April 9, 2019
Maybe it was just too good to be true… After years of being on the receiving end of a patent system stacked against them, things were finally starting to improve for US inventors. Under USPTO Director Iancu’s tireless crusade to restore faith in the US patent environment, we recently witnessed major changes at the PTAB and with the USPTO itself. Several measures were taken to swing the pendulum back a bit more in favor of patent owners and remove some of the uncertainty that has plagued patents as an asset class. The most recent, a new set of official guidelines dealing with patent subject matter eligibility (aka s.101 or the Alice doctrine), where Mr. Iancu told his army of examiners and PTAB judges that they needed to apply a more flexible test when determining if an invention is patent eligible.
We commented a few months ago that this long awaited move, although positive in and of itself, could actually end up making things worse for inventors if the courts did not align themselves with the new guidelines. Basically, we would cycle back to a broken system where the USPTO would issue new patents using one test, which the courts would then invalidate using another test.
Alas, this is precisely what just happened with two back to back decisions (Cleveland Clinic & Charge Point); from the Federal Circuit that have sent everyone back to the drawing board. The first case dealt with medical diagnostic methods while the second pertained to an electric charger, two domains that would seem (to most readers) as falling clearly outside the concept of a simple “law of nature” or “abstract idea”. The following statement from the court panel in the Cleveland Clinic case sums it all: “While we greatly respect the PTO’s expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance. And, especially regarding the issue of patent eligibility and the efforts of the courts to determine the distinction between claims directed to natural laws and those directed to patent-eligible applications of those laws, we are mindful of the need for consistent application of our case law.”
Although these two cases are described as “non precedential” (meaning each ruling is not meant to become the new rule of law in subsequent cases)[1], they have already caused a frantic reaction in the industry and were broadly decried as discouraging innovators from investing in further R&D activities.
With a Federal Circuit trapped in a Supreme Court Alice rabbit hole where it cannot seem to find an exit, these two cases have nevertheless the merit of making clear – if there was still any doubt – that the only way to resolve this imbroglio is for US Congress to intervene directly, and legislate in order to explain once and for all what is, and what is not, eligible subject matter. Until then, uncertainty remains and the smart money continues moving overseas.
While one has to be quite optimistic to pin one’s hope on Congress achieving anything concrete, especially in the current environment where IP is not exactly at the forefront of politicians’ minds. However, this may actually play to the favor of patent owners as we have for the first time, according to former Federal Circuit Chief Judge Paul Michel, a newly resurrected, mostly competent and so far bipartisan Senate sub-committee on Intellectual Property. On the House side, the new chairman is a former judge who is quite knowledgeable and interested in patents based on some recent hearings on the topic. In short, this could be a breath of fresh air after the reign of former Congressman Darren Issa who was well-known for his obsession with the patent troll narrative.
It will take this new blood, a lot of elbow grease and a great dose of bipartisan luck to get anything done before we enter the next election cycle. Still, rumor has it that a new bill could be brought to the floor as early as May or June of this year, which would address specifically the s.101 issue in a series of recently published Guiding Principles.
Let’s hope this is the case as there is no one else to turn to after that!
[1] The US Fed Circuit sits on appeal from lower courts for all IP matters and has often been dubbed as the “Supreme Court for Patents”.
Buyers & Sellers:
First, we are pleased to report that we recently closed on another transaction a couple of weeks ago by successfully brokering a license to our Multifactor Authentication portfolio, which remains available for additional licenses or a straight sale.
In our last column, we shared some interesting statistics regarding the price per patent (or families) in the current market, based on confidential data collected over hundreds of transactions. Defensive clearing house, Allied Security Trust (AST), just released their own data that, while consistent with earlier findings about the market growing at a healthy rate (by number of deals), also points to the near disappearance of NPEs whose acquisitions have dropped by a whopping 80%, a direct reflection of how hard it has become to monetize patents via assertion. The summary below also mentions Santa Clara-based cloud platform company ServiceNow and its neighbor Facebook as two relatively active buyers.
