Hello all,
It appears our crystal ball was indeed accurate! From our personal experience and in alignment with several industry news outlets, patent deal activity has continued to increase in September, defying the usual summer slowdown. Tangible IP has facilitated several successful transactions already across various technologies, indicating a renewed sense of optimism in the market. More on this below. This positive trend is particularly encouraging after a sluggish first half of 2024. Could this be the start of a strong finish to the year? We’ll be keeping a close eye on developments.
In this issue, I want to spend some time looking at the phenomenon of defensive patent aggregators. I’ll discuss a very recent case that revived a decade-long debate by accusing them of acting in a monopolistic way that violates antitrust laws. This argument, should it succeed, would significantly upend the current US patent landscape and it is worth understanding some of the salient arguments made by both sides.
As usual, as I focus on the macro picture in this newsletter, I want to remind everyone that we track everything that is going on in this world and for those who need their regular dose of news, once again you can follow me on either LinkedIn or Twitter where I post almost daily about some of the most newsworthy events.
Happy reading!
Louis
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Tangible IP News
As mentioned above, we are pleased to report several recent patent transactions, including one pertaining to smart appliances. See the full press release here. Interestingly enough, none of these sales were to NPEs.
Our CEO was invited to speak recently in Chicago at the 10th annual meeting of the LOT Network and presented on the topic of how to build a valuable patent portfolio, as opposed to simply protecting inventions. For those interested in knowing more, you can read our primer on What Makes a Patent Valuable.
Our Sr. VP Brokerage, Erika Warner, will be speaking on the workshop panel, “AN UPDATE ON THE CURRENT STATE OF MONETIZATION” at the 11th Annual IP Dealmakers Forum, November 6-8 in Miami. This will be the first time in 11 years that I cannot attend due to a conflicting schedule which is too bad since the IP Dealmakers Forum’s content is always top notch and attracts global IP leaders. This year, the Forum has added a crucial pre-conference workshop, “FROM COST TO PROFIT – THE IP MONETIZATION PRIMER.” As companies shift their IP portfolios from cost-centers to profit generators, this workshop will arm IP owners with the tools to build successful IP profit centers – from assembling the right team to selecting the best strategy. Few are better positioned than Erika to speak on this topic.
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Patents Wanted
Call for high quality portfolios! We represent several buyers looking to acquire high quality portfolios. Some of the areas of interest are included below. Please refer to our Brokerage Criteria to see if your assets qualify. If so, you can send portfolios that match these requests to info@tangibleip.biz for review.
- Semiconductor
- Handset/laptop
- Wireless wifi5/6
- Network security
- Medical device
- Network hardware
- Imaging
- Battery
- Lights/led
- Automotive
- Display
- IoT
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Featured Portfolio
We recently sent to market a very interesting portfolio that pertains to digital content analysis. It boasts 11 assets and no fewer than 30 separate claim charts reading on various companies that are well known to the IP community. If you want to receive a copy of the materials, please email Erika Warner at erika@tangibleip.biz.
We have several other portfolios for sale that offer great opportunities to savvy buyers. All of our patents for sale are listed on our website. Similarly, if you’d like to be added to our distribution list, please email us at info@tangibleip.biz.
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Recent News:
Yet Another US Bill on Patents
Yes, you read that correctly. There’s another piece of proposed legislation in the tug of war between those who want a stronger US patent system (inventors/innovators and those who fund them) and those who prefer to integrate technologies developed by others without having to pay a fee (implementers). Pushed by republican congressman Darryl Issa and called the Litigation Transparency Act of 2024 (LTA), its purpose is to force the full disclosure of not only the identity of the funders who help inventors with their patent infringement claims, but also the actual terms they entered into.
While I am personally not opposed to disclosing the identify of a funder, as long as we have the same standard for those who hide behind Unified Patents to challenge the validity of issued patents, disclosing business terms between the funder and the inventor should absolutely remain confidential. Otherwise, the defendants know exactly how much money is available at each given milestone, and they can play a war of attrition accordingly without any regards to the actual merits of a case.
This is exactly the same issue we had a decade ago with Publicly Traded IP Companies (PIPCOs). Anyone could see their balance sheet and adapt their litigation strategy accordingly to bleed them off. The proof is in the pudding; there used to be dozens of PIPCOs and even a PIPCO index where anyone could invest in. Now they are all gone, give or take a couple brave ones.
SEP Mess
There have been numerous articles and court decisions lately regarding ongoing disputes between large Standard Essential Patent (SEP) holders on one side and implementers on the other side that one would be excused to be a little confused by what is going on. This is usually a battle between titans and the stakes are high. Unfortunately, conflicting court decisions and long appeal delays have only created more uncertainty about the outcome. As a result, some companies have decided that it is probably a lesser of two evils to agree on terms between themselves rather than wait for judges to get it right. Interdigital and Lenovo did just this after a fierce battle on several continents, although they are still kicking the can on royalty rates by pushing this aspect to a binding arbitration process.
Supreme Court Ruling Expands Damages for Willful Infringement
A recent Supreme Court decision has the potential to significantly impact patent litigation. The ruling clarifies the scope of recoverable damages in cases of willful infringement. Previously, there was some ambiguity about what constituted “willful” infringement, making it difficult for patent holders to claim the full extent of their losses. This new ruling provides more clarity and could lead to higher damage awards in the future, potentially deterring infringement and increasing the value of strong patent portfolios.
Europe Tightens Patent Eligibility Rules
The European Patent Office (EPO) has introduced stricter eligibility criteria for patents, making it more difficult to obtain patents for certain types of inventions. This move aims to improve the quality of the European patent system and reduce the number of patents that will later be found invalid. While this may be a positive development for patent holders, it could also make it more challenging for innovators to protect their ideas in Europe.
