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60 
Professor Colleen Chien testifying before the House Subcommittee on Intellectual Property, Wednesday, July 18, 2012.
On Wednesday, I testified before Congress about the prevalence of patent assertion entity (PAE) cases at the ITC. For as long as I have been an academic, I have been studying the ITC, and my testimony drew upon the scholarly literature about the International Trade Commission including three review articles — Patently Protectionist, Patent Holdup, the ITC, and the Public Interest, Protecting Domestic Industries at the ITC, a separate amicus brief, and an ITC treatise in development that I have authored or co-authored.
As detailed in my written submission, my research has found that in the last 18 months (Jan. 2011-Jun 2012), PAEs brought more than a quarter of Section 337 patent cases, and nearly half of the total respondents appearing before the ITC were there because of a PAE-initiated case. (The submission details my methodology and reports the results of an independent parallel analysis that has been conducted by other attorneys, which find higher shares than I report for licensing-based investigations. It also reports my analysis that, in most cases, the PAE patent was purchased from its original owner.)
About a month ago, the ITC released its own official statistics. I regret that I only became aware of it yesterday, after my testimony, but I applaud the ITC for its responsiveness and engagement on this issue, given their full docket of other concerns, not the least of which includes carrying on their tradition of efficiently and fairly resolving trade disputes. But the heart of academic discourse – the discussion and examination of data, ideas, and assertions – is particularly important in the context of policy-making. Thus, I am thankful that the ITC chose to provide this data, particularly in a form detailed enough to enable a comparison to my data.
Though some may interpret the ITC data as a refutation of my claims, I have a different view. My view is that the data are closer together than they are farther apart.
My definition of PAE differs slightly from the ITC’s definition of NPE (which they divide into “NPE1” and “NPE2”), my data extends to 2Q 2012 whereas their’s stops as 1Q 2012, and they appear to have included non-patent (e.g. TM) investigations in their non-NPE investigation numbers, which I exclude. Also, because their report doesn’t include numbers, I had to estimate them from the graphs. Nevertheless, the numbers, at least in my opinion, are similar.
- 47% vs. 43% respondents: I claimed that in the last 18 months, 47% of the total (patent) respondents (332 out of 701) in the ITC were there because of a PAE-initiated investigation. The ITC’s chart on page 4 contains the comparable data on NPEs, regarding the last 15 months of investigations.
It appears to report that in 1Q2012, NPE1 + NPE2 respondents numbered about 45+70 = 115 and non-NPE respondents numbered 110. That makes a ratio of 110/(110+115) = 49%. When 2011 data (205/(205+300)) is added in, the total percentage comes to 43%.
- 28% vs. 19% investigations: I reported that about 28% (23 out of 81 through 2Q2012) of patent investigations are NPE investigations. Based on the ITC’s chart on page 2, the ITC is reporting about 15 NPE cases through 1Q2012, out of about 77 cases or 19%. This number is farther off from mine than the respondent number, so further investigation is warranted. However, it appears that the main source of discrepancy comes from 2Q2012 where my data reflects that 50% of the investigations come from PAEs.
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:
- 43-47% of respondents at the ITC in the last 15-18 months are respondents named in NPE/PAE investigations.
- 19-28% of investigations at the ITC in the last 15-18 months are NPE/PAE-initiated investigations.
Also, my testimony did not cite any numbers regarding the claim that eBay has caused PAEs to file their cases at the ITC at a higher frequency. However, the ITC’s graphs appear to report that 1 out of 13, or 8% investigations in 2006 and about 5 out of 75, or 7% of respondents in 2006, were NPE investigations. This establishes a baseline, of about ~ 7% of respondents and ~8% of investigations in 2006, from which change can be measured.
Again, I applaud the ITC’s willingness to provide statistics on this important issue. In the coming weeks, I will try to compare datasets with them so that any discrepancies and remaining questions can be answered.
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Join the Discussion
60 comments so far.
Blind Dogma
August 8, 2012 11:58 amIf I wasn’t against academia in general before, the “other blog” posted a guest column by academia that shows that certain people are downright dangerous and should be banned from having anything at all to do with patents.
Not to name names, but Dr. Cristal Sheppard should be vociferously castigated for the wanton bias and legal misrepresentations in her “scholarly” article. It is beyond scary that she includes as part of her background Chief Counsel on Patents and Trademarks and Courts and Competition policy for the United States House of Representatives Committee on the Judiciary.
If anyone wonders why the AIA is so F***ed up, there is a clue.
Stan E. Delo
August 4, 2012 10:29 amVery well said Anon!
Those that think that they don’t have a horse in this race seem to have forgotten that this whole discussion would not be possible without the patents that led to the widespread use of personal computers and therfore access to the internet. Some academics don’t seem to get that at All, as in advancing the arts and sciences, for various reasons I suppose. I guess it is just too easy for them to go the cheap and easy route of just saying no to patents, and deny the innovators their very brief moment in the sun. If they were to actually innovate instead of just teaching, they might be whistling a very different tune.
Anon
August 4, 2012 09:56 amThe fact that Ms Chien focuses on PAE’s to begin with provides the evidence needed to show that any results are inherently biased.
Such a focus naturally innures to those who despise patents and who created the “Troll” label to begin with: the large established companies who are most threatened by patents.
Patents are a potential game changer that nullifies the advantages that large established companies have. While large established companies will play the patent “game” (because in part they have to and in part because patents DO work to advance society), the fact that large established companies face threats from patents (in the hands of others) is enough for those large established companies to actively seek out and diminish the power of patents.
One thing often overlooked when it comes to “Trolls” is that the nature of “Trolls” acts as a patent thicket buster. The large established entities use the patent system to purpsoefully grow thickets of patents because they can best afford to. The large established entities then can employ an armageddon strategy against new small companies with a small portfolio. “Trolls” neutralize this armageddon strategy because “Trolls” cannot be blackmailed with the threat of shutting down production of goods.
The aim of Prof. Chien’s work (whether on purpose or not) is a clear abetting of the established entities that seek to diminish the power of patents.
It is for this reason that I reject the very premise of Prof. Chien’s entire work and focus. Those who think they do not have a “horse in this race,” but nevertheless actively feed the horse that is in the race need to re-evaluate their positions – they are not as removed and objective as they may think themselves to be.
Michael Risch
August 3, 2012 11:26 amYeah, I know what THIS decision says, but but that’s not the whole story. This decision also makes clear that the substantial investment wasn’t challenged here. We don’t have the opinion in the new Rambus case yet, but it cannot be that you can have substantial investment generally, but a piece of it goes to one patent. If that were true, Rambus would not have lost on this issue.
See this article: it explains things pretty nicely, and it shows that licensing alone is enough, but…
http://www.lexology.com/library/detail.aspx?g=87ad870d-c420-4632-8fd0-40c22ac1bae1
As noted in the article (and the case), pre-litigation licensing efforts are key, and the ITC and court can take a fine-grained look at whether litigation is really licensing, etc. I think this is consistent with what I’ve been saying – that it is harder to meet the standard than you might think. You clearly disagree with me, but I think that “licensing is enough” doesn’t win without more.
