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May 15, 2017
We’ve talked on several occasions about the dynamic nature of IP and the fact that if one country’s patent protection scheme is perceived as being on the way down, others will step up and fill the vacuum. Although this is rather intuitive, we rarely see strong data to back it up. This past week, however, several indicators were published that, once woven together, tell a compelling story about the current decline of the US patent system and how other jurisdictions are happy to fill the void.
First, Price Waterhouse Cooper just released its annual report of patent litigation in the US. It was noteworthy for two main reasons: (1) patent lawsuits are down significantly from 2015 and (2) so are damage awards. While the former could be considered a positive, it reflects, in our opinion, the following phenomena: in this era where approaching a patent infringer to politely ask for a license is simply ignored until you file suit, the fact that the number of cases is down would suggest that many patent owners have concluded that the system is just no longer there to protect their rights and have given up on asserting. If you compound this with the fact that more and more NPEs have recently announced they were scaling back their patent assertion activities, many patent owners have concluded that there is simply no affordable conduit for a patentee to seek justice in the US. Hence why so many new assertion cases are being introduced in Europe and Asia these days. Second, damage awards are down from US$10.2 M in 2015 to US$6.1 M in 2016, a 40% decline despite a US Supreme Court decision last summer in the Halo & Stryker cases which made it easier to obtain enhanced damages. And that number would have been much lower but for a whopping US$2.5 billion awarded to Idenix (Merck) in 2016, the largest in US history If you take into account that the typical patent litigation in the US can easily reach $5M and that the odds of winning are at about a third only in the current legal environment, this means your “best-case scenario” in most cases is to break even, while you may have to pay the opposite side’s legal fees if you lose. No wonder lawsuits are down, and no one should take this as a sign that the patent system is healthy. Indeed, new patent filings were also down by almost 10% in 2016 compared to the previous year, which could reflect an erosion of trust unique to the US system since other patent offices around the world are seeing an increase in filings.
Here is a good illustration of the US patent system dysfunction: a recent study comparing the fate of over 30 patents filed in 2013 in the medical diagnostic space in both the US and Europe revealed the following: “while 30 of the applications filed in the European Patent Office have either matured into patents or are still pending, 29 of the same applications in the United States have been either abandoned after receiving what the authors refer to as a “Mayo” rejection, or are still pending after receiving this rejection” (note: a “Mayo” rejection indicates that the USPTO considers the claimed subject matter to be invalid). This means that you can now have the same invention result in an enforceable patent in all of Europe (which is known for its rigorous process), while the US will conclude that it is not even worthy of protection! We have recently seen the same phenomenon in Asia, where China relaxed its guidelines for software patents and is rapidly becoming the new IP global powerhouse, while Japan has also gone from being one of the most difficult major jurisdictions in which to patent business methods over the past two decades to one of the easiest, according to recent data from the Japan Patent Office (JPO). Let me ask you a simple question: if you are an investor and the return on your investment is tied to the competitive advantage that a company’s IP can create, where do you want to put your money? …
Meanwhile, we learned from UPSTO Director (at least until this week :)) Michelle Lee that the USPTO is diverting fees it receives from inventors filing for patents to the PTAB, which has been invalidating patents at a rate of 70% to 80% since its inception. I trust the irony of this isn’t lost on anyone. There was actually a full day summit dedicated to this sad state of affairs last week in Washington D.C. under the auspices of the US Chapters of the International IP Commercialization Counsel (IIPCC). Called “Promoting Innovation, Investment and Job Growth by Fixing America’s Patent System” the conference was attended by the most prestigious voices in the IP community, including several past USPTO directors and Federal Circuit Judges as well as current and former Chief IP officers of some of the largest companies such as IBM, Microsoft, Cisco, J&J, to name a few. Their diagnosis was pretty clear and former Director Dave Kappos gave the perfect summary: “We need to admit that we have a solidly mediocre patent system… we are in bad shape in relation to our patent system.” One element of a solution would be to return to the fundamentals and start treating patents like property rights again, as the US Constitution intended. This would stop the “patent troll” narrative that has been abused so many times to justify watering down IP rights for those who acquired the patents from the inventors. More importantly, it could announce the demise of the PTAB as we know it since only courts are entitled to take away property rights under the US constitution. The US Federal Circuit had a golden opportunity last week to indeed clarify the intent of the Patent Act on this very topic in the Cascades Projection LLC v. Espon America, Inc. case; alas it declined to hear the case en banc and we will have to wait another day to have a court say in plain language that there should be no difference between owning a house or a patent when it comes to how this property right can be monetized.
This and other news below…
Fed. Circ. Denies Dow Review Of $455M Bayer Patent Award
Law360
The dispute arises from five patents related to a gene that confers resistance to the herbicide glufosinate, which Bayer licensed to Dow’s predecessor … (more…)
Creative Boeing filed, or received 2266 patents in 2016
The Daily Herald
Last year, the company was awarded or applied for 2,266 patents with the U.S. Patent and Trademark Office, according to data compiled by Sqoop, … (more…)
IAM
ZTE is the “major Chinese telecom equipment and smartphone manufacturer” that agreed to sell a patent portfolio – including, significantly, a number … (more…)
PTAB Imposes Double Jeopardy on Patent Owners
Corporate Counsel (registration)
Even if you believe the Patent Trial and Appeal Board’s post-grant proceedings have generally played a positive role in eliminating some junk patents, … (more…)
Uncertainty: Helsinn Foreshadows Trouble with AIA Patents
Patently-O
The AIA was passed back in 2011 and the changes have gradually been implemented through the patent system. We are finally at the point where … (more…)
Patents as property rights: What will it take to restore sanity to the narrative surrounding US patents?
IPWatchdog.com
Charles Henry Giancarlo, former Cisco CTO, explained that the patent system specifically envisioned those who do not manufacture being able to … (more…)
US, EU Diverge On Medical Diagnostic Patents
Intellectual Property Watch
While 30 of the applications filed in the European Patent Office have either matured into patents or are still pending, 29 of the same applications in the … (more…)
America’s Patent System: Mediocre and stabilized in a terrible space
IPWatchdog.com
The focus of the program was to explore the direct and essential role that strong and enforceable patents play in allowing investors and entrepreneurs … (more…)
Update: the Unified Patent Court and Unitary Patent
Lexology
This note summarises the latest position regarding the Unified Patent Court (“UPC”) and Unitary Patent (“UP”) system, and considers the issues that … (more…)
Bipartisan Patent Reform and Competition Policy
American Enterprise Institute
The US patent system is a foundation of the economy, encouraging innovation and growth. Patents are essential to important economic sectors, … (more…)
USPTO diverting fees internally to subsidize PTAB trials
IPWatchdog.com
Earlier this morning Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office Director … (more…)
Open Invention Network Announces Expansion of its Patent Non-Aggression Coverage
Yahoo Finance
DURHAM, NC–(Marketwired – May 04, 2017) – Open Invention Network (OIN), the largest patent non-aggression community in history, with well over … (more…)
Uber, Others Set August for Group Defensive Patent Buy
Bloomberg BNA
Non-profit group Allied Security Trust and members, including Uber Technologies Inc., will hold another fixed price patent buy this summer, the group … (more…)
IAM
Japan has gone from being one of the most difficult major jurisdictions in which to patent business methods over the past two decades to one of the … (more…)