Perpetual Innovation

Category: patent

  • Who will beat Amazon in the New-Abnormal

    The COVID pandemic creates winners and losers. Will it simply accelerated some winners and some losers. As with any recession, it creates destructive innovation. In the sad carnage of the pandemic should lie silver linings. Telework is one. Winners are ZOOM, losers are office buildings. We’re spending some time on this concept trying to estimate how permanent this shift to remote work will be and the massive savings (time, fuel, traffic, etc.)

    But the focus of this discussion is on the Amazon effect. The death of the department stores in favor of buying online and having a shipper like Amazon deliver to your door. The Forbes article, Amazon has Finally Met its Match, by Stephen McBride got me started on this topic. Even though Amazon is BIG, you can’t call it a monopoly because anyone can do it, kinda. They are simply big, the gorilla in the room.

    How much has Amazon (AMZN) subscription services (prime, music, unlimited, etc.) increased related to the covid shutdown, how much has Amazon online purchasing increased, and what percentage of that online purchasing will dissipate once things get back to normal. Since we don’t think that things will ever go back to “normal” we refer to the post-COVID world of the future as the “new-abnormal”. Amazon has more than doubled in a year, reaching an all time high Sept 2, 2020 of $3,552 per share, a market capitalization of $1.8T. Wow!

    Amazon became famous in the Intellectual Property (IP) world with the one-click patent.Look away from your screen for just a second, and you could find that you accidentally bought the item(s) you were scanning. That patent expired in September of 2017 allowing everyone to accelerate the purchase process and reduce shopping cart abandonment. Amazon still has had more that 13,000 patents granted (many have expired) and 1,259 applications (according to Justia). That’s a pretty significant war chest.

    Walmart (WMT) was not doing a good job to compete with Amazon, so they took an extreme measure in 20016 of buying an upstart name JET that was developed from the ground up to compete with Amazon. In 2016 Walmart bought JET for $3B (more discussion here). Walmart has the unique advantage that you can return online orders to the store. An advantage for Walmart is that people who return something at the store, will likely spend that money and more before leaving. Walmart has 1,237 patents and 820 patent applications as of August 2020.

    In the August 2020 Forbes article, McBride thought that there would be several winners in the Amazon space. Etsy (ETSY) is a wonderful place for customized products, arts and crafts. Etsy and the artists who utilize their online marketplace excel in this area where Amazon cannot. 

    The last one is Shopify (SHOP) a software platform for small and medium sized companies that integrates all of their business. Businesses that have online, storefront and mobile businesses find Shopify works well to bring all the pieces of the business together. Since most small(er) companies have very little online presence, Shopify helps them jump over the intermediate stages of going online and managing all the sales’ processes. Shopify hit its all time high Sept 1, 2020 of $1,147, up from its low in November of $282. That’s more than a 300% increase! Wow!

    Shopify had zero (0) patents in 2015 and only maybe 32 today. Etsy has about 25 patents; many are interesting in the use of fuzzy logic and categorization of products. The stores that use Shopify and Etsy need to build their own intellectual property protection including trademarks, copyrights and patents.

    Who do you think will be the winners in the new-abnormal world? Big boom for AMZN, of course. But what about these Amazon competitors in the move away from brick: SHOP and ETSY? And what about the ultimate click-n-mortar: WMT?

    #Invest #Stocks #patents #ecommerce #NewAbnormal

  • Unexpected Consequence of US Tax Reform: International Patent Pinball

    IP intensive US corporations have gained a tangible, potentially very profitable benefit from the tax reform signed into law in December 2017.  A new provision reduces taxes on “foreign derived intangible income,” i.e., Intellectual Property (IP) — primarily patents.  However, in yet another “all that glitters…,” this new benefit doesn’t arrive without its requirements for a
    new level of analysis and decision-making.

    In  a comprehensive January 24, 2018 Wall Street Journal article by Sam Scheckner, Tax Change Aims to Lure Intellectual Property Back to the U.S. – WSJ, the tax rates was dropped to 13.125% until 2025 which corporations view as a major improvement over the prior rate of up to 35%. As the author states, this is a serious attempt to bring back assets from countries such as Ireland that had a much lower tax than the US for years.  Corporations, such as Google and Facebook, while not commenting for the article, have in place elaborate asset transfer schemes- see “Double Irish” across multiple countries to gain the optimum tax rate.  

    The US action to reduce the asset rate has not gone unnoticed by these other countries.  Several are revising their tax rate in response to and to outflank the US change.  This has driven US corporations with overseas operations to reengage in asset number crunching — aka patent pinball — to

    land on the country with the optimum package. The patent number crunching could involve licensing versus barrier patent protected product revenues versus sales versus tech transfer partnerships depending on the terms and conditions in a given country.  And as countries change their tax laws in
    what amounts to revenue one-up-manship, patent pinball is certain to become an ongoing game.

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  • Welcoming and Commending New Patent Legislation

    The America Invents Act (AIA) was passed in 2011 and we are about to start the eighth year since its inception. (See description hereincluded such changes as a move to “first to file” from “first to invent”.) Intellectual Property time since then has been, to say the least, tumultuous.  We have seen significant Supreme Court decisions, the rise and spread of the troll as an intimidator of patent-owning small and medium size businesses and infringement litigation run wild.  “Beware of the law of unintended consequences.”
    In response to these and other post AIA problems, Senator Patrick Coons (D-DE) introduced the “Support Technology and Research for our Nation’s Growth and Economic Resilience (Stronger) Patents Act.”        http://www.ipwatchdog.com/2017/06/29/stronger-patents-act-introduced-senate/id=85117/ Co- sponsors include Tom Cotton (R-AR), Dick Durbin (D-IL) and Mazio Hirono (D-HI).
    There is a lot in the bill as one can see in the article.  But, one condition not covered is that of patent examiners.  First, funding is needed to significantly increase the numbers of examiners as annual patent applications increase and overwhelm the existing workforce.  Second, the increasingly complex and variety of technologies in patent applications, such as Artificial Intelligence, make it imperative that highly educated people be hired, and trained. Plus pay and benefits must be competitive to keep them working at the Patent Office, not jumping ship into the private sector.
    Third, the incidence rate of infringement claims that ultimately lead to patent invalidity is much too high.  USPTO time and expenses incurred to settle claims in a drain on the organization and cause delays in getting valid products to market.  New techniques, more training, special masters or other aids such as special computer systems (WATSON-like) are needed to insure that patent claims are validated and not infringing issued patents.  “An ounce of prevention is worth a pound of cure.”

  • 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.

  • Supreme Court Limits Where Patent Lawsuits Can Be Filed – WSJ

    Supreme Court Limits Where Patent Lawsuits Can Be Filed – WSJ:

    Yeah. It’s a victory. Maybe a big victory, time will tell.

    It seems that 20% or more of the patent infringement lawsuits are filed in a small corner of Texas. Even though there’s not really anything there except maybe a bogus office. But, it is a very friendly district for winning law suits by non-practicing entities (NPE) against real companies that make stuff. Such patent assertion entities (PAEs) are often ungraciously referred to as “Patent Trolls”.

    See our prior discussion on patent trolls.

    But the US Supreme court has change the rules that funneled frivolous law suits on patents into these bogus home court districts.

    As much as it is good to see patents being used, and enforced, there needs to be a balance. Companies have been paying off frivolous patent assertion law suits because it is too time consuming and expensive to fight; especially if the suit would occur in a distant venue that is famously friendly to the trolls that lurk there.

    Way to go supreme court.

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