Does Patented Intellectual Property Still Matter? Yes, Depending on Who You Are

By Charles Neuenschwander
February 14, 2017

ChessThe value of patents resides largely with companies like Microsoft, Samsung and IBM.  If Bill Hewlett and David Packard were just starting in their garage, they might be wise not to waste money acquiring them.

“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right…”  (Article 1, Section 8, Clause 8 of the United States Constitution).  It is difficult to argue today that this applies to individual inventors or small and medium-sized enterprises (SMEs).  The same is true about our elite research universities.

If a patent assertion entity (PAE) – a small group of investors who buy someone else’s patents and threaten others with infringement lawsuits or a “small financial contribution” – assumes ownership of patents and asserts them against an infringer, we holler “patent troll”.

A rifle-shot change in the law could stop egregious behavior, but that is not what many in Congress have done or contemplate doing.  Our Judiciary is no better.  Instead, shotguns are used without regard to collateral damage to everyone who is not a high-tech titan, or a large, international company such as Facebook or Apple.

An easy reading of patent law tells us that an individual inventor, or SME, may defend patented inventions against unauthorized use – by everyone and anyone.  However, it is disingenuous to say it is reasonable for them to do so, no matter what Congressional soundbites trumpet.  The system is severely biased against these entities to the point of no longer serving them.  Among other things, an individual inventor must overcome:

  • Zero chance of preventing an infringer from using his or her invention. If an inventor receives a favorable judgment, the court will require monetary compensation to be the remedy for both past and future infringement.  The high-tech titan’s business is never threatened; it only monitors the number of zeros in potential judgments which, with billions in the bank, it can easily afford.  Huawei’s General Counsel – and every other high-tech titan GC – loses no sleep.
  • Gang-tackling and serial IPR filing are often coordinated among high-tech titans. By separating suggested prior art and filing multiple IPRs spread out over time, titans place enormous financial impoverishment and delay of justice in the courts on the shoulders of the inventor.  Why?  Because they can.  Because under the law it makes business sense.  Apple alone has filed more than 200 PTAB petitions.  The power imbalance between the two sides is insurmountable.
  • The inventor has no safe harbor that defines rules of engagement guaranteed to protect him from eventual demands by a titan for all its litigation expense, much of which is generated by actions taken by the titan to maximize the inventor’s bleeding. It is impossible to imagine Joe Inventor accepting the risk of being required to repay Google for its team of outside litigation attorneys.

Another nearly insurmountable problem is high-tech titans do not negotiate when first shown proof that they infringe individual inventor or SME patents.  The American Invents Act (AIA) effectively grants protected status to titans for infringement of small entity patents because it provides opportunities to impose enforcement costs and risks of financial destruction – detailed above – if the little guy pursues legal options to be compensated for his or her inventiveness.  Industry insiders referred to this as “efficient infringement”.

The reality is high-tech titans view patents as rights created for themselves to fight for world-wide market dominance over other titans with similar product offerings.  They welcome all law-protected relief from the SME and inventor piranha who want compensation – however reasonable – for co-opting their invention.

Equal justice to all?  It is the preponderance of judicial decisions combined with legislative initiatives that tilt the field in favor of titans and against individual inventors and SMEs.  So, what is the small guy to do?  There is little he or she can do. . . except, find a PAE financially capable of accepting the costs and risks of enforcing patents; someone who can stand toe-to-toe with titans.

This exposes what Congress refuses to acknowledge:  AIA rules, when paired with previous court decisions, at the very least, encourage inventors to feed trolls.  Another option is a program such as IP3, a titan-driven effort to sweep righteous – but small – patent portfolios out of the market and away from PAEs.  However, in its most recent incarnation, only 4% of proffered patent families were purchased with prices ranging as low as $10,000, the cost of securing a patent.

Conversations with most Congressional staffers demonstrate Congress’ singular intent to continue the narrative of fixing the troll problem, something the recent Federal Trade Commission report failed to give unqualified support, to the surprise of many.  High-tech titans whine and our Senators and Representatives are receptive because “wow – what a great soundbite”.  Individual inventors’ and SMEs’ plight is ignored even though Congress champions commitment to promote technology development.  Those we elect can only be referring to the work inside tall silos on titan campuses – including those outside our borders.  Lest we forget, foreign entities benefit equally with US industries by the disenfranchisement of little guys.

