Tag Archives: The Intangible Investor

Attorney-investor is willing to share patent filing costs & risks with clients

Many law firms still seek to participate in the outcome of clients’ patent litigation, but few are willing to share the cost of obtaining and maintaining invention rights, which frequently turn out to be worthless. 

A new book by an innovative Colorado attorney and inventor suggests that patent lawyers need to have more skin in the prosecution game, and that filing patents just to have them is a waste of their client’s time and money.

Russ Krajec, author of Investing in Patents: Everything Startup Investors Need to Know About Patents, says that the high cost of obtaining, maintaining and defending patents is prohibitive for most young companies. But without patents they can undermine their future, the value of their enterprise, and the fate of their investors.

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Recent studies indicate that 30 percent of U.S. “unicorns” (start-ups with greater than $1B in valuation) have no patents and 62 percent have fewer than 10 patents.
(David Kappos, et al. the New York Law Journal)

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In the January issue of IAM magazine, available this week, you will find my Intangible Investor review of Krajec’s deft book and industry-challenging strategy, “A strong case for a new approach to patent investing,” accessible to IAM subscribers, here.

Investing in Patents, deceptively spare at just 139-pages, is relevant to all patent filers, lawyers and investors, in addition to young companies, many of which are choosing to forgo patent protection. (See excerpt from The New York Law Journal article above.)

Patents are more expensive than ever, just over $56,000 for the average one over the course of its life. Defending them has reached new highs of cost and risk. A case through IPR(s) to trial can cost several million dollars and require more than five years, with a reduced likelihood of success.

Average Cost of a Patent Over its Life – $56,000

patent-cost-pie-chart-v1-1

Engineer, Inventor, Financier

Investing in Patents is available at Krajec.com or on Amazon.com, here. In addition to being a patent attorney who has worked for H-P and other companies as a practicing engineer, Krajec has more than 40 patents to his name and, earlier in his career, was a USPTO patent examiner. He also runs BlueIron, LLC, an IP finance and management company.

While the sugg51l5ndgkvlestion of joint or fractional patent ownership is compelling, it is not entirely new or simple. As in most agreements, the devil is in the details.

It is unclear how Krajec believes ownership of a patent should be divided and who has the right to license, enforce, sell or otherwise leverage it – and when. Perhaps, most importantly, who gets to define success?

Given the current high-risk/low return scenario for obtaining and licensing patents most high-tech patents, this lawyer’s ownership alternative may be just what is needed to realign interests and enhance performance.

Image source: aipla.org; krajec.com

Tech cos use patents to turn up the volume on smarter hearing devices

Aging baby boomers, exposed to a lifetime of loud music, are more demanding than past generations about the quality of what and how they hear.

Don’t expect them to sit by idly watching Mick Jagger mouth the words to Satisfaction.

A group of leading technology companies familiar with consumer lifestyle preferences are helping to reshape the emerging hearables industry. A cross between a tiny wearable and smart prosthetic, it would be unfair to call these devices hearing aids. They are tiny, but powerful, information processors which, 13892-32c56cdb6fd37fccfbd10d1ffb425f54if properly programmed to individual users’ needs, can do far more than merely amplify speech.

Some will be able to offer simultaneous foreign language translations and are fully customizable with a phone app.

360 Million Hearing-Impaired 

Companies vying for leadership in the field include Samsung, Apple, Qualcomm and Google, as well as those already in the business – the so-called ‘big six’, each with decades of practical experience.

For the whole story see “Turning up the volume on hearables,” in the Intangible Investor in IAM magazine’s November issue. Subscribers can find my fully linked report here.

A Google search for hearing-aid–related patents by Apple, Samsung, and Qualcomm showed zero patents 20 years ago but 816 in 2015— slightly more than half of the total patent activities by the Big Six in the same period.

For the “Complete Guide to Hearing Technology in 2016” go here.  For “New Patent Applications: The Sound of Hearables to Come,” go here.

Sound Play

Apple has teamed up with Starkey Hearing Technologies to provide support for the company’s advanced Halo 2 smart device; Daymond John – founder and CEO of fashion brand FUBU, star of reality TV series screen-shot-2016-02-12-at-9-29-50-pm-e1455334928779Shark Tank.”  He told CNN that the technology has changed his life (see video here.)

