Joff Wild

The first full day of IPBC Asia 2017, taking place at the palace Hotel in Tokyo, has come to an end. The 530 delegates attending the event have been treated to a number of insightful presentations and have enjoyed any number of stimulating conversations during the networking breaks. As ever, IAM’s editorial team has been monitoring the proceedings. Here, Joff Wild (JW), Richard Lloyd (RL) and Jacob Schindler (JS) report on what’s caught their ears and eyes so far.

Change rolls on - As convergence brings cellular function into vehicles, Japan’s automakers are embracing new patent strategies. Speaking in the opening Meet the deal makers plenary, the general manager of Nissan’s IP department, Tomonori Bekku, described the changes to the sector as “huge and unprecedented”, adding that issues like standardisation “cannot be avoided”. The basic model of automakers buying parts from suppliers and assembling them will not change even as telecoms technologies become one of the parts, said Bekku, who acknowledged that those who can show an appropriate valuation should be licensed. But Bekku questioned whether patents are being used in a way that is constructive for the industry overall. Similar concerns have in large part motivated recent efforts by the Japanese government to reform the country’s IP system for what is termed the Fourth Industrial Revolution. One proposal that’s come out of this is a mandatory ADR process that would be initiated by implementers and resolved by the government. Whether this proposal can alter the licensing environment in a way that helps automakers remains to be seen. But Brian Selby, of GE Ventures, said that companies at risk of disruption need to rapidly transform themselves internally, because the market is quick and brutal. How will an automaker be able to differentiate itself, he wondered, when 50 different Chinese companies are expected to release an electric vehicle in the coming years? The answer that GE arrived at when assessing its own competitive position was that it needed to focus on how it can collect and analyse data. Ultimately, he advised: “You need to roll with the changes, or they’ll roll over you.” (JS)

Wasted opportunities - Never look back with regrets, so the old saying goes; but there are a few patent dealmakers in Tokyo right now who could be excused for forgetting that golden rule. Talking to a couple of them at the opening reception last night we were discussing how these days it would be highly unusual for anyone to buy a patent portfolio – even at current knockdown prices – unless it contained a good smattering of non-US rights, German and Chinese ones, in particular. What a contrast to how things used to be, when the only game in town was US assets. Back then, my companions told me, if you happened to pick up non-American rights in a transaction, the likelihood was that you would let them lapse at the earliest opportunity – essentially leaving the path clear for anyone to use the patented technology risk-free outside the US. Thinking about the amount of value and leverage that was essentially thrown away on a bet that the States would always be the only game in town must keep at least a few people awake at night. A lesson learned, no doubt; but for many perhaps a little too late. (JW)

Keeping up with the competition - The second plenary session of the day - Moderating the market - looked at the complex and constantly evolving nexus between IP and antitrust, throwing a spotlight on how the courts and regulators in a series of the world’s major jurisdictions are policing both the owners of standard essential patents (SEPs) and licensees. The panellists were asked about the numerous investigations and decisions in various parts of the world. “Each jurisdiction has its own interest,” commented Professor Kimitoshi Yabuki, a competition law expert from Hitotsubashi University. “The US is generally a pro-patent country, while Japan is focused on protecting its own companies and the European Union is interested in preserving the freedom of movement of technology.” Whether America can be seen as a pro-patent jurisdiction is a debate for another day, but Yabuki’s point was that regulators and standard setting organisations (SSOs) should work together to come up with a more standardised approach to SEP licensing. ZTE’s Ben Wang cautioned against a centralised, regulator-led approach but called on the patent owning and licensing communities to take the lead in coming up with a standardised approach. If the market is going to get to that kind of approach then, according to Scott Burt of Conversant, there needs to be a balanced approach between patent owners and licensees. “The best we can do is be reasonable in a licensing negotiation, the issue we’ve had is sometimes we don’t get reasonableness back,” he commented. (RL

A matter of perspective – US patent litigation filings tumbled during 2016 and, according to Lex Machina data, if trends hold the number of new cases for 2017 will again fall slightly. But talking during the Big challenge afternoon breakout Yuji Toda, the general manager of the IP department at Hitachi, said he doesn’t think the NPE threat has changed much. A look at the litigation record shows that Hitachi and its subsidiaries have faced about five patent lawsuits a year in the US in recent years, almost all of which appear to be initiated by NPEs. It is a good reminder that macro-level trends which look seismic on the aggregate level can feel very marginal from the perspective of an in-house IP counsel. Toda says that Hitachi is considering joining defensive groups like the Open Invention Network and will continue to pursue invalidation where possible. (JS)

