Tag Archives: PTAB

Reactions to Oil States show that patent due process is not dead

April 30, 2018 by Bruce Berman 3 Comments

Two days before World IP Day, on April 24, the Supreme Court of the United States relinquished significant judicial authority for patents to the executive branch in Oil States Energy v. Greene’s Energy.   

This decision upheld the constitutionality of the Patent Trial and Review Board. The Wall Street Journal stated in a thoughtful and uncharacteristically nuanced commentary, “This process [the inter partes review] was intended to discourage frivolous patent litigation, but is susceptible to political bias.”

Oil States overturns 200 years of judicial precedent and allows the federal government to revoke patents. Dissenting were Justice Gorsuch, President Trump’s appointee, and Chief Justice John Roberts.

” …the purpose of patents, which is to encourage innovation and reward investment, will be undermined if they can be nullified without due process and hearing before an Article III judge,” the WSJ concluded.

The WSJ’s editorial page got it right, even if SCOTUS did not.

Sin of Omission

James Carmichael and Brad Close writing in IP Watchdog, “Despite Oil States, IPRs May Still be Unconstitutional,” reminds patent holders that the Court, by its own admission (or should that be “omission”?), ruled on a very narrow area of law and may have left the door open to further decisions that will strengthen patents.

“What was unfortunately never addressed in Oil States, and which the court specifically left the door open for, was that patents rights are still property rights for the purpose of Due Process–the inference being that IPRs may fail under the Due Process or Takings Clause.  Indeed the court seemed to lament that Oil States did not challenge the retroactive application of IPRs and their constitutional sufficiency on a broader basis.”

Carmichael and Close cite the justices tone in their written decision:

We emphasize the narrowness of our holding. We address the constitutionality of inter partes review only… our decision should not be misconstrued as suggesting that patents are not property for the purpose of the Due Process Clause or the Takings Clause.

Justice Gorsuch wrote that until recently, most everyone considered an issued patent a personal right—no less than a home or farm—that the federal government could revoke only with the concurrence of independent judges.

Dig In

Oil States did not go well for patent holders, but that was no surprise. What was somewhat unexpected was a strong stance from the US’ leading business periodical, the Wall Street Journal, about the shortsightedness of the Court’s decision, and that the Chief Justice and another member of SCOTUS also were not in favor of constitutionality for PTAB reviews.

Further judicial review of patents and patentability, if not the PTAB and IPRs, is order. If nothing else, Oil States puts a greater burden on USPTO Director Iancu to step-up and de-politicize PTAB administrative procedures and judges.

Despite the obvious loss, Oil States may prove to be the best reason for patent holders to dig in.

Image source: yahoo.com; law.com

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Weak stock performance for leading PIPCOs in 2017; PIPX is suspended

January 8, 2018 by Bruce Berman 0 Comments

 Shares of many of the leading PIPCOs (public IP licensing companies) significantly under-performed the leading markets indices in 2017, with only a couple showing gains.

Despite annual increases of around 20% for the S&P 500 index and 29% for the NASDAQ composite index, IP CloseUp 30® companies were down for the most part, some by more than 40%..

The PIPX composite index of 13 PIPCOs, which IP CloseUp has run quarterly for the past two years, is no longer being prepared.

“I’m going to stop doing the index,” Dr. Kevin Klein, its founder, wrote to IP CloseUp in an email. “The performance of the companies has not been good, several are going private, changing their business models, and/or issuing additional stock so keeping the index coherent is getting to be a challenge.”

Negative Trend

Acacia Research Corp (ACTG), started the year at $6.70 and ended it at $4.05.  Its market capitalization is currently $210 million. Finjan (FNJN) began in January at $1.35 and closed at about $2.24, up 82%. Its market cap is around $62 million. Finjan has survived multiple inter partes reviews.