But, like I said, I don’t have a horse in this race.
Blind Dgoma
August 3, 2012 11:02 am“Substantial exploitation of a single patent is definitely MORE than just ‘licensing alone.’ ”
No. It is not. You are misunderstanding the decision grossly (beyond dense). The decision is clear: licensing alone suffices.
I don’t think you can get more clear than that.
Let me say it again in case you were cleearign the cobwebs from your ears: Licensing alone suffices.
Where you are kicking up dust is looking at which patent can be placed in action. OF COURSE, the specific patent affected must be the one to which the substantial investment – read that as the licensing effort – is affected. The decision is NOT saying that ALL of the substantial investment must be placed in each individual patent. That’s a reach even for academics who must conjure up juicy story lines in order to publish, lest they perish.
Michael Risch
August 3, 2012 09:59 amStill not sure what you mean – I guess I’m dense. The goal posts haven’t moved – I agree with you that the Fed Cir is saying licensing is enough. Indeed, I never even disagreed with this.
My concern was what it meant to be an investment in exploitation through licensing. The current rule is a substantial investment relating to the specific patent. That is not in line with my view of how it should work, so the goal posts are narrow and fixed and my position isn’t winning. It certainly isn’t the first time a court has disagreed with my view – indeed, the Supreme Court did so explicitly (with a cite, at least!) in Prometheus.
That said, I think the Fed Cir is not nearly as far from my view as you think. Substantial exploitation of a single patent is definitely MORE than just “licensing alone.” Significantly more, I think. Like I said, if Rambus can fail this test, no NPE is safe. We’ll see if the Fed Cir reverses the ITC in that case, maybe so.
Blind Dogma
August 3, 2012 09:50 am“Seems in line with my last comment”
Sorry Micahel that I did not notice how far you moved the goal posts and how wide you made them (even Charlie Brown can now score).
The “with respect to each patent” is a bottom line no-duh type of requirement. You bring action on those things that are affected.
The real gist is that licensing AND LICENSING ALONE is enough. This clearly cuts against the academic views espoused here. No wonder Colleen wanted a truce – her position is being trounced.
Michael Risch
August 2, 2012 12:10 pm? From my last comment: “For what it is worth, the recent Rambus decision that reverse the ALJ (and finds no domestic industry) seems to make quite clear that the ITC must find industry with respect to each patent – not with respect to “licensing” activities generally. In other words, apparently the ITC can target anyone it wants, and the patentee must show substantial licensing investment with respect to the patent at issue.”
Isn’t that exactly what the Fed. Cir. said? That domestic industry requires investment in licensing for a particular patent, and not generally?
I don’t mean to claim victory – this is obviously not the view of the statute that I have. I was only implying that the latest case appears to have a similar view as the ITC in Rambus.
In any event, if I were an NPE, I wouldn’t rest easy, because a) there is still a risk that Congress will not like the current view and thus will modify the statute to somehow let universities and design houses in in but exclude patent assertion entities, and b) if the ITC can find that Rambus doesn’t have sufficient industry with respect to a particular patent, I think that many NPEs could fall prey to the same factual finding. It appears that interdigital is a design house similar to Rambus, not a patent assertion entity. Thus, it may be easier for it to show the type of investment in a single patent necessary to win at the ITC.
Blind Dgoma
August 2, 2012 10:00 am“Seems in line with my last comment”
Not.
But a good “academic” trick, when all else fails, just claim victory.
Michael Risch
August 1, 2012 11:26 pmSeems in line with my last comment. Definitely a good read for NPEs, though I think the focus on a single patent may actually be a harder hurdle than I had in mind.
Blind Dogma
August 1, 2012 07:05 pmSpeak about timing…
http://www.patentlyo.com/patent/2012/08/federal-circuit-again-supports-usitc-jurisdiction-for-pure-enforcement-npes-court-again-splits-on-claim-construction.html
Oh snap.
Michael Risch
July 29, 2012 03:41 pmFor what it is worth, the recent Rambus decision that reverse the ALJ (and finds no domestic industry) seems to make quite clear that the ITC must find industry with respect to each patent – not with respect to “licensing” activities generally. In other words, apparently the ITC can target anyone it wants, and the patentee must show substantial licensing investment with respect to the patent at issue.
That seems hard to meet to me – even too hard. That said, I wonder whether enforcement in court counts as an investment in licensing. If not, that can be a problem for NPEs (including those like Rambus that are not just in the acquisition/enforcement business).
FYI, the argument for no domestic industry is in this brief:
http://investordiscussionboard.com/sites/default/files/post-attachments/638/732161-476308.pdf
and the ITC seems to have bought it.
Stan E. Delo
July 29, 2012 07:11 amBTW-
There Is a requirement for discovery documentation, at which point the other party will know about the proceedings. Another interesting feature is that if the other party tries to keep getting products into the US. the products can be seized and forfeited.
Thanks-
Stan E. Delo
July 29, 2012 07:04 amTBL-
Of course a patent or TM is neccesary, and it looks as if the time range is from 4 to 15 months to get an exclusion order. Seems as if you can get Temporary Exclusion Order (TEO) in a few months though, if the Administrative Law Judge thinks your request for one and your complaint has merit. Interesting that I couldn’t find any information about the cost, except for attorney fees for preparing and filing the complaint, of course.
http://usitc.gov/ Guess I need to keep looking, which perhaps is why nobody seems to know how much an exclusion order might cost at the end of the day.
The Big Lebowski
July 29, 2012 06:13 amStan, looks like you’ve got two misconceptions, and my earlier post may be partly to blame for one of them. First, you can’t get an exclusion order if you don’t have a patent (or TM or (c)) – you can’t even bring suit before the ITC if you don’t have a patent. Second, the surprise element in ITC proceedings is NOT a surprise exclusion order – that would violate due process – but the fact that the ITC does some leg work of its own, based on the patentee’s (or TM owner’s, or copyright owner’s) complaint to the ITC, before deciding to proceed, and you can consult the ITC attorneys while preparing the complaint to increase the likelihood that the ITC will move to the next step. The alleged infringer doesn’t know about that initial stage of inquiry. If the ITC decides to proceed, i.e. to formally open an investigation, it posts notice and only at that point is the accused infringer notified – and the infringer will normally only have 20 days to respond (compared to what’s normally 60 days to respond to a complaint filed in district court).
