The Year in Review and 2024 Market Predictions

Hello all,

A belated happy new year to you all and an early happy lunar year to our readers in Asia!

2023 was certainly an interesting year in the IP marketplace. Some good, some bad and definitely some ugly stuff for those who want to monetize their IP. I will cover those and a lot more below.

I will also revisit our 5 predictions for 2023 and share our hindsight evaluation. Assuming I am not too embarrassed by the results, I will also wager predictions for a few new ones for 2024, if space allows it.

I will turn to the current saga between Massimo and Apple which has received significant press coverage lately and is a real reflection of what currently plagues the US patent system.

Finally, I will provide some updates on a few legislative initiatives that could substantially impact market conditions depending on where things land.

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. 

On behalf of the whole Tangible IP team, we wish you a happy 2024!

 Louis

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Tangible IP News

We have recently closed the sale of yet another portfolio originating from the AST IP3 program and will be making a formal announcement shortly.

We also have several other portfolios for sale that offer great opportunities to savvy buyers. All of our patents for sale are listed here. 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 info@tangibleip.biz.

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Patents Wanted

Call for high quality portfolios!

We are always open to reviewing high quality portfolios. Some of the areas of most interest to our buying network right now include:

• Video compression SEPs and/or video streaming, live streaming, targeted ads, machine learning
• Point of Sale Technology

• Medical Device technology – particularly wearables and IOT health monitoring

• Patents applicable to RFID tags, RFID Antennas, RFID readers and Near Field Communication (NFC) devices.
• SEPs (Declared or not) relevant to any of the following: 3GPP, 802.11, LTE, 5G
• Imaging technology including both medical and nonmedical applications such as OCR, image manipulation
• Semiconductor as related to memory-FLASH, DRAM as well as process/manufacturing and circuit technologies

You can review our criteria here but if you own a patent portfolio with at least five issued US patents and have knowledge of others using your technology (infringement), we are happy to review for potential brokerage. We will also look at larger portfolios where evidence of use is uncertain.

Please reach out to info@tangibleip.biz with any assets that may match these requests.

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Recent News:

Rotten Apple – Can It Be Fixed?

I usually refrain from singling out individual companies, but I feel compelled to do it this time. And what I will say below applies to various degrees to a lot of other large implementers. I am sure they will recognize themselves.

Unless you live under a rock, you’ve likely heard about the judicial saga between pioneering US health watch maker Masimo and Apple which unfolded around the holidays. I posted regularly on LinkedIn at that time as things were moving very quickly.

This case illustrates the worst side of predatory infringement by a company that, with time, has become the most unethical of Big Tech I can think of when it comes to violating other people’s IP. Apple’s approach is very simple, and its playbook akin to many of our current politicians: copy, deny, delay, attack. In the Masimo case, Apple not only willfully infringed Masimo patents; but it also allegedly stole its trade secrets, poached a dozen of its top employees (a practice called “smart hiring”), including Masimo’s CTO, filed multiple challenges to its patents in front of the PTAB, etc.

It then lost its case before the ITC, tried to lobby the White House to overturn the decision (as it had done successfully with the Obama administration a decade earlier after the ITC issued an exclusionary order sought by Samsung). When that didn’t work, it appealed the decision and was able to buy a few weeks of reprieve right around Christmas to continue selling its Apple Watch. When that lapsed, it finally relented and removed the infringing feature (a pulse-oximetry sensor) from its products, which the ITC judged was acceptable.

The decision means that the Apple Watch can remain on the market, but with that functionality disabled. Apple is expected to continue its legal arguments in the appellate briefing, contending that it should have prevailed at the ITC and that the exclusion order is improper. The ongoing legal process may take several months, with a final decision possibly a year away. Additionally, Masimo may pursue infringement damages in a parallel Federal Court litigation and has an existing trade secrets lawsuit against Apple seeking nearly $2 billion in damages.

However, the only reason Masimo was able to make it that far in the process was because it had enough financial resources (most inventors do not) to sustain Apple’s onslaught of legal challenges, and its CEO seemed to have made this a personal quest to prevail, as money may never fully compensate it for the damages it has already sustained. Finally, without the ITC offramp -which is the closest thing to traditional injunctive relief- Apple would still be stealing Masimo’s lunch and the small company’s watch sales would have already plummeted. One detail worth mentioning; had Apple manufactured its products in the US as opposed to China, the ITC would have had no jurisdiction on this matter.

The following message is to my fellow lawyers who work in the Apple IP department. Guys, you know better than this and it is high time you start educating your business clients -all the way to Tim Cook- that this continued unethical behavior around IP is very shortsighted and costing the company its reputation, billions and billions in lost sales and many lost partnerships, as fewer still want to do business with Apple.