ACTG, FNJN, NTIP, QTRH, RMBS and XPER stock comparison for 2017

Network-1 Technologies (NTIP), a solid performer until an adverse district court decision this year, dropped from $3.45 to $2.35, down 28%. Its market cap remains around $57 million. Quarterhill (QTRH), formerly WiLAN, dropped from $2.32 to $1.82. Market value is $220 million.

A larger player, with a $1.5 billion capitalization, Rambus (RMBS), finished the year at $14.30, up slightly from $13.80. However, Xperi, the former Tessera (XPER), saw its shares drop from $44.95 to $24.70, down 44%.

Some attribute the poor PIPCO performance to the passage of the America Invents Act, adverse decisions by the courts and weak demand for patent licensing because of diminished litigation threat. There were, however, momentary bright spots throughout the year for some of these companies’ shares, but, on the whole, 2017 was not a good year, even for larger and historically better performing PIPCOs. With a new Director of the USPTO and fairer PTAB 2018 will hopefully be better.

Image source: yahoofinance.com

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Passage of STRONGER Patent Act is likely to spur innovation and jobs

June 26, 2017 by Bruce Berman 0 Comments

A bi-partisan bill introduced by Senators Coons, Cotton and others is one of the most important pieces of legislation for American competitiveness and innovation to come along in recent memory.

So why has it gotten almost no coverage from the leading business, technology and general news media? It may have to do with perspective, as well as how the media and its constituents wish readers to regard more certain patents, which are potentially more expensive to license.

Washington Examiner, IP Watchdog and a few others, who are generally pro-strong patents, provided extensive coverage. Others did not cover the STRONGER Patent Act at all.

The Hill ran the following headline: “Senate Dem Offers Patent Reform Bill.” It’s actually a bi-partisan effort, between Chris Coons (D-Del), and Tom Cotton (R-Ark), Dick Durbin (D-Ill), and Mazie Hirono (D-Hwi), and is supported by conservative members of the House, as well as business groups, like the Innovation Alliance, the Chamber of Commerce, inventors and others.

From 1st to 10th Place

The U.S. patent system is now ranked tenth worldwide by the U.S. Chamber of Commerce, in a tie with Hungary. Until this year, it had always been ranked first.

Mostly, the business, technology and general news media have been silent on the best thing to come out of Washington in support of U.S. competition and jobs in a decade. Conservative groups are supporting the bill. Internet and some large tech companies who favor weaker, less challenging patents are not likely to support the bill in its current form, and may try to oppose it.

“This bill is totally worth getting behind,” a Washington observer told IP CloseUp. “Reforming the PTAB and restoring injunctions, what’s not to like? Frankly, just the injunction issue alone gives Coons great leverage over all other legislation.”

Key points in the STRONGER Patent Act in its current form include:

  • Restore injunctive relief for infringed inventions
  • Reform unfair Patent Trial & Appeal Board (PTAB) reviews
  • Allow the USPTO to retain its fees for faster, higher quality examinations
  • Protect consumers and small businesses from patent abuse

This STRONGER bill is a more robust version of the Coons-proposed STRONG Patents Act that was introduced in 2015.

The Washington Examiner article can be found here. The IP Watchdog piece by Brian Pomper of the Innovation Alliance, here. For the Hill article go here.

“Coons wants to get ahead of Goodlatte in the House and Grassley in the Senate,” the IP CloseUp contact said. “He would like to seize the momentum from TC Heartland (driving more patent litigation to Delaware) and encourage Republicans to join the cause. During last year’s campaign, Trump voiced pro-patent sentiments, a change from Obama.  Cotton is on board, and I hear that Kennedy [Louisiana] and others are interested and willing to go against Grassley.”

For a one-page summary of the bill, go here.

For a section-by-section review, here. 

For more on the subject of media coverage of patents, see the Center for Intellectual Property Understanding report, “Patterns in Media Coverage of Patent Disputes,” here.

