Posts in Licensing

As any viewer of “Shark Tank” can attest, the variety of financial arrangements which are negotiated between inventor entrepreneurs and investors is broad. A final agreement is always the result of negotiation between the two parties. Unfortunately, many inventors go into the gunfight with a knife, so to speak, over-matched and under-prepared.

Unfortunately, I’ve known for a couple of weeks what this month’s column was likely to be about. After a brief illness, my friend Howard Bremer died last Friday… Working through WARF, Howard’s efforts were critical in our eventual success enacting Bayh-Dole despite long odds. Over the years, he remained a steadfast defender pushing back against the critics of the patent system… Howard attended the Association of University Technology Managers meeting this year—an organization he helped found in the 1970’s to foster the profession. Howard knew it was his last as he was not physically able to travel any longer. But there was no sadness; he enjoyed seeing many of his friends for what he knew was the final time…

IPXI is the first financial exchange that facilitates non-exclusive licensing and trading of intellectual property rights with market-based pricing and standardized terms. Earlier this week word came from the Intellectual Property Exchange International Inc. (IPXI) that the U.S. Department of Justice Antitrust Division issued its Business Review Letter (BRL) upon the culmination of its eight-month review. The DOJ believes that the IP Exchange business model proposed by IPXI is capable of producing market efficiencies in the patent licensing arena and is likely to be pro-innovation. Although no permission is required of the DOJ before IPXI opens its exchange, having this review of the DOJ Antitrust Division complete has to make IPXI and Exchange participants much more at ease as the move closer toward their attempt to revolutionize IP licensing.

I spend a lot of time every day and my staff also spends time every day looking through press releases, looking for stories. And I can’t tell you how many times I have come across something that I knew was good but I couldn’t get any information on. I mean literally no information other than the self-congratulating, back slapping stuff that you see in two or three paragraphs in a press release. So that is one of the things I want to talk to you about today. How do you get your story to those journalists and reporters out there who care? Continually there are calls from detractors who want to change the technology transfer system regardless of how wildly successful it has been.

In the last five years, the patent market has undergone a change of seismic proportions. Patent rights are now regularly stripped from any underlying product and traded much like commodities in a largely unregulated market–the market for patent monetization. Regardless of what one thinks about the causes and implications of patent monetization, it is clear that this behavior is expanding at an explosive rate. In this rapidly shifting landscape, it will be critical for companies to be able to keep track, not only of simple ownership of patents, but also of actual control. With this new market for patent monetization, we currently have no way to accurately measure girth and no way to know what people are doing with the girth they have. This is why sunshine rules are so critical for grappling with the market and designing the rules that will ensure a competitive marketplace.

The month of January started off quite busy, which in all likelihood was as the result of deals and announcements either held over or that simply couldn’t get done in the run up to closing out the year. There was a noticeable lull in news and announcements. This month some of the highlights included (1) an exclusive option to license drugs targeting Parkinson’s disease; (2) potential patent problems on the horizon for Facebook; (3) additional settlements in the Forest Laboratory’s BYSTOLIC® patent litigation; (4) the inevitable news from Acacia Research; plus more.

The latest statistics show that the cumulative value of U.S. intellectual property is approximately $5.8 trillion (or 48.4% of GDP), and each year over half a million patent applications are filed, over a quarter million patents are issued, over 4000 patent infringement suits are filed and IP verdicts total over $4.6 billion with a median patent damage award of approximately $4 million. Against this backdrop, I now present an updated taxonomy containing 19 IP-related business models. The business models are in addition to the “traditional” operating companies and their “traditional” IP law firms. Further, while not pretending to be all-inclusive, a directory of players implementing one or more of these 19 IP business models is available for download at the end of this post.

What you think of Ryan and Acacia is almost entirely dependent upon the side of the aisle on which you sit; namely whether you are an innovator or a practicing entity. Even more specifically, those who are innovators but don’t have a voice loud enough to be heard by practicing entities are likely to believe that Ryan and Acacia are the answer to their prayers. Those practicing companies that simply want to make a product and sell it without regard to the underlying patents that might be in place are likely to believe Ryan and Acacia are the poster children for everything wrong with the patent system. But you can decide for yourself. Without further ado, here is the culmination of the interview with Paul Ryan.

Paul Ryan is a more common name than you might think. In the world of politics when one speaks of “Paul Ryan” they are talking about the Republican Congressman from Wisconsin who was Mitt Romney’s running-mate and would-have-been Vice President. But in the intellectual property world, particularly the patent litigation world, the name “Paul Ryan” refers to the CEO of Acacia Research Technologies. It is the later Paul Ryan that went on the record with me to discuss Acacia, patent enforcement, how large companies who are infringers disregard innovative independent inventors and more.

Recently the Federal Circuit, sitting en banc, denied Nokia’s petition for rehearing. The Federal Circuit decision is nevertheless interesting for its treatment of Section 337’s “domestic industry” requirement as it is applied to NPEs. Under 19 U.S.C. §1337(a)(2), relief at the Commission is predicated on the existence or establishment of an industry in the United States “relating to the articles protected by the patent.” This is commonly known as the “domestic industry” requirement. In turn, section 1337(a)(3) provides that an industry is considered to exist if there is in the United States, “with respect to the articles protected by the patent,” significant investment in plant or equipment, significant employment of labor or capital, or “substantial investment in [the patent’s] exploitation, including engineering, research and development, or licensing” (emphasis added).

The dispute at issue here regarding Qimonda arose when the company went bankrupt and seven licensees invoked the protection of § 365(n) to retain patent rights. This became an issue because there is no similar provision on German law, thus there is an attempt to nullify the patent licenses. This would force the seven licensees to open fresh negotiations or face expensive patent infringement litigation which they could not hope to prevail in since they are almost certainly infringing.

The report ignores actual practice. Universities rarely have multiple companies fighting to license their inventions. They’re lucky to find one. The rule of thumb is that a promising university technology requires 5-7 years of private sector development to turn into a product. For a drug, double the time and add a billion dollars in costs. Exclusive licenses are often essential to justify such risks.