I have absolutely no problem with enforcing patent rights, and frankly I don’t think it should matter how the patents were acquired, but there is something exceptionally seedy about the use of shell companies and taking a back-end on revenues like Intellectual Ventures is routinely accused of doing. But if there is infringement of solid patents then there should be recourse. Having said that, it would be naive to pretend that there is not real evil lurking in the patent infringement realm. Stories of $500 to $1,000 offers to settle and avoid patent infringement litigation that would cost millions of dollars to defend abound. Some courts have openly acknowledged what feels like “extortion-like” activity. See Indicia of Extortion and Troll Turning Point?
That there are bad actors is hardly surprising, particularly given the lucrative nature of the business model and the fact that many district courts feel as if they do not have the tools to do anything other than allow their courtrooms to be used as the main prop in the extortion-like shakedown. Of course, despite what some district court judge say, there are considerable powers that can be exercised if judges really do want to stop the bad behavior. See Judges Can Make Patent Trolls Pay. But the shell game played with the ownership of patents does add a layer of complexity to figuring out what is really going on and who is calling the shots. Why is it so necessary to have such secrecy? As Justice Brandeis once said “sunlight is the best disinfectant.” The troll industry could use some disinfecting. It is a sin that these nefarious actors tar those innovators with real, strong patents that are infringed.
Patent and technology firm, Intellectual Ventures (IV), recently brought a new complaint against computer security company, Symantec, claiming that the company infringed on three of its patents. To be specific, the complaint alleges that three of Symantec’s products (Replicator, Veritas Volume Replicator, and ApplicationHA) “actively, knowingly and intentionally” infringed on three separate IV patents. Symantec was also sued as part of a different complaint by IV back in 2010, along with Trend Micro, McAfee, and Point Software Technologies.
The First Round
In 2010, former Microsoft exec. and IV founder, Nathan Myhrvold, brought three separate lawsuits against the three above-mentioned companies and six others, claiming that they would not sign licensing agreements, yet they continued to use IV’s patents. Apparently IV had held out on filing the lawsuits against the companies for as long as possible, and according to the company attorney, several attempts were made to negotiate with the companies; however, the negotiations were either unsuccessful or the companies refused to talk about the situation altogether.
The term “privateering” is a new one for some, but by the end of 2013, everyone will talking about it. It’s the transfer of patent rights, including the right to sue for infringement, from a large company with a strong research and development capability to a patent holding company.
There is a tremendous amount of unrealized (“un-monetized”) value in the patent portfolios of many large companies. Yet, for one reason or another, such companies have chosen over the years not enforce their patents in court or through a licensing campaign. In recent times, however, a few of these companies have, one-by-one, started to transfer their patent rights to patent holding companies that are quite willing to enforce those patents. What does the large company receive in return for its patents?
Eastman Kodak Company, the once mighty technology juggernaut that has fallen on hard times and found itself fighting to get out of bankruptcy, has completed a series of agreements that successfully monetizes its digital imaging patents. Under the agreements, Kodak will receive approximately $525 million, a portion of which will be paid by 12 intellectual property licensees organized by Intellectual Ventures and RPX Corporation, with each licensee receiving rights with respect to the digital imaging patent portfolio and certain other Kodak patents. Another portion will be paid by Intellectual Ventures, which is acquiring the digital imaging patent portfolio subject to these new licenses, as well as previously existing licenses.
Giant patent aggregators like Intellectual Ventures and RPX being involved will certainly make people stand up and notice, and perhaps also make them wish that they have entered the bidding.
The proposed transaction, which achieves one of Kodak’s key restructuring objectives, follows other recent major accomplishments that include an agreement for interim and exit financing for the company’s emergence from its Chapter 11 restructuring, and resolution of U.S. retiree non-pension benefits liabilities. Kodak’s monetization of IP assets further builds on its momentum toward a successful emergence in the first half of 2013.
A multinational corporate client, who was concerned about potentially defending non-practicing entity (NPE) patent suits, recently asked me about its options for joining a U.S.-based defensive patent pool. Upon doing the research, I was surprised to learn that there are only really three options: Allied Security Trust, RPX Corporation, and Intellectual Ventures!
First, some background.
NPEs, as most of us know, are entities that own one or more patent portfolios, attempt to license them through targeted letter-writing campaigns and then file patent infringement suits against those letter recipients who refuse to enter into non-exclusive licenses. In some cases, due the U.S. Court of Appeals for the Federal Circuit’s 2007 ruling in Sandisk Corporation v. STMicroelectronics Inc., NPEs often file law suits first and then attempt to negotiate a license with the accused infringer/defendant.
