The recent issuance by the USPTO of its 10 millionth patent marked a symbolic milestone. More importantly, it gave pause for many to reflect upon the fundamental question: why does one file for a patent?
Those, like us, who personally interact with inventors daily know their motivations vary greatly; many individuals simply want the social recognition that they have contributed something of value and a patent is the currency that proves it. For them, a patent is something you frame and provides bragging rights. They often have no ulterior motivations. Others though, dream bigger and often believe that once they obtain a patent, they have unlocked the key to paradise, and solved a world’s problem worth a monumental investment from others. They often drop back down to earth after having tried unsuccessfully to commercialize it for years, only to realize that having a great idea (and a patent) was just the beginning and that the hardest part is, by far, bringing a product to market. And there are others who are more realistic in terms of their own skill sets and are happy to look for partners who will license or sell their great invention. Most of these people also fail miserably as companies nowadays rarely feel the need to pay to license in rights from inventors, especially if the product is half-baked and most of the work is still to come. The fear of an injunction that could stop them from selling an infringing product, a driver once upon a time for licensing deals, is just no longer present.
On the other side of the spectrum, we see large corporations still filing thousands of patents a year, while at the same time lobbying hard to weaken the patent system. What may appear to many as a rather schizophrenic behavior (why devalue an asset class you keep investing in internally?) is actually quite clever: patent enforcement is rarely a battle between who is right and who is wrong, but rather who has the resources to fight a long, protracted battle. At that game, the house always wins, and this means a patent becomes a lot more valuable in the hands of someone who has vast resources to enforce it than in those of the inventors who do not.
Patent filings also offer an opportunity to take a rare peek into the “soul” of a corporation, as it gives a preview of where the company’s R&D efforts are directed, sometimes years before the product sees the light of the day (which may never happen). As large technology companies yield more and more power and influence (think Amazon getting billions in tax credits for its HQ2 or forcing the City of Seattle to reverse itself on a “head tax” to help with the homelessness crisis they are partially responsible for), the last thing the citizenry would want to see is a Fortune 50 company receiving a government-approved monopoly on technology that will only accelerate that trend. Yet, we have noticed lately more and more patent applications emanating from large corporations that pertain to what I would call the “big brother” category. A few of weeks ago, the New York times reported the following: “A review of hundreds of Facebook’s patent applications reveals that the company has considered tracking almost every aspect of its users’ lives: where you are, who you spend time with, whether you’re in a romantic relationship, which brands and politicians you’re talking about. The company has even attempted to patent a method for predicting when your friends will die.” This coming from a company that has a less than stellar track record in respecting privacy rights should be alarming in itself. More recently, the Guardian reported about the publication of another Facebook patent application (15/376,515) describing a system that would allow the company to “activate your phone’s microphone, using inaudible signals broadcast via a television, to monitor your television viewing habits”. Creepy? You bet. You want more? Try this one: “A newly public patent shows Facebook is eyeing tech that automatically chooses an animated selfie based on your current emotional state”.
To be fair, Facebook is not alone in its quest to exert more control over people’s information or behavior. We’ve seen patents from almost all large technology companies that were some variations on this theme. Last week alone, there were reports about Walmart having obtained a patent for “technology that will allow bosses to eavesdrop on their workers. The audio surveillance technology can measure workers’ performance and listen to their conversations with customers at checkout”. This is probably just a temporary measure as most cashiers will eventually be replaced by robots, but nevertheless…
Oftentimes, the advancements described in a patent can be used in everyday scenarios, such as recently issued patent to Samsung pertaining to new facial and iris recognition. But you can easily see the slippery slope. If you cannot trust their management to maintain a certain moral compass, it then becomes incumbent for employees at these large organizations to hold the company accountable to higher ethical standards, just like Amazon employees did recently when they asked Jeff Bezos to stop selling Amazon’s own face recognition software to law enforcement. These people deserve a big, free, two-day delivery- hug from the rest of us who do not want our every moves tracked. This followed similar employee activism at Google over providing AI technology to the Pentagon, and at Microsoft over its contract with the US Immigration and Customs Enforcement (ICE). In other words, in all these 3 cases, the company had to change course because of internal pressures from the rank and file. Robots won’t have those ethical quandaries in the future, so now may be the right time to start thinking on types of patents that should be given additional scrutiny before being allowed, just like any patent application that could affect national security is currently subject to an additional screening.
In the meantime, wear sun glasses and leave your phone at home when you go for a walk!
Buyers & Sellers:
Despite the usual summer slowdown, we’ve still seen fair amount of activities on the IP transaction side. Google took a trip to the middle east to snatch Israeli Startup LucidLogixwhich had actually ceased its operations a few months prior. Google reportedly paid $40M for the defunct company’s assets, the lion’s share being Lucid Logic’s patent portfolio. This is a rare happy ending for a company gone bust. It goes to show once again that a strong IP portfolio can still be of significant value even when a company is not successful commercially.
