Posts Tagged: "Licensing"

What’s troubling is that Hewlett Packard itself, the original startup headquartered in a garage, was one of the earliest and most-respected leaders of the 20th Century high-tech revolution that had its epicenter in Silicon Valley. It was William Hewlett who gave a 13-year-old Steve Jobs spare parts for a device Jobs was building — and a summer job as well. And it was Mr. Hewlett and his executive heirs who insisted that HP conscientiously patent its breakthrough innovations and fight against those that infringed those patents. HP today earns hundreds of millions of dollars annually by licensing its patent rights to others — according to IAM magazine, “at any one time, HP has about 150 licensing transactions in process.” And as the court dockets show, it certainly isn’t shy about filing suit against infringers who refuse to take a license.

In short, today’s smartphone patent wars are simply “back to the future” when it comes to how disruptive new industries are developed. Every major technological and industrial breakthrough in U.S. history — from the Industrial Revolution to the birth of the automobile and aircraft industries on up to today’s Internet and mobile communications revolutions — has been accompanied by exactly the same surge in patenting, patent trading, and patent litigation that we see today in the smartphone business. This is how the rights to breakthrough new technologies have always been distributed to those best positioned to commercialize them — to the benefit of the whole nation in terms of new jobs, new medical advances, and new products and services.

The types of returns promised to investors and the types of benefits offered to participants are also quite different from garden-variety non-practicing entities, as are some of the tactics used in organizing the entities and in asserting the patents. Finally, the scale itself is simply mind-boggling. Mass aggregators operate on a scale and at a level of sophistication and complexity that would have been unimaginable a decade ago. They have taken the prototype strategies pioneered by a prior generation of non-practicing entities and changed them into some of the cleverest strategies yet seen in the intellectual property rights field.

Whenever I write about USPTO conferences, symposia and events for independent inventors I say: “Simply stated, if you are a serious inventor you need to go to this Conference.” I really do believe that is true. You will be amazed at how much useful information you can obtain, and meeting up close and personal with successful inventors and government Officials is both educational and inspiring. It is sometimes easy to feel all alone as an independent inventor, facing a huge faceless bureaucracy as you attempt to do something that few of your friends and family really understand. These events that cater to the independent inventor help you realize you are not alone and while the USPTO is a government agency — even a bureaucracy — there are dedicated people up and down the chain of command who really care about innovation and want to help independent inventors. So be prepared to learn and be prepared to be inspired. Also come armed with ideas and suggestions. USPTO officials genuinely seem to want to hear what independent inventors are thinking and what they would find useful in the future.

It would be bad enough if politicians did nothing once elected, but it seems that they have a knack for doing those things that will do the most harm. That is why one of the recommendations in the interim report has me rather concerned. On page 21 of the report the Jobs Council recommends: “the Administration should test an ‘open source’ approach to tech transfer and commercializations.” What does that even mean? It might sound good to some, and certainly is the “in thing” to recommend I suppose. After all, “open source” is the solution to all the problems of the world, right? Never mind that the open source community has yet to identify a long term, stable business model that makes money.

Contrary to the tone of the Jobs Council report, U.S. academic technology commercialization made possible by Bayh-Dole is a world- wide recognized success. The law allowed universities and small companies to own and manage inventions arising from federally supported R&D. It decentralized technology management from Washington, allowing a market driven system to flourish. It did not create any new bureaucracy to select winners and losers. And it works in the hard, cold light of day.

So here we are, many years later and IV’s philosophy seems to have changed. No longer is litigation a poor way to monetize patents, but rather IV sees itself as having a responsibility to litigate. The self-righteousness of IV’s claims is why they engender such distrust, even bordering on hatred. For so long they came in peace and now that they have the leverage they seem to be playing a different tune, and using patent litigation with greater frequency. They accumulated patents over time, sometimes getting as much as $50 million from companies like Google, eBay, Sony, Intel, Microsoft, Apple, Nokia and others, ostensibly for the purpose of obtaining a defensive patent position. Oh how the tables have turned.

Licensing your invention is a lot easier if you can show that it’s selling. That means you have to produce a small quantity of your product. Nice idea – until you learn that a plastic injection mold costs $25,000. Now what? Fortunately, there are options. You just have to know where to look.

You might want to consider some type of up front guaranteed payment to ensure that you get at least something. This may seem overly pessimistic, but it is the job of any attorney negotiating or drafting a license to assume that things will go wrong. The agreement can never contemplate everything, but with respect to payment you need protection. What if the licensee is paying you a defined percentage of sales but then decides to offer your product for free, or as an add-on to a sale, as is common in direct TV marketing? If your product is used as a “come on” and given away for free even 100% of $0 is still $0. That is why some type of minimum payment can be quite beneficial.

We conclude that the FTC has not identified sufficient evidence to raise serious doubt about the current efficiencies of the IP marketplace. Indeed, the available empirical evidence suggests that these existing rules and practices work well. The interests of consumers are well represented by standard setting organizations and competition among technology implementers who at the end of the day must make goods and services that people wish to purchase.

Earlier this month Dechert LLP, representing an undisclosed number of companies (“stakeholders”), sent a letter to IMG College (“IMG”) and its licensing division, the Collegiate Licensing Company (“CLC”), and demanded that IMG and CLC cease and desist any efforts to restrict the number of licensees permitted to supply merchandise bearing the brands of various NCAA colleges and universities. It looks likes trademark and antitrust issues are back on the menu in sports, which makes intellectual property nerds like me very happy. We all knew American Needle Inc. v. National Football League (“Needle”) would embolden private antitrust suits; it was just a question of when. But a pivotal question is should Needle be extended to permit private antitrust suits in collegiate athletics?

It doesn’t roll off the tongue quite like the famous Shakespearean line — “to be or not to be: that is the question” — the opening line of Hamlet’s soliloquy in Act 3, Scene 1, but the question that some inventors will ask themselves is whether they should seek out licensing opportunities or follow the path of manufacturing and selling.  Truthfully, many inventors probably don’t ask this question and instead jump past this fundamental question and straight for the licensing revenue, but is that the best thing in the long run?  Licensing takes a lot of work out of the monetization equation and minimizes risk, but foregoing manufacturing and pursuing licensing can significantly cut down on profit realized by the owner of the invention rights.