Stan E. Delo
July 28, 2012 01:30 amComparitive costs, as regards ITC filings versus a Federal Circuit litigation proceeding. Does anyone here have any ideas in that regard? An ITC decision in my favor will prevent cheap knock-offs from stealing my market before I have even a slight chance to develop a *domestic* market, once my patent hopefully issues in about 2 years from now. I requested non-publication, just so that the rest of the world won’t be able to see it unless a patent is actually granted. Methinks some of the attormeys here have forgotten what their real purpose is, as in protecting their clients’ best interests, by waxing Rhapsodic about the importance of the price of Tea in China, or the price of beans in Boston.
How much does it cost to file a complaint with the ITC? Infringement proceedings in the FedCirc can easily run into the millions, which nearly all small entities cannot afford.
Any ideas in that regard Colleen?
Stan~
Michael Risch
July 27, 2012 08:09 amYes, now we are clear on the differences between our views. Except I’ll note that I hold mine with significantly less certainty than you hold yours. I’ve said that my gut says it doesn’t feel right. I have no idea how the law will or should shake out. I do believe with 100% certainty that Acacia and Warner Brothers are not the same business model.
To address your questions, though:
“one only needs to find a sufficient number of infringers to render a patented technology not having a “domestic industry.””
No, the issue is not how many infringers you go after. It’s what you are doing with the IP when you are not going after infringers. You could probably license to one new entity and go after 1000 infringers depending on the business model.
“Does your criterion require that the patentee “pitch” the patented technology to every possible entity that is “not yet developing the [would be infringing] product” in order to qualify as “domestic industry”? Would pitching it to 100 qualify?”
Of course not every, or even 100. I don’t know the threshold, but I suspect it’s more qualitative.
“Do you believe that the ITC has authority to find patentee’s “employment of significant capital” or “substantial investment” in licensing activity as not meeting some ‘pitching intensity thresholds’?”
I don’t know, but I don’t see why not. How else could the ITC keep everyone who filed a complaint from coming in? And I will reiterate – it is not investment in licensing. It is investment in exploitation (which may include licensing), and those are two different things.
“Can it do so without actually having promulgated rules for such thresholds by public notice and comment?”
Maybe not, but there are lots of statutory provisions that are applied without promulgated rules. Not every statutory standard has to have a clear bright line to be arbitrary – though I agree with you that it would be better if there were such rules.
“Why then did the ITC not issue rules for distinguishing between “commercialization” and mere “protection of IP” if that distinction is intended under the 1988 Act? Is it possible that the ITC could not come up with such rules because it could not find such distinction in the statute?”
Sure, that’s possible. It’s also possible that this issue was not really an issue until the growth of such claims. My initial point was that given limited resources, we might want to limit who can go to the ITC. As I’ve said over and over, I don’t have any animus toward NPEs.
“Are you and Colleen not really talking about the current statute but rather about some other statute you hope Congress will enact? Congress can enact many different laws in the future but here we are talking about what it did enact in 1988, right?”
Colleen can speak for herself. I don’t hope Congress does anything. I don’t have a dog in this fight. I could be wrong about the interpretation of the 1988 statute; I’ve been wrong before and I’ll be wrong again. I can tell you that Congress is heading in this direction, even if it is a clarifying statute, and continuing to equate Acacia with Warner Brothers will not carry the day. Which leads to my last answer.
“To make sure I understand your criterion, I want to confirm that you do consider Warner Brother’s licensing division’s activity a “domestic industry” because you have not said so. If you do, can you please point to how they meet your criterion and please clarify how their “pitch to those who are not yet developing the product” differs from that of patent NPEs.”
Yes, Warner Brothers owns the IP. Not “Warner Brothers Licensing”. Which means that even if the licensing division goes after infringers and infringers only (which is certainly not true – see Batman happy meal toys), they are going after infringers of published copyrightable products that the company exploited. In other words, they commercialized already first, and then went after infringers.
Like I said, there are plenty of NPEs that do this. Licensing arms of of practicing companies, for example (like Warner Brothers). Qualcomm (that’s your better analogy, no?), etc. The key is the exploitation (though admittedly undefined), not just the fact that the entity is going after infringers.
Ron Katznelson
July 27, 2012 04:11 amMichael,
Of course the issue is not whether the defendant has infringed when determining whether the plaintiff is in a domestic industry. I never said it was, nor did I make a circular argument. I am sorry if I failed to make myself clear. I said that by your criteria, a patent holder that had not “pitched to those who are not yet developing the [would be infringing] product” would not qualify as having “domestic industry.” By implication, if the holder “pitches” it to parties that have developed the [infringing] product – in other words, asserting the patent – then the patentee does not have a “domestic industry” according to you. It is you who are making a circular argument because under your criterion one only needs to find a sufficient number of infringers to render a patented technology not having a “domestic industry.”
To make sure I understand your criterion, I want to confirm that you do consider Warner Brother’s licensing division’s activity a “domestic industry” because you have not said so. If you do, can you please point to how they meet your criterion and please clarify how their “pitch to those who are not yet developing the product” differs from that of patent NPEs.
Does your criterion require that the patentee “pitch” the patented technology to every possible entity that is “not yet developing the [would be infringing] product” in order to qualify as “domestic industry”? Would pitching it to 100 qualify? Do you believe that the ITC has authority to find patentee’s “employment of significant capital” or “substantial investment” in licensing activity as not meeting some ‘pitching intensity thresholds’? Can it do so without actually having promulgated rules for such thresholds by public notice and comment? I hope you understand that this would be arbitrary and capricious under the APA. Why then did the ITC not issue rules for distinguishing between “commercialization” and mere “protection of IP” if that distinction is intended under the 1988 Act? Is it possible that the ITC could not come up with such rules because it could not find such distinction in the statute? Are you and Colleen not really talking about the current statute but rather about some other statute you hope Congress will enact? Congress can enact many different laws in the future but here we are talking about what it did enact in 1988, right?
Stan E. Delo
July 27, 2012 02:35 amDoes anyone happen to know the comparative difference between an ITC complaint versus a District Court litigation proceeding? As has been mentioned before, an ITC complaint is Not litigation, per se, or otherwise the opposing attorneys could demand discovery. If there is no access to discovery, as in a *surprise* injunction, what’s not to like about that? The impressions I got is that an ITC complaint is a sort of fixed fee thing, whereas a Court case wil very nearly by definiion be a somewhat open-ended and perhaps incredibly expensive proposition. I guess I asked just the right question, because nobody has dared to venture even a guess.
Cheers,
Stan~
Michael Risch
July 26, 2012 02:58 pmWell, you don’t have to sell me on the history, though many have argued that we owe more to Curtiss for commercializing. I haven’t studied it enough to know. I also think there are some conduct differences, at least for some NPEs. But I think the differences are not that great. That aside, though, I’m still not following the argument. Perhaps I really am dense.
The issue is not whether the defendant has infringed. The issue is whether the plaintiff is in an industry that has invested substantially in the exploitation of IP through engineering, R&D, or licensing. Then the question is whether investment in exploitation in licensing counts where a) the business model is to not invest in the creation of the IP in the first place (I think probably, but that doesn’t mean its unambiguous) and/or b) the business model is the exploitation primarily by licensing to those that are already infringing versus those that are going to take the IP and exploit it but that weren’t already.