Google is working on commercializing a high-end in-ear computer, according to press reports based on patent filings. The technology is reportedly part of its secretive new wearable tech initiative, known as Project Aura.

If hearables reach their market potential, vision, memory and other human-assist devices will not be far behind. Forgot what you stated for entertainment on last year’s tax returns? An assistant far smarter than today’s Alexa, Siri or Cortana (Microsoft), and swifter than Google, will be able to find what you need.

Yesterday’s iPod is looking like today’s iHear and tomorrow’s iKnow.

Image source: wearable.com; anewdomain.net

Patents are rights, not privileges; Jefferson story is “historical myth”

Is it any wonder why patents are widely despised and holders mistrusted?

Patents and other IP rights have been caught in the perfect storm of anger towards the government, the entitled, and ideas too complex to fathom on Instagram.

Patents are difficult to explain and uncertain in nature. To many people they represent inscrutable and insurmountable barriers to entry that are erected with government sanction and controlled by an elite class of corporations, lawyers and speculators acting on their own behalf.jefferson-300x300

Ten-Second Lesson

Many people are introduced to the world of IP by nasty anti-piracy notices: two ten-second screens on the head of DVD and Blu-Ray discs that the viewer is forced to sit through.

That may or may not be an effective piracy deterrent, but it is a hell of a way to introduce viewers, especially young people, to copyright protection. It would not make a believer out of me. Surely, the government and motion picture industry can do better.

Such warnings are accompanied by an advisory that “For more information about how digital theft harms the economy, please visit, www.iprcenter.gov.”

I doubt that anyone (other than IP CloseUp) is dumb enough to actually visit the IPR Center. Did you know that it is home of National Intellectual Property Coordination Center, which is run by  the U.S. Immigration and Customs Enforcement (ICE) and Homeland Security Investigations (HSI)? I did not know that.

Its website explains that the IPR Center “stands at the forefront of the United States Government’s response to global intellectual property (IP) theft and enforcement of its international trade laws.”

Heavy Baggage

In “The perils of privilege” in the September issue of IAM Magazine (out next week) I weigh some of the heavy baggage that accompanies IP ownership, especially patents, which to this day still are confused with royal grants of authority bestowed by English monarchs.

“In reviewing primary historical sources in the eighteenth and nineteenth centuries, it is apparent that the Jeffersonian story of patent law [as privilege] is a historical myth,” writes George Mason Law Professor Adam Mossoff in a provocative 2007 article in the Cornell Law Review, “Who Cares What Thomas Jefferson Thought About Patents?”

banner1“Judge Rich once criticized labeling patents as monopolies due to the negative ‘emotional’ baggage that the term ‘monopoly’ carries with it. He recognized that ‘talk of the patent monopoly weds patents to prejudice, which is not conducive to clear thinking.’”

Modern patents are not privileges, but natural rights and may present an opportunity for the holder, in rare circumstances, to profit for a limited period of exclusivity in exchange for disclosing information about an invention. Patents are about sharing ideas to inspire more and better ones, and facilitating new and occasionally important improvements. They are natural rights, not monopolistic grants of privilege.

Blurred Lines

In a digital world, the line between ownership and fair-use continues to blur. Walking off with other people’s IP is as reflexive as going to the tap for a drink of water. To be fair, it is not always clear who owns what.

Violating the IP rights of others is more widely regarded as acceptable than perhaps at any time in American history. It is difficult to know who or what is responsible. One thing is for sure, educators and lawmakers are ill-equipped to answer the most fundamental questions about patents: why do they exist and whom do they benefit?

 

Image source: upfromslavery.com; iprcenter.gov

 

Engaging IP book for students is free via iBooks or PDF, $.99 Kindle

The US intellectual property system has been the envy of nations everywhere. Despite this, confusion reigns about what are patents and other IP rights, and whom do they serve.

A new book has been published that makes it easier for college students and non-IP professionals, including inventors, engineers and investors to understand how IP rights work in the real world and how they affect peoples’ lives.

