A belated Happy New Year to all of you! As I reflect upon this column, which has gone through various permutations over the last 7 years, I am amazed by how readership has grown organically from a dozen (including several family members 😊) to over 15,000 professionals in the IP and business communities. I must admit, this baby is a real time investment, but every time I think of retiring it, someone new tells me that they actually read it, and an even enjoy it. Go figure! Since the fall of 2017, we are also published monthly through the always informative Inventors Digest magazine. I feel strongly that the inventor community needs to understand how the market operates so that it can set expectations accordingly.
With this mind, my resolution in 2019 is to continue to write these IP Market Updates throughout the year, with a few notable changes: first, we are introducing a new look and logo as you can see above. The old one was starting to show its age. (We will also soon launch a highly revamped website that also incorporates a fresh design and new content. I hope you like it.) Second, we will be migrating this newsletter into a more traditional blog format that will allow me to write more regular, shorter texts. Not everyone is cut out to read War & Peace each month…
I hope we can continue to inform you and support a more vibrant IP marketplace! Conversely, if you want to bring some important development to my attention, please email it to me at info@tangibleip.biz.
In this regard, I have a couple pieces of good news to share. First, we recently announced the closing of yet another licensing deal (the second) on a marketing automation software patent portfolio. Second, we have just been retained as only one of the 4 top brokerage firms worldwide that will be allowed to list patent portfolios on offer to the IAM Market platform. Up to now, only operating companies could list their own patents for sale. We already have eight distinct portfolios listed, with more to come. Check them out!
Who will win the Alice race?
The race is on as to who will get rid of the infamous Alice (aka “abstract idea”) doctrine first; the USPTO, Congress or the Courts? A few weeks ago, USPTO Director Iancu made good on his promise to tackle Section 101 (what is patentable subject matter) head on by having the patent office publish new guidelines to its own corps of examiners regarding how to respond and otherwise treat patent applications that would traditionally have triggered Alice-based rejections. The new test should provide some much-needed clarity and increase the number of allowed patents by cutting rejections on the basis of patentable subject matter, especially as it pertains to software patents. Director Iancu was also successful in convincing the PTAB to give deference to these guidelines when reviewing challenges to issued patents. This in turn should help reduce the IPR-related patent invalidation rate that has remained fairly high over the years. It is never easy to put the genie back in the bottle but this is precisely what Director Iancu has been doing of late, and rather successfully I might add.
The problem we are now facing is that the Courts (especially the US Federal Circuit which hears all patent cases under appeal) have yet to embrace this new simplified approach, and they really have no obligation to do so, as the USPTO is limited to rule making whereas a change to the Patent Act must pass through Congress. Similarly, Congress has several bills on the table that attempt to address this matter, including the recently filed STRONGER Patent Acts, but none of these is likely to see any momentum during this new Congress as the House and the Senate will be dealing with more pressing issues that should be obvious to anyone reading the news. Some have also posited that the new guidelines published by the USPTO may actually remove some of the impetus for Congress to do anything, on the premise the problem has now been fixed.
This could leave inventors with a new false sense of security that their newly issued patents are now valid in spite of Alice, only to discover years later that the courts never agreed to the USPTO approach and still declared their patents invalid under the Alice doctrine. However, a decision from the US Supreme Court just one week ago could pave the way for an even more radical solution; Henry Schein, Inc. v. Archer & White Sales, Inc, a case examining a judicially-created exception to the Federal Arbitration Act, may foreshadow how SOCTUS will approach patent eligible subject matter going forward. Specifically, the three judicial exceptions to patent eligibility could be found, unanimously, inapplicable at the Court’s next review of the issue, which could be soon, as it has recently accepted to hear an appeal of the famous Berkheimer decision on this very subject.
Meanwhile, since the USPTO is the rare US agency that can pay for itself, examiners are hard at work, despite the prolonged US Government shutdown, issuing many new patents, including some directed at border walls… and others, of course, at underground tunnels! You can’t stop progress.