Image source: cpip.gmu.edu; ipwatchdog.com

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PTAB fairness data is misleading, say more patent holders

April 10, 2017 by Bruce Berman 0 Comments

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; 

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A record number of major holders were granted far fewer US patents

July 6, 2016 by Bruce Berman 0 Comments

Many significant tech companies experienced dramatic declines in US patent grants, fueling speculation about the reasons why. 

While total patent grants were virtually flat, according to USPTO data, down just 53 patents from 326,032 to 325,979, and utility patent grants and applications were up, many top US holders received significantly fewer US patent grants in 2015. Patent reform and uncertainty are the most likely reasons why.

Notable declines in patents received include Microsoft, off 17.2%, Sony, down 23.8% and AT&T, which dropped 31.3% after increasing 14.4% in 2014. The immediate result has been a noticeable drop in US patent grants received in 2015 by information technology companies, both domestic and foreign based. Japanese companies led the foreign declines.

Businesses of foreign origin were issued a record of 52.8% in 2015 US patents. US company patent applications abroad was likely up.

Digesting the Declines

Fifteen of the top 26 US patent recipients (58%) were granted fewer patents by the USPTO in 2015 than in 2014.  Even IBM, a leading patent recipient for more than two decades, was down by 0.5%. (See IPO top 300.)

Bucking the trend with net increases among top ten patent recipients include Qualcomm, Google GE , Intel and Samsung Display. Biggest percent increases among the top 300 were from NXP Semiconductor (147.9%), Amazon Technologies (53.3%) and Ford Global Technologies (49.1%).

These are in contrast to 2014, when top US-based patent recipients were all up (see 2014-2013 chart below).

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Litigation Down, Too

It is too early to be certain about why the issuance declines among major IT holders are occurring, but if it is in keeping with the recently announced 30.7% drop in patent litigation for the first half of 2016 (see IAM story), a pattern may be emerging.

What this means for some major technology companies is that patent quantity is no longer king. The arms race may be abating, somewhat. It also indicates that US patents mean less today to many companies than in the past, and paying to secure and enforce all but the best few may no longer makes sense. (I will try to cross-check this with US company foreign filing in a future IP CloseUp.)

Decreases in IT company patent filings can be interpreted in several ways.

The Intellectual Property Owners Association (ipo.org) list of top 300 US patent recipients for 2015, published recently, illustrates a downward trend, with some exceptions noted above. It is difficult to tell whether NXP, Amazon and Ford are playing catch up or see an opportunity that others do not. Also, is it that semiconductors, e-commerce and financial transactions, and automotive are inherently more innovative and potentially combative.

“A combination of factors”

Clearly there are many IP rights in portfolios that should never have been issued, and would be invalidated under further review. Also, patents are less reliable than ever, so why bother? It may be that some companies want to rely on fewer, better quality patents, for freedom of action, but it also may be that they see less value in obtaining them or in identifying new inventions.

“It is a combination of factors,” one veteran patent attorney and analyst told IP CloseUp. “Businesses are seeking better patent quality, and chartoftheday_4260_top_10_patent_recipients_n
USPTO examinations are getting somewhat tougher. Also, there is pressure on software patents from the courts, frequent PTAB invalidity rulings, and a general anti-patent environment. Weaker corporate balance sheets also have led to cost cutting.”

The America Invents Act and PTAB reviews have made it much more difficult to license patents, and have diminished their defensive value, too. Patents role in some businesses’ corporate strategy and ROI is under scrutiny.

Interestingly, despite the 2015 drop in patents to top holders, corporate patent buying activity was relatively high. Rock bottom prices may have made portfolio purchases attractive to some.

Patent-dubious Google, which has been an active buyer through various programs (e.g. experimental Patent Purchase Program), as well as a more active filer, experienced a 10.9% increase in patents received in 2015. In 2014, it was up by 31.6%.

Image source: patentdocs.com; aulainip.com; statista.com

 

 

 

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

May 23, 2016 by Bruce Berman 0 Comments

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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PTAB instituted IPRs are flat after declining slightly in 2015

February 9, 2016 by Bruce Berman 0 Comments

After declining 9% in 2015 from the 2014 fiscal year Patent Trial and Appeal Board-instituted inter partes reviews (IPRs) have leveled off.