In an increasingly digital, knowledge-driven economy, an understanding of IP rights needs to be part of a core curriculum. The Intangible Advantage: Understanding Intellectual Property in the New Economy serves that mission admirably.

Compiled by an all-star team of writers, jurists, lawyers and professors, The Intangible Advantage (TIA) explains in clear, non-technical prose how the IP system works and the many audiences (aka stakeholders) it benefits. TIA is a revealing journey through the history and practice of IP in the United States. It is the first comprehensive text book for students that explains the IP system’s strengths and weaknesses, and dispels many of the myths surrounding them.

Clear and Concise

Chief writer, David Kline, is co-author of Rembrandts in the Attic (HBS Press), the first serious book about patents for business managers and investors. Kline is a former Pulitzer-nominated war correspondent, who has contributed to many business and news publications.

Serving as the book’s executive editor was David Kappos, Under Secretary of Commerce and Director of the United States Patent and lockup-ipad-verticalTrademark Office, 2009 to 2013. Prior to that Mr. Kappos was chief IP counsel at IBM. Also integral to the project was Hon. Paul R. Michel, Chief Judge for the Court of Appeals of the Federal Circuit (CAFC) who sat for 22 years on the bench, from 1988 to 2010. CAFC is the the highest patent court.

Giving Back

The Intangible Advantage is published by the Michelson 20MM Foundation. Established by Dr. Gary K. Michelson, an inventor, a spinal surgeon who responsible for 340 issued US patents and 953 worldwide. Dr. Michelson sold his company for $1.35 billion to Medtronic in 2010 as a settlement in a patent dispute.

The Michelson 20MM Foundation supports and invests in leading edge entrepreneurs, technologies, models, and initiatives with the potential to improve post-secondary access, affordability, and efficacy.  Dr. Michelson also founded the Gary Michelson Medical Research Foundation, which since 1995 has supported forward thinking initiatives in medical science by leveraging the collaboration of engineers, scientists, and physicians to solve real world problems; rapidly moving medical advancements into our society.

Separating Truth from Myth

The Intangible Advantage is written with clarity and charm, a Kline’s trademark that can be found in the books and articles about IP that he has written under his own by-line and those he has co-authored. IP professionals as well as students will gain from the historical insights the book provides, such as that despite media and hoopla about “trolls,” patent trials have remained virtually flat at around 100 for 30 years.

Given the explosive increase in patent filing and grants — About 325,000 US patents were issued each in 2014 and 2015 alone, and there are literally millions in force — the number of disputes that go to trial is extraordinarily low — not what the media would have us believe.

static1.squarespaceWhat The Intangible Advantage does exceedingly well is explain the US patent system and how rights can be used productively. It reminds readers that the system exists to facilitate sharing information about new inventions and stimulate new business, not to keep inventions secret or deter commerce. US IP rights differ markedly from others, especially the 18th and 19th century English system, which was more closely associated with privilege and class. The book underscores that the US system strives to use IP, especially patents, to level power, not to wield it.

TIA is un-intimidating at just 287 pages (1320 KB), a good length for those who want to know more without getting into legal minutiae. The book is available at iBooks for free and on Kindle for just $.99. An inexpensive print-on-demand edition (under $10) is also available. I downloaded a copy to my Kindle in about 15 seconds and read it over several days.

Start Learning Now

For the free iBooks version, go here or to your iBooks app store.

For the 99 cent Kindle version, go here or to the Kindle store.

For the $6.68 print on demand version, go here.

For the free standard Widows PDF version, go here.

The main Michelson 20MM Foundation resource page provides additional information.

In addition to Kline, editorial credits include:

Randall E. Kahnke (Author), Robert G. Krupka (Author), Kerry L. Bundy (Author), David Kappos (Editor),Paul R. Michel (Editor), Phillip J. Kim (Editor), Mayra Lombera(Editor), Marisa S. Moosekian (Editor), Gary K. Michelson (Preface).

The book is accompanied by a series of 3-minute animated videos available on YouTube answering such common questions as “Can I Patent That?”“Is it Fair Use or Infringement?” and “What If Someone Infringes Your Trademark?

Education – the Future of IP

IP literacy is no longer an option, it is a requirement. A rudimentary understanding IP rights and the patent system is essential for individuals to excel in a knowledge-based economy.