Three Different Bites at the Apple
In the past month, Apple and Qualcomm have continued their all-out patent war on several international fronts, with varied success emblematic of the legal patent environment in place in different countries. At its essence, Qualcomm is suing Apple for non-payment of royalties due to its chipsets that go into Apple products, while the Cupertino company is pushing back on payments on the basis that the rates are unreasonable and has filed a formal complaint with the US antitrust division. Last fall, Qualcomm had the ITC (which is the US competition watchdog) declare that their patents were valid and indeed infringed by Apple, just to see it refuse to issue an exclusion order, which is the only remedy one can hope to receive from the ITC as it cannot address any award in damages. This decision is being reviewed by a full panel. Meanwhile, Qualcomm took its case to China and Germany respectively, where it quickly obtained injunctive orders preventing Apple from shipping several of its products out of China or selling them in Germany. In other words, Qualcomm had no choice but to resort to forum shopping to find a friendlier jurisdiction, except than instead of going to the Eastern District of Texas as used to be the default mode, it filed suit in Asia and Europe because no other jurisdiction is currently tougher on patent owners than the US Court system. You have heard me often state this, but this is actually a perfect example of how it actually work in reality.
So here is a quiz for you; if you are considering starting or investing in a startup whose IP is key to its future success and growth (and honestly when is this not the case?), where are you more likely to locate the company, all other things being equal?
Buyers & Sellers:
Some companies were fairly active during the holiday season and found new patents in their Christmas stockings… It was reported that North, the company behind the Focals AR glasses, acquired the “technology portfolio” behind Intel’s Vaunt AR glasses. Basically, North just got its hands on 230 of Intel’s patents to help propel its Focals AR glasses into the future.
Meanwhile Facebook purchased 107 U.S. patent assets in the third quarter of 2018, after a two-year hiatus from buying in the brokered market. The patents it bought in July mostly related to wireless communications and web security.
According to RPX, who tracks all patent assignments with the USPTO, Sovereign Peak Ventures, LLC (SPV), an affiliate of Texas monetization firm Dominion Harbor Enterprises LLC, received over 500 assets from Panasonic in late 2018. USPTO records also identified roughly 65 US patents assigned from Entropic Communications, a subsidiary of MaxLinear, to Dynamic Data Technologies, LLC (DDT). Those patents are part of a larger acquisition effort by DDT which, in October, began an international litigation campaign asserting a subset of the acquired portfolio.
Also, since it announced that it was no longer purchasing assets in April 2018, former powerhouse Intellectual Ventures has accelerated the sale of patents from its portfolio, including transfers to a number of particularly prominent NPEs—in some cases, retaining a financial interest in the assertion of its divestitures.
Finally, although companies such as Uber, Lyft, Pinterest and Slack are among the companies planning or actively considering IPOs this year, in comparison to the past, such unicorns are acquiring far fewer patents in the run-up to listing, reflecting a more general trend that US-based companies view owning patents as less important strategically than they used to.
Winners & Losers:
A few weeks ago, one big loser was undoubtedly Wi-LAN, the Ottawa-based public NPE who saw its $145M award against Apple melt like Canadian slush to a paltry $10M after a judge ruled that the wrong basis for the initial award had been used. Should they accept that revised award, it will probably barely cover their legal fees after what was a lengthy trial. And remember, they WON!
Another public NPE that had been enjoying quite a lucky streak in court, Finjan, lost an important case against Juniper Network when a California jury returned a verdict of non-infringement, apparently over the meaning of the word “schema”. Meanwhile, another California federal jury found that Nikon Corp. did not infringe camera sensor patents jointly owned by lens maker Carl Zeiss and semiconductor maker ASML.
In the biotech space, we saw several decisions affecting important drugs. But the most important one came from the Indian Supreme Court that saw Bayer-owned Monsanto prevail in a closely-watched Indian Supreme Court case where the top court upheld the patentability of novel genetically lab-engineered chemical entities like the company’s blockbuster Bt cotton variety. This is expected to have a major impact on the industry.
