Perpetual Innovation

Category: licensing

  • Even with patents, the past can be prologue

          One might characterize the patent market of the past several years as a herd of elephants fighting over the last leaves on a tree.  This might be somewhat crude to many but a scan of the landscape of Fortune-100 corporations spending millions litigating accusations of infringement or suing for infringement makes a case.  Or, the flooding of the PTAB with requests for IPR (inter partes review procedure) to determine patent validity also makes a case.  Turmoil and conflict are the (dis) order of the day among the patent fortresses.  Unfortunately, the considerable ripple effect created reaches to the startup company attempting to file its first application.
         “Nothing is more powerful than an idea whose time has come”, said Victor Hugo roughly the same time as the sewing machine patent wars of the 1850s were raging.  The pre-Civil War sewing machine was a disruptive technology comparable today to smart phones, driverless cars and retail sales on the Internet.  There were numerous inventors of the machine and devices that improved it all with patents.  You know what happened- each machine sold infringed on a number of patents.  Elias Howe didn’t make sewing machines.  He licensed his patent on the lockstitch to sewing machine manufacturers.
         There were suits and countersuits by the score matching the complexity for their time as the suits of today.  They were heard by judges and juries largely unschooled in the technology.  Relative peace and calm came in 1856 when the patent owners created the first patent pool.  Fast forward to today, Article by TechCrunch.  Patent pools handle basic building block and Standards patents for a selected product. The reference here is to the data transmission protocols for transmitting high density digital audio content that makes up the Advances Audio Coding (AAC) patent pool administered by Via Licensing Corp of San Francisco.  Dolby, AT&T, Philips, Microsoft, NEC, Panasonic are among those participating.

         This is compensation (revenue) beats litigation (legal and court costs).  Net savings can be substantial.  The patent wars are different today – smart phones, batteries, DNA twiddling, drug targeting. History repeats itself… Sort of.

  • Toll of the Patent Troll

    The Wall Street Journal has a great article about Patent Trolls and the Toll the cost on an innocent economy. Here’s the excellent WSJ Article: America’s Biggest Filer of Patent Suits Wants You to Know It Invented Shipping Notification, By RUTH SIMON and  LORETTA CHAO, Updated Oct. 27, 2016 1:11 p.m. ET.
    Small(er) companies are targeted by a non-practicing entity (NPE), sometimes ungraciously referred to as a Patent Troll. IPZine previously discussed Patent Trolls in their various forms. Efforts to kill the trolls, or at least send them back under the bridge have moved forward with mixed success. In the US, the court costs have been paid by both parties historically, so winning in court, might still be losing. It might be better to simply pay the fees that would go to lawyers and be 100% certain of the outcome. A court ruling in 2014 has shifted this court cost dilemma. (See Wikipedia article on Patent Trolls.)
    Imagine a portfolio of patents related to predictive arrival. That is, when will a product, person or thing arrive. The patent portfolio has 60 some patents with about half still active. That affects almost every business concept from shipping, manufacturing, service and more. It certainly hits on most of the activities that occur on the internet as well. Airlines, shippers, buses, and school buses — government and private — have fallen prey to the transit NPE.
    So a small(er) business, attempting to do business, gets suddenly clobbered by legal notices and maybe even law suits. WHAT!!!??? The company probably has no patent attorney, so they scramble to find one. The patent attorney advises, at say $500 per hour, on the options and the potential costs. Litigation will cost $250,000, unless you lose; then it gets expensive!.
    So, what’s a small firm to do? This fight is like taking a pocket knife to a gun fight. Might be better to pay some fee, say $25,000-$50,000 and possibly a licensing fee (say a small % of sales), then to risk the bankrupting if the business. 
    All agreements are confidential, so it is hard to see who paid what licensing fees, and how much. The big shippers of FedEx and UPS have, apparently, full licensing for them and their clients. So a small company that uses their services, and only their services (of shipping and notification), might be in the clear. 
    The big NPE in this Simon & Chao article is Shipping & Transit LLC. About 10 years ago, the company tried to do a product for buses and shipping (Bus Stop and ArrivalStar). But neither worked out. So now Shipping and Transit sit around suing companies. 
    Not a single law suit has gone the distance. Consequently, none of the patents have been really tested. This is interesting since many of the patent claims are rather obvious and arrival/queuing goes back 50-100 years. 
    It seems like some type of a class action suit would be possible and force the issue against the NPE. The secret to the success of the Patent Troll, however, is to pick off the prey a few small targets at a time. Then, those victims who survive, are signed into an iron-clad agreement that cannot be breached under penalty of death. The airlines, FedEx and UPS are not talking, but what an interesting conversation that would be. 
    The Jones gang of Shipping & Transit, way back in the day (circa Y2K) of ArrivalStar were ruthless. Doesn’t seem like much has changed… 
    Keywords: NPE, Patent Troll, licensing, PLA, patent licensing agreement, economic development, 