Tesla Wins Against Avago in UPC Cases
Tesla emerged victorious in two significant patent cases against Avago Technologies at the Unified Patent Court (UPC). The cases involved critical technologies in the automotive and semiconductor sectors. Tesla’s win is seen as a major boost for its ongoing innovation and patent portfolio strength.
Delhi High Court Upholds Blackberry Patent
In a notable decision, the Delhi High Court upheld Blackberry’s patent on the “auto-selection of media files” technology. This ruling is significant for Blackberry as it reinforces the company’s intellectual property rights in a key market.
Are There Truly Patent Cartels?
Are defensive patent aggregators: cartel-like organizations or market efficiency enablers? This is essentially the question the courts will have to answer after the recent lawsuit filed by Xockets against RPX has reignited the debate about whether defensive patent aggregators operate as de facto cartels in violation of antitrust laws. This controversy touches upon fundamental tensions between patent protection, market efficiency, and competition law.
The core argument against defensive patent aggregators like RPX and, to a lesser degree, Allied Security Trust (AST) centers on their collective buying power and coordinated action. By pooling resources from multiple large technology companies, these organizations effectively create a united front against independent patent holders and smaller innovators.
In the Xockets case, the plaintiff argues that RPX, working with NVIDIA and other members, engages in concerted action to suppress patent values and create barriers for smaller companies seeking fair compensation for their innovations. This coordinated approach, they contend, constitutes anticompetitive behavior that violates Section 1 of the Sherman Act.
The argument gains strength when considering how these aggregators can potentially drive down patent licensing fees through their collective bargaining power. By simultaneously representing numerous large technology companies, they may exert undue pressure on patent holders to accept lower royalties than they might obtain in bilateral negotiations.
On the other hand, defenders of patent aggregators maintain that these organizations actually promote market efficiency and innovation by:
- Reducing transaction costs through centralized negotiation and licensing
- Protecting companies from predatory patent assertion entities (PAEs)
- Creating a more transparent and predictable patent marketplace
- Enabling smaller companies to access patent protection they couldn’t afford individually
RPX and similar organizations argue they serve as market-making intermediaries rather than anticompetitive cartels. They point to their role in reducing wasteful litigation and creating economies of scale in patent licensing.
By the way, this is not the first time this argument was raised in court. In 2013, Cascades Computer Innovation LLC v. RPX Corporation et al., No. 12-cv-01143 (N.D. Cal. 2013) represented the first major antitrust challenge to the defensive patent aggregation model. Cascades alleged that RPX and its members (including Samsung, HTC, and Dell) conspired to boycott Cascades’ patents. The complaint argued that RPX operated as a buyer’s cartel to suppress patent prices and Cascades claimed the arrangement violated Section 1 of the Sherman Act.
The case was ultimately dismissed in 2013 as the court found insufficient evidence of conspiracy among RPX members. More specifically, the judge ruled that parallel conduct alone was insufficient to prove antitrust violation. However, the court also acknowledged that joint defense agreements could potentially raise antitrust concerns but required more specific evidence of anticompetitive conduct.
The Xockets case differs from Cascades in several important ways:
- There is more detailed evidence of coordinated action alleged in the filings
- There is a stronger focus on direct harm to innovation
To succeed where Cascades failed, Xockets needs:
– Direct evidence of coordination beyond membership agreement
– Proof of specific intent to harm competition
– Documentation of actual market effects
The burden is substantial, but not insurmountable with proper documentation of coordinated anticompetitive behavior and its effects on the patent market.
The antitrust analysis hinges on whether these aggregators’ activities constitute legitimate joint ventures that promote efficiency or illegal horizontal combinations that suppress competition. Courts typically apply the rule of reason analysis, weighing procompetitive benefits against anticompetitive effects.
Key factors include:
– Whether the collaboration is reasonably necessary to achieve legitimate business objectives
– The extent of market power exercised by the aggregator
– The availability of alternative licensing channels
– The impact on innovation incentives
If it succeeds, the Xockets lawsuit against RPX could have far-reaching implications for the patent licensing ecosystem. A ruling that characterizes defensive patent aggregators as illegal cartels would fundamentally reshape how companies manage patent risk and potentially fragment the current licensing marketplace.
However, some will argue that invalidating the defensive aggregator model might also lead to increased patent litigation costs and greater vulnerability to patent assertion entities, potentially harming the very innovation the patent system aims to protect. The long-term ramifications are incredibly difficult to predict in my humble opinion. The reality is that no one is forced enter into discussions with RPX or other defensive aggregators if they do not want to. They can simply continue their discussions or, if the other party does not want to come to the table, bring their case against them. But there is definitely an advantage gained by having the ability to share meaningful information among members, coordinate actions and make sure no one will make a move that could jeopardize another member. That is where I see the real potential issue.
The question of whether defensive patent aggregators constitute illegal cartels remains complex. While their collective action raises legitimate antitrust concerns, their potential to enhance market efficiency and protect against unfettered litigation suggests their role may be more nuanced than pure anticompetitive behavior. The Xockets litigation may provide crucial guidance on how courts will balance these competing considerations in the evolving patent marketplace. The resolution of this debate will likely shape not only the future of patent licensing but also how companies collaborate to manage intellectual property risks in an increasingly technology-driven economy.
Interestingly, this debate is not limited to the US. Similar ones have emerged in other jurisdictions: EU competition authorities have examined patent pools and aggregators. On their side, Japanese regulators have issued guidelines on patent aggregation. Finally, Chinese authorities have included patent aggregation in antimonopoly considerations. This international context may influence U.S. courts’ approach to these issues. Stay tuned!