Posts Tagged: "patent license"

Recently the Federal Circuit, sitting en banc, denied Nokia’s petition for rehearing. The Federal Circuit decision is nevertheless interesting for its treatment of Section 337’s “domestic industry” requirement as it is applied to NPEs. Under 19 U.S.C. §1337(a)(2), relief at the Commission is predicated on the existence or establishment of an industry in the United States “relating to the articles protected by the patent.” This is commonly known as the “domestic industry” requirement. In turn, section 1337(a)(3) provides that an industry is considered to exist if there is in the United States, “with respect to the articles protected by the patent,” significant investment in plant or equipment, significant employment of labor or capital, or “substantial investment in [the patent’s] exploitation, including engineering, research and development, or licensing” (emphasis added).

The dispute at issue here regarding Qimonda arose when the company went bankrupt and seven licensees invoked the protection of § 365(n) to retain patent rights. This became an issue because there is no similar provision on German law, thus there is an attempt to nullify the patent licenses. This would force the seven licensees to open fresh negotiations or face expensive patent infringement litigation which they could not hope to prevail in since they are almost certainly infringing.

The report ignores actual practice. Universities rarely have multiple companies fighting to license their inventions. They’re lucky to find one. The rule of thumb is that a promising university technology requires 5-7 years of private sector development to turn into a product. For a drug, double the time and add a billion dollars in costs. Exclusive licenses are often essential to justify such risks.

Now, for those of you paying attention, you will notice that the spelled out numbers do not match the digits appearing in parentheticals. Why do attorneys do this? What class in law school do they teach this? I’m told this is a practice that dates back to the days of carbon copies and “old school” telefax machines, where parties needed two chances to be able to discern the figures in legal documents.

Todd Sherer: “And what we’re seeing, what the AUTM survey is showing, is that patent budgets are going down. And that’s of concern to me, because everything has to go through that funnel. You can do a lot of research, basic and then applied research and have translational funding, but that technology has to come through the Tech Transfer Office and through the patent budget. So it doesn’t do us a lot of good just to have funding targeted at programs at the front end of that funnel to try to shove it through, through the right limiting step, or pull it out the other side. We need to also be mindful of the fact that we need to invest in those fundamentals, that patent and licensing part. Because we’ve also seen that the number of licensing professionals has gone down over the last couple of years in the Tech Transfer Offices. So, what we don’t want to see is that trend continue. We don’t want to see the number of our staff go down and the patent budgets go down at a time when we want to improve impact.”

Todd Sherer, Ph.D. is the director of technology transfer at Emory University, and is also currently President of the Association of University Technology Managers (AUTM). Recently AUTM concluded its annual survey and found, not surprisingly, that University technology licensing has substantial positive impact on the U.S. economy. On the heels of that survey I reached out to my friends at AUTM and requested an interview with Sherer. Our interview took place on Friday, December 14, 2012. During our interview we talked about the nearly constant challenges to gut Bayh-Dole, which is the very foundation of university technology licensing and the piece of legislation called the most successful domestic legislation in the post World War II era by none other than The Economist. We also discussed what it is that universities do and how, despite what the critics say, the basic research done by universities is hardly ready for the marketplace.

Unlike NPEs, defensive patent pools entities do not (at least initially) seek to generate revenues. Rather, they charge admission fees into the pool to fund IP acquisitions and the administrative costs to operate the pool. In sum, defensive patent pool aggregation is analogous to an insurance policy. But, where classic insurance lowers a company’s costs when accidents happen, patent pools are designed to reduce the likelihood of accidents (i.e., being sued for patent infringement) from happening at all.

In the case of product sales, 58 institutions (31 percent of the 186 respondents) reported that 2,821 of their licenses paid $662 million in running royalties based on $37 billion in product sales, implying an average royalty rate of 1.8 percent. In the case of startups, 66 institutions (35 percent of the 186 respondents) reported employment of 24,653 by 1,731 operational startups, an average of 14 employees per startup. Assuming all 3,927 startups still operational averaged 14 employees, total employment would have been 55,929.

