a disease that needed to be eradicated. Lost in defendants’ anger is that those who enforce valid patents may actually facilitate innovation and competition, and play a positive role in job creation.

Weighing In

Weighing in on whether the over-corrected patent pendulum has finally started to swing back towards the middle are Brian Hinman, Chief IP Executive at Philips, and Ashley Keller, Managing Director at Gerchen Keller Capital. In Balancing Act, in the May Intangible Investor simple-pendulum-suspensionin IAM, they speculate on what it will take to move the patent pendulum more toward the middle where it belongs.

In 2016, with the emergence of an extreme degree of uncertainty, patent licensing became virtually impossible. (Degree of uncertainty licensing can be compared to degree of difficulty” in a gymnastics competition, although their are no bonus points for successfully enforcing an infringed patent.) Of no help was the rise of preemptive, defensive litigation (declaratory judgments), forcing many patent holders to sue first and (maybe) talk later.

Factors responsible for patents’ loss of reliability include the American Invents Act (AIA) which permitted Inter Partes Reviews (IPRs), litigation-like, post-issuance examinations of patents that invalidated many invention rights filed under previous guidelines and slow enforcement. A number of  district court, Court of Appeals for the Federal Circuit (CAFC) and United States Supreme Court cases have gone against patent holders wishing to license for revenue, including the Alice decision, which rendered many software patents and business methods invalid.

Another major set-back is Non-Practicing Entities or NPEs, also known as patent “trolls” or owners who do not commercialize or sell products but hope to generate ROI through royalty payments. All NPEs have been lumped together and have been universally demonized as “black hats” who are the primary source of all that ails the U.S. patent system and that wish to enforce questionable rights and shake down otherwise innocent companies wishing to avoid costly disputes.

However, many of the largest corporations engage similar practices themselves (aka privateers), while decrying other NPE’s.  As a result of the actions of anti-patent proponents — many large patent holders themselves — patents have become even more uncertain, and litigation longer and more costly. NPEs continue to be held responsible for the need for more anti-patent legislation, and have become a sort of obsession for some businesses and lawmakers wishing to re-frame the discussion and absolve many tech companies of serial theft.

According to Patent Progress, “a project of the Computer & Communications Industry Association (CCIA)” that endeavors to limit patents reach, there are six bills currently before Congress that still endeavor to reel-in or otherwise weaken patents and deter enforcement.

Only one piece of patent legislation, the STRONG Act, which is before the Senate, attempts to roll back some of so-called improvements introduced over the past several years, much of which in retrospect looks like an overreaction to a much smaller problem.

Fourteen bills were introduced in the 113th Congress (2013–14) alone to deal with one or more aspects of the patent troll issue. For a list of these and other bills, go here. Computer and Communications Industry Association members include Amazon, Facebook, Google, Microsoft, Red Hat and Samsung.

More and Higher Hurdles

The diagram below, “Patent Licensing: Higher Hurdles for Protecting New Ideas,” is a graphic reminder of the progressive number and nature of impediments added since 1996 that discourage the licensing of U.S. patents. It was prepared by Brody Berman Associates for a client who has given permission for it to be shared. Key court decisions diminishing patent value and creating more uncertainty can be seen in a second slide below.

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“Risk-Adjusted Theft”

For technology companies the era of the licensing discussion is all but over. Uncertainty has never been greater, nor has hostility to owners offering an invention for license, no matter how good the patents or fair the terms. This leaves no alternative but to litigate.

“Efficient” infringement, a term we are hearing more of lately, is really a kind of risk-adjusted theft. Simply put, the deck is all but stacked against patent licensors (who are now forced to sue) because it is more economically viable today for most businesses to steal what they use than pay for it.

The courts, lawmakers and media will need to start soon if the damage that has been done to patent licensing is to be reversed. The Supreme Court decisions below speak volumes for the imbalance and how far patents have to go to bet back to the middle. It is not so much that Alice made software unpatentable as it rendered most existing business methods and many software patents invalid under the narrower guidelines that the Court established.

If proponents of fewer and lower hurdles feel the system has over-corrected and is doing damage, they had better turn up the volume. The courts, legislators and even most patent holders do not appear to be listening.

casesPatent TimeLine

 

*My gratitude to Irv Rappaport who assisted in writing this article. Irv has served as the head of IP departments at Apple, National Semiconductor and Medtronic, and was a consultant to Intel responsible for suggesting the Intel Inside® campaign. He has served as an expert witness more than 70 cases and is named more than 20 U.S. patents. He also served as a USPTO patent examiner and a U.S. Army officer.

Image source: Brody Berman Associates; tutorvista.com

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

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

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

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

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

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

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

“Financial Patent Quality” concludes that:

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

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

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

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

Image source: hbs.edu 

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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

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Google’s patent giveaway is not really about saving startups from predators

The Patent Starter Program announced last week by Google may be less about how the company can help protect young companies from patent “trolls” than re-thinking how patents are most effectively used.

