Paul McCartney is not the only one gradually losing his voice… Sometimes, Courts also speak the loudest by what they do not say. Indeed, the US Supreme Court, in the Investpic v. SAP America case, had the opportunity – for the 44th time- to clarify the current mess on patent eligibility, when the case was placed on its docket for approval. The request for certiorari was denied. No questions asked. The Supreme Court Justices must have figured that the Federal Circuit was better suited to handle this situation. After all, SCOTUS gave lower tribunals all the guidance they needed in the Mayo and Alice decisions to deal with such mundane issues, right?
A few days later, that same Federal Circuit denied en banc (meaning all 12 judges heard the case) rehearing in Athena Diagnostics v. Mayo Collaborative Services. The 86-page order from the Federal Circuit included eight separate opinions—four concurring with the en banc denial and another four dissenting from the decision. Five judges said the Federal Circuit must find a way to make expensive, often life-saving diagnostics eligible for patenting under the Supreme Court’s framework. But the majority concluded that the Supreme Court had simply made that impossible. Remarkably, all 12 judges implored the justices—or Congress—to fix the problem. Finally, some consensus! After this abyssal non decision, many like author Gene Quinn of IP Watchdog have now suggested that maybe we don’t need the Federal Circuit after all, as it is doing more harm than good these days.
Since we now know that SCOTUS is not interested in picking up the pieces of the mess it created and which the Fed Circuit made even worse, it seems we must now place our faith in Congress… In 2019, this takes a strong stomach.
We saw what happened; just a month ago, everyone was all gung-ho that a bipartisan Congress was going to pass a short surgical amendment dealing with Section 101 (“subject matter”) to remove the cloak of uncertainty currently dragging patents down. A last-minute amendment was introduced that, according to many, opened the door to invalidate patents through Section 112 that had just been rehabilitated via Section 101. Furthermore, some of those who initially supported the bill publicly now oppose it. It is now in limbo, as far as we can tell.
But not to remain idle for long, Senator Coons (D-DE), the co-sponsor of that bill, was quick to make a tactical move and, along with Congressman Steve Stivers (R-OH) went to his filing cabinet, dusted off and re-introduced the STRONGER Patent Act. Yes, this is the same bill that was first introduced in 2015 as the STRONG Patent Act and then renamed in 2017. Give it another round, and it will probably come back as the STRONGEST Patent Act, or if president Trump supports it, will likely change again to be called the “BEST PATENT ACT THAT THIS COUNTRY HAS EVER SEEN IN HISTORY!!!”
Considering they could not get a one-pager through the grinder, I am not holding my breath that Congress will succeed in passing such a comprehensive piece of legislation. In short, we badly need help, and we are quickly running out of options.
Buyers & Sellers:
Just when things were starting to slow down for the summer, Intel surprised many by announcing it put a huge stockpile of 8500 of its wireless patents on the block and it was going to auction them off the highest bidder. This announcement came on the heels of Intel’s decision to vacate the 5G chipset space altogether a few months ago. Without a viable product in that space, it did not make much sense to keep such a large and expensive portfolio on the books. A few days ago, Intel announced the portfolio was off the table. Apparently, they received interest from a prospective buyer that probably did not want to see a redux of the infamous Nortel patent auction 8 years ago which triggered a bidding war between the tech giants and led to an arms race around mobile patents. Many speculate this mysterious buyer to be none other than Apple, as the Cupertino giant is developing a 5G modem internally and it would greatly benefit from the protection of the broad Intel portfolio in that space.
According to RPX (who closely tracks sales of patents), the first half of 2019 saw Intellectual Ventures (IV) continue to rapidly peel off patents, most of which end up in assertion campaigns soon thereafter. Although the core of those assets is sold to NPEs, some operating companies such as Citrix and Samsung have gobbled up some of the IV patents for their own needs. IV also assigned some patents to MEC Management, LLC, an NPE “formed under the tribal laws” of the Three Affiliated Tribes of the Fort Berthold Reservation, North Dakota. That tribe was the subject of considerable press in 2017, when it launched a litigation campaign amid a heated public debate over the issue of tribal sovereign immunity. Such immunity has now been rejected by the courts and one can only suspect that this transaction occurred prior to the final determination made by the courts.
