IP Market Updates
December 18, 2017
Bitcoins, “Bit-Cars”, and Bittersweet News
A few momentous events took place this past week that have important IP related ramifications; i) Crypto currency (aka Bitcoins), after surging spectacularly for months (from $1,000 to $19,000) continued their apparently limitless climb after it became possible to trade them on the open market; ii) we are seeing a collision course between car manufacturers and technology companies that could lead to the next patent war… or not; iii) the GOP passed a first in a generation massive tax cut which President Trump is expected to sign before year end and that should cut most people’s tax bill (at least in the short term)… except for patent owners.
Bitcoins are seen by many as the currency of the future; decentralized and decoupled from any country and its politics, this is the perfect standard for the digital age and the way it is created (“mined”), exchanged and protected relies on sophisticated technologies and underlying IP that belong, not to government, but to corporations. Accordingly, we are witnessing a race between the main stakeholders, mostly banks and large technology companies, jockeying for a dominant position to own large swaths of blockchain-type patents. Bitcoins cut the middleman and are not subject to the usual restrictions that many countries impose to the free circulation of money. For a great primer on how this works, see here.
To fully understand how recent and fast this phenomenon is happening, one simply has to look at related patent filings. See chart below (remember that we can only see filings up to 18 months ago as subsequent ones haven’t been published yet. Thus, one should not infer that the trend of the past years has slowed down in 2016 and 2017).
Source IPWatchdog
So, who filed all these patents? Well, not too surprisingly it is those who have the most to lose (the banks) and the most to win (technology platform companies). The chart below shows the main assignees so far and all companies listed below are well known to the public.
Source IPWatchdog
Fast forward 10 or 20 years from now when bitcoin has become the new dollar (the way the dollar eventually replaced the gold standard) and I ask you: how will you feel knowing that the money you use for everything, from buying milk to selling a house, belongs to private parties who can control new entrants through their intellectual property? And what happens when the money disappears suddenly, as a result of hacking? I believe we are witnessing the very beginning of an experiment that few governments are ready for and it will take a while for the regulatory framework to catch up with the market. Keep a few dollars in a safe in the meantime, just in case…
“Bit-cars” or connected vehicles lead the current fast and furious race to create smarter, and eventually fully autonomous, vehicles. That race pits traditional car manufacturers against new entrants like Tesla and Uber, and large consumer technology companies like Apple and Google (via Waymo). Fueling this trend is a sudden adoption of connectivity-related technologies (telecoms, sensors, IoT, AI, etc.) that have not traditionally been the core business of carmakers, and this has left many of them vulnerable as they have historically focused mostly on the driving part of the problem. It is clear here again that those controlling the underlying IP will be able to either dictate some of the rules, or at least improve the odds of remaining relevant. One preemptive move in that direction came this week from newly formed patent NPE Avanci, which just released its licensing program whereby it will require car owners to pay between $3 and $15 per “connected” vehicle and announced by the same token that German car giant BMW was its first licensee. Avanci has pooled patents from Qualcomm, Ericsson, ZTE and a few others and claims to now cover almost 50% of the standard essential patents (SEPs) relating to 2G, 3G and 4G technology. It will be quite interesting to see if others follow suit after BMW (which lends credibility to the NPE licensing model in the automotive space) or if the auto industry takes a page from Tech Cos and fights tooth and nail against any efforts by patent owners to monetize their assets in that space while the legal environment still favors the infringers. Either way and even in the current buyers’ market, this has caused many connected car patents to currently command a premium.
Bitter-sweet news is what patent owners heard this week as the GOP announced the House and Senate had reached a broad consensus on a massive tax cut bill that President Trump will be eager to sign before he retreats to Mar-a-Largo for Christmas to focus on his golf swing. The good news first: most corporations will see their corporate tax rate sink from 35% to 21%. This is massive, although truth be told, many of the large US companies who know how to use every loophole in the law never came close to paying that rate in the first place. There is a similar- albeit indirect- cut for what we call “pass-through” companies such as limited liability companies (LLC) and “S-Corps”. The Bill is 560 pages long and I don’t expect anyone to read it, including the ones who voted for it. But thanks to the document search capability, it takes seconds only to find the following ominous text on page 259 of the reconciliation section, which should send anyone who own patents to call their congressman or senator this week and read them the riot act:
In short, under the proposed bill, the sale of patents, even after holding those assets for years, will no longer be considered (and taxed as) capital gain, meaning they will have the same tax treatment as licensing royalties which are taxed as regular income. Thus, if you are a corporation and your marginal tax rate just went down 21% (capital gain is generally taxed between 15% and 20%), this is not such a big deal. But if you are an individual owner and your marginal rate will still be above 35% under the new bill, this has a significant negative impact. It therefore becomes readily apparent that the way patents are held will require additional thinking so that they end up being owned by an entity that can better benefit from the new tax provisions, assuming those become law.