Of course, if the industry model fits the statute you should be able to go after people who are infringing, but you are making a circular argument. Because we are going after those that infringe, we are entitled to go after those that infringe. I think it cannot work that way. I think you have to show that you are fitting the statute otherwise. If you are arguing that only getting licenses from people who already infringe counts as investment in exploitation from licensing, that’s fine, but I’m not convinced by focusing on infringers.
As far as “intent,” perhaps that was the wrong word. The question is what it means to “exploit.” A court could find that exploit means to actively create new stuff (or license someone else to do so), and not to merely collect royalties from those who already exploited it (albeit in an infringing manner). I get that you disagree with that interpretation of the word, but it is not a crazy one, and it is NOT one that singles out NPEs – there are many NPEs that fit that description quite nicely.
I also continue to fail to see the analogy to copyright. Is there some group of copyright holders out there that are NOT selling a copyrighted product or licensing that product to someone who was not infringing beforehand that is bringing ITC claims? The copyright ITC plaintiffs all sell products or license to those that do, and I suspect that most of those licenses came before infringement, not after.
Ron Katznelson
July 26, 2012 02:44 pmNow, the historical perspective. For the last few years, NPE’s have been targeted as second-class patentees of lesser rights for no other reason but the nature of their business model – not their conduct. However, this is hardly a new tendency, as patentees’ rights were under similar assault a century ago, with far reaching adverse consequences. The NPE rationale was used along with the fabricated myth of the aviation ‘patent logjam’ to persuade Congress to authorize funds for the U.S. Government’s condemnation of the Wright airplane patent in 1917 before the U.S. entered WW-I. This rationale was later explained by the National Advisory Committee for Aeronautics (NACA) executive committee, which instigated the action as follows:
“Throughout the development of aeronautics to this period, the Wright Company had done very little as a building company. It had rather preferred to stand on its patents and assess royalties, leaving to others the actual development of the art of aeronautic construction. … The Curtiss Company, on the contrary, had engaged actively in airplane construction, had sold planes under bond with regard to royalties which might he assessed under the Wright patents, had built extensive works for airplane construction and laboratories for experimental research, had likewise developed new types and forms of construction, especially in the field of the hydroairplane and flying boat. It is fair to say that throughout this period the Curtiss Company was the only active agency largely engaged in the development of the airplane industry and that the industry as it now stands owes far more to the Curtiss Company in the way of development, than to any company in the field.” [NACA executive committee “Memorandum regarding patent situation in the early months of 1917” to the Attorney General (Sep. 27, 1917)].
In arriving at its recommendation for condemning the Wright patent, the NACA executive committee maintained that “any adequate return to the Wright stockholders upon their investment [in the Wright patent] must be through the manufacture and sale of airplanes, airplane engines, etc, and not through patent channels.” It insisted that “any return from patents must necessarily fade into insignificance … .” [(NACA executive committee minutes, Feb. 3, 1917, p4].
By today’s definitions, the Wright Co. was an NPE. Now, who do we “owe far more” when it comes to domestic development of aviation? To the Wrights (NPE), or to Curtiss (manufacturer)?
Ron Katznelson
July 26, 2012 02:36 pmMichael,
Thank you for finally moving the ball forward in this discussion, having clarified a purported distinction you see in licensing activities. You question whether “NPEs are investing in the exploitation of the IP in the way the statute intended” and you create your own straw-man that has no basis in the statute – “I think you have to show purchase of patents and pitching it to those who are not yet developing the product.” However, the statute does not “intend” any “way” for “investing in the exploitation of IP.” This tortured logic of yours would mean that any infringer who had actually developed products based on a patented technology would be immune from ITC action because the patent holder was not “pitching” to the infringer while he was “not yet developing the product.”
Let me give you two hints: first, exclusion orders issue only upon a finding of infringement; second, check that any criterion you come up with for “domestic industry” passes the smell test in a copyright setting. By your criteria, a copyright holder that had not “pitched to those who are not yet developing the [infringing] product” would not qualify as having “domestic industry” and would therefore be unable to obtain an exclusion order upon showing of infringement. That is definitely not the intent of Section 337, which does not distinguish among IP holders’ business models. Your arguments for singling out NPEs are simply unsupportable.
Michael Risch
July 26, 2012 10:36 amWell, we obviously disagree on this. I’ll sign off with this: I’ve written an article that says that NPEs should generally be viewed on par with other patentees. If you can’t convince me that Acacia and Disney are in the same industry, good luck convincing anyone else.
The problem with your argument is that you’ve fallen into assumption 1: that the statute treats all licensing industries the same. It does not. It requires substantial investment in exploitation. There is a non-trivial argument that investment in the enforcement of patents where the technology has already been exploited by another is not the type of substantial investment intended by the statute. As such, industries that license in that way are excluded.
You disagree – that’s fine. But I’m still waiting for the reasoned argument that either a) I’ve got the statute wrong (and your pronouncement that it is not vague is not getting you there), or b) that NPEs are investing in the exploitation of the IP in the way the statute intended. I think you have to show purchase of patents and pitching it to those who are not yet developing the product (and I know some NPEs are doing this), but maybe I’m wrong about that. But you won’t convince me by saying that Acacia and Disney are in the same licensing industry. They are just not.
I’ll read more of Ron’s articles on this – maybe he’s got the arguments that will convince me.
Blind Dogma
July 26, 2012 10:25 am“The problem with this argument is this: it either assumes that the statute treats ALL licensing the same, or it assume that Disney and Acacia are the same type of licensors.”
There is no “problem,” as you are attempting (or at least drinking the same Kool Aid as those attempting) to artifically create an issue of “types” of licensors.
You were not being too subtle. You were being too dense. You still want to create an errant distinction of “who owns” instead of “industry,” and industry has already been defined as including “licensing.”
It is a bogus argument to say “if Congress chooses to” because Congress can choose anything and that is NOT the point of the discussion.
Point in fact is that any “leaning” you see can be attributed to the very powers attempting to shape the legislation to fit their agendas. You are dangerously naive if you do not think this is happening (and I am heartened to see that you, the non-royal you, get this – probalby one reason why I actually think decently of you even though you are an academic). My point is that the academics would do everyone a greater service if they choose to spend their energies on making sure the process is crystal clear.
Michael Risch
July 26, 2012 08:45 amApparently my point was too subtle, so I’ll spell it out. As I said, though, if you mistake skepticism for an argument for an agenda, your favored policy will get run over in the end, because your arguments won’t get any stronger. And that’s what I am: skeptical. i have no idea how it should turn out (though I have a gut feeling) and I’m waiting to be convinced to the contrary. I didn’t imply anything was illegal or anything of the sort.
