Richard Lloyd is the North American Editor for IAM (Intellectual Asset Management) magazine, which is a publication that reports on intellectual property as a business asset and the many ways in which it can be used to create significant corporate value. Leading up to the IAM Patent Law & Policy event in Washington, DC, next week I thought it would be interesting to touch based with Richard for an on the record conversation about the industry and what he expects to see happen as we close out 2015 and head into 2016.
Without further ado, here is my conversation with Richard Lloyd, which took place via telephone on October 26, 2015.
QUINN: Okay, thanks, Richard, for taking time to chat with me today.
LLOYD: My pleasure.
QUINN: I know IAM has the Patent Law & Policy conference coming up on November 17 in Washington, DC, so I thought it might be a good opportunity to get on the phone and do like a journalist chat, I suppose, to get an idea of what are the issues that you’re following, what important issues you think might come up at this DC conference and what people should keep their eyes on as we move towards the end of the year and into the next year.
QUINN: So what’s occupying your time these days?
LLOYD: So patent reform has definitely been a big issue for us throughout the course of the year and one of the reasons, obviously, we’re doing this event. I have written less though as it has faded a little bit from view and Congress has continued to work on a couple of the key issues. That’s not to say it’s completely off the radar. I just think the likelihood of something getting done this year is pretty small and then we sort of shift into next year and then it’s an election year so the timetable becomes a little bit less certain. So I’ll keep following it but it just becomes less front and center of what I’m doing.
Other things that I’m continuing to follow are things like the impact of IPRs on the litigation landscape and the licensing market. They are also a part of the reform agenda but how companies are using them, particularly on the defendant side, is very interesting to me. Three years into this new regime there’s more and more data coming out in terms of what sort of reviews are being instituted and I think there’s going to be a lot more data coming out which is really starting to drill down into institution rates and, you know, I’ll continue to follow that very closely.
Then there are always cases from the Federal Circuit, obviously, and also from the Supreme Court that I will keep a close eye on and, you know, I’m interested in those decisions but also what they say about the macro level climate. I know this is something that you touched on last week with the Supreme Court granting cert. in the Halo and the Striker cases, you know, you posed the question, could this be the pendulum starting to swing back in terms of patents? I think that’s a very interesting question and certainly it’s something that I will continue to follow. It’s one of those macro level questions which I think really touches on many stories that I’ll report on over the next six months.
QUINN: So what do you think about that? If Octane Fitness and Highmark get applied to enhanced damages it seems to me that will put further pressure against patent reform. It’s going to be too difficult to get anything done anyway. Such a ruling seems like it would be more of an equalizer because you have to at least worry potentially about triple damages.
LLOYD: I think it’s an interesting point, the equalizing point and the way it relates to the pendulum around patent rights and certainly we are hearing from more people in the market that perhaps it’s starting to swing back. Now when you look at the reasons for that I think this certainly could be one. I think you were right to identify it. I think though there’s still a lot of skepticism in the market with some patent owners, certainly smaller patent owners, who fee that the litigation climate in particular is against them and to what extent that changes. It will be interesting to follow and I’m not quite sure it’s clear yet that the pendulum is gonna be swinging enough really to help them.
QUINN: Yeah, it’ll be interesting to see how this plays out because everything seems to have both intended consequences and unintended consequences.
QUINN: Before we get too far from it I want to take a step backwards just a little bit into patent reform. Has it surprised you at all how political this has become? For example, we have some of the conservative Republicans stepping in and trying to make this into a property rights issue, which I think it probably should have been all along. Patents are intended, I believe, from the very beginning of the country to be a property right, but did that shift in dialogue surprise you at all?
LLOYD: I think it’s interesting to see how people present this as a bipartisan issue but that covers up the fact that actually there are some very clear splits within the parties themselves. A number of the conservative think tanks and interest groups have come out and come out very strongly against broad-based patent reform. But, if you look at some of the Republicans in the House and Senate who support legislation they have not really addressed that property right piece and have focused more on litigation reform and things like fee shifting which they feel need to be part of any strong reform package. So the politics is quite split and is actually quite nuanced which I’m not sure people always appreciate.
QUINN: Yeah, I mean, it’s bipartisan in that way, I guess. In the House it’s the conservative Republicans that seem to be fighting the strongest to stall patent reform while in the Senate it’s the Democrats, Senator Coons primarily and he has an ally in Senator Durbin, and those factions that you don’t usually see agree on a whole lot. I wonder where this all leads? Whether this is going to bode well for more reform or people are going to look at more reform skeptically? And then at the same you also have to take into consideration that bio and pharma are asking for a carve-out so that Orange Book listed patent can’t be IPR challenged.