When the day comes, and it will, that patenting provides individual inventors and SMEs with an expensive piece of paper and little else, many will stop throwing away their money and some will stop inventing.  That is impossible to argue against.  Congress will have a fresh opportunity to tell us how they can help reboot technology advancement.  How much damage will we endure by then?

The Author

Charles Neuenschwander

Charles Neuenschwander has more than 45 years’ business experience in the licensing, electronics and chemical industries. He has spent the past twenty-five years managing and supporting client patent license negotiations for International Patent Licensing Company, Patent Solutions (both of which he co-founded), Mahr Leonard Management Company and STMicroelectronics. Mr. Neuenschwander personally or through organizations he has led has completed more than 65 IP transactions. Mr. Neuenschwander directs and participates in developing licensing strategies, completing portfolio evaluations, documenting patent infringement incidents, calculating royalties, and successfully concluding license agreements for clients. He has clients and conducts negotiations in Asia, Europe and the United States. Mr. Neuenschwander has testified as a fact or expert witness before the International Trade Commission and in Federal Courts. His licensing focus is in the areas of telecommunications, information technologies, semiconductors, consumer electronics, the internet and software. An active member of the Licensing Executives Society, Mr. Neuenschwander accepts speaking engagements world-wide and participates in panel discussions both for the Licensing Executives Society (LES) and at continuing legal education seminars. From 2012 through 2016 he was named one of “The World’s Leading IP Strategists” by British-based Intellectual Asset Management (iam) Magazine. Mr. Neuenschwander is a Certified Licensing Professional (CLP), has served on Boards of Directors for a company in the high-tech industry and for a hospice care company and he currently participates on the Board of Advisors for a high-tech company. He is a past US delegate to the international body of LES and has participated in the Hoover Institute’s study on Intellectual Property, Innovation and Prosperity.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 29 Comments comments.

  1. angry dude February 14, 2017 11:13 am

    “Does Patented Intellectual Property Still Matter? Yes, Depending on Who You Are”

    Do you realize that there is unsolvable contradiction in this title ?

    “property” means it can be sold and bought by anyone, in arm-length transaction,
    and that the price paid does not depend on identity of buyers and sellers
    (otherwise we would have a real estate crisis in US where property values are impossible to define)

    “depending on who you are” is an identity requirement for buyers and sellerd of “property” making said “property” anything but property

    Someone should investigate illegal cartel nature of SV giant tech corps – the way they always bundle together to wipe small IP holders out of existence

    I believe this would be a criminal charge

  2. Chris Gallagher February 14, 2017 11:40 am

    Well said and sadly money matters, which is why horse racing has now been joined by congressional patent policy as a “sport of kings ” a winner’s circle pairing that is not coincidental. Until Congress understands the realities so well described in Charles’ post, his “disenfranchised little guys” (including universities,) will also see commercialization “round the club house turn” and head for “greener” pastures .

  3. Invention Rights February 14, 2017 1:34 pm

    Policy makers have an insurmountable blind spot when it comes to innovation. You see something similar in management once a company grows to $1B. They think innovation is a commodity that can be bought/cultured/planned. According to them, R&D departments innovate by definition. More patents means more innovation, each has about the same value. Policies that incentivize R&D increase innovation, in their small world.

    What they are incapable of understanding is that true innovation comes from rogue contrarians. We cannot and will not innovate for anyone for $150K per year. We might play that game for a while. But when we find ourselves obsessing all hours of the day and night over a revolutionary concept, we figure that is not part of our employment terms. We cash out our 401K and go for it. We know the odds are slim and that capital, marketing, licensing, distribution are formidable challenges.

    We are crazy but not stupid. If the reward for success is decades of futile enforcement and serial IPR attacks, we will find another outlet for our creative energies.

  4. angry dude February 14, 2017 1:43 pm

    In the meantime, US lemming population should start getting used to buying hi-tech consumer products not just made but INVENTED in China

    VR technology is one example – China is leading US by a large margin
    no kidding here, trust me on this

  5. Inventor Woes February 14, 2017 2:15 pm

    angry dude: “VR technology is one example – China is leading US by a large margin[…] no kidding here, trust me on this”

    Citation required.

  6. Stephen Curry February 14, 2017 3:51 pm

    Invention Rights @3
    Well said!

    Big time silicon valley companies were conceived in the garage.