Here was my point. Ron argued that this is so clearly in the statute. After all, it protects licensing companies like Disney. if we limited this in any way, then surely we wouldn’t tell Disney that they are foreclosed from the ITC for licensed properties. The problem with this argument is this: it either assumes that the statute treats ALL licensing the same, or it assume that Disney and Acacia are the same type of licensors.
We know the first assumption has to be wrong – the statute is clear that only certain licensors (or licensing INDUSTRIES) if you prefer fall into the statute.
Thus, to prevail on the argument, you have to get people to buy into the notion that Acacia’s licensing efforts are no different than Disney’s. And maybe they are. But my comment was making the point that if that’s the best you’ve got, you’re in trouble because Congress will have no problem finding that they are not the same if that’s what they choose to do – which appears to be the way things are leaning.
As for the lobbying, you are right. A lot has been written lately about corporate lobbying to strengthen copyright and trademark and we view such efforts negatively. We should be looking carefully (I do, but I think many academics are not) at who is backing changes to the patent law and considering whether the source implies a problem.
Blind Dogma
July 26, 2012 08:14 am“let’s tell Congress that Acacia and Disney are the same and see how that flies. I have a feeling someone smart in Congress is going to be able to make a distinction, whether right or wrong.”
Further, a comment like this only highlights the fact that there are agendas in play and says nothing about making sure that those agendas are checked at the door. A big so what between any difference between Acacia and Disney. Are you somehow implying that Acacia is acting illegally with its rightful property? It certainly seems that you have drunk freely from the “Trolls are Evil” Kool Aid.
If Academia wants to really do the patent world a favor, they would spend some of their ink on addressing how Big Corp is actively attacking the patent system and using its lobby power to influence legislation (and that is but one mode of their attack).
Stan E. Delo
July 26, 2012 12:04 amColleen-
Sorry for the delay… I agree completely with what The Big Lebowski had to say, and I wasn’t even aware of the surprise factor he mentions, which is a major benefit. I should probably have been speaking for independents and small entities actually, but after being on the Techno-L forum for a few years, I was seeing that the Universities tend to have some of the same reasons for avoiding litigation whenever possible.
Two of the main factors are the sheer expense of litigation in the District Courts, and the huge delay of an unencumbered patent right until the case is decided, often being several years. The only way the vast majority of independents can *afford* the cost of litigation is to find someone willing to take up the the case on a contingency basis, which is difficult at best. I would guess the same is true for small entities that are trying to get an invention into the marketplace. Many small entities are spin-off companies based upon inventions coming from the universities, so that is where I was making the connection to the Univerties’ best interests. That is generally how they monetize their patents, as well as licensing some of them, as seems to be indicated, benefiting the Universities so that they can continue to do more research and development.
To my way of thinking, even if I was able to enlist contingency representation, the years in litigation might very well cause me to miss my market window, while it was tied up in court, and the possibility of finding a willing licensee would pretty much vanish until the case had been resolved. As far as I am aware, the ITC route will be only a dime on the dollar compared to Distric Court proceedings, but I am not sure about that. Does anyone know about the comparitive costs? Add to that it has become much more difficult to get a permanent injunction in the District courts lately, so why would the infringer have any reason to accept a fair licensing agreement to continue their activities? If they won the case, they could walk away from the bargaining table.
Thanks for being there for us! During most Patent Reform hearings, small entities and independents were completely left out in the cold, except for Dean Kamen, on a panel that included about 5 or 6 representatives from large corporations. I know this because I watched the hearings on C-Span as they happened.
Best regards,
Stan~
Blind Dogma
July 25, 2012 03:47 pm“a) this isn’t just academics,and b) Congress is listening to folks with a clear and unsurprising point of view, and that is going to be a problem for NPEs”
I am well aware that patents are under attack by more than just academics. Those that would love to weaken patents come from both the left and the right, and NPEs make an attractive scapegoat for both.
Michael Risch
July 25, 2012 02:35 pmI think Colleen’s point was that a) this isn’t just academics,and b) Congress is listening to folks with a clear and unsurprising point of view, and that is going to be a problem for NPEs.
The statute is vague. I know Ron makes a good argument, but it is only one argument, and it is hardly beyond refutation. As for that argument, and without commenting on the merits too much, let’s tell Congress that Acacia and Disney are the same and see how that flies. I have a feeling someone smart in Congress is going to be able to make a distinction, whether right or wrong.
Colleen
July 25, 2012 01:32 pmThanks Lebowski. I know that the ITC has many procedural advantages, your post helps illuminate that they’re an important driver. Isn’t litigating in the ITC more costly than say, EDTex? Seems expensive to file in both places.
Blind Dogma
July 25, 2012 01:00 pmI am also surprised at Colleen’s apparent oversight of the motivation of a company like Cisco in quashing the availability of using the ITC.
Not really, but I wanted to give the academic the benefit of the doubt.
The Big Lebowski
July 25, 2012 09:49 amColleen, I’m little surprised by your question ” So interested in what the ITC adds?”. It’s well known that there are a number of advantages to using the ITC. First, proceedings at the ITC are often much faster than at the district courts (or least have been until now). Second, for judges at the ITC, patent disputes constitute a much larger percentage of their caseload than they do for most district court judges, so ITC judges are on average more patent-savvy than district court judges. Also, there’s an element of surprise: firs the ITC institutes an investigation, and only afterward does the defendant learn it was investigated when case is passed on to the judge. Plus, in keeping with the speed factor, the time for discovery is quite short. If the defendant is a foreign entity that’s not used to US litigation, let alone such litigation at breakneck speed, that’s a huge procedural advantage for the patentee. So the ITC can be a useful forum to obtain a exclusion order (the equivalent of an injunction) while a parallel case for damages proceeds before one of the district courts.
Blind Dogma
July 25, 2012 09:44 amMichael
Your comment about 1) at post 26 is a contradiction. The “who” is a specific owner question. “Industry” is not a specific owner identifier. And it is not a minor point because it reveals the very agenda, er um, philosophical viewpoint that I first railed against.
Your comment about 2) ignores the actual record that Ron Katznelson supplies. It is thus more than just a “statutory interpretation.” Also, “statutory interpretation only comes into play when that statute is vague. Here the record indicates otherwise. Wanting a different interpretation does not mean that there is a statutory interpretation issue (you, again the royal you, do not get to fabricate issues in order to advance an agenda, er, um, philosophical viewpoint (this goes to one of my pet peeves against academia: the need to generate issue upon which to publish; publishing “all is well” does not cut it in academia).
Your comment about 3) might stem from Congress not being interested per my reply to 2).
Colleen
July 25, 2012 09:38 amSupportive of Michael’s last point and Gene’s reporting, the issue of NPEs at the ITC is not an academic
one — three of the other panelists were from companies, 2 supporting immediate change (Cisco and Ford) and one (Tessera) against it. I and someone from the antitrust institute favored a wait and see, then act if needed approach.