In the US, Amgen Inc lost its bid at the U.S. Supreme Court to overturn a ruling that kept the Regeneron Pharmaceuticals Inc and Sanofi SA cholesterol-lowering drug Praluent on the market. American pharmaceutical firm Hospira was not so lucky as a US district court invalidated two of its patents in a victory for German healthcare company Fresenius Kabi.
For those who have been tracking the tribulations of Allergan since it had the clever (back then at least) idea to sell some of its blockbuster drug patents to the St-Regis Mohawk tribe in order to bypass the PTAB, which did not work, has recently appealed to the US Supreme Court so that the sovereign immunity of the tribe can be confirmed.
In the high-tech world, Ericsson scored a major victory when a Texas federal judge ruled in a major blow to HTC, which has accused the company of trying to overcharge on royalties to license cellular and wireless network SEPs, that Ericsson isn’t automatically required to license its standard-essential patents at the much cheaper component level.
Last but not least, one has to tip their hat to IBM who earned a record 9100 new patents in the US in 2018, marking the company’s 26th consecutive year of U.S. patent leadership. IBM led the industry in the number of artificial intelligence (AI), cloud computing, security and quantum computing-related patent grants.
I’ll See you in Court:
You can tell when people start the New year with fresh resolutions and newly voted budgets… As a result, there was a flurry of new major cases initiated in the past weeks, too many to keep track. A few of the most visible ones include:
Endeavor Robotics filing a complaint against QinetiQ North America and Foster-Miller Inc. alleging that QinetiQ infringed on two of Endeavor’s patents for stair-climbing mobile robots. Talk about taking the first step forward…
Japanese manufacturer Canon Inc. filing a rare law suit in the US claiming that a subsidiary of China’s TCL Corp. infringed five of its patents on developing smart televisions that use the “Roku TV” operating system. TCL Electronics Holdings Ltd. is alleged to have used technology developed by Canon in its smart televisions’ design, remote control, display, streaming, search, voice command, and cloud storage functions without Canon’s permission.
In addition to its numerous complaints against Apple, Qualcomm is also on the receiving end of a crucial case in the US as the Federal Trade Commission is accusing the San Diego-based chip company of abusing a monopoly on mobile chip technology. Many predict that the outcome of this trial could have a major impact on the smartphone industry.
Proximity Sensors of Texas LLC, an affiliate of monetization firm IP Valuation Partners LLC (d/b/a IPVal), has filed new cases in its campaign over a single patent generally related to an apparatus on an object’s surface that emits light and receives reflected light in return. The suit is directed at AMS and ROHM. In prior cases in the campaign, Proximity Sensors named smartphone and tablet makers themselves—Apple, Huawei, Microsoft, and ZTE—as defendants.
Publicly traded PIPCO InterDigital, Inc. was hit with an international salvo of complaints over the NPE’s alleged breach of its fair, reasonable, and non-discriminatory (FRAND) licensing obligations as to certain standard essential patents (SEPs) covering cellular technologies, notably by Swiss semiconductor firm u-blox in California and in China by Huawei.
Serial patent litigant Leigh Rothchild expanded its QR Code campaign against 5 more defendants by adding Delta Electronics, Driscoll’s, Hyland’s, Iconix Ecom and TP-Link, which brings the number of defendant to above 80. In a related news, Mercedes Benz recently announced it had settled its own case with Rothchild’s company.
We have reported from time to time about the tribulations of PIPCO Inventergy who fell on hard times despite have a world class management. As a result, the company is heavily indebted (mostly to TCA’s Global Master Fund) and is now being forced to double down on filing new lawsuits in order to repay its debt. It recently filed 7 new cases related to patents generally concerning communication with a tracking device; the patents were developed by GTX Corp.
