Posts Tagged: "non-practicing entities"

Any discussion of flaws in the United States patent system inevitably turns to the system’s modern villain: non-practicing entities. They are known more colorfully as patent trolls, although the business model of non-practicing entities has appeared in copyright markets as well as well as in patent markets. In the America Invents Act, Congress directed the nonpartisan Government Accountability Office (GAO) to conduct a study “on the consequences of patent infringement lawsuits brought by non-practicing entities.” At the GAO’s request, we provided data on non-practicing entities for five years (2007-2011).

To be sure, all of the concerns over the patent bubble are legitimate, and as always, rational debate is beneficial to the healthy development of patent market. The lack of disclosure leads to the scarcity of data, and what comes with the scarcity are the incompleteness and obscurity, all of which lead to misinterpretation of the data and information. More importantly, misinterpretation, in turn, can lead to mispricing and market inefficiency when the misinterpreted data is applied to value patents for transaction. But is no systematic evidence to prove that NPEs behave differently than other players in the patent licensing market and patent sales market.

Innovation and how to foster next generation technologies is a topic of very active discussion within businesses across the country. But how can America continue to be one of the most innovative countries in the world? The rapid adoption of IP management and licensing platforms built around social collaboration seems to lead us to one answer – open innovation. Indeed, with today’s technology allowing for the seamless transfer of information – R&D departments have little to no choice but to begin to embrace the open innovation model and use it to their advantage. Understanding your intellectual assets and being able to capitalize on them in order to generate more revenue must be an important part of managing IP and fostering innovation.

The theme of the annual meeting of the AIPF this year is “intellectual property as a corporate asset.” There are indeed presentations sprinkled across the two days of this meeting that relate specifically to this topic. Another recurring and equally treated topic is the use of the Internet in practice in a variety of contexts — attracting clients, networking generally and use of the Internet for investigations. Topics of particular interest included: (1) The Invisible Hand: Models for Monetizing Patents in the 21st Century; (2) Lies, Damn Lies, and Lawyers; (3) Contingent Fee Arrangements in Enforcing IP Rights; and (4) Economic Effect of Non Practicing Entities.

So what is going on with these research Studies that seek only U.S. patents? It would seem that based on the specific details of some of these research assignments there are a growing number of entities using the AOP network to search for patents that might be able to be acquired for some strategic purpose. If that is what is going on it would be a creative way to use the AOP network of researchers to identify patents and/or patent portfolios. It also means that if you are a patent searcher and you are not frequently perusing ongoing AOP Studies you are missing an opportunity.

On May 22, 2012, STEC IP brought separate patent infringement lawsuits against Apple, Amazon and Oracle. Little information about STEC IP seems available. In the complaints filed they explain only that they are a Delaware limited liability company having a principle place of business in Greensboro, North Carolina. Under Delaware law Members of the LLC (i.e., owners) may remain anonymous, therefore, those who are behind STEC IP may remain a mystery. Of course, it is known that STEC IP is being represented by Richard Kirk of Bayard and Mark Hogge of SNR Denton, both of whom are listed as attorneys for STEC IP in the respective filings. Each of the patents asserted by STEC IP are now undergoing review by the Article One Partner’s research community.

Article One Partners, or AOP for short, is the world’s largest patent research community. Yesterday the company announced a partnership with Sony Corporation. AOP is supporting Sony’s defense against the rising trend in patent disputes with non-practicing entities (NPEs). “We have chosen to expand our prior art research capabilities with Article One Partners and their global community of researchers,” said Fumihiko Moriya, VP, Sr. General Manager, IP Alliance & Licensing Dept., IP Division, Sony Corporation. “Our partnership with Article One enables Sony to identify highly relevant prior art to help defend against an increasing number of low-quality patent assertions.”

Reasonable minds may disagree about how significant the gap is. Indeed, it could fairly be said that the investigation figure I report is 50% higher than the ITC’s (28% v. 19%), and that the sample size is too small to draw any statistical conclusions. Still, reporting the results together, the ITC and I agree that: (1) 43-47% of respondents at the ITC in the last 15-18 months are respondents named in NPE/PAE investigations; and (2) 19-28% of investigations at the ITC in the last 15-18 months are NPE/PAE-initiated investigations.