Also I’m really curious about the comment that the ITC is the *only* recourse universities and inventors have. As 2/3 of ITC cases have district court counterparts it doesn’t seem to be a matter of jurisdiction. So why isn’t district court sufficient? Anyone can get royalties there, and from looking at all district court decisions since eBay (new research that’s reported at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2022168) it seems like universities and individuals also do quite while at getting injunctions. So interested in what the ITC adds?
Michael Risch
July 25, 2012 08:06 am1. Yes, I agree that it’s industries, not specific owners. But that’s a minor point – it’s not about the patents, but who is enforcing them.
2. This is an issue of statutory interpretation – the question is who is covered. You’ve made the argument that all NPEs are. And maybe that’s right. But maybe it’s not. It’s only a “change” in the law if you’re right in the reading.
3. Stan – yes, it may not come to pass. Good luck with that – Colleen didn’t testify before Congress because they weren’t interested.
Stan E. Delo
July 25, 2012 02:26 amMichael-
By it’s very description, what *may* come to pass is yet to be determined. You can aver whatever you like, but the real truth in the matter is that it has not been decided quite yet. Sometimes I get the sense that pure acedemic *examination* of the issues often misses the really relevant issues, in that any particular acedemic correspondent doesn’t really understand the market and prior art issues that smaller entities often face. Does the pure acedemic actually understand how much is at stake for smaller entities, or are they just pontificating on more abstract concepts?
The law is what it happens to be, no matter which way anyone happens to care to spin it. You can construe the *laws* in different ways, but at the end of the day, you will have to come up with a compelling case for your views, or you might very well Lose your case.
Very interesting stuff, and you make a good case, but I don’t happen to buy some of your posits.
Best regards,
Stan~
Ron Katznelson
July 24, 2012 08:50 pmColleen,
I appreciate that the ITC opinions and FTC report may recommend or seek to interpret the 1988 statutory change narrowly, concocting a counterfactual notion that “licensing activities that promote technology transfer may not be ‘exploiting’ patented technology within the meaning of Section 337.” This notion, however, ignores the actual meaning of the term ‘exploiting’ and belies the plain language of the statute. Congress made no reference to “technology” or any distinction between copyright, trademark, or patent “licensing.” It did not distinguish between these forms of IP for which “significant employment of labor or capital” is made – a criteria met by those who acquire patent rights with “significant capital” for the purpose of licensing them. The concept that you propose in your paper – “commercialization and adoption of technology, rather than the protection of intellectual property, has been or should be the focus of Section 337” – is a non-sequitur because there is no commercialization and adoption of patented technology without the coordination that necessarily takes place under patent licensing.
JD, my comments above regarding “significant employment of capital” in licensing activities would make your distinction between “significant” and “substantial” moot.
Licensing is a domestic industry under the 1988 Act.
Ron Katznelson
July 24, 2012 08:21 pmMichael,
I do appreciate your effort to be objective and the opportunity to clarify where we differ. You say: “Ron can make whatever arguments he wants, but the fact of the matter is that there are all sorts of OWNERS that are barred from the ITC, and the question of which NPE owners, if any, are among that group is not predetermined.”
While the owners may not be predetermined, the industries are. Contrary to your implication, I have made no arguments regarding OWNERS or owner-specific rights in ITC proceedings. As you may have correctly implied, Section 337’s role and purpose is not to protect owners or their property rights – that is the role of the federal district courts. Rather, Section 337 is designed to protect “domestic industries,” and my question was what public policy rationale you offer to single out domestic IP licensing activities as not eligible for the same protection as domestic manufacturing. Your comment above that “I am not convinced that NPEs, even those that spend a lot of money doing R&D, should be able to enjoin imports at the ITC” does not answer this question. If you want to change the law – and you might have compelling reasons for doing so – it is you that bears the burden of providing the explanations for that change (even if that change is purported to be interpretive only). Give us a cogent reason for singling out these domestic licensing activities. While you are at it, please also answer the second unanswered question I propounded: would your rationale for excluding domestic industries that are based exclusively on substantial licensing activities apply to copyrights?
For example, would you deny Warner Brothers or Disney the ability to obtain an ITC exclusion order against imports of infringing copyrighted material or merchandise? They have no significant manufacturing operations but rather have extensive licensing divisions that include market research, sales, sales promotions, graphics services, financial control, and business affairs departments. Have you noticed that these types of licensing activities form the lion share of the copyright-intensive industries that provided 5.1 million domestic jobs in 2010? (See the March 2012 Commerce Department study Intellectual Property and the U.S. Economy: Industries in Focus at http://www.uspto.gov/news/publications/IP_Report_March_2012.pdf).
Why is this not a “domestic industry” which Section 337 is supposed to protect?
Michael Risch
July 24, 2012 06:48 pm*blush* Don’t forget that I had a career enforcing (and defending) patents for individuals, small businesses, and NPEs before going into academia.
But yes, the goals of scholarship are often at odds with the goals of patenting, so there is great resistance. If you are interested in this area, one of my former students, Josh Nightingale, wrote a note in the W. Va. L. Rev. on the lab rat v. patenting culture in universities a couple years ago.
Blind Dogma
July 24, 2012 06:41 pmI do have to chuckle Gene at your peace-making move. After all, Michael Risch is probably my favorite academic.
OK, MIchael, don’t get a big-head, I hold most academics in very low esteem.
It’s funny as I have worked with universities on the pro-patent side which tends to highlight the anti-patent feelings that most pure-teachers have. Most publishing academics aren’t worth spit. I hold you as an passable exception.
Gene Quinn
July 24, 2012 03:52 pmMichael & BD-
Jumping in mid-stream I know…
Michael says: “I think the “we have rights, you’re taking them away, so stay out of our business” attitude will lose the battle in the long run.”
I hate that, but I unfortunately suspect he is right. There is significant pressure pushing against patent rights presently. There are so many who erroneously believe innovation will simply happen without patents, despite the fact that there is no evidence to support that theory and overwhelming evidence to contradict the theory. What we are seeing is much like the debate over taxes. Most cannot get their head around increased taxes bringing in less revenue, although the history is clear on the point. When tax rates drop revenue increases, but it seems so logical that 30% of $1 is more than 25% of $1, so raising taxes has to generate more revenue. No one is ever going to win a debate with those who ignore history in favor of self-serving studies/reports.
Michael also says: “I think one issue with these blog comment debates is that there is an assumption that any person who disagrees on any point must have an agenda.”
My 2 cents is this… there are plenty who have an agenda and their disagreement is nothing more than intellectually dishonest propaganda. Having said that, the accusations of “an agenda” are too many. I agree that any dispute rises to the level of one party thinking the other has an agenda. For my money I like to level that charge only when lies are being told and uncontroverted facts being ignored or denied. Perhaps even then “an agenda” isn’t the right way to characterize much of what goes on in the blogosphere. I think mindless and uninformed commenters posing as experts lead many with knowledge to assume there must be an agenda.