Instituted reviews were at 74% in 2014, went to 65% in 2015 and are thus far at 66% for fiscal year 2016. This is according to, “PTAB Grants Lower Rare of IPRs as Patent Owners Fight Back,” by Erin Coe in Law 360.

Coe reports that patent holders have “an 86 percent chance of seeing the PTAB find some or all of the instituted claims unpatentable, according to the total number of IPR trials that reached final decisions in the review period.”

The declining rate has been attributed to among other things, improved quality of the patents being put before the PTAB, although it still is reviewing about two-thirds of the patents that petitioners request.

An analysis through August 2015 showed that instituted reviews result in invalidation of one or more claims 88% of the time; invalidity success rate for patents with fully instituted petitions is 82%.

ipr

 

 

 

 

 

 

 

 

 

 

 

 

The Kill Rate Analysis

According to Amy Simpson and Hwa Lee, attorneys at Perkins Coie LLP, the key take-aways or recent IPR activity:

1. Very few petitioners are walking away empty-handed: 88 percent of petitions with final written decisions resulted in at least one claim being invalidated.

2. A notable percentage — 21 percent — of all final written decisions resulted in complete invalidation of the patent.

3. Success starts and ends with the petition. The invalidity success rate for fully instituted petitions is 82 percent while the invalidity success rate for partially instituted petitions plummets to 52 percent. The PTAB’s first impression of the petition’s strength appears to affect the entire preceding and ultimate outcome.

Simpson and Lee analyzed all of the approximately 404 final written decisions on instituted IPRs from September 2012 through Aug. 1, 2015 to explore the factors behind IPR kill rates.

Image source: Law360.com via USPTO

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E.D. TX patent suits up 165% in first half; NY and So Cal also gain

September 18, 2015 by Bruce Berman 0 Comments

After a dip in filings for 2014, Texas is back as the undisputed leader in hearing patent suits filed by plaintiffs for the first half of 2015; New York and California were up, too.

Patent suits filed in the Eastern District of Texas for the first two quarters were up 165.7% over 2014, according to Lex Machina. In the Northern District of Texas, they were up 120.7%. Delaware was down 39.5% over the same period.

Surprisingly, the Southern District of New York was up 68.2% and Southern District of California was up 36.1%.

Lex Machina is reporting 2015 is on track to be a record with more than 6,000 cases filed.

It’s difficult to know why the move back to Texas courts has occurred, but the state has been traditionally patent-friendly, and patent holders today need any edge that they can get with new obstacles like “101” (subject matter) dismissals and the Patent Trial and Appeal Board (PTAB) making it more difficult to succeed. New York has not been known as particularly patent friendly or has Southern California.

For the highest volume plaintiffs, it was definitely Texas or nothing for the first two quarters of 2015 (see second graph below).

 Patent cases filings in H2 2014,  H1 2015, and percentage change

(showing top 10 districts)

new-B1-new-cases-by-district

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Plaintiffs filing 10 or more cases filed in June of 2015

(Most plaintiffs filed in the Eastern District of Texas, shown in dark blue) 

Top-plaintiffs

 

Image source: lexmachina.com

 

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

May 26, 2015 by Bruce Berman 1 Comment

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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PwC Patent Litigation Study: More Suits and NPEs; Fewer Big Awards

August 4, 2014 by Bruce Berman 2 Comments

What’s to be learned from PwC’s 2014 Patent Litigation Survey that we don’t already know?

Patent suits are at an all-time high, with almost 6,500 in 2013 keeping pace with the number of utility patents granted, about 300,000.

Most of the new cases (67%), have been brought by NPEs or those without significant operating revenue. Median damages are still down over years past, and significant damages awards are being appealed – and reduced or thrown out – in record numbers.