QUINN: What is your take on that bio/pharma request? That seems to be a request that is unrealistic, at least in the short term.
LLOYD: Well, that’s what most people say and that’s certainly what we’ve heard from some legislators who have come out and said they don’t like the carve-out. The question is to what extent does it become a necessity to get anything done? And for some legislators do they say we want to get something passed so we have to sort of swallow this one? I don’t think it will happen like that. I think increasingly what’s clear is we have an AIA-like process where this legislation is shaped and formed over many years and as that takes place the case law evolves, we see more impact from changes introduced by the AIA and we see the impact of things like higher pleading requirements. But IPRs have totally changed this reform debate. I mean, a year ago if we had had this conversation we wouldn’t really have been talking about them much and then, you know, thanks to Kyle Bass essentially it’s become perhaps the key issue in patent reform.
QUINN: It’s interesting because I don’t think pharma, who supported the AIA, really saw this coming. I remember going to a bunch of these presentations and conferences and I’m sure you’ve been to them too over the past few years, and it seemed like pharma just didn’t expect that this was going to touch them.
LLOYD: Right. I think you could find a few people who saw it coming or certainly claim now that they saw it coming but yeah, it wasn’t really touched upon and that’s partly because the first IPRs were mostly, and still are mostly, filed in the high tech space. But it has been developing — you know, I touched on this in a blog last Fall picking up on something from speaking to people in the market and I remember one distinct conversation and they said this could be an issue. The message was kind of watch this space in terms of pharma and IPRs and their relation to the overall sort of reform debate. So a few people saw it coming but it certainly wasn’t widespread.
QUINN: It really caught a lot of people by surprise. Now that the Patent Office has at least decided to move forward on one Bass challenge I think that that really adds a whole lot more fuel to this fire. It’s going to become a lot more interesting, I suppose, before we get to the end here and figure out what has happened. I also wonder, do you hear anybody concerned about the lack of appealability of these IPR institution decisions?
LLOYD: Yes. Yeah, I mean, that I think falls into a category of a couple of areas where people are frustrated, I guess, by it and I think it’s one of those areas that will be looked at. Quite how it’s changed I don’t know but it seems to me that there are a number of areas that need to be looked at in the IPR process in particular and there’s a growing body of opinion in favour of changes and debate around what should be done. The Patent Bar, to its great credit, is very aware of it and I think is conscious that it’s probably best that they and the PTO try to come up with some solutions and avoid the need for legislative action.
QUINN: Yeah, it’ll be interesting to see what all of this happens once we get a new administration here in a little over a year. I would agree with you that the PTO is going to be in a position to affect IPR in all the post-grant reviews to a greater extent probably than Congress just because there’s so many people lined up on both sides of the issue here. And I get the sense that they want to do the right thing, but I also don’t think a lot of people give proper consideration to just how popular this was going to be and how much of a lightning rod issue it would become.
QUINN: I also think, going back to the question about appealability, what really bothers me is that you could have a decision from an executive agency that cannot be judicially reviewed. I wonder whether that’s going to change the first time that one of these big tech companies who supported this gets denied and then they can’t appeal it.
LLOYD: Right. Maybe.
QUINN: In your travels are you that tech is still quite happy with the post-grant process?
LLOYD: Yeah, I’ve had no indications that people aren’t. Obviously, that’s a very broad church but tech companies in general seem to be very happy with it and obviously they are the most frequent filers of IPRs.
QUINN: Now let me shift to the innovation box, which is what we’re calling it here in the U.S., what others have called the patent box over in Europe?
LLOYD: I know it’s getting a lot more interest in Europe and what the U.K. has done. In fact, I think The Financial Times has come out with a story today talking about the savings that companies have made in the first six months. I’ve touched on it within the U.S. I’ve spoken to a couple of people but I haven’t written about it in any detail. I think the interesting point is does it become part of a bigger tax reform package in the new administration and then who knows how long that could take.
QUINN: Then the other thing I wonder about is what is going to happen to any discussion about tax reform now that it looks like Paul Ryan is Speaker of the House and no longer on the Chair of the Ways and Means Committee. He seemed receptive to the idea of the innovation box, which seems like a creative idea to me and, you know —
QUINN: — a lot of people say oh, well, you know, that’s never going to happen and my response is don’t underestimate the ability of Congress to pass a tax loophole that will provide a lot of benefit to big business.