Anyone who is even casually interested in patents and innovation has to know that over the past few years there have been massive patent battles surrounding the major innovators, copy-cats and manufacturers involved in the smart phone industry. According to the ITC, “Smartphone companies involved in Section 337 investigations during the first half of FY 2012 include: Apple (14), HTC (8), Motorola (4), Samsung (3), RIM (3), Nokia (3), and LG (1).” This has required the ITC to increase staff, and has been a burden on the Commission. But none of those companies are NPEs, are they? It seems the patent infringer lobby is using increases in ITC filings to support their preferred policy position despite the lack of a causal connection.

Perhaps the infringer lobby needs a refresher course on the rights granted to a patent owner. 35 U.S.C. § 271(a) says: “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” (emphasis added). So, as it turns out, importation of products covered by a patent during the term of the patent are an infringement of the patent rights granted. Let’s not forget that at the end of the day what these Silicon Valley elite are arguing is that it should be more difficult for a patent owner to stop infringement. The wrong-doers are NOT the patent owners who have the audacity to exercise rights granted by the federal government. The wrong-doers are those who infringe those rights and there is absolutely no reason to make it easier for them to engage in infringement.

As a result of this announcement today, AOP will help Appsterdam accomplish the organizations mandate of supporting ongoing innovation and business success in the mobile app development community through research projects sent to its global, diverse and highly educated community. The Appsterdam Foundation attorneys and developers will work with AOP to conduct patent research, harnessing the global reach of the AOP community, which has been used by many Fortune 500 companies to locate prior art that can be used against patents asserted against them. While note every search conducted by Article One results in prior art that can be used to invalidate patent claims, many searches have found prior art that is then used in both federal court and at the United States Patent and Trademark Office during reexamination proceedings.

The story of the invention and development of the sewing machine challenges these two assumptions insofar as it is a story of a patent thicket in an extremely old technology, but, more important, it is a story of the successful resolution of this thicket through a private-ordering mechanism. The Sewing Machine War was not brought to an end by new federal laws, lawsuits by public interest organizations, or new regulations at the Patent Office, but rather by the patent owners exercising their rights of use and disposition in their property. In so doing, they created the Sewing Machine Combination, which successfully coordinated their overlapping property claims until its last patent expired in 1877. Moreover, the Sewing Machine War is a salient case study because this mid- nineteenth-century patent thicket also included many related issues that are often intertwined today with concerns about modern patent thickets, such as a non- practicing entity (i.e., a “patent troll”) suing infringers after his demands for royalty payments were rejected, massive litigation between multiple parties and in multiple venues, costly prior art searches, and even a hard-fought priority battle over who was the first inventor of the lockstitch.

Mr. Kessler believes that Mr. Madison did not understand what he was doing or, at best, did not foresee the expense that patent litigation would involve in the 21st century. In fact, the founding fathers knew exactly what they were doing when writing the intellectual property clause into the U.S. Constitution. They were protecting the individual from the overwhelming power of large entities. They were enacting the very principles of American society for which we fought the Revolutionary War. Since 1790 the U.S. patent system has contributed to America becoming the most innovative society in the history of the world. Fundamentally changing the system in the ways suggested by Mr. Kessler would stifle that innovation.

Attendees agreed that it’s critical for companies to gain greater leverage to deter nuisance lawsuits and manage costs by reducing the cost of litigation defense. According to those surveyed this is accomplished, at least in part, through the use of joint defense groups (JDGs), where parties engage in shared co-counsel to reduce defense costs. JDGs have been used in approximately two-thirds of all NPE cases, and three-quarters of those surveyed reported working in some capacity with JDGs.

In the last decade, a substantial market has begun to develop for contingent fee representation in patent litigation. Wiley Rein — a traditional general practice law firm with hundreds of attorneys practicing all areas of law — represented a small company, NTP, Inc., in its patent infringement lawsuit against Research in Motion, the manufacturer of the Blackberry line of devices. The lawsuit famously settled in 2006 for $612.5 million, and the press reported Wiley Rein received over $200 million because it handled the lawsuit on a contingent fee basis. And Wiley Rein is not alone in doing so. Many patent litigators around the country have migrated toward handling patent cases on a contingent fee basis.