New York-based CTRL Labs, which is working on a device that can translate electrical muscle impulses into digital signals, has acquired the patents for Kitchener-Waterloo-based North‘s armband technology. The price of the IP acquisition was not disclosed.
Following its recent filing for bankruptcy after its CEO dilapidated $144M on a gambling spree, the rich patent portfolio (nearly 3000 families) of Chinese phone manufacturer, Gionee, will be auctioned off by the administrator of the Court on July 24 and 25 via Taobao.com’s bankruptcy property network auction platform.
On a much smaller scale, GTX Corp., a self-described pioneer in the field of wearable GPS, people and asset tracking Location-Based Services and Real-Time Location Systems, announced that it had sold two patents, certain other assets and also provided two separate patent licenses to Inpixon in exchange for a combination of cash and shares of Inpixon common stock. I can only assume that the licenses cover more than just these two patents, otherwise the transactions would be redundant.
Kingpak, a Taiwanese automotive imaging business, recently picked up former Round Rock assets in its first patent purchase, supplying the firepower for a new US litigation campaign.
Recently-formed NPE Slingshot Printing LLC—received more than 100 US assets earlier this year from Funai Electric (who acquired IBM’s printing spinoff Lexmark in 2013). These assets are now being asserted against HP.
According to RPX, 4 networking patents originating with Ozmo, a company acquired by Atmel (itself bought by Microchip in 2016) in 2012, were assigned recently to Sonic Wave LLC, an entity under the management of one of the founders of Longhorn IP LLC. The assignment of patents to Sonic Wave, together with other recent Longhorn IP activity, suggests that more litigation may be on the horizon.
Last but not least, defensive aggregator AST has announced the third iteration of its IP3 program and industry-driven IP acquisition program. New this year, patent owners can continue to offer their portfolio to the open market while the buyers in the IP3 group review the assets. Last year, just 31 portfolios were purchased for an average of US $99,000 each, well below industry average.
Winners & Losers:
Since the sudden departure of Provenance founder and CEO Dan McCurdy to RPX, Provenance has had a difficult time demonstrating that its “rent-a-patent” model can attract interest. It is now apparently considering an assertion campaign in a search for alternative ways to generate revenue from its huge portfolio of mainly ex-Nokia patents. Welcome back to earth, guys! I had expressed serious doubts about this business approach when it was first launched, and it appears I was not the only one.
Huawei recently announced its intention to monetize its rich patent portfolio in the US (it specifically asked Verizon to pay it $1B in royalties), a move made necessary by its recent ban on selling products in the US market. Someone’s got to earn a living! That announcement immediately triggered an outcry from US Sen Marco Rubio, who threatened to block them from suing any US company, a clear intrusion in the independence of the legal system, which everyone who understand patents (he clearly does not) decried as being a stupid idea. The last thing anyone wants to do is give the Chinese government an excuse to start favoring the local team in patent disputes brought to the PRC. It will occur soon enough… The irony is that Huawei has, in fact, has been paying a lot more in patent royalties since its inception than it has received in licensing revenues, $6B versus only $1.4 billion over all.
Publicly Traded IP Company (aka ‘PIPCOs”) VirnetX Holding Corp. persuaded a U.S. appeals court to toss invalidity decisions on two of its patents, giving the company a chance for a potential billion-dollar payout from Apple Inc. over secure communications. On the other hand, Ottawa-based Conversant (who used to be public when called MOSAID), won only a pyrrhic victory when the English High Court delivered a mixed ruling in its ongoing dispute against Huawei and ZTE, declaring its standard essential patents (SEPs) to be valid…but, unfortunate for them, not infringed.
US-based chip company Qualcomm’s, patent monetization efforts have often come into collision with antitrust concerns these past year, both locally and abroad. It just lost its latest effort to block the implementation of a sweeping antitrust ruling in the US when judge Koh of California remained unconvinced by Qualcomm’s argument that the ruling could hamper critical negotiations with phone makers over 5G technology. Their argument being that it forces them to rework license agreements and even offer deals to rival chip suppliers, thus scrambling its business in a way that would be impossible to unwind if it wins on appeal.
