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How Valuable Is Your Patent, Really?

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How Valuable Is Your Patent, Really? 1 2 3 4 • These are factors that go beyond the usual realm of a patent prosecution counsel • broad claims • well supported by spec • clean prosecution history • Timely issuance • Can the patent stand alone as an asset? à How much is the patent worth in the market place? 5 • Life after AIA • Presumption of validity at the district court level is no longer there • Parallel proceedings at PTAB • High rate of IPR institution and claim cancellation (especially at the outset of AIA) • While the application of AIA rules and new processes are being hashed out, presumption of validity is definitely gone. • Case law is always evolving – Pendulum still swinging • Gottschalk v. Benson • Parker v. Flook • Diamond v. Diehr • State Street Bank v. Signature Financial Group • In re Bilski • Alice Corp. v. CLS Bank International • DDR Holdings v. Hotels.com (one patent held as patentable! • Enfish v. Microsoft • Certain PTAB decisions being designated precedential 6 http://www.ncsl.org/research/financial-services-and-commerce/2016-patent-troll- legislation.aspx http://www.law360.com/articles/836578/the-post-aia-battleground-for-patent- challenges http://www.finnegan.com/resources/articles/articlesdetail.aspx?news=3aad1da2- 08a9-4f14-a147-611b1e39ff75 ITC: Availability of Cease and Desist orders and Limited or General Exclusion Orders; speedy proceedings “anti-patent troll” — i.e., entities that have made a business out of directly challenging patents via IPR for financial gain (“...IPR process is being misused by hedge fund companies whose motive isn't to develop their own products but to make money by selling company stocks short.” https://www.bna.com/inter-partes- review-n73014447528/) (http://www.epmmagazine.com/opinion/patent-challenging- lucrative/) e.g., nXn partners (Kyle Bass and Erich Spangeberg) taking on the issue of evergreening of pharma patents 7 e.g., http://www.itbusinessedge.com/slideshows/top-10-strategic-technology-trends- for-2017.html http://fortune.com/2016/12/01/blockchain-patents/ https://blockstream.com/about/patent_pledge/ (Blockstream’s patent non- aggression pledge) SCOTUS decision on Lexmark (http://www.scotusblog.com/case- files/cases/impression-products-inc-v-lexmark-international-inc/) and Apple v. Qualcomm will have bearing on patent exhaustion/double-dipping 8 CY16Q3 list: 1. RPX 2. IV 3. Acacia 4. Google 5. IP Bridge 6. Philips CY16Q4 list: 1. RPX 2. Hynix 3. Apple 4. Intellectual Ventures 5. Hitachi, Panasonic, AT&T Note RPX, IV, Allied Security Trust (and arguably Google) are patent aggregators – sell membership as defense/insurance against patent enforcement actions • IV took over the top spot from RPX from CY16Q3, although IV is reportedly scaling back on patent acquisitions starting in CY17Q2 (http://dominionharbor.com/news- iv-pulls-back-patent-acquisition-market-focus-monetising-existing-portfolio-sale- licence/), e.g., by transferring 4000-patent Kodak portfolio to Dominion Harbor • The list changes Q-to-Q depending on timing of deals 9 Google also uses its Google Patent Acquisition Program as a defensive mechanism • Bought 28% of offered patent assets for an median price of $150k each during a 3-week program window (as of October 2015) • (http://spectrum.ieee.org/computing/software/google-tries-to-keep-patents- out-of-the-hands-of-trolls) • Still have “Patent Opportunity Portal” Acquirers may also sell, sellers may also acquire (see next slide) 9 CYQ3: 1. Google; 2. Toshiba; 3. Broadcom; 4. Panasonic; 5. SK Telecom CYQ4: 1(tie). Hitachi, Panasonic, AT&T; 2. Huawei • Certain technologies are hotter than others (IoT, autonomous vehicles, AI, VR/AR) • IV might make the list for CY17Q2 as it sold the Kodak portfolio to Dominion Harbor • Panasonic has launched an active IP sale subsidiary in recent years (Panasonic Intellectual Property Corporation of America, Panasonic IP Management Co., Ltd.), and has sold assets to IP Bridge, WiLAn, etc. • Google has a Patent Divestiture program for operating companies to acquire Google portfolio(s) for defensive purposes (https://www.google.com/patents/licensing/#tab=pd) • Toshiba sold 500+ patents to IP Bridge in 2016 (http://www.iam- media.com/blog/detail.aspx?g=75ba041f-410e-4d62-a27b-d5d95f6bcf4d) as well as a portfolio to Inventergy (http://www.iam- media.com/blog/detail.aspx?g=30736f64-dd3d-46a1-a2a4-bedcd54e8fa6) . • Also, Toshiba is Fujitsu’s wholly owned subsidiary — Fujitsu has been actively making IP deals in and outside of Japan since 2010. • Avago Technologies completed acquisition of Broadcom, in addition to Emulex and LSI, earlier in 2016, so assumedly there are ongoing IP portfolio pruning efforts • SK Telecom is putting a lot of effort into the new 5G standards, thus likely selling off patents related to LTE and older technologies (“Via Expands LTE Patent Pool License Coverage to Include LTE Advanced” 10 (http://www.businesswire.com/news/home/20160928005305/en/Expands-LTE- Patent-Pool-License-Coverage-Include)). 