I am often asked why so many patents are invalidated or impossible to enforce. When I tell patent owners that we can really only transact 1-2% of the patents we review daily, they do not understand, which is legitimate. Some of it has to do with what the patent market values; but much is also linked to the nuances of the patent itself; namely how it was researched, drafted, prosecuted, issued and ultimately maintained over the years. I’ll provide some context below including some of the most common mistakes and hopefully some clarity regarding why owning a patent will never be akin to owning real estate when it is time to monetize that asset class.
I also discuss recent news covering such topics as litigation funding, AI generated inventions, some good news for patent owners in Texas and a very large patent verdict in Utah after a protracted litigation.
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.
Tangible IP News
On the deal front, in addition to the two transactions we announced in February and the group of licenses we brokered earlier this month in the data processing space, we recently brokered the licensing of a Wi-Fi related portfolio to a few large operating companies. The formal announcement will be made later on this month.
This latter portfolio, which reads on the 802.11ah and 3GPP standards, among others, will soon be available more broadly for sale and licensing.
While we have received offers on several portfolios currently under brokerage, there is still time to put a bid in if you haven’t done so. Hurry up! We still have the following portfolios for sale.
- AST IP3 2021 Portfolio – 34 Unique LOTS representing some of the most relevant assets submitted via AST’s IP3 program in 2021. A variety of technologies are available including semiconductor, multimedia, networking, wireless and others.
- High Frequency Trading Portfolio – Owned by SpectraNet LLC, this portfolio consists of two foundational patent families with extensive industry wide evidence of use.
For more details, please email us at email@example.com. Similarly, if you’d like to be added on our distribution list in the future so that you are the first to receive new opportunities, please email us at firstname.lastname@example.org.
We have received requests from several buyers with immediate acquisition interest in the following sectors:
- Patents applicable to RFID tags, RFID Antennas, RFID readers and Near Field Communication (NFC) devices
- Image Processing technology
- Battery Charging technology
Please reach out to email@example.com with any assets that may match these requests.
For those who have worked with litigation funders to finance patent assertion cases, the general rule is that the financier should never be involved in settlement discussions, as its interests may diverge from those of the inventor/patent owner. But what happens when the funder has invested colossal sums ($140M here allegedly) in a case and the Plaintiff wants to settle at a much lower price? This appears to be the drama behind a recent lawsuit filed by food processing company Sysco against Burford Capital, the world largest litigation funder, accusing the latter to “force it to litigate against it will”. Burford did not lose any time and countersued, stating that Sysco was ready to settle for “a pittance” and obtained an injunction via arbitration that precluded Sysco from completing the contemplated settlement. While this case is not a patent case per se, the same principles and natural tensions are present in each patent case, and it will be interesting to see how this plays out. This must be viewed in the context of a recent article indicating that patent litigation finance has skyrocketed in the past 3 years.
I have written extensively over the years about Judge Albright from the Western district of Texas, and how external forces (Big Tech lobby, congress, the US Supreme Court and even his own Chief judge) all converged to make sure he would not hear so many patent cases. Let’s add to this group the Federal Circuit who generally agree with Defendants who want their cases to be sent to their home districts which are much more favorable to the local team. Recently however, judge Albright has identified ways to keep the same Defendants before his court and the Fed Circuit has sided with him. In one case the defending party was General Motors and, in the other case, Google. If this trend holds, we could see cases where serial defendants (such as Apple) who are usually able to get their cases transferred elsewhere now forced to remain in Texas. This would ultimately have a significant impact on how these defendants conduct their cases as most cases under judge Albright are concluded in less than 2 years.
Not too far from Texas, and in stark contrast to Albright’s rocket docket, Dish Network was condemned earlier this week by a jury in Utah to pay almost a half billion dollars to ClearPlay over its infringement of 2 patents pertaining to commercial skipping technology. This is a major win for the patent owner, but let’s not forget that it took them 9 years to reach that verdict! Only companies with deep pockets can afford to play this long game.
Finally, the UK Supreme Court will soon have to decide whether an AI engine can be a named inventor to a patent, an issue that the US courts have answered by the negative so far. Let’s hope they do not use ChatGPT to pen the first draft of the decision…
What Did I Do Wrong?
Receiving a notice of allowance on a patent application usually comes at the tail end of a journey spanning several years and costing tens of thousands of dollars. Therefore, unsurprisingly, it is generally a moment of celebration and renewed expectation regarding the value of the patent that will soon issue formally. Fast forward a few years later when reality is often a stark contrast to expectations. The inventor has likely tried to build a business around the invention to no avail while sinking a good chunk of his/her retirement funds or has been unsuccessful attracting a licensee that wanted to pay in order to practice the patent.
