Richard Lloyd

When might a stupid patent, not actually be that stupid? Perhaps when it ends up being bought at auction by some of the world’s most sophisticated IP-owning businesses. Well, that is exactly what has just happened with regards to an asset once named by the Electronic Frontier Foundation (EFF) as its “Stupid Patent of the Month” for April 2016.

Last spring AST launched the third iteration of IP3, the patent buying programme which is designed to give patent owners a quick and efficient way of selling their IP. The final results are yet to be confirmed — the day when participants decide which patents they want to buy took place in November — but some of the deals are starting to show up in the USPTO’s assignment database.

Among the packages to change hands, was a portfolio of 14 assets previously owned by a company called Tigerlogic which sold its main operating business focused on data management technology in 2016 and then wound up its operations through the first half of last year. Another transaction that caught my eye involved the sale of five assets by an entity called Voice2Text Innovations LLC.

There’s not a huge amount of information publicly available on the company except that it’s registered in Texas, its IP appears focused on speech recognition technology and its portfolio was assigned to it by Empire IP, an NPE headed by a couple of former New York-based patent lawyers. Voice2Text was also in the spotlight in 2016 as it filed a series of five infringement suits, two against a company called Mutare Inc, and the rest against USCC Services LLC, Onvoy LLC and Phone.com Inc. All of them had reached a conclusion by the second half of 2016 or start of 2017.

Those suits did ensure that Voice2Text garnered some notoriety as one of its patents - no. 8,914,003 - which uses speech recognition to convert a voicemail into a text message, was featured as the EFF “Stupid Patent of the Month” back in April 2016. The advocacy group, a strong and long-time supporter of major patent reform in the US, makes it award to those grants that it deems to be particularly suspect.

The EFF declared that the ‘003 patent is “absurd”; explaining that: “Since the patent describes nothing beyond banal generalities (eg the system “may be configured to convert the voice mail into a text”) it provides no meaningful assistance over simply starting the project from scratch.” Plus, according to the EFF, there’s plenty of prior art out there to show that the invention is not novel.

All of which suggests that ‘003 might have been expected to sit on the shelf, once the spate of court cases had come to an end, along with the millions of other US grants that have very little value and therefore are not monetised. That, though, would be to ignore the contextual element which can so often contribute to a patent’s value; the one in which a grant might be dismissed as poor quality and possibly worthless by one party, only to have some value attached to it by another.

The IP3 buying process is by all accounts a very thorough operation. AST – an entity populated by individuals with long experience of operating at the top end of the patent market - helps vet the patents offered for sale using high-grade analytical tools, the owners name their price (which can’t be negotiated) and then those operating companies taking part determine which assets they’d like to buy. In 2016 the process led to 56 deals being done out of 1,378 that were offered with an average price of $96,000 per patent family, as AST members - which include Apple, Google and Microsoft - opted to buy only a tiny slice of the IP put up for sale. 

There is information around the most recent sale relating to the ‘003 patent that we don’t know, such as how much Voice2Text wanted for its portfolio and how value was ascribed to each asset. A smartphone manufacturer among the IP3 participants may have been prepared to pay a relatively low amount simply to take the assets off the market and out of possible future litigation; or they might have deemed the patents of sufficient value that it was worth adding to its portfolio for defensive purposes. Either way it seems that the patent may not be so stupid after all.   

I got in touch with AST CEO Russell Binns to ask if those company representatives in the room for the IP3 auction were aware of ‘003’s notoriety. “Our members were aware of its litigation history and I would not be surprised if many of our members were aware of the EFF designation,” Binns wrote in an email.

He then added: “There are many reasons our members choose certain families of patents to acquire: sometime it’s about getting the highest quality assets or highest risk assets off the market, and sometimes it is to cost-share and cost-effectively remove a family of patents from even low risk litigation costs. When priced right, it can be a simple decision. Each member does its own due diligence and makes its own decisions on how much to contribute to an acquisition, so I can’t speak to the exact reasons that each member contributed to this particular family of assets.”

This also raises questions around the thorny topic of patent quality and what exactly is a good quality patent. There is a school of thought, espoused by the likes of former Federal Circuit Chief Judge Paul Michel and Dominion Harbor CEO David Pridham, that the debate around quality is a false one and that a grant is either valid or invalid. Maybe the ‘003 patent shows that they have a point.