Close to home, defensive aggregator RPX reported “a number of acquisitions on behalf of its patent risk management network in June 2018, obtaining rights to the patents involved either to end litigation against its members or to prevent it in the first place.” Given the RPX practice to do licensing deals as well as straight acquisitions, it is unclear if this announcement covers both, or just the latter. The transactions are said to have occurred within the Mobile Communications and Devices market sector, as well as in the networking space.
After divesting a portion of its portfolio to Quarterhill-owned Canadian NPE WiLAN, MagnaChip Semiconductor doubled down and assigned some of its patents to Texas-based NPE Longhorn IP.
We don’t often hear of IP-driven transactions in the medical device space but, on July 9, Bovie Medical announced a deal with Tennessee-based Specialty Surgical Instrumentation Inc (SSI) whereby SSI will receive Bovie’s electrosurgical business and related IP in exchange for a $97M cash payment.
Finally, after previously picking up assets from Sharp, Intel and SK Telecom, Chinese mobile devices manufacturer Oppo just made its largest patent acquisition so far by acquiring over 20 patent families – totaling around 240 individual assets which cover audio and visual technologies – from Dolby.
Winners & Losers:
In life as in patent assertion, grit and resilience are paramount skills to success; body camera manufacturer Digital Ally can attest to this as its patent suit against Taser and WatchGuard can now move to the next phase after having successfully fended off no fewer than 5 direct challenges to its validity. And I always thought you could only shoot a Taser once!
US-based Motorola sent a signal (loud and clear) that its two-way radio technology patents were not to be encroached upon, when it scored an initial ITC victory against China’s Hytera Communications. A final decision (and possible ban to importing in the US) is due this fall.
Tech giant ZTE for its part was condemned to pay Maxwell $43M for infringing its smartphone patents. But it wasn’t a half bad week for the beleaguered Chinese company, as the Trump administration lifted their prohibition to sell products in the US after a few weeks’ hiatus.
Pursuing its winning streak, publicly traded NPE Finjan successfully closed a campaign against Trend Micro that saw the latter take a license to Finjan’s cyber security portfolio. At $13.5M settlement, no one will argue this was a mere nuisance settlement…
Meanwhile, another publicly traded IP company, Marathon Patent Group, had a rough week as it now faces a possible delisting from NASDAQ after losing two of its board directors.
Finally, it would appear that patenting is still an old boys’ club, as a recent research found that only 7.5 percent of patents were granted to women, and that just 5.5 percent of patents commercialized or licensed were done so by women. Clearly, there is no doubt in my mind that women are as innovative as men, and female under representation in the engineering world (15% to 20%) only partially explains this phenomenon (as you’d otherwise have the same percentage of female inventors). Hopefully, this will change with time as we need all inventors on deck. Meanwhile, we are honored to have several great patent portfolios on offer (and have sold others in the past) where the main inventor is a woman.
Who wants to go to court in the summer, especially when training camps for the National Football League are about to start? Apparently not the NFL itself, which just opened its checkbook and settled a pending case brought by OpenTV which alleged infringement of 8 of its patents.
Even perennial patent foes Apple and Samsung could not resist the long sunny days and decided to play hooky instead of returning to court by settling once and for all their 7-year dispute over the design patent that Samsung infringed when it copied some of the ornamental aspects of the iPhone.
The sunny days also seem to have made lighting technology less quarrelsome as it would appear that Taiwanese LED maker Epistar shook hands with All Star Lighting. The light bulb went off and it looks like several lawyers will be able to take their summer vacations after all.
Finally, Interdigital announced that it had entered into a multi-year, worldwide, non-exclusive, royalty bearing patent license agreement with Fujitsu Connected Technologies Ltd. What is remarkable these days is that it was achieved without any litigation. Do the Japanese know something US companies don’t?
I’ll See You in Court:
Remember the Supreme Court decision in Oil States that validated the constitutionality of the PTAB? We discussed it extensively in previous columns, including the veiled invitation by SCOTUS to claim that invalidation of a patent by an administrative tribunal could be seen as a “taking” under the US Constitution. This quickly led to a class action suit initiated by a patent owner whose invention was declared invalid by the same agency that first granted it, the USPTO. Not surprisingly, the DOJ is now arguing, in a motion to dismiss that case summarily, that IPRs do not amount to such a “taking” and the lawsuit should be rejected.
I’ve been asked by one of our readers to handicap the upcoming patent trial between Groupon and IBM, which I declined to do. I am not in the individual prediction business but would rather focus on trends and industry-wide shifts. While I am often called to consult with analysts who want to know who has the upper hand in some specific patent battle, my response is always the same: there are only two guys who really know that case in depth enough to comment (i.e. each party’s main counsel) and one of them is invariably going to be wrong… Regardless, it is going to be an interesting one to watch, as we rarely see a Fortune 50 company (not named Apple) go all the way to trial on patent cases. If IBM loses, I hope they had bought a discount from Groupon.