Enough with the bad news. On a lighter note, because it is the Christmas season after all, here is an interesting article reminding us that even the most unusual items of daily life, such as those fuzzy earmuffs, were first and foremost great innovations, rooted on a solid patent foundation. I wonder if the concept of applying fur to one’s ears to keep them warm would be considered a mere abstract idea nowadays under the Alice doctrine. After all, aren’t most animals born with those? ??
For other great Christmas themed patents, ranging, from tinsel guns to a Santa Detector Kit, not to forget Christmas tree shaped pasta, you should read this.
Buyers & Sellers
Not many patent transactions were reported in the past two weeks, but we are awaiting the report from AST regarding the second IP3 purchase program that concluded a few weeks ago. We will let you know as soon as these numbers are released. Talking of AST, it recently acquired a set of 33 US assets from music streaming business Napster, formerly known as Rhapsody International.
Google, on the other hand, has started for the first time to divest some patent assets in its portfolio that it had inherited from other companies through some previous transactions. We are pleased to share in this regard that our firm been retained exclusively for the upcoming sale of three of these portfolios, which we will bring to market in early 2018. Stay tuned.
Winners & Losers
While most pundits by now predict that the US Supreme Court will not abolish the PTAB (SCOTUS’ decision can come any time before June 2018), there was, nevertheless, some (rare) good news for patentees recently in that the invalidation rate of IPRs seems to be inching closer to 50%, after stubbornly hovering around 75% for years. This data is mostly from 2016, but our understanding is that this trend has continued in 2017.
However, the success achieved by many large corporations who can now file IPRs directly -as a way to make a litigation risk go away- has put enormous pressure onto defensive aggregator, RPX, whose model has traditionally been to syndicate the buying of patents in lieu of fighting them in court. This has in turn impacted its stock and attracted an unsolicited offer by a private group to buy the publicly traded company for about $800 million, which would be slightly above its current valuation of $668 million. RPX management has not yet reacted to the offer, but announced a few days ago a major reorg that saw a few of its top executives leave the company, seemingly to improve its balance sheet. It will be interesting to see if this is followed by additional layoffs.
On other fronts, Ericsson emerged victorious and $75 million richer after a protracted patent battle against Chinese owned TCL, while ROVI prevailed against Comcast in another patent dispute. Finally, a US jury awarded wireless speaker company Sonos a rather symbolic $2 million in its litigation against competitor Denon, while wearable manufacturer Fitbit resolved its pending litigation against former nemesis and now bankrupt Jawbone.
Who is being naughty (lawsuits)
Apple filed an IPR challenge against patents currently owned by the three Affiliated Tribes of the Fort Berthold Reservation, North Dakota, in a move that will force the PTAB to take sides on the controversial issue of sovereign immunity of certain patent owners like universities and native tribes. Many on the infringement side see this as a serious loophole that needs to be plugged quickly and the stakes are pretty high on both sides, as is reflected by the numerous amicus curiae briefs recently filed by both sides on this topic in a related case.
NPE Document Security Systems (DSS) filed its third enforcement action against Japan’s Nichia Corp. and Nichia America in U.S. District Court regarding the alleged infringement of LED patents DSS acquired from Intellectual Discovery Co. Ltd. of South Korea for a reported $9 million.
Recent law suits in China alleging rampant theft of trade secrets by Asian companies in the memory sector, including one filed by the US-based Micron Technology against Taiwan’s United Microelectronics (UMC) and its affiliated China memory maker Fujian Jinhua Integrated Circuit (JHICC), are raising concerns that some old habits die hard even though China is officially on record for being on the side of innovators these days. It will be interesting to see if this is symptomatic of an effective PR machine hiding a sad reality of organized IP theft, or whether this case is an outlier in this new era.