Some recent business misfortunes triggered a series of interesting patent-related transactions. Apple, a rare buyer, bought the patent portfolio of security camera company, Lighthouse, after it recently closed its doors. Lighthouse’s patents mostly pertained to artificial intelligence and facial recognition. In a similar scenario, AR hardware maker Magic Leap reportedly acquired (via a shell company) the patent assets of competitor Osterhout Design Group (ODG) who recently went out of business. Finally, SunLink, a manufacturer of solar trackers and fixed-tilt ground mounts, is auctioning 11 patents and intellectual properties in an attempt towards payment on a defaulted loan.
Taiwanese chipmaker Media Tek reportedly made its first third party acquisition in five years, picking up a portfolio related to speech recognition and audio processing from Philips. This acquisition could be related to the recent move that saw AMD sue Media Tek for patent infringement.
While some people are selling off their patents, other prefer to donate them: Japanese car manufacturer Toyota made a splashy announcement a few days ago that it was making available royalty-free over 24,000 of its patents covering hybrid and electric car technology. Some pundits saw the move as a way for Toyota to encourage others to keep innovating around hybrid cars (like the popular Prius), as the industry appears to be moving to all electric plug-in vehicles. In the same vein, Microsoft announced that it would donate an additional 500 patents with an expansion to its patent protection program Azure IP Advantage first announced in 2018.
Winners & Losers:
And the overall winner is… Samsung, who now owns over 25,000 US granted patents more than runner ups Canon and IBM. Samsung has 61,608 active patent families, with Canon in second position with 34,905 and IBM rounding out the top list with 34,376.
Up North, Canadian-based Blackberry surprised many by announcing a huge surge in IP licensing revenues in Q4 of 2018, while it looks to hires a new head of licensing. Although, perhaps, they should leave things just as they are…
Our readers should all read the fascinating stories of the Bunch O Balloons inventor – turned patent rights activist – Josh Malone, who chronicled his experience trying to protect his patents in the US against behemoth TeleBrands. Josh was just awarded what most would consider a sizable court award last week when the court declared TeleBrands a willful infringer and ordered it to pay him $24.5 million in damages (plus another $5M in attorney fees). But Josh is not out of the woods yet; his costs so far for enforcing his patents already top $17M and they could easily swell over the award he is trying to collect, as he will now be facing the perennial appeals that TeleBrands will no doubt file (it has been their pattern to do so all along this protracted litigation). Before eBay, the simple threat of an injunctive relief (when the courts were still issuing those) could have resolved this battle in a matter of months….
Another bittersweet battle that came to an end was the pyrrhic victory of Qualcomm over Apple that saw the Cupertino company found liable of infringing several Qualcomm patents. The price for their transgression: a paltry $31 million, which Apple probably makes in less than a day… This is not the kind of decision that will incite Apple to come to the table and resolve its other ongoing disputes with Qualcomm. Similarly, R&D powerhouse SRI won its case against US switch manufacturer Cisco, but saw the damages it sought be slashed from $55 million to about $30 million in hard-fought litigation over network security technology. Once more, there will be little left once all their legal fees have been paid.
Back to Apple’s good fortune, a separate Delaware federal jury also found that it did not infringe two patents related to LTE wireless broadband communication technology, ending Evolved Wireless LLC’s bid to recover up to $30 million in royalties from the tech giant.
At the Federal level, the International Trade Commission issued a rare decision involving two foreign companies (its primary role is to protect US companies against illegal imports) that found Fujifilm infringing some of fellow Japanese company Sony’s magnetic tape patents. Finally, chip maker Intel dodged a bullet when it was able to convince a federal court to dismiss allegations that it willfully infringed four semiconductor patents owned by patent holding company VLSI Technology LLC.
I’ll See you in Court:
With 6000 new patent cases per year in the US alone and increasingly more abroad, it becomes rapidly impossible to monitor them all. Therefore we try to focus on the few that stand out.
