Posts Tagged: "non-practicing entities"

On July 1, 2013, I spoke on the record with Ray Niro, who is one of the most well known patent litigators in the United States. Throughout his career he has been a champion for the inventor who was facing long odds due to widespread patent infringement. So loathed was Niro, he was the one who was originally referred to as the “patent troll” by the media due to his representing innovators against giant technology companies. Of course, if you are going to call Ray Niro a patent troll you might want to also point out that he is extraordinarily successful, which means he has been very good at proving that large corporations have infringed valid patents, sometimes on fundamentally important innovations.

In June 2013 the anti was raised significantly in the ongoing discussion of patent trolls. The White House chimed in, which you might be inclined to think would be an important development. Sadly the President getting involved in the discussion had more to do with grandstanding than solutions. With all this in the news who better to speak with than Ray Niro, the original “patent troll” according to the media. In our interview Ray unapologetically, and unsurprisingly, comes out in defense of American inventors and those who engage in the hard work that is research and development of new and wonderful innovations. He pulls no punches, and in part 1 of our interview he calls out Cisco, a strong critic of non-practicing entities, as a hypocrite for doing the very thing that they rail against.

The attack on individual inventors using names like NPEs and patent trolls is nearly identical to the attacks previously waged by corporate America on personal injury lawyers, using the McDonald’s hot coffee case as an example of lawyer abuse (now it’s the Wi-Fi patent cases). Like the corporate attacks on everything from the private enforcement of securities fraud claims to unfair business practice, civil rights and age discrimination claims, the new target is patent infringement claims brought by “boogie man” entities that don’t manufacture products.

Acacia Research Corporation (Nasdaq: ACTG) announced on Friday, July 5, 2013, that its Board of Directors appointed Matthew Vella, Acacia’s current President, as Chief Executive Officer and a Director effective August 1, 2013. At this important moment when the patent rights pendulum has swung Vella takes over. He will have his hands full as he steps into the spotlight as the public face of Acacia. There is growing animosity toward non-practising entities and numerous legislative attempts underway to benefit big business at the expense of universities, individual inventors, research and development companies and those who acquire rights. His task will not be an easy one. As a publicly traded company Acacia’s information is there for all to see, making them an easy target.

Those that do the complaining erroneously state that they speak on behalf of the entire industry. But I know they don’t speak for IBM, or Qualcomm or Tessera or the many other innovative companies that exist in the high-tech sector. They certainly don’t speak for the pharmaceutical industry that absolutely needs strong patents to survive, and they don’t talk for the biotechnology industry where start-ups and even large companies largely have little in the way of asset value outside their patent portfolios. And they absolutely don’t speak for the independent inventor who needs a patent system to protect their innovations from being ripped off by… well by those same Silicon Valley elite who so hate the patent system.

Chief Judge Rader: “The patent system has a narrow focus. It is not a consumer affairs program. It is not a manufacturers guarantee compliance program. It’s not a competition program. It has one objective, summarized well by the Constitution: promote the progress of science and the useful arts. It’s there to create more investment and more incentive for innovation and invention. The things that the patent system is criticized for is not its job.”

From implementation of sections of the Leahy-Smith America Invents Act to anticipated decisions from the Supreme Court, we can expect changes to the patent system that will affect the high tech and biotechnology industries, start up companies and established businesses of all sizes. Just some of the developments we can expect to see include a determination of whether genes are patentable, proposed legislation addressing the litigation strategies of non practicing entities, and harmonization of the US with much of the world through the implementation of the first-to-file patent application system and the introduction of an international design patent application process.

It’s no secret patent litigation costs are immense. According to the American Intellectual Property Law Association, the cost of an average patent lawsuit, where $1 million to $25 million is at risk, is $1.6 million through the end of discovery and $2.8 million through final disposition. Adding insult to injury, more than 60% of all patent suits are filed by non-practicing entities (NPEs) that manufacture no products and rely on litigation as a key part of their business model. Patent litigation will always be costly, but by planning, preparing, assessing, narrowing and focusing – the attentive client or counsel may succeed in achieving some predictability and keeping costs to a minimum.

What you think of Ryan and Acacia is almost entirely dependent upon the side of the aisle on which you sit; namely whether you are an innovator or a practicing entity. Even more specifically, those who are innovators but don’t have a voice loud enough to be heard by practicing entities are likely to believe that Ryan and Acacia are the answer to their prayers. Those practicing companies that simply want to make a product and sell it without regard to the underlying patents that might be in place are likely to believe Ryan and Acacia are the poster children for everything wrong with the patent system. But you can decide for yourself. Without further ado, here is the culmination of the interview with Paul Ryan.

Paul Ryan is a more common name than you might think. In the world of politics when one speaks of “Paul Ryan” they are talking about the Republican Congressman from Wisconsin who was Mitt Romney’s running-mate and would-have-been Vice President. But in the intellectual property world, particularly the patent litigation world, the name “Paul Ryan” refers to the CEO of Acacia Research Technologies. It is the later Paul Ryan that went on the record with me to discuss Acacia, patent enforcement, how large companies who are infringers disregard innovative independent inventors and more.

Recently the Federal Circuit, sitting en banc, denied Nokia’s petition for rehearing. The Federal Circuit decision is nevertheless interesting for its treatment of Section 337’s “domestic industry” requirement as it is applied to NPEs. Under 19 U.S.C. §1337(a)(2), relief at the Commission is predicated on the existence or establishment of an industry in the United States “relating to the articles protected by the patent.” This is commonly known as the “domestic industry” requirement. In turn, section 1337(a)(3) provides that an industry is considered to exist if there is in the United States, “with respect to the articles protected by the patent,” significant investment in plant or equipment, significant employment of labor or capital, or “substantial investment in [the patent’s] exploitation, including engineering, research and development, or licensing” (emphasis added).

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.

Unlike NPEs, defensive patent pools entities do not (at least initially) seek to generate revenues. Rather, they charge admission fees into the pool to fund IP acquisitions and the administrative costs to operate the pool. In sum, defensive patent pool aggregation is analogous to an insurance policy. But, where classic insurance lowers a company’s costs when accidents happen, patent pools are designed to reduce the likelihood of accidents (i.e., being sued for patent infringement) from happening at all.

I fail to see how the increase in individual suits suggests in any way, shape or form that the AIA has failed. Because there was a spike in litigation leading up to September 16, 2012, and because the AIA by its express terms requires more patent infringement cases of smaller scope, patent reform has failed. Unbelievable! How can something fail when it is working as intended?

This workshop will examine the economic and legal implications of patent assertion entity (PAE) activity, as distinct from prototypical “non-practicing entity” (NPE) activity, such as developing and transferring technology. By contrast, PAE activities often include purchasing patents from existing owners and seeking to maximize revenues by licensing the intellectual property to (or litigating against) manufacturers who are already using the patented technology.