At the heart of policy disputes over standard essential patents is a simple truth: Companies whose products depend on standardized technologies want to increase their profit margins by cutting input costs – the royalties they pay to use standardized technologies invented and patented by other companies.
In other words, policy conflicts over standard essential patents (SEPs) tend to pit implementing companies against inventing-and-licensing companies, one business model against another.
So when in the course of patent policymaking it becomes necessary to examine the worthiness of alleged scholarship about SEPs, a decent respect for the consumers and markets ultimately affected requires policy makers to examine the scholarship’s origin and separate fact from advocacy.
Such is the case for a new “working paper” that entered the standards debate last month with a controversial thesis that generated headlines and a lot discussion in patent circles. Its title: “The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones.” Its authors: Ann Armstrong, associate general counsel at Intel, as well as Joseph J. Mueller and Timothy D. Syrett, two lawyers at Wilmer Cutler Pickering Hale & Dorr who work for Intel.
WALKER: Let me give you an example, Gene, that would be simple. I would like to be the nonexclusive agent for your blog in South America. All right? I think I can get people in South America to pay to read your blog. Because how it works in South America they pay to read blogs. I don’t know how much I’m gonna generate for you, Gene, but you can revoke it at any time. I won’t license to any of the major television networks, publishers, et cetera, I’ll only license to small people. And 85% of any money I collect in South America for the blog licenses that I generate for you I’m going to give you. Would you be willing to list your blog with me to try to generate revenue for you in South America?
QUINN: Yeah, I mean that’s a no brainer.
WALKER: There you go. It’s no different. Exactly the same. It’s a no brainer. Listing with us is a no brainer. The only reason you wouldn’t list with us if you didn’t want to have a nonexclusive agent. If you only wanted to license on an exclusive basis.
Recently I had the opportunity to interview Jay Walker, the founder of Priceline.com. Walker, with over 700 patents and pending patent applications, is one of the most prolific living inventors in the world. He is embarking on the monumental task to commoditize patent licenses in a way that streamlines the process, keeps costs down, maximizes the number of licenses and charges a low flat fee. A daunting task no doubt, but his methodology is unique and seems to me to be more likely to succeed than any other efforts, which really bear no resemblance to the Patent Properties model. Still, to call the task difficult is an understatement, but if anyone has the ability to pull it off it would be Jay Walker.
WALKER: Let’s switch to the other side before we go to the theory. On the other side are users of patented technology, most of whom don’t know which patents they are using. They have no way to run the kind of sophisticated outlook to say, well, if I’m using patented technology how do I know what it is? I can’t read claim lines, which takes a federal judge to interpret whether I’m actually am infringing or not. It takes a whole Markman Hearing to figure that out. And on top of that when I try to look through the patents that are already issued as a way to learn they’re not written up in a user-friendly language, and I’m often advised by counsels not to do that.
Simply stated, Jay Walker is one of America’s best-known business inventors and entrepreneurs. Walker has founded multiple successful start-up companies across various industries, although he is best known to members of the public as the founder of Priceline.com.
Walker has had a incredibly successful career, and with well over 700 issued and pending U.S. and international patents he is the world’s 11th most patented living inventor. TIME magazine has twice named Walker as one of the “50 most influential business leaders in the digital age,” and he was selected by Businessweek as one of its 25 Internet pioneers “most responsible for changing the competitive landscape of almost every industry in the world.” Newsweek has cited Walker as one of three executives at the forefront of the Internet commerce revolution. He is an icon within the patent world and one of the visionary leaders of the Internet business revolution.
Walker currently serves as executive chairman and lead inventor of Patent Properties, a successor in interest to Walker Digital, which has developed a new no-fault patent licensing system.
Recently I had the opportunity to interview Walker, along with the CEO of Patent Properties Jon Ellenthal. While nothing was ruled out of bounds for the interview we spent much of our time discussing his attempt to create a no-fault patent licensing system that will help innovators monetize patents through a uniform licensing regime that offers a variety of peripheral benefits to those who take licenses. In a broad sense there have been some who have tried to commoditize the monetization of patent licensing in the past, but as yet have largely been unsuccessfully. Initially I was skeptical, but listened. Over the Winter and Spring as I learned more about Walker’s plan I became intrigued because this effort and have come to believe that his plan has a real chance of succeeding. Of course, if anyone is going to be able to figure out the myriad issues involved Walker can.
Reckitt Benckiser Pharmaceuticals Inc., a wholly owned subsidiary of Reckitt Benckiser Group plc (OTN: RBGPF), and XenoPort, Inc. (NASDAQ: XNPT) announced yesterday that they have entered into a license agreement that will grant Reckitt rights for the development and commercialization of XenoPort’s promising oral treatment for alcohol use disorders, a condition affecting more than 140 million people worldwide.