  • Readying a Patent Portfolio for Sale

    In years gone by, companies with extensive patent portfolios were loathe to sell these assets, strongly preferring to license them.  These Patent Licensing Agreements (PLA) came in several flavors, most had some form of royalty payments for the licensor and the fundamental was that ownership of the patents remained with the original owner, i.e., the company granted the patent(s).
    While not totally different today, much has changed in the disposition of thousands of US patents.  Patents are now sold in much greater numbers than in decades past.  Some of the reasons for this are:
    ·         Corporate decision to shut down or sell of an operating division
    ·         Near term need to financially rescue another part of the corporation
    ·         Shift in corporate direction/strategy
    ·         Pay a court imposed penalty
    Patent sales are now so commonplace that online IP reporter sites like www.IAM.comrecently devoted a webinarto the patent selling process.  This process, as one can see, includes seven steps.  The assumption here is that the seller completed a validity check to the extent possible on each patent offered for sale. 
    It is noteworthy under Step 6 that the biggest buyers of patents review around 1,000 seller packages per year.  This clearly puts the onus on the seller to develop a first class patent package.  It also suggests that this is a buyers’ market putting more of a burden on the seller to find ways to get the most value for its assets.

    Keywords: patent, patent portfolio, licensing, PLA, Patent Licensing Agreement, commercialization. 

  • ARM Holdings is giving up their "holding" to Sprint/SoftBank

    ARM Holdings, the maker of chips and chip making technology has week a favorite here at IPZine. They are basically an IP company holding lots of patents on lots of stuff. They specialize in energy-efficient, reduced instruction set (RISC) chip technology; build it and then license it out to chip makers.
    They have really taken off into the work of the Internet of Things.
    Today SoftBank (parent of Sprint) has offered to by ARMH in an all cash bid. The stock is up 50% today. Even at this elevated price, the price-to-earnings ratio is 70!. Compare that to Intel (INTC) with a paltry PE of 15. Profit margin of 35% vs 20% for INTC.
    ARM has remained independent and resisted the various take-over pressures. Until now. This changes somewhat the ARM dynamic of licensing tech to multiple players and making lots of money from licensing revenues (nearly pure profit). ARM has focused on tools and R&D and left the heavy work of manufacturing, distribution, etc. to their clients.
    This is probably a good time to start getting out of the stock; SoftBand (Sprint) is not nearly the same type of investment. Sprint is more of a utility play, not R&D.
    The drop in British Pound has made ARMH a far better deal to acquire. (ARMH is UK based.)
    On a separate note, SoftBank’s interests in buying up chip makers might become more complicated with ARM Holdings, in the company’s holdings.
    In the end, the independence of ARM Holdings didn’t hold.

  • The Toll of the Patent Troll by any other name: Intellectual Property – Bloomberg

    Symantec, Microsoft, Blue Cross: Intellectual Property – Bloomberg:

    A patent troll, by any other name, may not be called a “patent troll” in court.

    This would be funny, if it weren’t true. The often called “patent troll” company Intellectual Ventures LLC, can not be disparages by such names as “patent troll” in court the presiding judge says. IV — a play on the vampire concept of draining all the blood from the body of otherwise living and productive entities — does not produce anything and has a monster war chest of patents which it brings out only during the stealth of night.

    In the case of an entity that buys up patents but doesn’t invent and doesn’t produce anything, the company is often referred to unkindly as a “patent troll”. In the real world, like cell phone makers, someone producing a product is exposed to other producer’s patents, and vise verse. The players are forced to work together, license and cross-license in order for anyone to produce anything.

    But the troll has a wonderful vantage point. Any product produced is fare game, and the real players in the game don’t have much recourse if they want to produce anything and run a productive business.

    Non-Practicing Entity (NPE) is another name for the troll, but it is not nearly so accurate.

    IV was rated #1 troll in 2012 in the kingdom of patent trolls: here.

    And, of course, the targets of the NPEs are larger and more innovative companies like AT&T and Google. In 2013 the “troll” toll in terms of law suites were up 19% from the prior year. (Fortune article on this topic.) It will be interesting to see what the stats for 2014 are since there has been a big drop in several types of law suits based on benchmark legal rulings.

    For now, a patent troll, by any other name, will have to be by a nicer name, at least in court. I wonder if Patent Vampire, or intellectual property parasite is acceptable?

    ‘via Blog this’