Is PwC revealing a bleaker picture or a brighter one? It depends whom you ask, and how they believe new developments are likely to play out.

The Cost of Settlement

The PwC Study does not discuss that the vast majority of cases that settle and are profitable, albeit more costly, for those who enforce quality patents. Because it is sometimes difficult to separate the nuisance suits from the legitimate ones, the study provides no data or analysis about patent quality. The sheer number of suits and uncertainty about patent quality and, in turn, damages has created an environment strangely conducive (or maybe the word should read coercive) PWC-2014-patent-report-300x167to settlement.

Reading between the lines, it appears that patent quality matters more today than in the past, and respect for patents appears to be increasing. Still, the value of the best patents is being reduced by the attitude toward great patents and big awards, which, basically, don’t matter, unless a court says they do.

We should be mindful that different patent holders use patents in diverse ways and have expectations that differ widely. More than ever, patent enforcement is for those holders who are very serious about what they own, but also are well-capitalized and patient. It may take five or more years to see a dime, if they see any money at all.

NPEs filing more suits for two primary reasons: (1) the joinder provisions in the American Invents Act makes it difficult to file against multiple defendants in a single suit, and (2) most technology defendants will not even discuss a license unless a suit is filed first.

Another reason for the increase in patent suits: NPEs are generally better at enforcing patents than operating companies. They are counter-suit remote, and have the experience, time-line and lack the customers and competitors (and, sometimes, the shareholders) that operating companies must avoid upsetting. Despite this, “between 2005 and 2013,” reports PwC (see fig. 6b), “the practicing entity overall success rate outpaced that for NPEs by more than 11%, coming close to restoring the differential observed in the late 1990s.”

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NPE v. PE Success

I could not find this in this year’s study the NPE vs. PE success rate in given industries. Last year (fig. 6f, at left) PEs dominated in software, telecom and automotive. There are good reasons for that I suppose, including the difficulty for NPEs to prevail in on some arts. It may have been suggested to PwC that it not encourage any unnecessary licensing or litigation activity.

More Appeals

The PwC study found that about 71 percent of district court patent decisions are appealed to the USPTO’s Patent Trial & Appeals Board (PTAB), usually on multiple grounds. Of these appeals, 64 percent received a reasoned opinion, 11 percent concluded with a summary affirmation and the remaining 25 percent were dismissed, settled or are pending.

Additionally, reports IP Law 360, 65 percent of the cases decided by the Federal Circuit received a mixed decision on the multiple issues typically raised, while 11 percent were reversed, vacated or remanded. Only 24 percent of lower court decisions that were appealed were affirmed in total — meaning that over three-quarters of Federal Circuit decisions modified a lower court’s ruling in some manner, according to the report.

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Patent trials have remained virtually flat over the past twenty years, with approximately 125 per year. Given the amount of innovation produced, products sold and disputes filed, its remarkable the number is not much higher.

Click here for the full 2014 PwC Patent Litigation Study.

Image source: PwC.com

Litigation, News, Research, Uncategorized
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Despite Limiting Dubious Rights and Behaviors, Patents are More Uncertain than Ever

July 28, 2014 by Bruce Berman 1 Comment

It’s unclear whether attempts by lawmakers and the courts to rein-in invalid patents and bad patent-holder behavior have succeeded in improving the system.

Whatever the case savvy investors will be looking for a silver lining.

Recent United States Supreme Court and federal district court decisions and new laws making it harder to enforce patents have failed to provide a clearer definition of what is patentable.

Tested patents — including those that surmount USPTO examination hurdles and that the Patent Trial and Appeals Board elects not to review or that survive it — are likely to be more valuable than ever. Fewer, more thoroughly vetted patents are likely to be a more significant factor.

The increased time and cost necessary to enforce patents may actually improve the profit picture for NPEs unwilling to settle too quickly and with sufficient asset quality and capital to prevail. Many NPEs, however, will be knocked out of the box by higher hurdles, which is not necessarily bad, especially if their strategy is merely to bring nuisance suits for their early settlement value. Astute IP investors — and not always the obvious ones — will more than likely benefit from depressed IP prices, higher legal costs and a longer time horizon for resolving disputes.

