Louis Carbonneau

Justice Scalia never hid the fact that patent law was his “blind spot”. He also admitted to often taking his cues on IP issues from his colleague Justice Ginsberg. On a Court that has not been kind to patent owners these past years, Justice Scalia, who never feared a bit of controversy, was generally considered as a “staunch defender of patent rights” (as long as they were valid) and viewed them, rightly so, as property. On the other hand, he is also the first Supreme Court Justice to refer explicitly to “patent trolls” (in the Commil case), and not in a good way… He also famously called out the Federal Circuit jurisprudence on obviousness as “gobbledygook.” Google it; it is not exactly a compliment!

So it now looks like this: if you are a patent owner and feel that your rights have been encroached upon, you now have to assume there will be a challenge to their validity by a potential licensee through an Inter Partes Review (IPR). If you are one of the lucky few (~25%) who survive such a challenge with at least one valid patent claim, you then have to expect an appeal. Assuming you win that appeal, then the real court battle starts in earnest and you’ll have to face what has now become a $3-5M ordeal in legal fees to get through a full trial on the merits and the routinely filed appeal should you beat all odds and win. Treble damages for willful infringement have been rarer than a dodo bird sighting and even winning does not mean you will collect your money any time soon, as the Apple-Samsung saga has recently shown.

While the startup probably had an initial 100% market share due to a temporary de facto monopoly, such share rapidly decreases as soon as others start selling to the same customers. Worse, many times, one of those fast followers is a large entrenched company that has deep R&D teams, seemingly unlimited budgets, well-known brands and established distribution channels in many key geographies that took decades to build. They can play catchup really fast. In other words, the only thing going for the startup at that point (assuming it could not possibly achieve this scaling up over such a short period of time) is the uniqueness of its technology and its ability to out innovate others. This in turn is only true if the new technology it brings to market is adequately protected against free riders; otherwise one is simply doing others’ bidding and subsidizing their R&D… In short, innovation without protection is simply a form of philanthropy!

After a 13% decrease in patent litigation in 2014, we are currently back to the same level of activity that we saw historically, with 2015 shaping up to have an average of circa 5000 new cases. Now the REALLY interesting data point is that most cases (roughly 70%) were brought this year by an operating company… Although the pendulum has by no way stopped its course and there are still many forces at work that wish to push it to swing even further, its momentum has definitely slowed.

Patent prosecution describes the interaction between applicants and their representatives, and a patent office with regard to a patent, or an application for a patent. (source: Wikipedia). It is a well-known term of art commonly used in the IP community. On the other hand, patent persecution describes the activities among various actors currently dismantling the US patent system, block by block. It is a recent phenomenon and seems to know no boundaries. (source: read the news!).

The vast majority of the assets developed and owned by technology companies are intangible assets, i.e. they reside in their internal information and employees’ brain (Intellectual Capital or “IC”) and the output thereof (Intellectual Property or “IP”). It is estimated that in excess of 85% of the valuation of the NASDAQ Index companies (and of the new global wealth being created) lies in intangible assets. With smaller technology companies, this percentage is sometimes close to 100%. Nowadays, most technology based companies eventually fail or succeed in large part because of the way they handle their intellectual capital assets and convert those into strategic intellectual property assets.

In a recent article Toxic Asset, we explained in detail how much recent court decisions and new rules at the USPTO had negatively impacted the value of US patents. This is not to say that all patents are worthless, far from it. Actually, based on the fact that we have recently received strong offers on several of the portfolio we…

Not such a long time ago, owning a US patent was worth something! A patent was often the foundation for new and exciting startups, as well as a source of pride –and hopefully profits- for inventors. These assets promised competitive and strategic advantage in the market; conduits to new investment and deterrence to free riders… If the current trend is not soon reversed, others countries will become flagships for patent protection and the US might very well become the new China; an environment where innovation is no longer rewarded and where it pays more to follow than to lead. This would be a very sad and totally self inflicted demise “Made in America.”