Take it from me; once you pass the tipping point, it is very hard and extremely expensive to make it back. I know this firsthand; I was in a senior legal and IP function at Microsoft when the company went through a very traumatic DOJ investigation that almost ended in its breakup. A lot of our business clients were behaving unethically at that time, mostly because they did not know any other ethos than working for a company that could impose its will at every turn, or at least thought it could, and get away with it.  When the company tried to call some friends to testify in its favor, there were none left. It took over a decade and two CEOs to finally reestablish itself as a more responsible corporate citizen (for the most part) and it has now reclaimed much of its lost reputation (and market cap). 

Fellows, remember that you, seasoned IP lawyers, have often times more business experience than many of your corporate clients and, I would hope, a better sense of what is ethically proper. Thus, you can be part of the solution and it might be time to get rid of the rot before you start hating the company you work for. So many others already do.

Legislative Updates – PTAB: Little Movement Despite PREVAIL Act

There was a great conference put on by our good friend Gene Quinn from IP Watchdog that focused on the PTAB reform and current legislation aimed at reforming the much maligned tribunal. Speakers at the PTAB Masters 2024 program discussed potential changes to the U.S. Patent and Trademark Office’s (USPTO) Patent Trial and Appeal Board (PTAB), with a focus on the pending Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act. Participants expressed skepticism about immediate movement on the USPTO’s proposed rulemaking but highlighted various ways to enhance the PTAB system’s fairness. Suggestions included more oral arguments, allowing experts to testify in person, and improving the rehearing process. However, opinions varied on proposals like changing the standard for patent invalidity and altering claim interpretation rules. Former USPTO Director Andrei Iancu and others argued that the system currently favors multiple challenges against the same patents, emphasizing the need for a more balanced approach to patent disputes.

The PREVAIL Act, with bipartisan support, was considered a potential solution to address challenges such as serial inter partes review petitions and multiple attacks on patents in different venues. Proposals within the act aim to establish standing for PTAB challengers, limit multiple petitions against the same patent, and end the practice of filing reexaminations following failed PTAB petitions. Despite optimism from some speakers about the PREVAIL Act, others expressed doubt regarding its chances of passing, citing its ambitious scope. Panelists also discussed the importance of live expert testimony at the PTAB, a more effective rehearing process, and the role of the U.S. Court of Appeals for the Federal Circuit in reviewing PTAB cases.

Net/net: most of us know what is wrong with the PTAB and how the fix it. Just don’t expect congress to do the right thing during an election year, or the year before of after for that matter…

Erratum

A couple of months ago, I cited a report from AST which mentioned that our fellow brokers at Transactions IP had acquired a portfolio, which earned them the NPE label in the report. AST recently published a retractation, as it apparently confused a security interest the brokerage firm had filed on a portfolio with an assignment.

2023 In Review

A year ago, I ventured to make 5 predictions for the IP marketplace, which I reproduce below:

1. The patent market will continue to split in two opposing segments; the first one (going down) is where operating companies acquire assets. Corporate patent budgets are down in 2023, people in IP departments with vast institutional knowledge are being laid off and it is hard enough to justify the cost of maintaining, let alone growing, one’s portfolio organically. Plus, why buy when you can use the PTAB and the court system to drag things out over a decade? The second one (going up) is made of well-funded NPEs who have access to vast amounts of cash to feed their assertion programs. This trend will likely accelerate in a down economy as money managers are looking for alternative opportunities, and playing patent litigation roulette always looks enticing from the outside.

Update: I think I hit this nail on the head, as most of this has held true in 2023. We definitely saw many more large companies accelerating their divestiture of patents in a way to reduce expenses and put noncore assets to work. Meanwhile, NPEs have become the default buyers in most sales, as Opcos have lost appetite (and $$) to purchase third party patents. That might change in 2024 though as some of the funding we took for granted might be redeployed elsewhere and some large patent holders have indicated to us that they are back on the market looking to acquire. More on this in our next column.