    I conceived my startup company in my home library room because I got annoyed at David Kappos and Michelle Lee publicly promoting the AIA which totally kills silicon valley garage innovation, so I suppose I should be more kinder to those two jokers.

  7. Benny February 15, 2017 5:31 am

    Reading between the lines of the article, it is apparent that there must be a large population of SV IP professionals who have a vested interest in keeping things the way they are. Why advise the client to purchase the patent for 100K if you can bill him 300K for invalidating it? Follow the trail of expenditure which causes “Huawei’s General Counsel – and every other high-tech titan GC – to lose no sleep”. Where does it lead?

  8. Anon February 15, 2017 6:52 am

    “They think innovation is a commodity that can be bought/cultured/planned.”

    While one form of innovation may indeed stem from “rogue contrarians,” I will be a contrarian to your single mindedness that states that such is the only font of innovation.

    You not only are wrong in this view of yours, you are more dangerously wrong than the party that you seek to criticize.

  9. Edward Heller February 15, 2017 8:46 am

    Amen brother.

    The combined effect of eBay and IPRs is destroying the patent system for all but the well-healed.

    We need to repeal IPRs.

    Courts must recognize that the lack of a reliable injunction promotes efficient infringement and forces litigation. Somebody has to convince the Federal Circuit and the Supreme Court that willful intransigence justifies an injunction.

  10. angry dude February 15, 2017 11:10 am

    Benny @7

    Dude, your description fails to describe the actual madness going on in SV and elsewhere

    Why advise the client to settle for 200K if we can bill them 500K in a year or so ?
    (never mind client loses 200m in stock market, but big law firm will make me a partner anyway for bringing money in)

    Madness, self-destructing madness

  11. Invention Rights February 15, 2017 11:10 am

    Anon@8, it is axiomatic that innovation comes from rogue contrarians. The very essence is to question the status quo, break the rules, challenge the assumptions, go outside the box.

    I will agree with you that a patent system that upholds this is dangerous – for the incumbents. But for the nation as a whole it would be exciting, innovative, disruptive, unpredictable. It would inexorably advance the arts and science.

    Blind spots, fear, and propaganda have created an environment that demands we follow the rules, stay in the box, stick to the main road. It is nearly the opposite of innovation. If that is what we choose, that is what we will get. Doesn’t really matter what you call it.

  12. angry dude February 15, 2017 11:16 am

    Anon @8

    Dude, you must be one of those dudes behind google glasses ?

    how did it go ? how much money did they spend on that pos ?
    did they return all money they charged early adopters for believing in that pos ?

    Now they put out daydream – a cheap pos made of filthy fabric with a phone inside and severe heating issues

    (and a useless toy bt controller)

    innovation my a$$

  13. Stephen Curry February 15, 2017 11:42 am

    angry dude @12

    the big goggle is going to implode since alphabet has billions of loses per year and that is not sustainable.

    I am going to make a Hollywood film documentary regarding entitled, Bilskis Blob: American patent reform and the demise of silicon valley garage innovation.

    by then my startup will also have surpassed the big goggle.

  14. angry dude February 15, 2017 11:58 am

    Stephen Curry @13

    It would be interesting to look into google’s hiring policies:

    age discrimination

    american citizens discrimination

    etc

    etc

    I hope the H1B loophole will close for them soon

  15. Stephen Curry February 15, 2017 12:14 pm

    angry dude @14

    you will be a main feature in my future Hollywood film Bilskis Blob, if you wish and you will be handsomely compensated. Some of the top Hollywood directors are in my circle of friends or friends of friends. Lemley is really going to be infamous.

  16. Stephen Curry February 15, 2017 12:18 pm

    angry dude @14

    Darryll Issa will also be a subject of the film Bilskis Blob, by the way. I know a lot of inventors and entrereneurs in san diego county who are steaming mad about this american patent reform.

  17. JNG February 15, 2017 2:18 pm

    “Another nearly insurmountable problem is high-tech titans do not negotiate when first shown proof that they infringe individual inventor or SME patents. ”

    Absolutely right. And the “market” for patents died the moment the SCOTUS changed the DJ rules so that anyone who feels threatened can sue an inventor anywhere; AKA “big D firm perpetual employment act” Without an opportunity to have a business dialogue, the Courts have become the only arena where patents are discussed, and that’s under the control of poorly educated judges, and expensive attorneys.