Don’t leave it to the regulators – Convergence and connectivity, two words that must be seared into the minds of anyone working in the high-tech patents space, and beyond, these days. Patents created to underpin technologies in one sector are now being applied in industries far beyond the core experiences and knowledge of their owners. A family intended for use in, say, a mobile phone might now be integral to a car; and the emergence of the IoT and the cloud are only accelerating this process. If you think connectivity is making things complicated for IP owners, observed Avanci’s Kasim Alfalahi during the morning Meet the deal makers plenary, you ain’t seen nothing yet. But, he continued, IP professionals can’t just sit back and let things play out, they need to find solutions to the challenges of convergence now because leaving it until later will only make problem-solving harder. Fellow panellist Eeva Hakoranta, head of patent licensing at Nokia, was in full agreement. Her worry was that if IP owners themselves do not confront the issues posed by licensing outside of their comfort zones, then regulators will come in and set the rules for them – and these are bound to be sub-optimal, at best. The key, she stated, is to encourage constructive, friendly dialogue between stakeholders in different industries. It is only when patent owners are clear about the dynamics of a sector that they can set royalty rates and conduct negotiations on FRAND terms. Nokia is keen to talk to companies operating outside the telecoms space in order to understand their needs and strategies – that will then allow the company to develop appropriate solutions; and these have to be global, not jurisdictional. The alternative to this kind of conversation, said Alfalahi, is the type of litigation that characterised the emergence of the mass mobile communication market – and there is no company in the world that wants to be spending good time and money in the courts if it can avoid it. IP owners, it seems, can either be a part of the conversation or they can be left behind. Put that way, it doesn’t seem to be much of a choice at all. (JW)

Judged by different standards - One of the questions in the ‘Moderating the market’ plenary was addressed to Conversant’s chief IP officer Scott Burt on whether non-practising entities (NPEs) are judged by a different standard to other patent owners in SEP licensing negotiations. “I think there can be a different treatment,” Burt commented. “It’s often a result of a lack of education and understanding. One of the things I’ve done and had to do in the US is to explain the licensing business to regulators and members of Congress.” One of the developments that has helped Burt and others from the NPE community is the recent report from the Federal Trade Commission on patent assertion entities. That distinguished between litigation NPEs, which file a high volume of lawsuits in order to drive settlements, and licensing NPEs, which often own portfolios of higher quality assets and litigate relatively rarely. “We act more like the licensing arm of a manufacturing business,” Burt said of Conversant before adding: “There’s a lot of misunderstanding out there about the diversity in licensing businesses.” Many NPEs know exactly what Burt is talking about. (RL)

State of the deals market – Intel sells a lot of patents, giving Greg Sato, managing counsel in the company’s patent sales group, a good view of the secondary market. Speaking in an afternoon breakout Sato said that the present trend is an increased number of patents available for sale on the market, but fewer actual deals being done. Prices, he noted, are pretty stable. What Sato hears from buyers is that it’s hard for them to find high-quality patents that match their specific technology needs. From the sell-side, Sato said his team try to focus on the customer, and mine the Intel portfolio for assets that match what the market is looking for. Asked what assets are on and off limits during this process, he says: “We’re willing to consider selling any patent, but we’re not going to sell every patent.” (JS)

All change at GE – There has been a licensing revolution at GE over the last four years. That much became clear during the morning’s Meet the deal makers plenary session in which Brian Selby, vice president of licensing and technology at GE Ventures, detailed how a move to become a digital industrial company had led to the sea change in thinking around sharing the IP the corporate giant’s multiple businesses create. First off, there was a decision to shift licensing activity to the Venture operation, which is based in Menlo Park; then, Selby stated, the emphasis changed from the licensing of non-core assets to putting everything up for discussion. What’s more, GE is now interested in a lot more than just straight licensing. It is open to IP-enabled joint ventures, co-investment in the creation of new technologies, working with licensees to help them build new products and services using GE IP and on finding partners who can accelerate the arrival of GE technologies into new markets. Selby’s theme throughout was speed: things change so quickly these days and you have to be flexible enough to operate to timelines that are far more demanding than they may have been in the past, and you have to accept that you cannot do it all yourself; others may be better placed to use your IP than you are. Channelling his inner rock star, Selby concluded by saying: “You have to roll with the changes or get rolled over by changes.” This is something that all IP owners are going to have to think about very carefully. What is becoming abundantly clear at this IPBC Asia is that long-established ways of working in corporate IP are fast becoming redundant. It’s exciting, but it will demand a nimbleness that some may struggle with. (JW)   