Canada-based Bombardier, who seems to never learn from past cases, found itself of a receiving end of yet another patent infringement decision, this time against snowmobile competitor Artic Cat who was awarded $50 million by a jury. When it snows…
Finally, if you can’t kiss and make up, you might as well sue one another over your patents it seems. This is what US carrier Sprint decided to do after its merger talks with cable giant Charter came to a halt. What a way to kill the Christmas spirit.
On the Move
Quarterhill, the parent company of large NPE WiLAN, recently named Doug Parker as its new CEO, while it still searches for a CEO for WiLAN itself that will allow Jim Skippen to re-retire. Hang in there Jim!
Visual Impact of Alice
As a result of the seminal Alice decision in mid-2014 and its progeny, patent attorneys have tried to shield their clients by drafting longer and narrower claims in order to avoid falling into the “abstract idea” trap. It used to be that the shorter the first claim of a patent, the better it was. This is certainly no longer accurate in view of the recent case law and the profession has had to adapt. Seeing this visually is quite interesting as per the chart below. So, you now need on average 80 more words to say the same thing.
On the legislative front:
This was a busy 2 week in Congress, as the US Senate confirmed new USPTO commissioner Andrei Iancu unanimously. In parallel, the new Inventors Act, a wish list of pro patentee provisions, was “rolled out” to the House of Representatives (however, I don’t mean to imply it was actually proposed as a bill yet). Even if it makes it officially to the floor, this bill will probably join the other 7-8 bills that are still pending, some for at least 3 years. But the fact that we now have almost as many pro patents bills as those wanting to “reform” patent law even further is by itself telling, in that the narrative has finally changed, helped in part by recent data showing a sudden decrease in startup investments in the US.
Meanwhile, the USPTO announced that it will introduce a new electronic patent filing system in 2018.
Around the world:
Europe is not all about Brexit these days, as we were reminded when the Netherlands threatened to force pharmaceutical companies into a compulsory licensing scheme in order to keep the cost of drugs affordable for the Dutch. This came on the heels of a German court decision that forced Shionogi to license a key drug patent to Merck.
In India, the country has its own PTAB problem, as thousands of patents are in limbo while waiting for a decision on the constitutionality of the IP Appellate Board. It almost feels good sometimes not to be the only ones playing with a broken toy.
China never invaded Cambodia, but now its patents are, as it was announced that Chinese patents will now be validated in that country. Meanwhile, the European Unitary Patent system is going on 42 years in the making, with no closure in sight… This is it; I will see you back in early 2018. In the meantime,
Happy reading and Happy Holidays all!
NEWS
Qiagen to pay Oxford Immunotec $27.5 million to settle patent case
Reuters
Qiagen NV said on Friday it had agreed to pay $27.5 million to resolve a lawsuit claiming that a tuberculosis blood test it produces infringes patents held by competitor Oxford Immunotec Global PLC. The settlement came before a trial scheduled for next month and after a federal judge in September ... (more...)
The Good, Bad and Ugly of Cross-Licensing Your Technology Patents
IPWatchdog.com
A cross-licensing patent agreement is a contract between at least two parties that grants mutual rights to both parties' intellectual property. The agreement may be a private one between two specific companies or a small consortium of companies. Or it may be a public agreement such as a patent pool, ... (more…)
Above the Law
In case my post on stupid patents didn't tip you off, I am fascinated by the world of inventions that people see fit not only to create, but that they think are worth patenting. With the holiday season upon us, here are some of the more interesting Christmas-related patents. While I could've done an entire post ... (more…)
Economic Consequences of the Patent Crisis
IPWatchdog.com
This is where we find a link between the patent system and business investment in new technologies. The patent system has supported these investments by supplying a property right to an invention. However, in recent years, a cartel of large technology companies has influenced patent policy, which ... (more…)
Patent perception must shift, says Schechter
IPPro Patents
Public perception must shift if the US is to find feasible solutions to patent abuse, according to chief patent counsel at IBM Manny Schecter. In a recent interview, Schecter said that some members of the public “get the impression that IP rights are inherently suspect”, based on abuses of the patent system… (more…)
IPPro Patents