Until recently intellectual property has been taught primarily in law schools or the occasional business school seminar. The history and use of US IP rights is an amazing success story, whose impact needs to be conveyed accurately to wider audiences, and repeatedly over time.

The Intangible Advantage – not to be confused with my 2015 book, The Intangible Investor – is the first IP text book for non-IP professionals, especially college students, that makes it easy to learn about an integral part of American history and commerce.

Image source: 20mm.org; michelsonip.com

Contrarian patent investors see opportunity where others see risk

The emergence of contrarian patent investors – bargain hunters hoping to cash in on decidedly soft market for  licensing and sales – are an indication that the bottom of the bear market for patents may be at hand.

A number of operating companies and some NPEs have been quietly acquiring patent families and portfolios at bargain rates. They include financial institutions, such as banks, traditional tech players, a few NPEs, and “unicorns” looking to shore up their valuation with intangible assets.

Betting aodd-one-outgainst the prevailing sentiment by seeking to identify under-priced assets does not come easily for professional investors or businesses. A strong stomach and sufficient cash is essential.

Contrarians who invest in traditional asset classes like stocks, bonds and money market instruments, can be rewarded for their good timing and persistence. Those who delve into commodities and real estate, too.

But while patents are assets to some businesses – “intangible” investors at heart – they are not a traditional asset class. Uncertainty surrounds patent validity in many classes, and patent value is often context-driven. Additionally, patent litigation is more unpredictable since the Patent Trial and Appeal Board was established.

Acquiring patents is more like buying a futures contract than investing in securities, which historically, at least, tend to bounce back over time. Patents also lack price transparency and market liquidity, which are essential for most investors’ comfort level, and are subject to judicial and political winds.

So, what do secondary market buyers know that others don’t?

Bargain Basement

In “Au contraire?,The Intangible Investor column in the July IAM magazine, I consider patents as an asset class, and those brave investors with the courage (and cash) to recognize opportunity where others see adversity. IAM subscribers can read it here

“Current low IP company share prices are a road to finding a bottom in an emerging market,” says Mark Argento, head of capital markets and a senior research analyst at Lake Street Capital Partners. “It is a part of the process of patents becoming more widely understood and accepted as assets. While the shakeout is unpleasant for some, it is part of an evolutionary process from which at least some will benefit.”

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Benjamin Graham wrote in The Intelligent Investor, a highly regarded book about value investing: “The investor’s chief problem – and even his worst enemy – is likely to be himself.”

To be a true contrarian, an investor needs to do what others are not doing, even when it may seem unwise to do so. It takes guts to go against a market and one’s own instincts.

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“Patents as an Asset Class” will be the subject of a debate I am moderating at IPBC Global in Barcelona on June 7. Stop by to hear the pros and cons of patents as assets. The IPBC session has the makings of a very lively exchange. Audience participation is encouraged. Drinks will be served directly after.

Image source: valueinvestasia.com; novelinvestor.com 

Named on 40+ patents chemist sleeps in car on a Brooklyn Street

For more than a year a man slept in his SUV parked on the upscale Park Slope section of Brooklyn.

The man, call him Gene, a Ph.D. and organic chemist who did his post-doctoral work at Columbia, is named on 44 patents. How he found himself in this unenviable position is the subject of an provocative page-one feature today in The New York Times.

By last summer word and rumor were spreading on Fifth Street’s email exchange, ordinarily used for organizing block parties. An unnamed Man Living in His Car on Fifth Street was causing a problem. He was pouring urine from a bedpan onto the curb. The woman fostering his cats learned that he had copied her key. And what about the small children on the block?

Who is this Person?

Neighbors organized and went to bat for Gene, said Caroline Batzdorf, a Fifth Street resident, who said she was gratified by the positive shift in attitudes.

“Some of the people who were literally saying, ‘What’s this person doing on our block?’ are now, ‘Thank God there’s humanity in people,’” she said. “But what if this were a person of a different race? Who didn’t have a Ph.D.? Who someone didn’t know?”

According to New York Times a grant from the National Institutes of Health paid for Gene’s postdoctoral work. At a large (unnamed) pharmaceutical company, he worked with a team on variations of an immunosuppressant, and compounds useful in treating diabetes.

