Posts Tagged: "npe"

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.

Right now the best business to be in at the moment is the patent enforcement business, at least if you are concerning yourself with low-risk monetization with high reward. Between the legacy issue of bad patents, patent auctions and the many who purchase patents, what has started to happen is that the patent system rewards those who have the finances and ability to game the system. But the problem is extraordinarily complex.

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.

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.