 A provocative article running on the Fortune blog by Jeff John Roberts, Google’s new patent plan: how it will and won’t help startups,” suggests that Google is packaging incentives to discourage companies from enforcing patents or selling them to businesses that do.

Roberts believes that the Patent Starter Program could create big long-term ripples in how the tech industry views and deploys patents, and leverages brand recognition. It is an indication of Google’s growing sophistication in the IP space, and shows its willingness to participate in patent transactions (buy and release, similar to Allied Security Trust) if they can help to achieve the tech leader’s business goals.

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“The real significance of the Google Patent Starter Program,” writes Roberts,”is instead more subtle, and should be seen against the backdrop of other moves wpid-google-inc-offers-to-sell-patents-to-startups-as-company-fights-patent-trolGoogle is undertaking to change the economic incentives that have made patents such a problem for the tech sector in the first place.”

“Perhaps the search giant is actually tempted to follow the example of older companies like Microsoft and Qualcomm which, as their capacity for product innovation fades, have turned to their patent portfolios as a new revenue stream.”

Google lawyer Kurt Brasch said that was not the case and that the goal of the purchase program was in part to create more realistic expectations about the actual value of patents in the secondary market.

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The new starter program obliges the startups who receive Google patents to sign up for the LOT network, “a condition that’s easy to accept,” says Fortune, “since Google will pick up the first two years of the membership tab.”

Image source: techno-stream.net

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NPEs are winning 4.5x more in damages than opcos, new PwC patent litigation study shows

With patent litigation down 13% over 2013, and median damages awards just $2.9 million, the lowest in at least 20 years, NPEs are still besting operating companies in damages at trial by more than four fold.

PwC’s 2015 annual patent litigation study, subtitled “A change in patentee fortunes,” is a useful overview of trends in the IP space. The annual study is long on the big picture and short of reasons for changes. There is some attempt this year at a summary page and suggested implications (“Leading Observations”), which runs before the Table of Contents.

Median damages awards for NPEs over the period from 2010-2014 were $8.9M, compared to just $2.0M (page four of the 2015 study) for operating companies (opcos). Reasons for this may include: SMEs that tend to enforceScreen Shot 2015-05-22 at 10.41.50 AM their patents against competitors, not the deepest pockets, have more modest goals; and simply that NPEs are better at enforcing patents, with more experience targeting big companies than opcos, and are able to identify better quality patents to enforce.

The drop in litigation over 2013, already much discussed, can be attributed to may things, the PTAB and IPRs, Alice, less favorable large damages awards, longer time to trial, etc. Possibly overlooked is that after AIA was instituted in 2012 there was a rush to file suits, possibly to avoid IPR scrutiny.

The 2015 PwC Patent Litigation Study can be found here.

Image source: PwC

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Does Google’s patent buying experiment put it in competition w/ Intellectual Ventures and RPX?

On Friday May 8 Google will launch a two week experiment in acquiring patents from mainly small businesses and inventors.

Directly, or indirectly, the Patent Purchase Promotion (PPP) will be competing with NPEs and other operating companies for patent ownership.

The announcement raises questions: Is Google taking a page the play book written by IV and RPX (NASAQ: RPXC)? Is it aggregating patents for its own defensive use, the good of all operating businesses, or for potential investors/partners?

Has the company conceded that because it could not beat the patent-buying trolls it needs to kind of “join them,” or at least, compete with them?

It’s difficult to say what Google (NASDAQ: GOOG) is trying to accomplish. By its own admission, there is a lot of fine print in its agreement. The company’s LoT (License on Transfer) agreement, originally launched about 18 months ago, has generated mixed results, and PPP may be merely another arrow in Google’s IP quiver.

The company may be relying on inexperienced sellers to mis-price their assets, as did IV early in its buying cycle. No doubt some will ask for far too much. But, as IV learned ten years ago, there is no shortage of desperate sellers who will accept little or nothing in a down market for patents that could be quite valuable. With the market depressed and IV not buying the way it used to, the timing could be good for PPP to step 303170893_idu9a-m-300x199in. If Google can secured patents at a good price before NPEs do, it can improve its and other businesses’ defense against patent assertion.

Ars Technica wrote:

“As a way to combat the pernicious effects of patent trolls, Google announced Monday that it would be buying up patents from any inventor or entrepreneur who wants to sell.”

Google’s Patent Purchase Promotion is a radical change for a company that traditionally has been suspicious of patent buyers and sellers. For FAQs go here. The purchase program ends May 22. Decisions will be made no later than July 22.

Beginning on May 8 a copy of the actual PPP agreement can be found here.