Patent litigation around the world - As many members of the patent community have become only too well aware of in recent years, the attractions of the US as a venue for patent litigation lawsuits has declined greatly thanks to numerous court decisions and the intervention of Congress via the America Invents Act. What that means for the US’s position in relation to Europe and Asia as a venue for dispute resolution has been much discussed, but during the Situation room breakout on global litigation trends Nikon’s chief IP counsel Eric Kirsch was in no doubt about the consequences of recent changes State-side. “As the US declines in importance then people become more interested in Europe and Asia,” he insisted. That means that many plaintiffs have turned to courts such as those in Germany, where the promise of speedy resolution of a case and the possibility of an injunction hold considerable appeal. Kirsch predicted that interest in courts in Asia and Europe will only continue to grow, largely at the expense of bringing lawsuits in the US. What might change that is if the US Supreme Court rules that inter partes reviews are unconstitutional in Oil States Energy Services v Greene’s Energy Group LLC. That could lead to a big spike in cases and, with oral arguments set for the end of November, the stage is set for a decision that has the potential to upturn the global patent litigation market. (RL

The right call – Hindsight is 20/20, but NEC IP department general manager Toshio Asai is able to look back on one particular decision now with considerable relief. In the early 2000s, he explained during the Playbook breakout on buying and selling patents, NEC was the leading player in Japan’s PC market – and relied on unique proprietary technology, different from that of its competitors like IBM. At the time, it was approached by a patent seller, who offered the chance to purchase an entire portfolio, hundreds of rights strong, or a selection of five to 10 representative patents. Asai said that the seller had a very different corporate culture to the one at NEC – the patents on offer were market-oriented rather than technology-oriented. The choice came to Asai and he opted to buy the whole portfolio. A decade later, Asai continued, that decision was vindicated when PCs became a commoditised product, and the third-party rights mapped much better onto up-to-date products. The rights were ultimately more valuable to NEC than those that had protected its own proprietary PC business. Asai says the bottom line for buyers is that when in doubt, buy big and buy long-term – you may find unexpected value. (JS)

Finding the right price - As the programme description for the What it’s worth panel pointed out, valuing a patent is frequently more art than science. That means there are often a variety of approaches from patent owners, potential licensees and intermediaries when determining licensing royalty rates – something that helps explain why negotiations often end in disagreement. In his opening comments Jeffrey Carter of High Tech Solutions cautioned against what he called a standardised approach to determining a royalty rate. “If we could agree on different models on cost, market, income or a combined approach and the components of those then it makes sense,” he commented. Standardise too far, Carter cautioned, and two negative things would happen. “Firstly you remove the individualisation of IP and how it's valued, and secondly it means there are serious impacts on a free market and you wouldn’t get fluctuations in the market.” He added: “Standardised royalty rates would be helpful but every company is different, every deal is different, every patent is different.” Many in the licensing community know exactly what he means. (RL)    

Meeting a game-changer - By any standards Nomura is a huge organisation. Not only is it one of Japan’s oldest financial institutions, it is also one of the world’s largest, currently managing assets worth over $400 billion. Up to now, though, it has taken little interest in IP. That, however, has changed. During the Meet the deal makers plenary this morning, Takahito Nakamura – managing director and head of the corporate innovation consulting department at Nomura Securities – said that IP was now firmly in its sights. One very simple fact stood out, he stated: by 2050 the IMF predicts that 52% of the world’s GDP will be generated in Asia. This will create opportunities in IP that make it worthwhile for an entity of Nomura’s size and reach to start paying attention. There was still plenty to learn, Nakamura stated, and he asked audience members to help him do it; but you can bet your bottom dollar (or should that be yen?) that learn he will. And if Nomura are doing it, you can be pretty sure other major financial institutions will follow suit. If you are looking for IP game-changers, there’s one right there. (JW)

In this together? - One of the themes of several recent patent licensing deals has been the inclusion of a collaborative element whereby an agreement is part of a broader business arrangement which might include a promise of co-operation in a specific technology or some vague understanding to partner on future unnamed projects. Such deals have proved particularly popular with some companies keen to demonstrate to investors and markets that an agreement is about more than just simply handing over licensing cash. Despite their proliferation, however, not everyone is convinced. “You know that’s all nonsense, right?” one very senior member of the IP community said, throwing doubt on the substance of many such deals beyond the patent licensing portion. A top tip: when it comes to win-win read the small print, not just the press release headline. These kinds of deal, it seems, could sometimes be easier to claim than actually to do. (RL)