This is usually when patent owners knock at a broker’s door (in hopes that someone can help them monetize the patent(s) in question). Invariably, we are the bearers of bad news; there is either no market interest for their patents, either because no one is practicing their inventions, or as a result of flaws in the patents themselves. I will discuss the latter in more details, since this is the part that sits squarely within the control of the inventor and their IP counsel. I will try to address this in somewhat chronological in order with a focus on avoidable mistakes.
Let’s pause for a moment though and remember that a patent, in its essence, is a right to exclude others from practicing the invention as claimed (although one can argue that this right no longer exists in the US as injunctions are out and it is merely a right to collect from infringers). Thus, a patent has to be both valid and enforceable against others. Most of the things that go wrong for patent owners have to do with the validity aspects. Unlike real estate, it is not sufficient to simply claim title over a patent; the PTAB reminds us daily that the presumption of validity (that US issued patents are supposed to enjoy by law) is now only a mirage that often disappears when tested. So what can be done to make sure a patent REMAINS valid after issuance? What follows is not a legal treatise and by no means purports to be comprehensive, but it is a good summary of the most common pitfalls to be avoided.
- Avoid Making a Public Disclosures: The first mistake we often see when people have an invention is that they can’t wait to brag about it; whether to their family and friends, to potential partners and investors, etc. This is mistake number one. It is not a fatal one if they live in the US or Canada, where the law still allows a one-year grace period for an inventor to file a patent application after it has made a public disclosure, but it essentially means that the rest of the world is now off limits, as most other countries apply the “absolute novelty” rule. Which means the disclosure the inventor made now acts as prior art to his/her own filing. Easy fix: don’t talk about the invention without a written NDA in place and file a provisional patent that will preserve rights worldwide while giving you an early priority date against third party filings or prior art. See also #4.
- Don’t Just Claim the Invention: Most patents we review have the same common flaw; they essentially claim the invention as described. However, this often leaves too many options for competitors or infringers to design around the claims. When you hire a patent attorney to help you draft your patent application, you must be proactive and work through a design around exercise, asking yourself what would the “bad guys” do in order to avoid reading on your claims. Then add this to your specification (so that you have support) and have your patent attorney write additional claims. Remember that a patent is a barrier to entry and you want that barrier to be as high, wide and deep as possible.
- Research Prior Art Thoroughly: Most issued patents that are challenged in the US are declared invalid. This number hovers around 80% before the PTAB. This is terrible and we can accuse the USPTO of incompetence and the PTAB of bias against patent owners all we want, but the reality is that most patent owners have neglected to search for relevant prior art prior to filing their patent applications. Most patent law firms have failed to request that they do, because they know full well that it will mean in many cases that it just does not make sense to pursue patent protection after looking at the prior art. Here, the interests of the inventors and of the law firm do not always align and it is incumbent upon the inventor to insist on having such a search done. This is a vital step before sinking what will be on average more than $50,000 for obtaining a single patent (including maintenance fees and this amount goes up to several hundred thousand over the life of the patents if you file in many countries). And by search, I do not mean a Google search done in house; a professional search that includes non-patent literature such as scientific articles, journals, product specifications, etc. yielding reliable results. No inventor I know can do this by themselves and expect great results, as it requires both skills and access to subscription-based databases. So bite the bullet, pay the money (less than $2K most of the time) and have a firm do this for you. Then reassess whether a contemplated invention overcomes the prior art and remember that it will be three years before it issues (on average). A lot of new technology will hit the marker by the time it comes to force. Will it still be as relevant then?
- Keep Your Options Open: Five years ago, everyone was looking for Chinese patents. Then, somewhat out of the blue, it vaporized. Now, patents issued in Brazil and India are becoming more strategic, as these are countries where it is relatively easy to secure an injunctive relief. European patents are poised to become even more fundamental with SEP related decisions being made in Europe and with the official opening of the Unitary Patent Court (UPC) in June 2023. All this to say that you cannot predict on day 1 where you will need patent protection on day 1001, where competitive treats will come from or which emerging markets will become appealing. So the best course of action is to leave your options open by filing via the Patent Cooperating Treaty (PCT) – which you can do within a year after an initial filing (whether provisional or not). This will buy you roughly another 3 years and will defer most of the prosecution costs until you need to make a decision as to which countries to seek rights in. By that time, you will have significantly more clarity about the landscape, you may have raised funds, found a partner or licensee, etc. while preserving your rights worldwide with the earliest priority date possible.
