Posts Tagged: "patent license"

What is the best way to assess the potential value or use of a patent portfolio? Before we examine this, it’s important to clarify that a patent only has value in the context of its place in a portfolio and in how the portfolio is used to support the organization’s business strategy. Let’s look at two examples. A Patent Assertion Entity will evaluate patent value based solely on the potential revenue that will come from a licensing program. On the other hand, an operating company typically places a higher value on patents that provide protection. This can be the ability to defend leadership in a profitable market category or the ability to offer protection as a sole-sourced product’s revenue stream.

Anyone who has followed recent developments in the U.S. patent landscape, however, might note something interesting occurring in this particular case. According to the recent patent assertion entity (PAE) report put out by the Federal Trade Commission (FTC), Network-1’s business activities would seem to put it in the category of what the FTC calls a “litigation PAE.”… Unfortunately for the FTC, Network-1’s license agreement with Polycom is horribly inconsistent with the agency’s findings on the exact business model that Network-1 seems to employ.

Why should the costs of the tortfeasing infringer be relevant in determining whether the extracted value from a settlement is fair? The fact that law firms charge a lot of money to defend patent infringement cases, and don’t particularly have any incentive to settle cases early, somehow translates into certain settlements being for nuisance value without any consideration of whether the settlement is a fair value for the rights trampled upon by the infringer? The FTC has quite a lot of explaining to do, because it seems they picked an arbitrary number that is a function of what attorneys ordinarily charge infringing defendants through discovery. I don’t see how that is a function of the value of the innovation, or how it says anything about the merits of the infringement case, the damages case, or the tactics of the patent owner. In fact, it seems as if the $300,000 figure is completely irrelevant.

Another incursion into research university governance and operations is now underway. And this time all research universities are affected. Led by the DC Based Electronic Frontier Foundation, a leftist anti-patent activist coalition that has initiated a 50-state legislative campaign to shrink research university patent licensing rights at the state level. (See) The measure’s purported objective is to prevent publicly funded university research patents from being licensed to so-called “Patent Assertion Entities” (PAEs, also known by the pejorative term “patent trolls”). The draft legislation is imprecise, making it even more dangerous than first appears.

The validity of secondary markets for a variety of goods and services is never questioned. Securities are sold and resold many times after their initial offering, homes and buildings and built and resold many times, as are automobiles. A quick review of the products listed an eBay leaves little doubt that a robust secondary market exists for many goods and services across the American economy. However, not everyone is in agreement that a secondary patent market is beneficial. For some reason, many people villainize companies that practice patent licensing. Even resorting to the use of pejorative terms such as “patent troll” to describe these businesses. These detractors fail to account for the fact that inventors may not be the most efficient licensors. In addition, they don’t take into account that, just as a builder generates revenue to build more buildings by selling their current ones, companies that sell or license patents help fund further R&D with the proceeds.

What causes operating companies to sell their patents? Our intuition tells us that patent sales take place when the seller is in financial distress or the company is underperforming. We asked ourselves whether data aligned with our intuition… 71% of the sales occurred when the seller underperformed the overall market by more than 5 percentage points.

The IP Licensing Guidelines, which state the agencies’ antitrust enforcement policy with respect to the licensing of intellectual property protected by patent, copyright, and trade secret law and of know-how, were issued in 1995 and are now being updated. In the agencies’ view, the IP Licensing Guidelines remain soundly grounded, as a matter of antitrust law and economics. Nevertheless, the agencies have determined that some revisions are in order because the IP Licensing Guidelines should accurately reflect intervening changes in statutory and case law.

The focus of the political advocates pushing march-in may be lower drug costs. But the long-term costs of ripping apart IP rights are far higher and more fundamental than advocates acknowledge. The long-term price of exercising these exceptional prerogatives could include creating a crisis in confidence over use of federally funded research discoveries, dried-up private investments where basic research has federally funded fingerprints, hesitation to commercialize university research, and a corresponding drop in start-ups, new products, economic development and technological advancements. March-in could effectively repeal Bayh-Dole.

To maximize the return on investment from a patent portfolio, patent owners must determine which is more lucrative: sales or licensing. In general, patent licensing promises the highest total return on monetizing an IP portfolio because the IP owner can license the same asset or (a single patent or portfolio) to a number of different licensees. On the other hand, it may take three to five years to realize significant revenue from licensing. Additionally, licensing comes with a host of potential risks including litigation, invalidity arguments, and more. More and more frequently patent sales/transfers are part of licensing settlements to ensure there is more of a ‘win/win’ result for negotiating parties.

NASA released 56 formerly-patented technologies to the public domain so that they can be used by commercial enterprises prior to their expiration. Patents released by NASA into the public domain were selected based on the low likelihood that the patents would be licensed by private enterprise because of low demand for resulting products. Other patents cover technologies that require further development before products are market-ready.

Patents are a big capital investment for a startup company, but so is an office building. However, no startup company owns their office building outright. Even if they did own the building, they would take a mortgage on the building to free up capital. Exclusive licenses are the same thing as a lease agreement: the startup has full control of the assets, but does not have to spend capital to build or maintain the asset.

Though much of today’s proposed patent legislation is controversial, removal of the Brulotte rule remains largely uncontested by analysts and has historically garnered support on both sides of the political divide. Replacing the Brulotte rule with the rule of reason from antitrust law would improve market efficiency and spur innovation by increasing the dissemination of intellectual property in the marketplace. To unlock those benefits, Congress must modernize how Federal Courts evaluate post-expiration patent royalty cases.

Unlike other technologies (e.g. User interface) where the manufacturers have a choice to design around the technology of the patent, in case of SEPs, there is no possible way to avoid infringement and still comply with the standard. On the other hand, non-compliance with standard is a commercially non-viable option. This situation gives the SEPs holders a great leverage to assert their licensing terms. While there have been several cases and rulings in favor of SEP licensees that put some restrictions on the SEP holders regarding their FRAND licensing commitments as well as their abilities to exercise an injunction for infringement of SEPs, lack of clarity on FRAND terms still make the negotiations tough for a potential SEP licensee.

This post provides a practical approach for companies to handle the licensing of Intellectual Venture’s (IV’s) smaller in-house funds (ISF & IDF) during a negotiation with IV. These two smaller, in-house funds together represent approximately 20% of IV’s total portfolio. In a typical negotiation with IV, all of the patents in the IIFs (described below) are available for license without exclusions. But, the ISF and IDF patents are more restrictively licensed. Additionally, IV may have presented evidence of use (EOU) materials for assets in these funds, or otherwise highlighted, some of these assets during negotiations, further heightening the risks. For the two smaller funds, IV will provide a list of excluded assets. How can you cost-effectively assess these funds and the associated risks from these smaller funds?

How can a patent that is deemed essential for a standard not be infringed in a product that implements that standard? One possible explanation could be that the claim of essentiality is incorrect. That’s why it is important to document essentiality with a claim chart and ask an independent expert to verify that infringement of the patent claim is prescribed by the standard. But an independent verification is still no guarantee that court will agree that such a patent is really infringed by a product. Another explanation is that the patent is essential for an option in the standard and that the product does not implement this particular option. Most technical specifications of interface standards have options, describing alternative methods to implement the standard. Manufacturers can choose one of the options and will not infringe patents that are essential for implementing another option.