Below is summary of some of the patent deals from the last several weeks that caught my eye. If you have any “patent business” or “patent deal” news you would like to share please send me a message using our contact form.
IV Announces Silicon Labs as Newest Licensee
Silicon Laboratories, Inc. (NASDAQ: SLAB) joins Intellectual Ventures’ more than 30 industry-leading customers around the world as a licensee of Intellectual Ventures. On Monday, July 2, 2012, IV and Silicon Labs, an innovator in the semiconductor space, announced that they entered into an intellectual property license agreement providing Silicon Labs with access to the majority of IV’s extensive patent portfolio. Although not specified by number of patents licensed, the IV portfolio consists of nearly 40,000 patents in more than 50 different technology areas.
Raymond P. Niro is patent litigator with tremendous experience and a reputation that is larger than life. To some he is a champion of independent inventors and small business community, frequent clients of his. To others he is nearly the definition of evil.
It is certainly true that Niro is responsible for the coining of the term “patent troll,” a term first used by a journalist writing about a case he filed on behalf of a client against Intel in 2001. But how is it possible to characterize as a bad actor when those he represents are so often victorious? If you ask me the bad actors are the ones who infringe on patent rights, not those who stand up to have their rights vindicated. But I digress.
Niro has been trial counsel in literally hundreds of intellectual property cases, and since 1996, has won verdicts and settlements for his clients totaling more than $1 billion. In 2006, for example, Niro tried 6% of all the patent cases that went to verdict and, in the first six months of 2007, recovered the 11th, 15th and 35th highest patent verdicts (highest as of 2007), each resulting in a finding of willful infringement, an injunction and cumulative damages of more than $100 million.
To hear some critics tell it, the explosion of patent suits in the smartphone industry is evidence of a patent system that is fundamentally “broken,” at great cost to U.S. innovation.
Such histrionics, however, ignore one crucial but little known fact: throughout American history, the buying, selling, and litigating of patents has always been essential to U.S. economic success. Not only that, the truth is that today’s patent litigation rate is less than half what it was in the mid-19th century, a period widely-recognized as the “golden age” of American innovation.
The patent world is quietly undergoing a change of seismic proportions. In a few short years, a handful of entities have amassed vast treasuries of patents on an unprecedented scale. To give some sense of the magnitude of this change, our research shows that in a little more than five years, the most massive of these has accumulated 30,000-60,000 patents worldwide, which would make it the 5th largest patent portfolio of any domestic US company and the 15th largest of any company in the world.
Although size is important in understanding the nature of the shift, size alone is not the issue. It is also the method of organization and the types of activities that are causing a paradigm shift in the world of patents and innovation.
These entities, which we call mass aggregators, do not engage in the manufacturing of products nor do they conduct much research. Rather, they pursue other goals of interest to their founders and investors. Non-practicing entities have been around the patent world for some time, and in the past, they have fallen into two broad categories. The first category includes universities and research laboratories, which tend to have scholars engaged in basic research and license out inventions rather than manufacturing products on their own. The second category includes individuals or small groups who purchase patents to assert them against existing, successful products. Those in the second category have been described colloquially as “trolls,” which appears to be a reference to the children’s tale of the three billy goats who must pay a toll to the troll waiting under the bridge if they wish to pass. Troll activity is generally reviled by operating companies as falling somewhere between extortion and a drag on innovation. In particular, many believe that patent trolls often extract a disproportionate return, far beyond the value that their patented invention adds to the commercial product, if it adds at all.
Earlier today Intellectual Ventures (IV) sued Motorola Mobility for patent infringement in the United States Federal District Court for the District of Delaware. At issue are six patents that IV claims relate to Google’s Android operating system — US Patent Nos. 7,810,144, 6,412,953, 7,409,450, 7,120,462, 6,557,054 and, 6,658,464.
This litigation is worth noting for several reasons. First, this is yet another patent infringement complaint against Google’s Android operating system. It seems that practically every month there is another lawsuit claiming that Android infringes this or that patent, which has to raise eyebrows with respect to the underlying intellectual property Google owns in its operating system that is intended to compete against Apple. Second, once upon a time Google funded IV and vouched for the company and its founder, Microsoft alumnus Nathan Myhrvold. Now IV has turned the tables on Google, is going after Android and in so doing is suing the company that Google is set to acquire for $12.5 billion.