For what it is worth, I don’t think either of you have an agenda 🙂
-Gene
Michael Risch
July 24, 2012 02:36 pmWell, I said it was insulting, not that my feelings were hurt. If you look at my scraps in the Patently-O comments, you’ll see my skin is pretty thick. In general, though, I think one issue with these blog comment debates is that there is an assumption that any person who disagrees on any point must have an agenda. It is possible, believe it or not, to not target a group while simultaneously questioning what the best policy is. Bear in mind that I just published an article arguing that NPEs are not really any different than practicing entities for the most part.
As to my points, 1 and 2 were related, which makes 1 quite relevant. You are right that it would be a shame if the government took away a vested right. But you are also assuming that the ITC right is vested, and this point is not so clear. Ron can make whatever arguments he wants, but the fact of the matter is that there are all sorts of OWNERS that are barred from the ITC, and the question of which NPE owners, if any, are among that group is not predetermined.
Which gets back to my last point. I think the “we have rights, you’re taking them away, so stay out of our business” attitude will lose the battle in the long run.
Blind Dogma
July 24, 2012 12:38 pmMichael,
1) So what? The right is there. An argument that it is there for whatever reason and “the government can take that right” only muddies the water. Especially as the current law does NOT provide for any treatment of a substantivepatent right post-grant based on status of owner (aside from any pro-small entity fee arrangement).
2) A better point. Except now, this brings in the force of Ron Katznelson’s posts and the fact that it is a change is the legal condition that is being advocated. It boils down to a desire to have only certain specific selected types of owners kept out of the ITC and that desire was quashed by Congress. In essence, you (the royal you) are targeting a group for philosophical reasons that were already shut down. I have a slight problem with that.
3) If you take my post as “insulting” you have much too thin of skin. Also, see the response to points 2 and 4.
4) Another non-sequitur. I believe in patent rights. I believe in earned patent rights. I believe that once earned, any attempt to apply post-restrictions on those substantive rights based on the status of the entity holding those rights is officious and meddlesome. You disagree? Fine. Don’t expect a comment like “that ship has sailed” to resolve the underlying “officious” nature of what is being attempted. That’s just plain insulting to anyone of any intelligence. If you are targeting “trolls” – for whatever reason don’t try to hide what you are doing. And by the way, I agree in proceedings to make sure patent rights are legitimate and can be challenged. Throwing out “Bilski” is a red herring. Pushback is one thing- targeting is quite another. The “debate” is not “how” to deal with NPEs – it’s why treat them differently to begin with (even if you think that ship has sailed).
Michael Risch
July 24, 2012 11:24 am“Based on that, maybe we should not be sticking our officious noses into making distiinctions on pretense for what people may fully and legally do with their property.”
Really? That’s how you want to respond to a reasonable comment about statutory interpretation? Blind dogma indeed. Here are some problems with this response:
1. It’s only a property right because the government says it is. The government giveth, and the government taketh away.
2. The ITC statute specifically allows only certain owners to bring claims, and so the “let’s just treat the property right” ship has sailed.
3. Thus, there is a real debate going on about how to deal with NPEs at the ITC (and everywhere else), and it makes little sense to insult one of the few academics — indeed, one of the few people outside of NPEs themselves — who hasn’t jumped on the NPE bashing bandwagon with adjectives like “officious.” I give opinions because I’m asked for them (to policymakers – here I’m just an observer).
4. Attitudes like “anyone can game it, so stay out of our business” may end up costing patent holder rights in the long run – if you push too far, you might not like the pushback. Just ask Bilski and Warsaw how they feel about their property right – a lot of good that crappy patent application did for everyone else.
Blind Dogma
July 24, 2012 08:08 am“Of course, this can be easily gamed.”
Based on that, maybe we should not be sticking our officious noses into making distiinctions on pretense for what people may fully and legally do with their property.
How about we treat the property right, and not the owner of that property right?
Michael Risch
July 23, 2012 07:12 pmBased on that, it seems like the dividing line is whether the licensing is to companies already producing or companies who are not yet producing. Of course, this can be easily gamed.
Colleen
July 23, 2012 03:12 pmRon and others –
The Commision’s Coaxial Cable Decision (337-TA-650) from 2010 reads the 1988 amendments like I and Professor Risch’s comments do:
“The examples mentioned in the legislative history . . . share a
common thread; namely, the intellectual property right holder is
taking steps to foster propagation or use of the underlying
intellectual property . . . . To the extent the examples contained in
the legislative history may be understood to convey an intent of Congress, they identify instances in which licensing activities encourage practical applications of the invention or bring the
patented technology to the market” (Opinion at 49)
The ITC reinforced this in their brief to the Fed Circuit in
Mezzalingua Assocs. v. Int’l Trade Comm’n, 100 U.S.P.Q. 2d (BNA) 1462 (Fed. Cir. 2011)
(“The Commission recognizes that the legislative history and the design of the statutory scheme
indicates that Congress intended section 337 to cover ‘licensing’ that encourages the productive
use of the patented technology.”).
Just to clarify the ITC’s position. I have a paper that talks about some of these decisions, if you want to read them http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1856608
JD
July 23, 2012 11:44 amRon,
Clearly the act was amended to protect licensors – e.g. universities – who often would fit into many definitions of “trolls” (and clearly are NPEs). Unfortunately often these discussions devolve into broad categorizations without any substantive analysis.
I wonder though whether there is enough consideration of what is “substantial” investment in exploitation, as required in the statute (you emphasize only “investment”). I believe this will be an interesting development as the csae law is developed (since the legislative history does not seem to be much help).
Evidentially, I think “substantial” is typically a higher burden that “significant” – the later of which is applied to (A) and (B) – plant, equipment, labor & capital. Of course this is normally comparing apples and oranges, but perhaps this might be a way to distinguish someone actively licensing to develop a domestic manufacture, versus “catching” accused infringers.
Michael Risch
July 23, 2012 07:32 amWell, recall that I have written in the past that I think NPE activity is related to prior productive activities, and I am generally in favor of strong patent rights. Thus, I don’t make my comment lightly, nor do I think that lack of ITC remedy should be a basis for rampant infringement.
As for an articulated reason, the statute says it is to protect investment – which could be read to be the initial investment. Indeed, that’s one reason, I suspect, why the ITC separates its NPE categories into those that enforce their homegrown patents and those that don’t. A second articulated reason is that, as important as invention is, commercialization is more important. Thus, if we have limited resources, we should favor protection of investment in commercialization.
Stan E. Delo
July 21, 2012 10:06 pmAnon-
Hard to deny the facts in the matters when it is spelled out so clearly, and backed up with clearly valid legal references. He helped me immensely while I was trying to get a letter to the Senate prepared properly to protest the Patent Reform Act of 2007, and even directed me towards many others that were willing to be signatories. Fortunately the Act failed, which was arguably much worse than the present AIA.
