We are back after a longer than expected winter break. I must say, it feels great to put pen to paper again and reflect upon the latest developments that may have impacted the current market conditions, including the second highest court award for a patent case against Santa Clara based Intel. More on this below, as well as other factors that are currently at play.
In parallel, the US seems to have finally gotten its act together, combatting the pandemic with an average of 3 million vaccinations administered each day. Here, the issue will not be a shortage of doses, but rather a shortage of willing arms. An unfortunate overdose of disinformation has once again led to suspicion by a segment of the population who have indicated that they do not intend to get the vaccine. The Biden administration and community leaders alike have an uphill battle if they hope to create greater trust in science without which there is no way to beat a virus that clearly adapts faster than its hosts. Elsewhere in the world, we are seeing -unfortunately- a tale of two cities on the pandemic front where countries slow to ramp their vaccination programs (mostly due to dose shortages) will be confined once again to limit the damage of yet another wave while a few others have already reached a semblance of normalcy.
Tangible IP News
Just a few months ago we announced the sale of a subset of a portfolio owned by Siemens (with several assets still available for sale). Since that closing, we have been fortunate to close another two transactions. A few days ago, we announced the closing of a patent portfolio in the cyber security and encryption area. We also just closed the sale of a larger portfolio originating from Nokia and pertaining to video codecs. It will be announced shortly.
As we indicated in our last issue, we have started to let our readers know the areas where we have buyers willing and ready to acquire patents – this does not necessarily mean we have a buyside engagement so please keep this in mind. Our VP of Brokerage, Erika Warner is the point of contact for portfolios that may match these criteria. You can also reach her at email@example.com.
Currently, we have strong interest from buyers in the following technology areas:
- Patents relevant to Wi-Fi 4-6 (802.11n, 802.11ac, 802.11ax) or Cellular (3G, 4G, LTE, 5G).
- Size of portfolio is open
- US Assets are most critical – other geographies are welcome
- Patents in the Semiconductor Technology Space – interest in a variety sub areas such as processors, memory and packaging
- Size of portfolio is open – larger is better
- Evidence of Use is preferred
- US Assets are most critical – other geographies are welcome
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.
Digging A Money Hole
As most of our long-term readership has witnessed, from time to time I like to revisit the main factors that I believe most directly impact the marketplace and patent valuations. So here is our list again and please note that the last one (funding entities) was introduced a few months ago in lieu of publicly traded IP companies (aka PIPCOs). The reason for this shift is that while the goal was to gauge market viability, the reality is that most of these PIPCOs have gone private, disappeared, or their business model has evolved in such a way that their valuation is no longer tied completely to their patent monetization activities (a good example of this is Quarterhill- parent of WiLAN- who is now more diversified and just announced its best results in 3 years incidentally.
The main factors are:
- Noticeable changes in the supply & demand;
- New case law that may have long-lasting impacts;
- Changes in the regulatory environment;
- Recent large damage awards against infringers;
- Broad availability of funding to support assertion activities.
In the past weeks, there have been several events that should normally impact the patent market in a positive way.
First and foremost, there was the momentous court award against Intel that caught many by surprise given that we do not see patent cases lead to a $2.2 billion award very often. Actually, this was the second highest jury award in history (just behind Idenix Pharmaceuticals, who was awarded damages of over $2.54 billion from Gilead Sciences in 2016). The jury in Waco (TX) determined that Intel infringed two patents owned by closely held VLSI Technology and it awarded $1.5 billion for infringement of one patent and $675 million for infringement of the second, for a total of $2.18B. What’s noteworthy here is that although the patents originate from Dutch chipmaker NXP Semiconductors (who will get a piece of the action according to its lawyers), VLSI, the current owner, is a wholly owned subsidiary of Fortress Investment Group. Fortress is a well-known industry player associated directly or indirectly (via funding assertion campaigns) with litigation and would be considered a Non Practicing Entity (NPE) in that it does not directly practices the several patents it owns (although some of its subsidiaries might).
But that’s what makes this interesting as this is a great example where a set of patents changed hands from an operating to a non-operating company while preserving all their attributes. Most importantly, it validates patents as an asset class in its own right regardless of who might own those rights at any given time, just like real estate and other types of property. This may seem trite, but it is often an argument made in court by defendants that NPE plaintiffs should not be rewarded for asserting other people’s inventions (aka the “Patent Troll” stigma).
It is widely expected that Intel will appeal the decision to the Federal Circuit (who wouldn’t to be honest) and it is very possible that the award will be reduced and possibly overturned on appeal, but it will take time for such an appeal to unfold, and in the interim, boardrooms should take notice of the decision (which itself follows a trail of recent awards of a certain magnitude in patent cases). A string of headline-making awards has a tendency to invite change within corporate policy – perhaps making “efficient infringement” less attractive as the first option, as the alternative suddenly becomes quite expensive. So, let’s hope that this latest case will bring a few more people to the negotiating table when it makes sense to do so.
Another important moment, although the outcome is still unknown, was the oral hearing by the Supreme Court bench of the Arthrex case, which essentially calls into question the very existence of the PTAB Administrative Patent Judges (APJs) as having been appointed in violation of the US Constitution.
The hearing took place on March 3 and most judges asked pointed questions. The consensus emerging from those who read the tea leaves of SCOTUS hearings seems to be that the court will uphold the decision of the Federal Circuit – affirming that the APJ appointments were unconstitutional, but pundits differ as to what the actual effect will be as the Supreme Court has several options at its disposal, which are very well summarized in an article by the law firm White & Case, an excerpt thereof I reproduced below:
“If the Supreme Court upholds the Federal Circuit decision, the IPRs currently in abeyance before the PTAB will be reheard by new APJ panels. Other cases currently before the PTAB or future post-grant proceedings would not be affected.
If the Court holds that there was no Appointment Clause violation, the Court will likely vacate the Federal Circuit’s remands under Arthrex and briefing in those appeals would resume. Other cases currently before the PTAB or future post-grant proceedings would not be affected.
If the Court holds that the appointment of APJs was unconstitutional but disagrees with Federal Circuit’s remedy, the Court will have to decide if another remedy is appropriate or whether the entire IPR scheme must be struck down.”
The Supreme Court’s decision is expected between now and the end of the current session in June. Should it decide to eliminate PTAB APJs, this would also be the end of Inter Partes Reviews (IPRs) which have played a very large role in desecrating the perennial conventional wisdom that all issued patents have a strong presumption of validity by invalidating thousands of those since its inception. To be followed.
Meanwhile, we await a replacement for the departing Director of the USPTO (Andrei Iancu) This matter should not be underestimated. As we have seen with both Mr. Iancu and his own predecessor Michelle Lee (formerly of Google), the USPTO director can exert substantial influence on the state of the US patent system and whomever steps into this role as the new director will see his/her actions scrutinized from moment one. Everyone waits with bated breath to see if we are bound to see a continuation of the current policies or a return to a past that inventors and patent owners alike greatly fear. In this regard, it is noteworthy that the two US senators who have been the strongest proponents of a stronger patent system (and co-sponsors of the aptly named STONGER Patent Act) are still at the helm. Indeed, in an interview with Thom Tillis on IAM yesterday by the always insightful Richard Lloyd, the North Carolina senator – who is the ranking Republican on the Senate Judiciary Committee’s IP sub-committee – clearly reiterated how much he cares about IP and how important it is to the US economy. He had some frank things to say about the mess he believes has been made with respect to patent eligibility and the desperate need for reform. He also set out the qualities he expects from the next USPTO Director, making clear he will not support any nominee intent on undoing the Iancu reforms. This should be music to the ears of patent owners!