Under the terms of the agreement, Reckitt will receive exclusive rights to develop and commercialize arbaclofen placarbil worldwide for all indications, subject to certain rights by XenoPort to negotiate with Reckitt Benckiser Pharmaceuticals on collaborations for non-addiction indications.
According to the World Health Organization, alcohol use disorders are a global public health issue,with an annual economic burden of $224 billion in the United States alone, and alcoholism is directly responsible for more than 2.5 million deaths each year and is a causal factor in over 60 other major types of disease. See Global status report on alcohol and health. While anything can happen during clinical trials that can derail even the most promising drug or therapy, the potential market is enormous. If the drug proceeds through to market it should have little difficulty achieving blockbuster status, but many hurdles obviously still remain.
On Monday, May 12, 2014, Patent Properties, Inc. (OTCQB: PPRO), the brainchild of Priceline.com founder Jay Walker, announced the appointment of Robert Stoll, former Commissioner for Patents at the United States Patent and Trademark Office, to Chair the Patent Properties Advisory Board. Joining Stoll on the Board will be Mona Sutphen, former White House Deputy Chief of Staff for Policy for President Obama; Vinit Nijhawan, Managing Director, Office of Technology Development and Lecturer in the Entrepreneurship Programs Office at Boston University; Louis Foreman, CEO & Founder of Edison Nation; and Stephen Merrill, former Executive Director of the National Academies’ Program on Science, Technology, and Economic Policy.
The purpose of the Board is to advise Patent Properties’ senior leadership on business, policy, regulatory, and legal issues related to the development, launch, and growth. Board members will serve in an advisory capacity without operational or decision-making responsibilities.
This month’s column is based on my remarks to the Association of University Technology Managers (AUTM) at their annual meeting in San Francisco.
First of all, congratulations! You made TheWashington Post and they even spelled your name correctly. Unfortunately, AUTM was specifically called out in an article titled Patent Trolls Have a Surprising Ally: Universities.The name of another article appearing at the same time Patenting University Research Has Been a Dismal Failure, Enabling Patent Trolls: It’s Time to Stop while long winded speaks for itself. And two innocuous sounding reports from the Brookings Institution Building an Innovation Based Economy and University Start-Ups: Critical for Tech Transfer say that Congress should amend the Bayh-Dole Act to give the federal government control over whether you can grant exclusive licenses, that you have been unsuccessful as most technology transfer offices are not self-supporting, that your business orientation conflicts with the mission of a university and your alleged model of “licensing to the highest bidder” has failed. The New York Times accurately summarized the intended message in its headline Patenting Their Discoveries Does Not Pay Off for Most Universities.
For a profession that keeps a low profile and goes out of its way not to antagonize people, you may wonder what in the world’s going on that you are gaining such notoriety. The answer is that you are in the sights of several groups who do not wish you well. Some want to weaken the patent system for their short term benefit, some believe society would be better off if inventions were freely available without patents; some don’t think it’s moral for universities to work with industry, and others believe they should determine who reaps the rewards of innovation. While operating on diverse belief systems, they all have one thing in common: they don’t like you.
It’s no secret that the regulatory environment is challenging for companies that license patents – in our case, patents that are deemed essential to wireless standards and that our company, InterDigital, has developed in-house over the course of multiple decades, and continues to develop today. Some of the companies that dominate the wireless market today had little or nothing to do with the development of the standards that have contributed so much to their success, so they make every effort to devalue standards participation. And many in Washington lend them a willing ear, and take up arms to wage their battle for them.
One of the greatest frustrations for me is that so much of this rests on a bedrock of total miscomprehension of how standards are developed, the enormous cost and risk of investing in standards development, the value that standards provide, and the kind of licensing practices that have made the market successful, benefitting everybody. Late last year in New York, I met with a reporter for one of the primary tech websites in the world, and he dismissed standards development. It became apparent he didn’t understand how the process worked at all. When we asked him how he thought these things got developed, he said that he “figured there must be an engineering organization somewhere that did it.” And this is from the legal correspondent of a major tech website, someone whose articles influence debate!
He didn’t realize that it was private sector companies – companies like ours – that committed significant engineering time and resources, and competed to develop the best solutions, and in so doing committed to licensing them fairly. So – for his benefit, should he read this, and for the benefit of anyone involved in the debate – I’ll describe our company’s story, and draw some conclusions about what should and shouldn’t be done to protect, foster and incent innovation that benefits everybody.