One would think that Amazon would lead the pack in terms of drone related patents. Surprise! Its arch rival Walmart who apparently filed twice as many last year. Let’s hope they both invested in collision avoidance technology as the two companies start flying their UAVs to your doorsteps…
The US government is not often on the receiving end of a patent lawsuit; so it is doubly embarrassing when it loses. This just happened to the US Navy who must now pay an additional $7.4M in legal fees to FastShip, the patent owner, in addition to paying another $12M in damages. The court ruled that the Navy wrongly used FastShip’s patent information to design a class of littoral combat ships while sidelining it from the design process.
Finally, I am the first one to admit that we focus almost exclusively on patents as a transactional asset class, because very few established companies would sell away their brands. And it’s no wonder why; according to a recent report, the value of top brands increased last year by 8% to a whopping $2.33 billion. Most of the leaders are US-based. See graph below. Did someone just say GAFA?
I’ll See You in Court:
Fresh off its lawsuit wins against D&M Holdings’ Denon HEOS wireless multiroom audio system, Sonos is suing again. This time the target is Lenbrook Industries Ltd., maker of the Bluesound and BluOS products and platform for wireless audio. Sonos alleges Lenbrook infringes seven patents, including the two patents that D&M was found (in a jury trial) to have willfully infringed. Two other patent-infringement claims in that case – also involved in the Lenbrook lawsuit – were settled out of court.
In a rare assertion, Panasonic seeks to fend off Toughbook rival with design rights. Meanwhile, Panasonic was itself sued a few days ago for patent infringement over features in three of its camera models.
Italian-based Sisvel seems to have taken a new liking to the US patent market as it has launched a litigation campaign targeting devices compatible with the 802.11ac wireless networking standard against Belkin, CommScope, Netgear, Roku and TCL on the basis of 3 patents it had acquired from LG Electronics.
Another NPE that has become more active recently is Acacia whose patents were recently asserted against Xiaomi, Vivo and Oppo, to name a few.
As has become customary in recent years, there are many more reported cases filed than settled. More often than not, one of the settling parties will want to keep the lid on any announcement to avoid attracting new lawsuits. Nevertheless, a few settlements were made public when Tivo reported its license with Canadian operator Shaw Communications for TiVo’s i-Guide and its intellectual property license. Meanwhile Vestas and GE Renewable Energy settled their multi-patent dispute related to technologies that enable wind turbines to manage grid faults.
From the Bench:
The US Supreme Court, going the against USPTO recommendation, has agreed in Dex Media to consider whether a petition for an America Invents Act (AIA) proceeding was filed within the one-year window provided by 35 USC 315(b) for requesting inter partes review (IPR). The case will likely be heard next fall.
However, in what was another bad day for those claiming they are immune from their patents being challenged in front of the PTAB, the Federal Circuit has ruled that states, just like native tribes, lack immunity from IPR. University of Minnesota lost their appeal of an IPR filed by Broadcom and Ericsson on the basis that there was no reason to treat states differently from tribes in this context.
Many patent holders have been tracking closely the first decisions to come from the newly invigorated Western District of Texas due to the recent arrival of Justice Albright who vowed to turn it into the new mecca for patent cases, especially for NPEs. Albright just issued what seems to be his first Alice ruling in one such NPE case, denying an eligibility challenge brought by HomeGoods against IPValuation Partners, LLC (d/b/a IPVal) affiliate eCeipt LLC. Judge Albright held that the challenged patent is directed to a technological improvement, and thus not to an abstract idea, for reasons similar to the Federal Circuit’s holdings in Enfish v. Microsoft and Finjan v. Blue Coat Systems.
On the Legislative Front:
In addition to what we reported above in our main story, pharmaceutical companies appear to have succeeded in watering down legislation that would have made it harder for them to protect their medicines by accumulating patents — the latest win for the industry in Congress.
In parallel, and probably as a result of the same lobbying efforts, the Senate Judiciary Committee cleared a bill targeting the sale of drug patents to Native American tribes to avoid patent review, against opposition from Democrats who say it’s too broad and was obviated by a Federal Circuit decision last year.
Around the World:
Intellectual property is generating soaring revenue for Japan, jumping by 74 percent over the past five years to a record in 2017, according to the latest government data. Developing and protecting it is a key element of Prime Minister Shinzo Abe’s long-term growth strategy, which calls for greater investment in innovation to create wealth as the nation’s workforce ages and shrinks.
In India, the courts are toying with the idea of reintroducing interim injunctions in patent cases and a Delhi High Court judge says legal “experimentation” has become necessary to protect patent owners.