2. The US Supreme Court will screw inventors once again; this time over the concept of enablement. We all know by now the carnage it left in its wake with the Alice doctrine. Watch out now for the Amgen v. Sanofi case that it scheduled to be heard during this session. Here is the issue: “Whether enablement is governed by the statutory requirement that the specification teach those skilled in the art to “make and use” the claimed invention, or whether it must instead enable those skilled in the art “to reach the full scope of claimed embodiments” without undue experimentation—i.e., to cumulatively identify and make all or nearly all embodiments of the invention without substantial “time and effort.” This may sound technical for the uninitiated but, if it elevates the current burden, it is yet another tool offered to defendants to challenge the validity of any issued patents after the fact. As if they needed more…

Update: Well, that was an easy one, I will admit. SCOTUS never fails to disappoint us. It almost never takes on patent cases, which finds us wanting for more activism on its part, until it does and then finds us wishing it never did… In the case above, the Supreme Court did issue a decision that created yet another tool for defendants (lack of enablement) to challenge the validity of issued patents (as if they needed it). This new challenge to validity is already mystifying lower courts and creating a confusing progeny of cases, just as it had done in Alice. Thank you SCOTUS!

3. US Congress will manage to pass NO legislation on patent rights during the current session; I know; it is almost too easy to predict but wait: with the Republican party winning back the House, Congressman Darrell Issa became the new House IP Subcommittee Chairman, despite US Inventors putting in a good fight to defeat him based on his track record pushing patent rights averse to inventors. So, this could give a second life to some bills that have been on the back burner for a while. However, with Senator Patrick Leahy leaving the Senate, the opposite is happening at the Senate level and inventors now have a friendlier audience with Senators Tillis and Coons back to lead the Senate Judiciary Subcommittee that is responsible for IP matters. So, it is doubtful that both sides will agree to pass similar legislation. And since it takes all the stars to be perfectly aligned in Washington to pass ANY bill, I predict that some version of it might pass either the House or the Senate, but not both, which is required in the US to become law.

Update: Ok, ok, this one was a real softball to myself and I could not miss, barring a miracle. Well, there was none and both bills on the hill that aim at fixing the most glaring issues with the US patent system (PREVAIL and PETRA) are still the lore of legal conferences where pundits on both sides of the fence speculate as to how things would look like if Congress actually passed legislation. See above. Do not hold your breath for 2024.

4. A flood of patents owned by failed startups will be sold to NPEs and feed the new wave of patent litigation.We saw this phenomenon in 2001 when the DOT.com bubble burst, although the legal environment was a lot more conducive to asserting patents at that time. Each time there is a recession, many companies buckle up and all that is left for their investors to capitalize on are their intangible assets, primarily patents. Feed this into a market where NPEs can buy on the cheap and find ample funding for their campaigns; it’s just too hard to resist.

Update: I am not too sure about this one. We sure saw our lot of failed startups in 2023 who knocked at our door wanting to divest their last standing assets, i.e. their IP portfolio. We also were contacted more than usual by trustees in bankruptcy and receivers alike, or by Angels or VCs left holding the bag. But I can’t say that it was drastically higher than in the previous year as the economy mostly held true despite all the predictions pointing to a serious recession. Furthermore, we did not see a huge spike in patent litigation, mostly because so few patents these days will make the cut where someone feels comfortable asserting them in court.

5. Most people will opt out of the UPC. I’ve commented several times on the ever-changing date for the official start of the long-awaited Unified Patent Court in Europe. For sure it is coming this year to a theater near you! But the devil you know is sometimes better than the one you don’t, and I suspect that many large patent owners who assert their assets in Europe will take their time and observe how things unfold before embracing this new tribunal.

Update: I was right for a few months after the UPC was launched in June 2023, as most people were watching from the side lines to see how the brand-new tribunal would behave. It was a bit like watching your next-door neighbor coming home with a bunch of fireworks for the 4^th of July; you watch carefully from afar until you figure out that he knows what he is doing. So it went with the UPC and by fall, most of the big guys were using it to bring their case. It did not hurt that the UPC had virtually zero backlog and could hear and dispose of cases in a few months, and grant injunctions! This rocket docket won’t last. In the meantime, if you can do it, it sure beats bringing a patent lawsuit in (most of) the US.

And a bonus one: As a result of the ChatGPT frenzy, AI will become more tightly integrated into patent analytics software tools, because people will demand it. And maybe someday, there will be one of those expensive software packages that will actually guess right and find the proverbial diamond in a pile of coal.

Update: We definitely see service providers embracing AI to bring better analytics tools. One has yet to crack the nut where tools can automatically look for, identify evidence of use and prepare a draft claim chart with proper source material. But we are only months away from that, based on what I have heard of or seen personally. When that happens, a lot of traditional patent service firms will probably need to adapt or quickly fade away.

2024 Predictions

I said I would share these if space allowed for it. Well, it doesn’t. If you made it all the way to reading this, congratulations. But you are probably saturated by now and I will keep those for the next column due in a few weeks. Stay tuned. In the meantime, you can follow my musings on LinkedIn.