Patent owners are winning more than losing in inter partes review (IPR) proceedings, according to a study from law firm Fitzpatrick, Cella, Harper & Scinto. The firm found that, “despite the initial reputation of IPR proceedings being that of patent killers, patent owners are winning more cases than ever”… (more…)
EPO Study Shows Rise In Patents On Next Generation Technologies
Intellectual Property Watch
Munich, 11 December 2017 – European patent applications related to smart connected objects are rising rapidly, achieving a growth rate of 54% in the last three years, the first European Patent Office (EPO) landscaping study on “Patents and the Fourth Industrial Revolution (4IR)” reveals. Conducted by ... (more…)
Patent Reform: US Inventor Act goes to Congress
IPWatchdog.com
Capitol Building This week US Inventor, an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups, rolled out the U.S. Inventor Act in the House of Representatives. US Inventors have been visiting congressional offices since ... (more…)
ScienceBlog.com (blog)
But there has also been extensive interest in the variety of intellectual property issues surrounding CRISPR, including a heated patent dispute between two of the technology's originators, in one side Jennifer Doudna (UC Berkeley) and Emmanuelle Charpentier (Max-Planck), and in the other side Feng ... (more…)
Daily Republic
Notably, the U.S. Supreme Court decided two cases this year that continued a trend of reining in patent trolls, companies that buy up wildly overbroad patents and then sue anyone and everyone for infringement, looking for easy settlements. In TC Heartland v. Kraft Foods, the court restricted the ability of ... (more…)
Automakers avoid patent wars while adding new tech to cars
TheRecord.com
WASHINGTON — As automakers turn their vehicles into app-laden computers on wheels, there's one habit they don't want to acquire from Silicon Valley: fighting over patents in court. Manufacturers from BMW to Hyundai to Ford are trying to learn from the smartphone wars, which cost technology ... (more…)
Special Feature: 5G And Standard Essential Patents In The US
Intellectual Property Watch
NEW YORK — A panel at the recent IP Dealmakers conference including a US Federal Trade Commission official, a former US judge on a key patent case, and a telecommunications industry licensing expert walked through issues and prospects for the coming of the 5G next generation wireless ... (more…)
Are the days of Patent Office trials numbered? Last week's Supreme Court argument suggests they ...
American Enterprise Institute
Recall that Congress's 2011 America Invents Act created these proceedings as a quicker, cheaper, and easier alternative to test the validity of patents. Until then, district courts represented the only judicial or quasi-judicial address for challenging patents. But since the Patent Office trials have come ...
Arctic Cat Jury Snows Over Bombardier's Patents
Law360
Law360, Washington (December 7, 2017, 4:20 PM EST) -- A Minnesota federal jury struck down claims on a pair of snowmobile patents Bombardier had asserted against Arctic Cat on Wednesday, one day before the Federal Circuit threw into doubt part of a nearly $50 million infringement win Arctic Cat ... (more…)
Entrepreneur with 700 Patents Says This Is How to Foster Your Imagination
Fortune
That's according to Jay Walker, the investor-turned-serial entrepreneur who founded Priceline.com in the 1990s. “Imagination is sort of the great untapped resource,” Walker said at the Fortune Global Forum in Guangzhou, China on Thursday. “We talk about innovation, but there is no innovation without ... (more…)
Carmakers Want Silicon Valley's Tech Without Its Patent Wars
Bloomberg
Carmakers Want Silicon Valley's Tech Without Its Patent Wars ... Both Toyota and Ford were among the top 21 recipients of U.S. patents last year, with 1,540 and 1,530, putting them in company with Apple Inc., Qualcomm Inc., and Alphabet Inc.'s Google, according to figures compiled by the Intellectual ... (more…)
Changes in Patent Language to Ensure Eligibility Under Alice
IPWatchdog.com
When a rule becomes a target, it ceases to be a good rule. In the three years since the Supreme Court issued its opinion in Alice, there have been positive changes to patent applications, but there remains a long-term risk that patent practitioners will use tricks to beat the Alice test. Here, we focus on the ... (more…)
Standard Essential Patents, Antitrust and Market Power
IPWatchdog.com
With this article, I report from a very interesting panel on “Patents & Antitrust – Key takeaways for IP attorneys” which took place at John Marshall Law School's 61st Annual Intellectual Property Conference. Panel speakers were Dina Kallay (Ericsson), Dirk Weiler (ETSI/Nokia), Tim Syrett (WilmerHale), ... (more…)
Has the Patent System failed US tech companies?
IPWatchdog.com
The first (morning) panel was directed to Patent Litigation. The first topic was: Venue since Heartland. It was an interesting take. The Eastern District Texas cases have now been split up: some to Northern California, many to Delaware; some to Illinois and Central California; and some remain. Interesting ... (more…)