  18. Inventor Woes February 15, 2017 11:50 pm

    It’s like I always say: The doc said “to the morgue”, to the morgue it is!

  19. Tim February 16, 2017 7:45 am

    JNG: you only need to look at the case “Vringo vs IP Internet” where Vringo beat Google, AOL, Gannett and Target with a 12-person jury 12-0 on all 14 charges, only to have 2 of 3 Appeals Ct judges “toss” the case. It remind’s me of this “Liberal 9th Federal Court” that could care less about our security, here in the USA. Those 2 judges, “Wallace and Mayer” are probably living on “Google Island” by this time. And for some reason, the only qualified judge that “highly dissented” was Judge Chen, who had been the former head of the USPO, and the only judgemof the 3 with a degree in computer engineering. The case went to the US Supreme Ct with Attorney David Buies, only to be tossed. Vringo, now File Holdings, saw their stock price go to pennies, while Google doubled. FH is now at $2.27 after a huge reverse split, and should be @ $60.00! The Appeal’s Ct remind’s me of the liberal “9th Circus Ct” that President Trump has been slammed by. A flawed and corrupt system!

  20. Anon February 16, 2017 8:34 am

    Invnetin RIghts,

    Your reply indicates that you miss the point.

    Nowhere am I saying that the rogues do not innovate.

    I AM saying that NOT ONLY the rogues innovate.

    Your “can’t teach” comment to which I replied exhibits a blind spot of your own that is extremely pernicious. Take your reply as an example: you continue to be blind to what I actually stated.

    Read the exchange again please.

  21. Anon February 16, 2017 8:38 am

    angry,

    Please corral your emotions. My pedigree is well established (even as the moniker is as ubiquitous as I could make it).

    Read what I actually stated – try to use some reason.

    Thanks

  22. angry dude February 16, 2017 8:49 am

    Inventor Woes @18

    Dude, try not to plagiarize whole sentences from posts by others without quotes and proper citation…
    Maybe this one is trademarked by me, how do you know it’s not ?
    If I were Trump you would be hearing from my lawyers already 🙂

  23. angry dude February 16, 2017 9:03 am

    Anon @21

    My emotions match my blog name, what is your problem anyway ?

    I couldn’t care less about your “pedigree” – as far as science/tech goes I have more “digree” than you to show (1 phd, 2 ms and 1 bs – all in hard sciences/engineering form best schools)
    I am practically like that dude Myhrvold – only a lot less fortunate (thanks to scotus, congress, obama etc etc)

  24. Benny February 16, 2017 9:10 am

    Angry,
    The phrase “The doc said ‘to the morgue’ — to the morgue it is!” (?????? ?????? «? ????» — ?????? ? ????!) is a well-known Russian cliché. It isn’t yours, you can’t copyright it. If you had trademarked it, it would appear on the USPTO site, and it doesn’t, so you didn’t.

  25. angry dude February 16, 2017 9:17 am

    Benny @24

    I mentioned trademark, not copyright

    if “you are fired” can qualify for trademark then this one certainly can too

  26. N+13 February 16, 2017 12:51 pm

    As the author, my intent was to point to the futility for the “little guy” in the face of a decades worth of increasing impediments. I grant the right for titans to build silos and advocate in the best interests of its shareholders and stakeholders. I accept the legal industries exploitation of the situation to advocate in the same manner. But our national leaders have to rise above the fray and act on behalf of everyone’s interests. It is Congress particularly, and the judiciary partially (as they are – or should be – bound by law) that must step up and do the right thing. Now, not later. I am looking most for states[gender] as I am of an age that can remember some.

  27. step back February 16, 2017 3:28 pm

    Shouldn’t it be N+12 as there are twelve more letters in your last name after the “N”?

    That aside, yes it would be wonderful if we can return to a grander time where representatives were “statesmen” (or stateswomen) of honor and integrity instead of ones who adhere to an “alternative facts” world view.

  28. N+13 February 16, 2017 5:02 pm

    step back@27
    Count once more 🙂

  29. step back February 16, 2017 9:15 pm

    Count me as dyslexic.
    How old were you at the time you could first successfully spell your last name?

    https://media.npr.org/assets/img/2013/12/31/longnamecard312way_wide-cf45348dcf798c10991c4490c3a60c3f71f2f9bb.jpg