Richard Lloyd

Our first blog post from IAM’s NPE event (held earlier this week) was a glass-half empty kind of story. It reflected on the tough environment confronting many NPE executives today, particularly those that are listed on the public markets. A grueling litigation climate, diminished access to capital and a damaging public narrative meant that none of the CEOs we quoted were predicting boom times ahead. But that’s only part of the story, throughout the day there were also reasons for optimism.

In the final panel – which focused on IP commercialization - Finjan CEO Phil Hartstein said that he thought that the patent pendulum might be about to not simply swing back but accelerate towards stronger patent rights. As evidence he pointed to patent reform, which is widely assumed to have stalled in the US Congress, and which Hartstein claimed had been so badly thought out that its impact on a very complex system was being called into question. Plus, as the courts continue to weigh up cases involving a broad array of topics covered by proposed legislation, such as fee-shifting and venue reform, then the changes that are actually needed in any legislative package continue to narrow in scope.

Of course, your view on the patent pendulum depends on your market position and recent performance and, to that end, Hartstein could be forgiven for having a spring in his step. Finjan has just come off a very good run at the Patent Trial and Appeal Board where the Board refused to institute 10 out of 11 IPRs filed by Symantec. That’s an incredibly strong validation of the patents concerned to put in front of Symantec and other prospective licensees. These positive results can be added to a notable court victory last year as the cyber security business picked up a $39 million verdict against Blue Coat Systems in the Northern District of California.

Finjan is also transitioning away from a pure patent play as it has gone back into the product business, thus diversifying its offering at a time when a litigation-led licensing approach alone is increasingly risky and less lucrative than it once might have been.

Of course, that Blue Coat verdict could very easily be revised downwards or scrubbed altogether. And while Hartstein and his colleagues can pat themselves on the back for their recent run of success at the PTAB, Finjan has had 36 reviews filed against its patents, showing just how willing many defendants are to drag out litigation proceedings through post-issuance reviews. Indeed, Hartstein stated that deep pocket defendants can sometimes throw sums approaching $10 million at IPRs as a means to deter smaller plaintiffs. 

But Hartstein was not alone in being a bearer of good news. There was also some encouraging news on the deals front.

Yesterday’s blog post highlighted that Wi-LAN has already broken even on its $33 million acquisition of the former Qimonda portfolio which was one of the patent deals of 2015. As this blog pointed out at the time the transaction closed, that portfolio had been up for grabs for some time and there was a feeling by some that there were too many encumbrances on the patents for a deal to make sense.

Ultimately it seems that Wi-LAN made the acquisition at the right price and quickly put in place a licensing agreement with Samsung so that the NPE immediately started to pay off some of the asking price. That suggests that with prices way down there are still lucrative deals to be done even in the current, very challenging licensing climate.  

The Licensing Executives Society (LES) hopes to make that climate a little less challenging by introducing some licensing best practices – a set of standards that both licensors and licensees can follow to introduce some uniformity to negotiations. Bill Elkington of Rockwell Collins, who is spearheading the LES effort, provided an update on progress during the second panel of the day.

The idea is to develop a consensus around an initial set of standards that all companies can follow. “We think it’s very important to pull ourselves out of the Wild West and agree how we’re going to do business,” Elkington insisted. “We can benefit ourselves as an economy if we could figure out how to do all of this more efficiently and effectively.”

He revealed however, that so far interest has been much stronger among patent licensing companies than operating companies. “We’d like more operating companies involved,” admitted Elkington. Certainly if it is going to be a success it needs a critical mass of patent owners from all parts of the market.