5. Understand the Case Law: This may sound like an onerous burden to place on an inventor’s shoulders. But unless you understand some basic limitations developed by the case law in the US and abroad, whether they pertain to abstract ideas (the Alice doctrine), software inventions, business methods, etc. you might once again be investing in a patent that will be either invalid or unenforceable. It is also paramount – and this is where having the right patent counsel is very important – that the patent be drafted with enforcement in mind, i.e., thinking about how people are most likely to infringe upon it. Too many times, I review issued patents that have obvious flaws when it comes to proof that a given claim is infringed upon; either some terms are not supported in the specification (thus claiming more broadly than the described invention), they are indefinite or undetectable, they lead to a divided infringement (i.e. no single actor is practicing all claim elements) or inducement (the infringement is indirect and triggered by another actor) defense. All these flaws can be remedied before the patent issues, but not after, unless the family was kept open (See # 8). The fact that the patent office allowed the application despite these flaws is irrelevant; the patent examiner is not your friend and his/her job is not to correct your counsel’s errors.
- Don’t Settle for Less: It is a common habit for patent counsels to advise clients that they should take what the patent office is willing to give them after one or two rounds of office actions, declare victory on their first allowed patent, and file a continuation to fight another day. I believe that keeping a patent family open is paramount (I’ll explain why below). However, settling for subpar claims achieves nothing for the patentee if no one will ever practice them as issued given they contain too many limitations that would require a pure cloning scenario to ever be enforceable. Remember to consider the costs of pursuing a second full prosecution when the first one yielded nothing of value. When you see a set of claims that the examiner is willing to allow, ask yourself what exactly it will cover, whether it creates a real barrier to entry and how easy/difficult it would be for someone else to design around, knowing that if only one claim element is missing, the patent will not be infringed and therefore the inventor will be without recourses.
- Add Method Claims Whenever Possible: Not every single invention can be protected via method claims, but most are. Why is this important? Mostly for claiming damages from an infringer and avoiding marking requirements. Under patent law, the inventor and its licensees must “mark” the product(s) that practice the invention. This is done by literally putting the patent number on said product, or more generally via website marking where the products are sold. This serves as constructive notice of the existence of the patent(s) and is very important when asserting or licensing patents, since most of the assertion value stems from past infringement acts. Future damages are always hypothetical in nature, as the infringer can change its product to be non infringing or simply discontinue the sales thereof. Therefore, having access to up to 6 years of past damages (in the US) is oftentimes the most valuable aspect of a patent. Under that theory, you can even assert a patent after it has expired, as long as you can satisfy the marking requirements. If you never sold a product, this is not an issue. But if you did, or if you licensed the patents to someone who then sold products without proper marking, you may be out of luck. Conversely, there is no obligation to mark a method claim since the claim is infringed by an actor performing certain steps, and this cannot be “marked” anywhere. So it is best to always have method claims that are commensurate with the scope of the apparatus or system claims to keep a lack of marking from depriving you of what may be the most valuable portion of your patents, i.e., the right to claim past damages.
- Always Keep A Family Open: Most patents that are transacted these days are between 12 and 17 years of their 20 year term where the clock starts at the filing date of the priority application At that time, most applicants have long stopped asking for additional patents stemming from the original applications. This is a mistake. Buyers place a huge premium on patent families that are still open. Why is that? For two main reasons: the first one is that it acts as a hedge against changing law (which happens frequently). Indeed, keeping the family open with a pending continuation allows you to modify your claims to better align with the new prevailing case law. This was very important a decade ago when “means plus function” claims suddenly went out of favor and was even more crucial these past years when the Alice doctrine wiped out thousands of issued patents because the claims were drafted in such a way that they fell into the “abstract idea” trap. Those who had open families were able to go back and reengineer those claims without having to file a reexamination of the whole patent. The second reason is because of the prevalence of Inter Partes Reviews (IPRs) whereby prior art not considered during prosecution is filed before the PTAB and often leads to the invalidation of the patent entirely. This is a back stop measure if you failed to conduct a thorough prior art search as recommended in #3. If the family is open, you can then file this additional prior art in the open case and hopefully get the application to issue in light of this art. This in turn gives you a new issued patent that will be harder to challenge via an IPR since the PTAB is now in a delicate position where it has to second guess the examiner’s work product. It still happens, but it changes the odds significantly. Last but not least, an open continuation allows you to map infringing products perfectly by having the benefit of hindsight and draft new claims that will read squarely on such products.
In short, you cannot dictate what the market wants; but if you do all these things right, you will at least ensure that if someone wants to buy or license your patents – or if you ever need to assert them – they will stand a much better chance of making it through the gauntlet.
In our next column, I’ll cover the most common defenses that infringers come up with when that happens.