QUINN: I think in this case it would, or at least could, provide benefit to little business and the individuals too, if it’s crafted properly.
LLOYD: It makes sense. It appears to make sense. That doesn’t necessarily mean anything is obviously going to happen.
QUINN: Sometimes if it makes sense that means more than likely than not nothing is going to happen.
LLOYD: Sure. But I think as we see more stories come out of the U.K., for example, and the impact it’s having there then I think that certainly helps the case.
QUINN: So what do you have on your radar screen as the year winds up? Do you think that we’re going to see any kind of a movement on patents at all as part of a year-end omnibus, which sometimes happens. What do you have on your radar for the beginning of next year?
LLOYD: So, reform isn’t completely off the radar for us but I would say that I don’t expect to be writing a lot of stories between now and the end of the year. It will be interesting to see what develops in terms of the reform agenda for next year. Beyond that, the changing licensing environment continues to interest us, continues to interest our readers, things like SEP FRAND licensing terms and the IEEE’s still relatively new patent policy. We’re always interested in money coming into the sector, investors coming into the sector and what exactly that looks like and how that may play out. And then I think the final piece that kind of plays to our strength as we’ve got me in the US, we have our headquarters in the U.K. and I have a couple of colleagues in Hong Kong, is this sense of a much more multi-polar IP world. Globalization is nothing new in the IP world and there has certainly been a lot of work around harmonization, but I think it’s interesting to see how it’s playing out from an assertion perspective. That will be particularly interesting over the next few years as we see the development of the UPC in Europe and we see further development of IP policies in the major Asian economies and how the patent strategy of domestic companies in the likes of China and Korea and Japan evolves. I think it doesn’t mean that the U.S. suddenly becomes a significantly less important player in the IP world. It’s always going to be one of the most significant players but if you just take Europe, we hear a lot more now from our readers who are interested in litigating in Europe, specifically in Germany.
QUINN: Well, what you hear a lot is that assertion outcomes are much more predictable in Europe than they are in the U.S., which 10 years ago people would have laughed at you if you had said that.
LLOYD: Yeah, and it’s a very strange and we hear a lot, either firsthand or secondhand, from people overseas are asking what’s going on in the U.S. with regards to patent rights? And that clearly concerns a lot of people here. I think it will be interesting to see how it now plays out, particularly regarding the UPC, and exactly what that means for patent rights in Europe.
QUINN: Yeah. So there’s a lot of uncertainty around. I think things are trending in different directions in the U.S. and in Europe. But, yeah, I wish more people in Congress would pay attention to but I don’t think that that at the end of the day enhances the U.S.-based innovation economy.
LLOYD: Yeah. And — yeah, I think a lot of people would agree with you but it also goes back to the point that you made last week, if that pendulum does start to come back a bit, if we do start to see decisions from the Supreme Court, Fed Circuit that kind of redresses the balance then to what extent does the U.S. remain out of kilter with Europe.
QUINN: I would agree and I think that gone are the days where patent law and policy in the U.S. was static. We had two generations really after the 1952 Patent Act where things remained relatively static and stationary. Sure, you had the Federal Circuit created in the 1980s and that created a pro-patent atmosphere, but I think over the last few years we’ve really to a large extent thrown out the baby with the bath water. Now some people may think that that’s a good thing, some people may think it’s a bad thing, but I don’t think anybody can really question that we have gone on a different path than we have historically pursued.
LLOYD: Yes, I don’t think you can question that either. To what extent it needs to be redressed, how much do you need to move it to bring it into the middle? I guess that’s the question and what people I think will be grappling with over the next couple of years. But, you know, the fact that we’re talking about reform four years after the AIA to me reflects the importance of IP to the innovation economy and the economy in general. It shows that this has become a much, much bigger issue in the economic sphere so that’s why I’m sure we’ll keep talking about reform for a couple of years even if, for the next few months, it’s not something we’re writing a lot about.
QUINN: Yes, that’s what I always tell people. Stay tuned and don’t rest because regardless of whether you want reform or you don’t reform I don’t think we’re going to be out of this reform cycle even if this winds up dying this time.
LLOYD: Yeah. I agree.
QUINN: All right, Richard, well, I really appreciate you taking the time to chat with me. I look forward to catching up with you at the IAM Patent Law and Policy event. See you then and there.
LLOYD: Great. Thanks, Gene. Good to talk.