Posts Tagged: "patent monetization"

In the last 35 years, there has been a shift from a labor economy to a knowledge economy. Consequently, intangible assets (and thus, IP rights) have emerged as the most powerful asset class, overtaking more traditional capital assets such as real property, plant and equipment. Multiple studies have shown that a majority of the value of a U.S. publicly-traded company comes from intangible assets. In fact, one study has even placed the value of U.S. corporations included in the S&P 500 Index as coming 80% from intangibles.

The Federal Trade Commission testified on consumer protection issues involving patent demand letters, patent assertion entities (PAEs), and proposed legislation to prohibit deceptive patent demand letters. Delivering testimony before the House Subcommittee on Commerce, Manufacturing, and Trade of the Committee on Energy and Commerce, Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices at the Federal Trade Commission, provided lawmakers with comments on a draft bill regarding deceptive patent demand letters, and recognized that demand letters raise broader issues about patents and the U.S. patent system.

FTC says that it considered and implemented many of these suggestions it did receive in order to sharpen the focus of the study and reduce its likely burden on study respondents. Frankly, I see little evidence that the burden on the responding PAEs has been reduced to anything that approximates a reasonable level. The information that the FTC will seek from 25 different PAEs is extraordinarily detailed and it will be onerous to produce, if it can even be produced… The questions seek detailed information about each patent owned by the PAE. In one case a seemingly simple question asks the PAE to for every patent they own identify the patent’s “priority date,” which is a term not defined in the Notice. Asking this question in and of itself presents an objectionable burden in my opinion.

The above-enumerated problems of the current patent system are real and barriers to further innovation and job creation. But the solutions do not require a comprehensive definition of a troll to fix the patent system. Lady Justice is blindfolded for a purpose. Justice in the US should be meted out objectively regardless of identity. So too in the instant situation. It is not the identity of the actor that needs to be evaluated, but the character of the action. We need to assure that frivolous, predatory actions are penalized and prevent the abusive tactics used by many that harm our innovative culture.

And the game goes on, with sophisticated tactics and subterfuges. Some patent holders obfuscate their patent ownerships behind shell companies, including some large technology companies who find it useful to play the part of the NPE to harass competitors. Others use negotiations as fishing expeditions with the intent to prepare stronger cases in the court room – making escalations go even faster. Complaints are prepared before a first contact is made. Even those who would prefer to negotiate rather than sue are forced to sue to capture the attention of the accused infringer, many of whom simply refuse to discuss licensing or settlement unless they are sued. The IP game becomes a race to the courtroom. There are no obvious winners (except for the attorneys representing the parties) as legal fees keep escalating. Litigation could be avoided in many circumstances, but the IP game fosters a power struggle in which each party assumes the worst from the other and defends itself, at high legal expenses, against imaginary threats. Both sides, the users and owners of patented technologies, are antagonized.

By keeping an eye on stealth and dangerous patents managing the future risk presented is much easier. By proactively monitoring the landscape of published applications and granted patents you may be able to engage in design work-arounds to avoid the most dangerous patents. You may also be able to actively identify patents and pending patent application that are ripe for licensing or acquisition at an early stage, perhaps before the patent even issues or before the patent works its way into the hands of a litigious patent owner. Even if you cannot acquire rights through licensing or acquire all dangerous patents, if you have a meaningful patent footprint that gives you the right to do a variety of things you may well be able to defend based upon having broad based rights to engage in what it is that you are accused of doing.

The major beneficiaries are not the patent trolls- but the thousands of single patent owners and small high tech start ups who for the first time ever-are able to monetize the enormous investments in time, money and ingenuity that they have made in their inventions. The fact is- today, small patent owner and small tech start ups have real options to liquidate their intellectual property assets that they didn’t have before Intellectual Ventures and Acacia Research Group entered the market in the mid-2000s. If patent trolls sue big companies- then the owners of these patents were able to liquidate their investments. When the multinationals have to worry about these entities suing them it is good for the owners of the patents.

Professor Feldman has found striking new data on patent trolling and the effects of the America Invents Act, which to me suggests that the AIA has clearly been successful in its intended goal of reducing the number of defendants in a single patent infringement litigation. Professor Feldman’s new analysis was developed by breaking down the massive data set she collected into a month-by-month analysis of patent infringement lawsuits. The data examines all patent lawsuits over four key years, which represents approximately 15,000 patent infringement lawsuits and 30,000 patents asserted. Not surprisingly to those of us who have closely followed the America Invents Act, but there was an enormous spike in litigation leading up to the implementation of the AIA in September 2011.

Acacia Research Corporation (Nasdaq: ACTG) announced on Friday, July 5, 2013, that its Board of Directors appointed Matthew Vella, Acacia’s current President, as Chief Executive Officer and a Director effective August 1, 2013. At this important moment when the patent rights pendulum has swung Vella takes over. He will have his hands full as he steps into the spotlight as the public face of Acacia. There is growing animosity toward non-practising entities and numerous legislative attempts underway to benefit big business at the expense of universities, individual inventors, research and development companies and those who acquire rights. His task will not be an easy one. As a publicly traded company Acacia’s information is there for all to see, making them an easy target.

A variety of electronic cigarettes have hit the market in recent months, and lately it seems that I am seeing a lot of electronic cigarette commercials on TV. Last week ICAP Patent Brokerage announced that it would be selling a patent portfolio of heatless and smokeless cigarette technology that exclusively advances electronic cigarette science. The patent portfolio includes U.S. Patent No. 6,769,436 and related patents that are still pending. According to ICAP, the ‘436 patent has already been challenged in court and prevailed as valid. And if you look at the claims in the patent you can’t help but notice that they seem exceptionally broad.

In the last five years, the patent market has undergone a change of seismic proportions. Patent rights are now regularly stripped from any underlying product and traded much like commodities in a largely unregulated market–the market for patent monetization. Regardless of what one thinks about the causes and implications of patent monetization, it is clear that this behavior is expanding at an explosive rate. In this rapidly shifting landscape, it will be critical for companies to be able to keep track, not only of simple ownership of patents, but also of actual control. With this new market for patent monetization, we currently have no way to accurately measure girth and no way to know what people are doing with the girth they have. This is why sunshine rules are so critical for grappling with the market and designing the rules that will ensure a competitive marketplace.

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.

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.