While there are no guarantees in life, there may be some things that you can do in order to proactively protect yourself against the threat of a patent lawsuit.
There is no better way to prepare yourself for what may be lurking behind the next corner than knowing your business and the market in which you operated. Knowledge of the patent activity in your market is a critical first step to developing a proactive plan that will insulate you to the greatest extent possible. Of course, the first thing you need to do is to monitor the patent filings in your technology markets.
By keeping an eye on the publication of patent application in your sector you can spot potentially problematic patent application in advance of them ever issuing. While it may not be appropriate in every situation, if a patent application seems to be particularly dangerous you can elect to submit prior art to the examiner so that it can be taken into considering. This is called a third-party pre-issuance submission, which can be made in any non-provisional utility, design, and plant application, as well as in any continuing application. A third-party preissuance submission includes a concise description of the asserted relevance of each document submitted. There are strict time limits within which to file though. A third-party submission can be filed prior to the earlier of: (1) The date a notice of allowance; OR (2) The later of: (i) 6 months after the date on which the application is first published by the USPTO, or (ii) The date of the first rejection of any claim by the examiner. Thus, keeping a vigilant watch on patent filings is critical for those who may want the option to at least consider third-party pre-issuance submissions as an option.
Last week the Obama Administration announced a series of new Executive Actions and updated the industry on progress relating to previous Executive Actions relative to the patent system. See White House Announces Patent Related Executive Action. One of the line items in this announcement related to the creation of a Frequently Asked Questions (FAQ) section on USPTO.gov. Essentially, the White House announced the launch of what they refer to as an “online toolkit” aimed at answering common questions and providing information about patent lawsuits. The aim of this section of USPTO.gov is apparently to help consumers understand the risks and benefits of litigation or settlement so they can pick their best course of action.
Several things jump out at you when you visit this section of USPTO.gov, which is labeled as a BETA. First, although the section of the website falls under “litigation” and is found at uspto.gov/patents/litigation, all of the information is aimed at accused infringers, giving them advice about what they can and should do. Nowhere do I see any information or links to helpful resources that would be useful for the many hundreds of thousands of patent owners who routinely have their rights infringed, sometimes willfully. No, this “help section” is purely intended to provide help to those accused of infringement as if they are all victims.
It is almost incomprehensible that the Patent Office would put together a litigation resource that ignores the reality that many companies, both large and small, trample on the rights of innovators who have spent large amounts of time, money and energy to receive a patent and disclosing their innovation to the world. Indeed, the inconvenient truth is that many innovators simply do not have the resources to enforce their legitimately obtained and examined patents. Many of those innovators make up the backbone of the U.S. economy and in large part embody the American Dream. Yet, the Patent Office only offers a one-sided help section that gives advice to infringers and sets a tone that comes across as anti-patent and anti-patent owner. This strikes me as fundamentally misguided and clearly demonstrates the anti-patent bias of the Obama Administration.
Anti-patent groups who seek to diminish patent rights have turned the public’s imagination against licensing entities. Sometimes called NPEs or PAEs, sometimes called an epithet that need not be repeated here, such licensing entities do not practice the patent rights that they seek to license out. For now, let’s call them monetizing companies. I have previously written about the economic utility that monetizing companies bring to the patent system, and to the overall economy. As a general matter, they ensure that patents achieve their uses to promote technology transfer, promote commercialization of marketable ideas, and enable securitization of intangible assets to facilitate startup financing.
The anti-patent forces have convinced many members of the public – and their representatives in Congress – that such patent monetizing companies “abuse” the court system. But what do the data say?
If monetizing companies as a class “abuse” litigation more often than plaintiff operating companies, we would expect to see data that show that they bring less meritorious patent cases. Some have sounded the alarm that such data already exists. They cite to the annual PricewaterhouseCoopers report on patent litigation. But is this a reliable source for this conclusion?
The chart to the left, which is Chart 5b from page 12 of the latest PwC report released in 2013, appears to show comparative “success rates.” The chart appears to answer the question negatively for monetizing companies. As depicted in the chart, operating companies seem always to have had a higher “success rate” in court compared to monetizing companies, most recently 38% compared with 26%. That is, in fact, how alarmists (including those at the highest levels of government who advise the present Administration) have used these statistics. Examples are everywhere. Here are four notable ones:
NOTE: This article is written by Steven J. Moore and with the assistance of Alan Gardner and Marvin Wachs, also of the Kelley Drye & Warren Patent Department.