When the media paints images of all patents being bad they are doing a disservice to the industry and ignoring the good that has come from patented innovation and the sharing of such innovation via patent pools and other cross-licensing arrangements. Patent pooling is one example of a proven, effective tool that is helping industry better manage its licensing programs. By “pooling” patents from many license holders, licensors generally are able to lower transaction costs and administrative overhead, and benefit from a centralized model that encourages patent bundling and fair play. Licensees likewise enjoy advantages in the form of lower royalty fees and a single point of contact that eliminates the need to negotiate separately with multiple license holders.

Several public interest groups recently filed a march in petition under the Bayh-Dole Act asking NIH to force Abbott Laboratories to license its competitors for the production of Ritonavir, a drug used to treat AIDS.  Drug developers face a daunting task. For every 5,000 drugs tested, about five proceed to clinical trials. Perhaps one is eventually approved.  That one must not only pay for itself, but for all the company’s other drugs that died along the way. This grim math eludes the petitioners.

On November 8, 2012, Mylan Inc. (Nasdaq: MYL) announced that it, along with Famy Care Ltd., has entered into a settlement agreement with Janssen Pharmaceuticals Inc. that will resolve patent litigation related to Ortho Tri-Cyclen Lo® Tablets, which are indicated for the prevention of pregnancy in women who elect to use oral contraceptives as a method of contraception. Also on November 8, Research Affiliates, LLC and WisdomTree Investments, Inc. (NASDAQ: WETF) announced that Research Affiliates will withdraw its patent infringement lawsuit brought against WisdomTree and pay WisdomTree $700,000. On October 31, 2012, Acacia Research Corporation (Nasdaq:ACTG) announced that its subsidiaries settled patent litigation with Medtronic and Comcast Cable in unrelated cases.

The theme of the annual meeting of the AIPF this year is “intellectual property as a corporate asset.” There are indeed presentations sprinkled across the two days of this meeting that relate specifically to this topic. Another recurring and equally treated topic is the use of the Internet in practice in a variety of contexts — attracting clients, networking generally and use of the Internet for investigations. Topics of particular interest included: (1) The Invisible Hand: Models for Monetizing Patents in the 21st Century; (2) Lies, Damn Lies, and Lawyers; (3) Contingent Fee Arrangements in Enforcing IP Rights; and (4) Economic Effect of Non Practicing Entities.

There really is no one-size-fits-all approach to inventing that can be claimed to be a road-map to success that will work in all cases. Notwithstanding, there are certainly a number of things that can and should be done early in the inventing process if an inventor is going to pursue inventing as more than a hobby. I continually preach to inventors the need to follow what I call a “business responsible” approach, which is really just my way of counseling inventors to remember that the goal is to not only invent but to hopefully make some money. Truthfully, the goal is to make more money than what has been invested, which is how the United States Congress defined “success” in the American Inventors Protection Act of 1999.  The odds of being successful with one of your inventions increase dramatically if you engage in some simple steps to ensure you are not investing time and money on an invention that has little promise.

Last month, both the U.S. Senate and U.S. House of Representatives held hearings related to patent disputes, the ITC, SSOs and FRAND licensing – no doubt precipitated by the smart phone patent wars. On July 11, 2012, the full Senate Judiciary Committee held a hearing entitled “Oversight of the Impact on Competition of Exclusion Orders to Enforce Standard-Essential Patents.” Witnesses at the Senate hearing included the Acting Assistant Attorney General, Antitrust Division, U.S. Department of Justice, and the Commissioner of the Federal Trade Commission (FTC). A week later, on July 18, 2012, the House Judiciary Committee’s Subcommittee on Intellectual Property, Competition and the Internet held a hearing entitled “The International Trade Commission and Patent Disputes.” Witnesses at the House hearing included Professor Colleen Chien of Santa Clara University School of Law, IP Counsel for Ford, VP of Litigation for Cisco, the General Counsel of Tessera Technologies, and the President of The American Antitrust Institute (AAI).

By SENATOR BIRCH BAYH — What should we say about a steward that manages billions of dollars in public research funds not aimed at finding commercial products and turns them in to hundreds of billions of dollars in economic impact while supporting millions of jobs? You would think that a sincere “thank you” was in order. But many are saying that the system producing such riches is broken. Remarkable. The Bayh-Dole Act created no new bureaucracy, costs taxpayers nothing, and decentralized technology management out of Washington. It’s widely touted as a key in turning the U.S. economy around.