Posts Tagged: "npe"

Many of you are privy to the problem of excessive patents. You have all seen the articles about yet another cellphone company infringing on yet another patent, but what you’re left with are questions of what all this activity means and how to use that information to act in your best interest– whether you are the CEO of a company…

The GAO report explains that the number of patent litigations only slightly fluctuated between 200o and 2010, with a one-third increase in 2011, which the report attributed to changes to patent laws ushered in by the America Invents Act and not as the result of any problematic increase in litigations initiated by patent trolls. This increase in patent litigation was by design, with joinder provisions in the AIA guaranteeing an increase in patent litigations. Still, the GAO report further found that companies that make products brought most of the lawsuits and that nonpracticing entities (NPE) brought about a fifth of all lawsuits. So there isn’t a patent troll problem at all despite the protestations of the Silicon Valley elite who think every patent they get sued on is invalid and every patentee plaintiff is a patent troll.

Instead of condemning NPES, the GAO emphasized at the very outset of its report that our nation’s history is filled with examples of inventors who did not develop products based on the patented technologies… [O]verall, the report directly and indirectly supports the view that there is no patent litigation crisis and that, to the extent that there are problems with the patent system, they are linked primarily to patent quality – not the identity of the patent owner (e.g. NPE, PAE, PME, operating company or whatever name one chooses to use).

But how could Universities ever be characterized as non-practicing entities in the first place? If we are going to be intellectually honest there is no way you can characterize Universities as non-practicing entities. University innovations have laid the foundation for thousands of startup companies since 1980; in fact well in excess of 7,000 startup companies have been formed. These startup companies are not just high-tech companies, they are the highest tech companies based on the most cutting edge research and innovation our country has to offer. These companies are not imaginary or mythical, but rather they are real, tangible and operating companies; they exist! These startup companies are also U.S. formed companies that are located in the U.S. and employ U.S. workers. Now that is a jobs plan if I ever saw one!

How we deal with the problems uncovered herein is something for deliberate consideration, not the activity of an automaton. For example, this paper demonstrates that patents asserted by inventors and inventor based companies generally do not fare as well as patents of other entities. However, in the United States none of us would want to stop all such entities from trying to market and license their ideas. Most of us would agree that the independent inventor has been the heart of innovation in the United States for a very long time. We have too many memories of the stories of the Wright Brothers, Chester Carlton of Xerox fame, of Eli Whitney and the cotton gin, of Edison, and of Farnsworth — the farmer boy who invented the television.

As can be seen from Fig. 12, 25% of the cases brought against the retailer were actually brought by Producer companies. The other 75% of cases could indeed be classified as NPE suits. However, of these suits, 30% were by independent inventor or independent inventor related companies, and the other 45% of cases were brought by other NPEs. Interestingly of the “other NPEs”, we found all of the patents asserted against this retailer were patents originally obtained from Producers. Of these patents, one-third came from big corporate America and the remaining two-thirds from smaller Producing companies. That means nearly 65% of this retailers troubles, which it directly attributes to “trolls” asserting bad patents, are actually related to patents that derived from Producing companies. Of its cases that was resolved, pacer suggests none were tried and each was mutually dismissed within 4 months to 13 months.

Myth 4: Patents of NPEs fare much more poorly in reexamination proceedings brought during litigation than those of Producers. Truth: When one includes independent inventors and independent inventors in the mix of NPEs, the patents being asserted by NPEs may be said to fare slightly more poorly in reexamination proceedings than those patents asserted by Producers. However, if one removes these independent inventor entities from the mix of NPEs, the patents held by non-independent inventor based NPEs were seen to do at least as well, if not better, than the average asserted patent of the Producers which was likewise thrown into reexamination during litigation.

There are many myths that are attached to the fable of the so-called “patent troll.” Acting like the MythBusters, we probed some of them. For example, the success rate of NPEs overall across 267 random cases indicates that the litigation outcome for NPE suits looks very similar to litigation outcome for Producer suits. However, when individual inventor suits and individual inventor company suits were removed from the mix of overall NPEs, we found that non-independent inventor NPEs had an outcome profile that looked significantly better than the Producers, both in very likely favorable and likely unfavorable outcomes in litigation.

On July 1, 2013, I spoke on the record with Ray Niro, who is one of the most well known patent litigators in the United States. Throughout his career he has been a champion for the inventor who was facing long odds due to widespread patent infringement. So loathed was Niro, he was the one who was originally referred to as the “patent troll” by the media due to his representing innovators against giant technology companies. Of course, if you are going to call Ray Niro a patent troll you might want to also point out that he is extraordinarily successful, which means he has been very good at proving that large corporations have infringed valid patents, sometimes on fundamentally important innovations.

In June 2013 the anti was raised significantly in the ongoing discussion of patent trolls. The White House chimed in, which you might be inclined to think would be an important development. Sadly the President getting involved in the discussion had more to do with grandstanding than solutions. With all this in the news who better to speak with than Ray Niro, the original “patent troll” according to the media. In our interview Ray unapologetically, and unsurprisingly, comes out in defense of American inventors and those who engage in the hard work that is research and development of new and wonderful innovations. He pulls no punches, and in part 1 of our interview he calls out Cisco, a strong critic of non-practicing entities, as a hypocrite for doing the very thing that they rail against.

The attack on individual inventors using names like NPEs and patent trolls is nearly identical to the attacks previously waged by corporate America on personal injury lawyers, using the McDonald’s hot coffee case as an example of lawyer abuse (now it’s the Wi-Fi patent cases). Like the corporate attacks on everything from the private enforcement of securities fraud claims to unfair business practice, civil rights and age discrimination claims, the new target is patent infringement claims brought by “boogie man” entities that don’t manufacture products.

Acacia Research Corporation (Nasdaq: ACTG) announced on Friday, July 5, 2013, that its Board of Directors appointed Matthew Vella, Acacia’s current President, as Chief Executive Officer and a Director effective August 1, 2013. At this important moment when the patent rights pendulum has swung Vella takes over. He will have his hands full as he steps into the spotlight as the public face of Acacia. There is growing animosity toward non-practising entities and numerous legislative attempts underway to benefit big business at the expense of universities, individual inventors, research and development companies and those who acquire rights. His task will not be an easy one. As a publicly traded company Acacia’s information is there for all to see, making them an easy target.

Obama’s action plan was heavily influenced by a report, “Patent Assertion and U.S. Innovation,” which was released by the President’s Council of Economic Advisers, the National Economic Council, and the Office of Science & Technology Policy. The full text of the report can be read here. It is surprising that a report that was prepared by such an august and high-level set of entities could be so blatantly biased and one-sided. The body of the report slams PAEs and points to everything that’s bad about them. It creates an artificial distinction by referring to “good” patent middlemen as “patent intermediaries,” although there is no indication in the report of what are the characteristics of a good “patent intermediary” versus an evil PAE.

Settling nuisance value perpetuates the cycle, as the automobile industry discovered in the 1980s and early 1990s. Show a willingness to pay extortion-like demands and you will see more lawsuits filed. It is an endless cycle, at least until it gets broken. The solution is an easy one — fight at least occasionally, or at least one! Because the easy solution isn’t pursued and instead the industry pursues a strategy akin to a Buck during deer hunting season I have to assume that they really don’t want a solution. What other conclusion can you reach when intelligent people ignore the obvious?