I even managed to get the letter into the Senate record, with receipts from both Senator Mitch McConnell and Senator Harry Reid’s offices, through finding a sympathetic Senate staffer.
Thanks to Ron K.
Anon
July 21, 2012 09:42 pmAs usual, I find Ron Katznelson’s posts packed with the type of power that cannot be ignored.
Thank you Ron.
Stan E. Delo
July 21, 2012 09:08 pmDan-
Fair enough, but you and Michael are just two individuals. There are probably about 2 million currently valid patents and their owners out there that might disagree with you though. What you think “ought” to happen sorta pales in comparison to what many others might stand to lose. That is why we have the Congress and the courts decide these types of matters.
Stan E. Delo
July 21, 2012 07:25 pmMichael-
In many cases, getting an ITC injunction to prevent the importation of infringing products is probably the only really practical recourse, especially for smaller entities and universities and their spin off entities. It doesn’t really matter if they are just licensing or just getting started producing products that are being sold here and perhaps abroad as well. The main point is that they ostensibly have valid US patent rights, so they should have Some way to prevent foreign entities from importing infringing products. (or large US corporations that are having them produced abroad and are importing them)
Your suggestion that they should not be able to get an ITC injunction unless they are a practicing entity here in the US seems naive and dangerous to me. Many times that is their only option, as they obviously cannot afford to spend perhaps millions in litigation costs “so long as there is a venue in the US that allows for an infringement suit.” as you seem to think. Even if the smaller licensing entities prevail in the courts, the chances of them getting a permanent injunction is depressingly small, due to what I think were woefully bad prior decisions in both the FedCirc and Supreme courts.
The infringing products can always still be sold outside the US, so why all the sturm and drang about allowing them to willfully import products that they have been told by the ITC are infringing US patent rights? Besides all that, the validity of the patents will be in limbo for perhaps many years, which is a total disaster for folks trying license here in the US. I think Gene was right in an earlier article, in that this latest effort to change ITC practices is being promoted by corporations that want to be able to run new competitors out of town, just because they think they might be able to get away with it, and they have lots of re-election funding available to spend. They got away with it with the passage of the AIA while few were paying attention to what was really happening, so why wouldn’t they want to go for the rest of the Gold?
Ron Katznelson
July 21, 2012 07:22 pmDan,
I understand. Can you articulate a cogent public policy rationale that would single out domestic IP licensing activities as not deserving the same protection as domestic manufacturing? Would your argument apply to all IP including copyrights, or only to patents? If only to patents, why should patent licensing rights be second class to copyright licensing rights? After formulating an answer to these questions, you should read the legislative history of the 1988 Act, specifically addressing what the law “ought to say.” You will likely find that your type of arguments were precisely those that were rejected by Congress in 1988.
Dan Feigelson
July 21, 2012 07:02 pmRon, no argument here about what the statute *says*. Both Michael and I raised a question regarding what it *ought* to say.
Ron Katznelson
July 21, 2012 06:09 pmDan and Michael, you are mistaken.
Domestic manufacturing is not the only “domestic industry.” Narrowly defining domestic industries to exclude certain licensing activities ignores the law:
19 USC § 1337(a)(3) currently defines domestic “industry” as follows:
”For purposes of paragraph (2), an industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned—
(A) significant investment in plant and equipment;
(B) significant employment of labor or capital; or
(C) substantial investment in its exploitation, including engineering, research and development, or licensing.
In 1988 Congress passed the Omnibus Trade and Competitiveness Act of 1988 to specifically amend Section 337 to make clear that the licensing of intellectual property is an independent and sufficient “domestic industry.” See Certain Digital Processors and Digital Processing Systems, Components Thereof, and Products Containing Same, Inv. No. 337-TA-559, Order No. 24 at 88, 93 (2007) (“It is clear that the intent of Congress was to allow entities that were actively licensing their patents in the United States to be able to meet the domestic industry requirement under the statute.”). The 1988 Amendment was also notable because Congress eliminated the injury requirement for patents and other enumerated intellectual property rights, such as copyrights. Accordingly, the history and evolution of Section 337 clearly demonstrate that its purpose and intent is to protect domestic industries (including those based exclusively on substantial licensing activities) from unfair acts in connection with import trade.
Dan Feigelson
July 21, 2012 03:27 pmI think Michael’s observation is on the mark. Seems to me the issue is that licensing is now defined as a domestic industry for purposes of giving the ITC jurisdiction. That’s not a reason to take patent disputes away from the ITC, as some would like to, but it may be a reason to tweak to the statute to make it clear that “domestic industry” doesn’t include licensing.
Michael Risch
July 21, 2012 09:30 amI think Colleen said that most in the last 18 months acquired their patents and the ITC charts (esp. q1 2012) seems to bear that out.
That said, I think your comments highlight a much bigger issue, which is whether the ITC is the proper forum for non-manufacturers. I am not convinced that NPEs, even those that spend a lot of money doing R&D, should be able to enjoin imports at the ITC. I see that forum as protecting US based IP manufacturing and sales, not US based licensing efforts. I realize this is an open question, but I am not convinced that the ITC is the right forum to vindicate these types of rights, so long as there is a venue in the US that allows for an infringement suit.
Colleen
July 20, 2012 04:24 pmGene, thanks for posting this article and your comments and questions.
1) I don’t think until the ITC and I sit down and compare the data that I can comment on the contents of their NPE Category 1 codings,
2) how much PAEs are benefiting inventors is something the GAO is reporting on by September. Data should drive that discussion, not anecdote or impression,
3) the earliest time in the ITC report is 2006, so that’s what I reported. Also it takes time for companies to respond to court rulings.
Gene Quinn
July 20, 2012 04:04 pmColleen-
Thank you for this contribution.
I do have a couple questions. First, you say that you define PAE differently than the ITC. I don’t know how you can lump ITC Category 1 NPEs together with ITC Category 2 NPEs and simply call the combination patent assertion entities. That seems to disregard the significant research, development and inventing that is done by Category 1 NPEs. It would seem far more appropriate when discussing whether there is a problem or unfair gaming of the system to focus only on those entities that do not engage in research and development.
Despite my above comment, I am also not ready to throw under the bus PAEs who do not engage in R&D. Many of these companies work together with innovators, acquiring patent portfolios and then continuing to mine the inventions for additional disclosures, even doing additional research and development themselves.
The trouble as I see it is that in order to support a “problem” associated with NPEs the many “good” players need to be combined with the few bad actors in the industry. That doesn’t suggest a problem to me, and I don’t like the idea of legislating in a broad swath to punish the bad actors.
Second, why is 2006 the baseline? eBay v. MercExchange was decided in 2005. So if there were going to be an uptick related to eBay it should have started happening in 2006, which it did not. That fact seems to undercut all those who are saying that the “problem” is about escaping the 4-prong eBay inquiry.
-Gene