Data Scape Limited, an NPE recently formed in Ireland, has launched its first litigation campaign in the US, asserting patents previously owned by Sony against Apple, Citrix, Pandora Spotify, Western Digital, Dell, Fujitsu and SAP pertaining to storing and syncing data files in a distributed computing environment. This is a typical case of “privateering” whereas a large operating company will offload some of it patents to an NPE knowing full well that these patents will be asserted against competitors, while maintaining an official stance that it does not condone NPEs. If this sounds like cold war tactics where battles are being staged via proxy, it is because that is precisely what is happening. And many large tech companies resort to this tactic…
Handshakes:
If filing new law suits was in many people’s new year resolutions, settling old ones did not seem to rank very high, as very few agreements were reported in the past month. A couple clearly stood out though: in what is a first for RPX, it announced a large licensing deal with Italian-based NPE and patent pool Sisvel around some 700 WI-FI Standard Essential Patents. As a result, all RPX members (a few hundred companies) will now be licensed under those patents. The patents in play belong to Orange S.A., Fraunhofer IIS, Koninklijke KPN N.V., Columbia University, Hera Wireless S.A., Enact IP S.A., Aegis 11 S.A. In addition to the existing patent owners, Mitsubishi Electric Corp. joined this transaction and will now become a patent owner in the Sisvel Wi-Fi Joint Licensing Program.
Also, on the eve of the cross-patent licensing agreement they renewed a few months ago, Microsoft and LG recently announced a tentative agreement to develop automotive technologies. Under the agreement, LG will take advantage of Microsoft’s Azure cloud and AI tech to develop its digital platform for the vehicle industry, a market which LG says is key.
From the Bench:
In a rather strange decision that will give additional ammunition to those claiming Google is getting preferential treatment from the US patent regulators, the PTAB recently ruled that Google’s parent Alphabet which derives over 99% of its aggregate revenues from Google was NOT a party of interest in the IPR challenge filed by Google against a patent owned by SEVEN Networks, LLC. In short, this means that if Google loses its challenges, Alphabet can technically refile the exact same case and it would not be estopped from doing so on the basis that it already lost once. This flies in the face of any conventional wisdom, but this is the PTAB after all…
The Federal Circuit appears to be on a collision course with itself as one of its panel just ruled when invalidating a dice game that “Subject matter eligibility under 35 U.S.C. § 101 is a pure question of law, one that can, and should, be resolved at the earliest stages of litigation”. This is exactly the opposite view another panel (i.e. a group of 3 other judges) held in the Berkheimer case and some of its progeny when it ruled last summer that a section 101 challenge was a mixed question of facts and law that would be better resolved at trial. This one is headed to the Supreme Court…
On the Legislative Front:
As US Congress is poised for another 2 years of gridlock on anything substantive, some argue that this is a perfect opportunity to legislate in a bipartisan way around the needs to reinvigorate patent rights that support innovation. But I wouldn’t hold your breath on this one!
Around the World:
The irony was not lost on anyone that US and European companies are filing patents in record numbers… in China, which received over 1.5 million new patent applications in total in 2018. The Chinese government also stated that China’s top court will now rule on intellectual property cases for the first time starting January 1, elevating the handling of an issue that has become a key complaint in the trade war with the US. Remember that last year China created a specialized court for handling all IP matters. So government now directly controls the judiciary agenda at all levels for dealing with IP disputes, and no one should be surprised to see foreign companies fare gradually worse in the future when asserting their patents against China-based companies. Nevertheless, China is marching on to sell its vision of a market respectful of IP rights and it just released draft guidelines to boost fines fivefold for IP violators. This is meant to address the often repeated complaint that damage awards in China in patent cases are too low and do not do enough to deter infringers.
South Korea recently adopted a similar stance and introduce the US concept of “trebles damages” in patent cases, as well as substantially higher fines in trade secret cases, in a bid to curb “technology extortion”.
On the Move:
It was reported that the former President of Nokia Technologies and EVP of Dolby Labs Ramzi Haidamus has been appointed as the new CEO of Immersion Corporation (Nasdaq: IMMR), a leading developer and licensor of touch feedback technology.