One image captures it all: see below the raging war against standard essential patents (SEP) and the efforts of their owners to collect royalties under FRAND (Fair, Reasonable And Non Discriminatory) terms. There will be a quiz at the end.😊
Surely a sign that the automotive industry is upping its strategy against the looming patent threat coming from large technology companies, Daimler recently asked EU antitrust regulators to probe Nokia around its patents essential to car communications, a move underlining the tensions between tech companies and the car industry on the use of key technologies. It will be interesting if they use the same playbook against Broadcom who just filed suit against both Daimler and BMW, just months after the successful settlement with VW, Audi and Porsche.
Coming off recent settlements with ASUSTek, Huawei, and ZTE, Maxell (a subsidiary of Hitachi) has now sued Apple for alleged patent infringement of ten of its patents related to various Apple devices. The patents asserted against Apple also include several that were at issue in a June 2018 trial against ZTE, which culminated in a $43.3M damages award.
Baccone LLC, a Delaware-based company, has filed suit against LG and Samsung alleging that the two Korean companies infringed two of its patents involving facial recognition technology and processes and another one covering technology and approaches for image sharing. Facial recognition technology has been in the news lately because of its Orwellian attributes, but it is now also becoming a hotbed for patent litigation.
Finally, patent disputes can affect all sectors of the economy, right down to one’s dinner plate, as the recent case filed by Arista Cereal Technologies against Arcadia Biosciences Inc. alleging that the latter infringes six patents covering high-fiber wheat.
Handshakes:
Most licensing agreements, whether they take place voluntarily of subsequent to litigation are kept confidential. This gives the impression that there is lots of war and very little peace around (if you know of any, please email those to me at info@tangibleip.biz.) Meanwhile, I am relieved to have found at least one piece of good news, although it comes with an asterisk: the PTAB said it won’t review the validity of a pair of geolocation patents after the owner struck an agreement with Google and LG Electronics, thus putting an end to their dispute. What we do not know however, is whether the patent owner was simply forced to settle at no or very low cost given the prospects of a long and expensive battle against two deep pocket companies.
From the Bench:
See my comments on the two Federal Circuit cases above. One pattern that has emerged lately is the number of split panel decisions, indicating a clear fracture at the appeals level. This leaves everyone guessing that the outcome of their case will depend entirely on which panel of judges they get…
On the Legislative Front:
The director of the USPTO is considering next steps after the U.S. Department of Justice’s antitrust division withdrew from a joint policy statement on standard-essential patents last year. Some large SEP holders like Qualcomm and Ericsson are asking Director Iancu to revisit its policy and adopt a more favorable stance toward SEP owners.
A recent interview with Representative Steve Stivers (R-OH) who co-sponsored the STRONGER Patent Act a year ago in Congress suggests that the bill will get its day sooner rather than later and that restoring a fairer patent system, along with injunctive relief, is still a priority for those who support the Act.
On the pharmaceutical side, Democratic presidential candidate Bernie Sanders has vowed to cut the price of patent prescription drugs by half should he be elected.
Finally, the house IP subcommittee hearing of 116th Congress recently convened its first meeting which focused on addressing ways to increase female inventorship in the country, which still lacks greatly despite some improvements in the last few decades.
Around the World:
The latest WIPO data continues to show a surge in worldwide patent applications originating from Asia, which accounted for more than half of those. In the main category – the Patent Cooperation Treaty – the US led the way with 56,142 applications, followed China (53,345) and Japan (49,702).
On the Move:
Lenovo Chief IP Counsel Ira Blumberg recently left the Chinese company after a 7-year stint. He is now listing himself on LinkedIn as a “Consultant” in Camas, WA. Stay tuned… Meanwhile, in addition to Blackberry, Ericsson was in the market for a new Chief IP Officer after the recent departure of IP head Gustav Brismark. However, it just announced the promotion of its 21-year veteran Christina Petersson to the job.