Records list the Boise, Idaho-born chemist as a co-inventor on at least 44 “composition of matter” patents in the United States and Europe. The patents, the article reminds us, are owned by the company.

“Making the Journey from Menace to Neighbor, All on One Brooklyn Block,” can be found here.

Image source: nyt.com; dailycamera.com (person in featured image is not Gene)

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


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

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

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

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

“Leading brands increasingly have the most valuable patents,”

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

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

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

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

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

Image source: ipcloseup.com

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“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

Panasonic, NEC & Sony are battling with IBM for patent sales leadership

Despite dramatically lower patent valuations, some big companies, including under-performing foreign holders, have taken the number of U.S. sales to new highs.

While IBM still leads, over the past three and a half years, it has been joined by IP-conservative firms from Japan, notably Panasonic/Matsushita, NEC and Sony. All four of these companies have something in common: poor recent financial performance.

In the January IAM Magazine, the Intangible Investor looks at the latest trends in patent sales among the biggest sellers. Activity is up and emerging are new leaders, like Panasonic, which leads even IBM in U.S. sales for the first half of 2015.

Analysis conducted by Brody Berman Associates in conjunction with Envision IP, a law firm that specializes in patent research, reveals that “for the three-and-a-half year period from 2012 to early August 2015, the leading seller by far was IBM, with 5,356 patents. Buyers include Google, Facebook, Alibaba and Twitter. In 2014 alone, IBM sold 2,187 patents, the most in any year over the period by any of the 12 leading tech companies analyzed.

Leading Patent Sellers

“Surprisingly, the number two, three and four patent sellers in the 2012-2015 period were all Japanese companies,” writes this reporter. “Panasonic/Matsushita, NEC and Sony, with 4,203, 2,131 and 1,578 respectively. This is a dramatic shift for conservative Japanese electronics giants, which rarely litigate patents to generate revenue or enable others to.”

Subscribers can link to IAM’s January issue here.

Intellectual Venture’s 70,000 patent portfolio appears to contain no patents originally owned by Apple, Google or Qualcomm, as Envision’s findings indicate. Several patents owned by IV investors appear in its portfolio, including those of Nokia, Verizon, Microsoft and Sony. Only 268 of the 19,559 US patents owned by IV were identified as having a litigation history, representing less than 1.5% of the portfolio.

Top 4 Patent Sellers

Among the top companies IV purchased from are Kodak (1,057), American Express (643), AT&T (358) and Philips (313) and Ericsson (273).

A list of IV’s 35 top sources for acquisitions can be found here.

Image source: Envision IP, LLC

“Men of Progress” depicts U.S. inventing’s past, present and future

A group portrait that honors America’s rich invention history captures its greatest inventors in a moment in time that never actually occurred.  

The painting hangs in the grand, neo-classical National Portrait Gallery in Washington, once home of the United States Patent & Trademark Office. It depicts a symbolic gathering that honors America’s innovative past, while encouraging observers to speculate on its future.

Men of Progress (1862) is a study of how America saw its leading technologists in the 19th century. The romanticized gathering of great minds never took place but was a virtual product of artist Christian Schussele’s imagination, and underwriter Jordan Lawrence Mott, that took four years to piece together from individual portraits. (This was almost a century and a half before Photoshop.)

800px-Christian_Schussele_-_Men_of_Progress_-_Google_Art_Project“Men of Progress”

The National Portrait Gallery is a Greek-revival building, whose beautiful restoration was completed in 2006, which housed the United States Patent Office from at least 1867 to 1932. (The official NPG history has the USPTO moving in in 1842, before construction was completed.) Work on the building was started in 1831.

For my thoughts about why Schussele’s vision of America’s visionaries remains timely, please read “Fathers of Invention” in the September IAM Magazinehere. Both print and digital editions are available.

Necessity and Ego

“If necessity is the mother of invention,” I write in the Intangible Investor, “then ego is the likely father. The US industrial revolution spawned an innovation age prior to the Civil War that helped to transform the United States from a wannabe nation to one of greatness.