Maturing IP Strategy

Google appears to be growing as an IP holder and user, and it is not surprising that it would want to take advantage of its formidable brand and cash position to strategically acquire patents that may be harmful to it and others at below market prices.

Whether or not Google will use acquired patents for defensive purposes only is unclear. (The company reserves the right to use the patents it acquires however it sees fit.)

Richard Lloyd wrote in a thoughtful piece about Google’s possible motivation in the IAM blog last week:

“The more you think about it,” he said, “the more it raises questions around why a patent owner with a high-quality asset who understands the IP market would consider this option, even under current tough conditions.

“Instead, the likelihood is that if Google does come across something interesting it will be offered by a party that may not fully appreciate what it owns and needs some money quickly; and that probably means a smaller, cash-strapped business with little access to specialist IP knowledge.”

A page torn from IV’s playbook?

This sounds very much like IV’s M.O. back eight or ten years ago: Gobble up decent (if not good) patents for others to pay access to or for the company to enforce, if necessary. It will certainly expand Google’s rapidly growing patent portfolio and provide access to IP rights out of its core search technology.

PPP may be nothing more than getting a leg up on the competition, whether they be opcos or NPEs. We will have to wait and see.

Image source: allthingsd.com; apexbeats.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.

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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

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Patent ‘Quality Summit’ will be open to the public, March 25-26

The goal of the USPTO gathering is to promote discussion of ways to improve patent quality.

The first Patent Quality Summit will take place at United States Patent and Trademark Office headquarters in Alexandria, VA on March 25-26.

The two-day event’s opening session, “Perspectives on the Importance of Quality,” will feature corporate counsel, private practitioners, academics, economists, and jurists. Sessions will be open to the public, and those wishing to attend the Quality Summit but cannot be in Alexandria, they will be able to listen to and watch the presentations via a live stream. Participation in the Brainstorming sessions will be via WebEx during which virtual attendees will be able to participate interactively.

According to a press release the gathering is intended to “encourage robust discussions among USPTO leadership; patent prosecutors, litigators, applicants and licensees; and other members of the public interested in USPTO’s efforts to further improve patent quality through its Enhanced Patent Quality Initiative.

The conference draft agenda, three pillars to improve quality and six proposals can be found here, as well as information about virtual attendance. 

A focus of the Summit will be on improving patent operations and procedures to provide Quality SUMMIT Logo-02the best work product, to enhance the customer experience, and to improve existing quality metrics. USPTO has already set in motion several quality initiatives, including robust technical and legal training for patent examiners, as well as a Glossary Pilot, Quick Patent IDS Program, First Action Interview Pilot, and After Final Consideration Pilot.

Public Comments Solicited

Separate from the Quality Summit, the USPTO is seeking public comment on its Enhanced Patent Quality Initiative. Comments in this round will be accepted through May 6, 2015. For further information about the summit – including a draft agenda – and instructions for submitting comments, visit the Federal Register Notice.

“High quality patents permit certainty and clarity of rights, which in turn fuels innovation and reduces needless litigation,” said Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the USPTO, Michelle K. Lee.

Image source: uspto.gov

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More Patent Holders, Filers Need to be Mindful of Bad Behaviors

Companies that denigrate independent patent holders who enforce their rights should take care not put all of the blame for the patent system’s ills on NPEs — There is plenty of bad patent behavior to go around. 

In the patent system it’s getting harder to tell the bad actors apart. And you know what they say about bad karma: What goes around comes around.

In the current Intangible Investor, in the March IAM, What’s in Their Wallet?,” I speculate about the dangers of complaining too loudly about how and by whom patents are being used. It can come back to haunt some large holders, many of whom hold large numbers of dubious patents and could be considered serial infringers.

REGULATE-tmagArticle“High patent counts are frequently a tactic rather than a solution and are an unreliable measure of success,” I write. “They are no more an indication of efficiency or innovation than a frivolous suit is of infringement. The quality of a patent holder’s portfolio matters, regardless of whether there is an intention to enforce it.

“Securing questionable patents is not a crime (although perhaps it should be), while enforcing them borders on one. This double standard will not exist forever. Decrying frivolous litigation loses meaning when the most vocal detractors of the current system are responsible for some of its worst patents.”

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In “The Mousetrap,” Hamlet’s play-within-the-play designed to catch the King, Hamlet’s mother, Queen Gertrude, observes, “The lady doth protest too much.”

According to Wikipedia the quotation has been used “as a figure of speech to indicate that a person’s overly frequent or vehement attempts to convince others of something have ironically helped to convince others that the opposite is true, by making the person look insincere and defensive.”

Smart holders of some large patent portfolios would be wise to heed the advice. Subscribers to IAM can find “What’s in Their Wallet?” here.

Image source: depts.ttu.edu; dealbook.nytimes.com

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