Likely Scenarios

In “Turning Uncertainty Into Opportunity,” in the September IAM Magazine, published shortly, I look at what are some of the scenarios likely to play out in the IP investing space, especially for PIPCOs, or public IP (licensing) companies, most of Question Themewhom are feeling increased pressure.

“With patents affecting more businesses in new ways, an increase in tech M&A means more dollars will be spent on IP and the R&D that underlies it,” I write in the upcoming The Intangible Investor. “Learning to live in a world with even less patent certainty is difficult for both businesses and inventors. For investors, it presents an even greater challenge.

“Adversity of this nature may turn out to be a welcome surprise for some, presenting a foundation for new opportunities. Those rights (and holders) that are not destroyed by the patent system may indeed be made stronger by it. Is this not what free markets are all about?”

Still Rewarding

“Even if patents are less certain, holders with the right combination of quality, capital and patience will continue to be rewarded. New hurdles will not dissuade serious direct IP investors from continuing to play – nor will it stop strategic or defensive investors from stockpiling patents. Those with the best patents will dig in deeper for still rewarding if more delayed and less headline-worthy outcomes.”

The September IAM will be published in early August. Click here for subscriber access.

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Litigation, News, Transactions, Uncategorized
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Five New Stocks added to IP Close Up 30 Patent Licensing Index

June 16, 2014 by Bruce Berman 0 Comments

Finjan, Inventergy, Network-1, Straight Talk and Universal Display have been added to the IP licensing company (PIPCO) stock index, IP Close Up 30.

To remain relevant a stock index must change. Companies added to the IP CloseUp® 30, a conveniently configured, real-time listing of company stock performance, financials and news include those that can be described as operating companies.

These companies are otherwise known as PIPCOs, a term coined by this writer in September 2013.

Companies removed include ARM and Qualcomm, because of their much larger relative size, as well as Murgatroyd and RWS, which are more of an IP services play and less an IP licensing one. AxoGen, a medical technologies company that focuses on nerve repair, was removed because of a lack of IP information.

Inventergy (INVT), which began trading on June 9, says that it will have a market cap of about $150M once its merger with eOn Communications Corporation is completed. According to analysts close to IP Close Up who have examined the public filings this would establish the value of the company’s patent portfolio at approximately $130M.

Network-1 (NTIP) won a rare Patent Trials and Appeals Board (PTAB) ruling on May 23 affirming all claims in its Remote Power Plant patent, and defeating an Inter Partes Review (IPR) challenge (U.S Patent No. 6,218,930). ipcu30-blurb2-21

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As stated previously, the IP CloseUp® 30 is a stock index in progress. It is informally represents small, micro and nano-cap companies engaged in significant patent licensing whose market value hovers in the range of under $1 billion, $50 million to $350 million, and under $50 million.

The goal of the index is to make it easier to follow and understand companies who license their IP actively relative to each other by providing real-time trading data, news and charts. IPCU 30 hopes to include all companies whose stock price and shareholder value are significantly affected by IP performance. This could include direct income generation, such as in out-licensing, as well as strategic or defensive use of patents to secure and maintain market share and profit margins, and to manage risk.

In the future we plan to include more IP Close Up 30 group data, including how the group’s performance compares with other indices, like the S&P 500. Image source: IP CloseUp® 30

PIPCO Monitoring Made Easier:

The IPCU 30 can be conveniently followed on your PC or Mac. Click here, highlight the URL, and drag it to your desktop. Scroll down the page for recent company news.

To access the IPCU 30 on your smart phone: click here, tap the arrow at the bottom (iPhone), and select “Add to Home Screen.” You’re good to go.

Be sure check-in with IP Close Up (the blog) periodically to see if the list has been updated.

News, Research, Transactions, Uncategorized
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