“In 1857 the inventor of a coal-burning stove, Jordan Mott, commissioned Alsace-born portraitist Christian Schussele to paint a group portrait of 19 US scientists and inventors who ‘had altered the course of contemporary civilization’”.

Those depicted in the portrait had never met as a group. The artist sketched separate studies of each subject before combing them in his final, formal composition. Photoshop would have made it easier, but that was some 140 years in the future.

Fathers of Invention

The following list identifies the inventors and their primary contributions, starting from the left side (The Father of the Fathers of Invention, Benjamin Franklin, hovers on the wall in the background):

Dr. William Thomas Green Morton: surgical anesthesia
James Bogardus: cast-iron construction
Samuel Colt: revolving pistol
Cyrus Hall McCormick: mechanical reaper
Joseph Saxton: coal-burning stove, hydrometer, ever-pointed pencil
Charles Goodyear: vulcanization of rubber
Peter Cooper: railway locomotive
Jordan Lawrence Mott: coal-burning cooking stove
Joseph Henry: electromagnet design
Eliphalet Nott: efficient heat conduction for stoves and steam engines
John Ericsson: armored turret warship
Frederick Sickels: steam-engine gear and steering device for ships
Samuel F. B. Morse: electric telegraph
Henry Burden: horseshoe manufacturing machine
Richard March: rotary press
Erastus Bigelow: power loom for carpets
Isaiah Jennings: threshing machine, repeating gun, friction match
Thomas Blanchard: irregular turning lathe
Elias Howe: sewing machine

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I encourage those visiting Washington, IP professionals, inventors, and anyone interested in the great innovation history of the US, to stop by the National Portrait Gallery and take in this inspiring portrait. Admission is free.

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Image source: commons.wikimedia.org; Edward Sachse & Co., chromolithograph, c. 1857.

Patent values are hit by uncertainty; operating co buying overtakes NPE

Three things are needed to succeed today in patent licensing: more capital, more patience and more good patents, which are in increasingly short supply. 

Uncertainty is the glue that binds weaker patents to cheaper ones.

Patent reliability is poorer than ever, in part because invalidating bad patents is now somewhat less arduous and costly. The courts are awarding fewer and lower damages awards, and defendants with time on their side and cash in their pockets, can play an even longer waiting game.

Increased uncertainty has encouraged more patent holders, mostly those operating companies that generate their inventions and rights internally, to consider purchases that they may not have previously. At “buyers’ market” prices, who can blame them? It will be interesting to see how uncertainty in the patent system will affect future R&D strategy and domestic patent filings.

With asking prices per asset trending down, and brokered patent sales lower, the percentage of packages sold is actually up significantly, as is opco buying.

The top buyers in 2015 Q1 according to Richardson Oliver Law Group, which tracks brokered patent transactions, were RPX, a Canadian numbered company, and Intellectual Ventures, for their Intellectual Investment Fund 3. These buyers accounted for 42% of all of the packages purchased in 2015 Q1 and RPX alone accounted for 28%. Other, much smaller buyers in Q1 include Apple and Philips.

patpkgssoldUntitled

Listings are Down; Sold Packages Up

ROL indicates that patent deal listings (patent and application packages) are down 20% from 4Q 2014 to 1Q 2015, but that packages sold are up 88%. In an article in IAM earlier this year by ROL (see The brokered patent market 2014,), it was shown that corporate buyers have overtaken NPEs in 2013 and 2014, comprising 46% for the market versus 38% for NPEs.

Asking prices for US-issued patents monitored have fallen from $577,000 in 2012 to $360,000 in 2014, a fall of 37.6%. ROL’s latest broker sales stats can be found here.

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“Uncertainty rules,” my latest Intangible Investor, the July IAM Magazine looks at why confusion over new patent hurdles and lower damages awards is creating an opportunity for some companies to buy patents at lower prices and settle disputes more favorably. Subscribers can get it here.

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Don’t expect to see patent uncertainty to wane anytime soon.  Many operating companies and at least some NPEs will be sad to see it go.

 

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Image source: Richardson Oliver Law Group

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. 

*****

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

From the author’s abstract:

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

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

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

Defining Patent Quality” can be found here.

*****

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

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

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

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

IAM subscribers can find my Intangible Investor column here.

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

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