To support the above comment on Apple, the giant pulled out the big guns against their arch nemesis Qualcomm and fired a salvo of 6 IPR challenges to Qualcomm’s patents. It appears the recent settlement between Apple and Samsung has freed some extra resources on their end in Cupertino.
British Telecom, another behemoth, recently flexed its IP muscles by filing a lawsuit accusing Fortinet alleging infringement 5 of its patents around cybersecurity.
Meanwhile, the ever-active NPE Dominion Harbor started asserting newly acquired patents from Intellectual Ventures, which had itself bought from NEC. At least this goes to show that there is still some liquidity in the market… Dominion’s Clean Energy also added another defendant (Verizon) to its ongoing campaign around its mesh network patent. Ebay for its part found itself at the receiving end of a suit filed by UK-based and inventor-owned Byteborne Technologies.
From the Bench:
The week preceding the court’s summer recess is always packed with many decisions that come all at once. This year was no exception; the US Supreme Court issued a major decision in the Schlumberger case stating that damages for infringing activities can extend outside of the US. This is major as it will undoubtedly push future awards upwardly whenever a victorious plaintiff has foreign sales. The actual test is not as black and white, but this is the gist of the case. Although not a decision on the merits, SCOTUS also agreed to review a Federal Circuit decision that invalidated a Helsinn Healthcare SA nausea drug patent and to interpret changes made in the America Invents Act to the on-sale bar rule. For those unfamiliar with the concept, the “on-sale bar” is not a place where you can buy cheap margaritas; it is rather a limitation on patentability codified at 35 U.S.C. § 102 and it provides that an invention cannot be patented if it has been for sale for over one year prior to the patent filing.
Unless you were on a different planet, you must have heard by now that President Trump nominated Appellate judge Brett Kavanaugh for his next Supreme Court nominee. Apparently, Merrick Garland was no longer available… Given how many times SCOTUS has left patent owners holding the bag in recent years, everyone should be supremely interested in what Justice Kavanaugh (should he be confirmed) has to say about IP. Fortunately, someone did the homework for us and has analyzed his IP track record.
Around the world:
New EPO director Antonio Campinos began his 5 year term tenure, replacing his controversial predecessor Benoît Battistelli who was at the helm for the 8 previous years. Battistelli has been accused of abusing staff rights at the office, including introducing proposals to scrap permanent employment contracts, allegedly dismissing staff members against the wishes of the administrative council, and overseeing “shocking events” at the office. And you thought the White House was a mess?
On a more serious note, the European Commission has set up a group to consider licensing and valuations of standard-essential patents (SEPs). The SEP group was created by the commission to “deepen the expertise on evolving industry practices related to the licensing of SEPs in the context of the digitalization of the economy”.
It has been said numerous times that China loves to share other people’s secrets… but not their own apparently. Indeed, China is filing cybersecurity patents at an “unprecedented level”, according to a report from Minesoft and Patinformatics. The report showed that China had surpassed the rest of the world in cybersecurity patents, with a specific focus in the sub-category of authentication. Similarly, taking a page from the Apple-Samsung playbook, the number of applications for design patents with GUI in China has grown rapidly over past 3 years, at a rate hovering around 50%. Finally, patents filings around business methods are also surging in China due to a more favorable policy environment. Why does it sound like the US 10 years ago?
On the Legislative Front:
Our dear elected also had a burst of energy before leaving to do what they do best, i.e. fundraising. Last week, Reps. Thomas Massie (R-KY) and Marcy Kaptur (D-OH) introduced H.R. 6264, the Restoring America’s Leadership in Innovation Act. I love those titles by the way; it’s like watching a movie trailer; you don’t really need to see the details as you know exactly what the subtext is. Nevertheless, this pro-patent bill received support from the usual pundits and was opposed by unsurprisingly by the large tech companies. Since it will likely join the rest of the patent-related bills stalled in Congress for years, no need to delve into this too much, but for mentioning that this continues the streak of pro-patent legislation and provides a decent view of how our politicians view this narrative. We’ve come a long way since all you had to do was say the word “Troll” and everyone would answer “patents bad”.
Of more immediate significance is the ongoing effort to tackle the 101 beast (patentable subject matter) at many levels and it was heartening that the always influential New York Intellectual Property Law Association (NYIPLA) “has decided to support the joint IPO-AIPLA Section 101 statutory proposal as the best path forward to advance the debate on patent eligibility”. This effort is the most likely to bring forth changes in the near future, assuming the courts decide to follow its lead.
A fixture in the IP market community, Jim Skippen announced his departure from Quarterhill as Executive Chairman and interim CEO of Canadian NPE WiLAN in August 2018, taking a second stab at the retirement that he attempted a few years ago (only to come back at the helm of WiLAN to help steer it through troubled times). His decision to leave now would suggest that he and his management feels the company is once again on solid ground. He is replaced at WiLAN by Keaton Parekh. Happy retirement Jim!These and other relevant news below.Happy reading!
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