Michael Gulliford

Each year, companies invest significant financial resources building and maintaining patent portfolios. But instead of contributing to the bottom line, the patent portfolio often evolves into a growing cost center burdened by maintenance fees, prosecution expenses, and legal overhead. The patents protect some of the company’s products, and make nice plaques for the corporate hallways, but serve little other purpose. Patent monetization offers an opportunity to reverse this dynamic. Done correctly, it can transform dormant intellectual property into a durable revenue stream. Done poorly, it can create reputational risk, misaligned incentives, and wasted capital.

As we learned in Part I of this article, district courts, the Federal Circuit and the U.S. Patent and Trademark Office (USPTO) routinely confront Alice issues in different ways and with different philosophies. As the volume of Alice jurisprudence grows, so too does our ability to understand important trends. Below we outline those trends that practitioners, particularly litigators, would be wise to pay close attention to.

Ever since the Supreme Court’s seminal decision in Alice Corp. v. CLS Bank Int’l, the law of subject matter eligibility for software patents has remained an enigma. While practitioners understand that abstract ideas, without more, are not patentable under 35 U.S.C. § 101, gleaning from relevant precedent whether a particular software patent will or will not pass muster under Alice remains a challenge. This article attempts to make sense of what’s been happening with software patents over the course of the last six years (2018-2023). To sum up the current state of affairs: the Federal Circuit’s Alice test has become a search for technological specificity, different district courts take very different approaches, and the USPTO has charted its own course on the issue.

As investors and business-minded IP litigators, we see many situations where IP holders get the short end of the stick. But one stands out from the rest: joint development relationships. Too often we see great American startups losing their technology and competitive edge to joint development partners/investors with a front-row seat to everything. What follows is a multi-part series that we hope any company going down the joint development path will take to heart. We start with tips to prevent a problem. Future installments will focus on what companies can do after their “partner” uses the guise of venture investment to steal critical IP and know-how.

Intangibles, and particularly intellectual property, are curious assets. By some estimates, intangibles comprise a large overall percentage of the S&P 500’s total value. Yet – as most IP-rich companies know – leveraging the value of intellectual property to secure a financing has traditionally been very hard to do. Yes, the litigation finance industry offers capital to intellectual property owners who need to finance the tremendous expense of intellectual property enforcement litigation. And yes, some litigation finance deals provide for operating expenses. But many IP-rich companies have financing needs that do not center around litigation or jive with the litigation finance industry’s cost of capital.