At this time of year we often see many prognostications of what the future holds. From the prospective of the small entity patentee we see big changes in store particularly as some in Congress seem hell-bent on amending the patent statutes once more. These changes are being pushed through without any real consideration for the impact of the changes on patents held by universities, research institutes, small and medium sized companies, emerging companies, independent inventors and new entrepreneurs.
Our data analysis set forth in our article entitled America Invents Act – A Boon for David or Goliath, published as a two part series in iPWatchdog August 15, 2013, and the data we supply herein in regard to who is bearing the brunt of IPR petitions and institutions, suggest small patent entities are presently facing a daunting task to enforce patents in their patent portfolios against large competitors. In the former article, we compared pre-AIA administrative challenge procedures with post-AIA administrative challenge procedures to show how much more the post-AIA procedures were being used against small entity patent filers, and how the new post-AIA procedures were being used far less by small entities than the prior pre-AIA challenge procedures. We noted that the data did not allow one to subscribe this effect to more challenges against so-called NPEs post-AIA than pre-AIA.
What is lacking from the debate over “patent trolls” is the “other side” of the story. In other words- who is benefiting from large multinational high tech companies being forced to deal with claims of infringement against them?
The major beneficiaries are not the patent trolls- but the thousands of single patent owners and small high tech start ups who for the first time ever-are able to monetize the enormous investments in time, money and ingenuity that they have made in their inventions.
The fact is- today, small patent owner and small tech start ups have real options to liquidate their intellectual property assets that they didn’t have before Intellectual Ventures and Acacia Research Group entered the market in the mid-2000s. If patent trolls sue big companies- then the owners of these patents were able to liquidate their investments. When the multinationals have to worry about these entities suing them it is good for the owners of the patents.
Patent trolls are not bad for them. That’s for sure.
The Federal Trade Commission has extended the deadline for public comments on its proposed study of patent assertion entities (PAEs), which it announced on September 27. To provide additional time for interested parties to submit comments on the proposed study, the deadline has been extended throughDecember 16, 2013. The Commission will not consider requests for further extension. Comments can be submitted electronically.
PAEs are firms with a business model based primarily on buying patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies. The FTC is conducting the study in order to further one of the agency’s key missions — to examine cutting-edge competition and consumer protection topics that may have a significant effect on the U.S. economy.
In their article entitled The Private and Social Costs of Patent Trolls, James Bessen, Jennifer Ford, and Michael Meurer present a study on patent litigation involving Non Practicing Entities (NPEs), which they define as firms that do not produce goods but rather acquire patents in order to license them to others. Bessen et al.’s conclusions are startling. The loss to defendants involved in NPE patent suits during the last four years “exceeds $83 billion per year, over a quarter of U.S. industrial R&D spending per annum;” and NPE patent litigation constitutes a “very large disincentive to innovation.” Bessen et al.’s article was prominently featured on the cover of the Winter 2011-2012 issue of Regulation magazine with a cover illustration of oversized humanoids with visible malign intent, armed with clubs, holding up innocent travelers for payment at a bridge, wherein the cover is titled “Patent Trolls – How NPEs harm innovation.”
In my full article “Questionable science will misguide patent policy,” I expose fundamental flaws in the methods that Bessen et al. apply in their studies and explain why their fantastic cost estimates should be dismissed as extremely biased and unreliable, and why their conclusions should be discarded as misleading for patent policy. An abridged version follows.
Bessen et al.’s stock return event studies on patent litigation
Bessen et al.’s thesis is predicated on “event studies” of lawsuit filings—what happens to an alleged infringer’s stock price around the filing of a patent infringement lawsuit, after taking into account general market trends and random fluctuations of the individual stock. Without providing any proof, these authors argue that during these “events,” stock value declines that are otherwise unaccounted for by estimated market trends (called “Abnormal Return”), reflect “the costs of lost business, management distraction and diversion of productive resources that might result from the lawsuit, possible payments needed to settle the suit, and the reduction in expectations of profits from future opportunities that are forestalled or foreclosed because of the suit.”
How to Write a Patent Application is a must own for patent attorneys, patent agents and law students alike. A crucial hands-on resource that walks you through every aspect of preparing and filing a patent application, from working with an inventor to patent searches, preparing the patent application, drafting claims and more.
Without hesitation I recommend One Simple Idea and think it should be required reading for any motivated inventor. There is so much to like about the book and so much that I think author Stephen Key nails dead on accurate. The book is educational, information and inspirational. For the $14 cover price it is essential reading.
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