10 Medicines Patent Pool (www.medicinespatentpool.org — funded by UnITAID) DVD6C (www.dvd6cla.com) HEVC Advance (High Efficiency Video Coding) (www.hevcadvance.com) Avanci IoT (avanci.com) RPX Corp (www.rpxcorp.com) Intellectual Ventures (www.intellectualventures.com) Allied Security Trust (www.alliedsecuritytrust.com) Unified Patents (www.unifiedpatents.com) MPEG LA (www.mpegla.com) Consider also patent non-aggression pledges, like the Blockstream one mentioned earlier 11 12 • Uniloc USA, Inc. v. Microsoft Corp killed 25% Rule of Thumb (2011) • LaserDynamics initially awarded total of $57,456,136 after jury trial; • QCI was granted motion for new trial on “entire market value” considerations; LD given the option of taking $6.2M or new trial; • LD subsequently awarded $8.5M after new trial; QCI appealed to US CAFC for a new trial based on Judgment as a Matter of Law —> new trial ordered based on improper reliance on unrelated licenses (prior license with BenQ as a result of prior settlement agreement); • LD & QCI eventually settled • The question is whether the patented functionality is what motivates consumers to buy the complete product “in the first place.” • It is not sufficient to show that the patented feature is “viewed as valuable, important, or even essential.” • It is also not sufficient to show that a product without the patented feature would not be commercially viable. • It is not even sufficient to show that consumers would buy a product with the patented feature over one without the patented feature. • The patented feature must motivate consumers to purchase the type of product at issue, not merely choose one model over another. • Matthew Holohan, “Making Sense Of Apportionment In Patent Damages: Part 1” Law360 (March 13, 2015) 13 Nash Bargaining Solution: 50-50 split of incremental profits, assuming perfect knowledge https://www.law360.com/articles/529437/nash-bargaining-may-not-be-right-for- patent-damages Note: As an aside, Virnetx was more successful against Apple (VirnetX Inc v. Apple Inc, U.S. District Court, Eastern District of Texas, No. 10-417) • Federal jury awarded $300M+ to Virnetx in retrial in September 2016 • Of course, Apple has successfully challenged the Virtnetx patents at PTAB (IPRs 2015-00810, 2015-00811 and 2015-00812) – VirnetX is using other patents in their portfolio, as well as challenging the PTAB’s lack of use of expert testimony at the Federal Circuit VirnetX reached a $200 million settlement in a related patent case with Microsoft in 2010, which was VirnetX’s first patent licensee. (http://arstechnica.com/tech- policy/2013/03/cisco-beats-patent-troll-virnetx-which-sought-258-million-over-vpn- patent/) 14 • USPTO May 2016 subject matter eligibility update (https://www.uspto.gov/sites/default/files/documents/ieg-may-2016-memo.pdf) • USPTO April 2014 Interim guidance on subject matter eligibility (https://www.gpo.gov/fdsys/pkg/FR-2014-12-16/pdf/2014-29414.pdf) • Step 1: IS THE CLAIM TO A PROCESS, MACHINE, MAnUFACTURE OR COMPOSITIOn OF MATTER? Statutory categories: 1. Process 2. Machine 3. Manufacture 4. Composition of matter • Step 2A: IS THE CLAIM DIRECTED TO A LAW OF nATURE, A nATURAL PHEnOMEnOn, OR An ABSTRACT IDEA (JUDICIALLY RECOGnIZED EXCEPTIOnS)? • Step 2B: DOES THE CLAIM RECITE ADDITIOnAL ELEMEnTS THAT AMOUnT TO SIGnIFICAnTLY MORE THAn THE JUDICIAL EXCEPTIOn? • Recitation of “conventional” computer functions and components is not enough • “Merely adding a generic computer, generic computer components, or a programmed computer to perform generic computer functions does not automatically overcome an eligibility rejection” 15 • Enfish is a reaction to Alice Corp. v. CLS Bank International • CAFC did affirm non-infringement by MS on one claim • Software can make non-abstract improvements to computer technology just as hardware can • "We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two [i.e., transformation test of Alice]...Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis...Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis. ” Id. • District court is not allowed to describe “... the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to §101
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