Down to business in Barcelona

Down to business in Barcelona

Well over 500 senior members of the international IP community met at the Hotel Arts in June for the ninth IPBC Global. Up for discussion were the rapid pace of change in the market, its shift from the United States to Europe and Asia, as well as emerging IP value creation business models that reflect the new realities. Throw in an IP Hall of Fame induction ceremony and hours of top-level networking opportunities, and it is no wonder that so many declared IPBC Global Barcelona the best event so far

The panel for the opening plenary session of IPBC Global 2016: “Welcome to the new normal”. From left: moderator Monica Magnusson, vice president, IP policy and communication, Ericsson; Erich Andersen, vice president and deputy general counsel, IP group, Microsoft Corporation; Alexandra Cordes, head of strategic IP initiatives, SAP; Joo Sup Kim, vice president and head of IP licensing, LG Electronics; Allen Lo, deputy general counsel, patents and patent litigation, Google; Boris Teksler, CEO, Unwired Planet

The theme for this year’s IPBC Global, “Embracing the New Normal”, reflects the seismic changes that have taken place in the IP market over recent years. Not only are developments in Europe and Asia creating a more internationalised ecosystem, but assertion-based monetisation programmes are becoming harder to implement in the United States. As traditional IP value creation strategies become less attractive, newer, more collaborative business models are gaining traction; while emerging sectors and priorities demand that ever-closer attention be paid to the full range of IP rights.

Tao Zhang, senior director of IP strategy, Huawei Device USA, answers a question from the floor in the “Alice effect” breakout, watched by her fellow panellists

These issues were discussed right from the get-go in the opening plenary session: “Welcome to the new normal”. Google’s Allen Lo hit on three points that he said will help to determine an IP player’s future success. First, he insisted that there needs to be a realignment of expectations in terms of the kind of direct financial return that patent owners are looking for from their intellectual property. Too many, he claimed, still hark back to the $4.5 billion auction of Nortel’s portfolio in 2011. “That deal was a blip, an anomaly; but it’s still referred to today in terms of what patents are worth,” Lo stated. As one of the bidders for the Nortel assets, of course, pre-Lo Google helped to push the price higher as it competed with the likes of Apple, Microsoft and Ericsson for a portfolio of assets that was seen as a valuable weapon in the smartphone wars.

David Shofi, vice president, IP strategy solutions, CPA Global and moderator of the “Integrated approach” breakout, makes a point watched by panellists (from left): Charles Clark, global head of IP, Edwards Ltd; Ralf Lamberti, director, intellectual property, trends and innovation, Daimler AG; Stefan Tamme, vice president, IP strategy and licensing, Rambus; and James Pooley, IP Hall of Fame inductee 2016

Winding down at the closing reception

The second point that Lo mentioned was that business strategies that rely on deficiencies in the patent system will be less profitable than they may have been in the past. Instead, he asserted, “entities that are successful will build their model around certainty”. That is hard to argue against; but when that level of certainty is dictated by, for example, court decisions – as has been the case for software businesses following the Alice decision – then companies may have few options to control their own destinies.

Lo’s final point was one that will probably resonate with all operating companies that develop their own patented technology, but also spend a lot of their time implementing the inventions of others. “Don’t kill the host,” he stressed, as he warned of the impact of loading too many royalty payments onto a product. That will eat into its profitability and then force the company to fight back.

The following day, though, Randall Rader – the former chief judge of the Court of Appeals for the Federal Circuit – drew loud applause when, during another plenary session, he stated: “I do not think there is any greater irony than Google complaining that the legal exercise of property rights is killing hosts.” Many involved in the US patent scene – attorneys, operating company IP managers and non-practising entity (NPE) executives alike – blame Google advocacy for much of what they see as the diminution of patent rights in the country. They probably have a point about that. But Lo had a point too: if you keep on asking for too much, in the end there will be nothing for you to receive. That is just as abusive of the patent system as efficient infringement.

Networking in the sun with a glass of something fizzy

Europe’s moment

One of the major themes of this year’s IPBC Global was the shift in the patent market from the United States to other parts of the world. As the event was taking place in Barcelona, there was little surprise that Europe was a primary focus.

It is clear that patent owners – from operating companies to NPEs – are seeing a lot more potential in Europe than might previously have been the case. It’s not just that the European Patent Office (EPO) is thought to issue the highest-quality patents or that courts in key jurisdictions are generally quicker and cheaper than their US counterparts and have high levels of expertise, but also that across the system there is what Unwired Planet CEO Boris Teksler referred to in the opening “Welcome to the new normal” plenary as “a balanced outlook”.

Teksler attributed this to the fact that Europe has never really seen widespread patent abuse – either by patent owners looking to shake down companies for licensing cash or by infringers looking to weaken patent rights to further their business aims. As a result, there have never been the wild corrections that the United States has had to endure, or the resulting lack of certainty. In short, it is much harder to game the system in Europe and always has been. The effects of that can be seen in decisions such as Huawei v ZTE, handed down by the European Court of Justice (ECJ) last year. The case, said Ericsson’s Monica Magnusson, established that fair, reasonable and non-discriminatory (FRAND) negotiations are a two-way street. For his part, Teksler lamented the United States’ lack of even keel and concluded: “Quite frankly, I see Europe as the model at the moment.”

Gustav Brismark, chief IP officer, Ericsson, speaking during the “Meeting the CIPO challenge” plenary. To his right: moderator Brian Hinman, chief IP officer, Royal Philips. To his left: Jean-Marc Brunel, head of intellectual property, Snecma; Alyssa Harvey Dawson, vice president, global intellectual property and licensing, Harman International; Heath Hoglund, vice president and chief patent counsel , Dolby; Ilkka Rahnasto, vice president and head of patent business, Nokia Technologies

“Europe’s chance to lead” plenary moderator and president of Via Licensing Joe Siino addresses the session’s panel, from right: Nikolaus Thumm, senior fellow, European Commission Institute for Prospective Technological Studies; Bruce Schelkopf, chief IP officer, ABB; Guillaume Minnoye, vice president, directorate of general operations, European Patent Office; Daniel Maier, head of IP licensing and transactions, Siemens AG; Rubén Bonet, president and CEO, Fractus; Phyllis Turner-Brim, vice president and chief IP counsel, Intellectual Ventures Management LLC

Google patent chief Allen Lo (centre) catches up with contacts in the exhibition area

Marquis Technologies CEO John Veschi, sporting his trademark “Make Patents Great Again” baseball cap

Huawei v ZTE was also a major topic of discussion in the “FRAND futures” breakout, with panellists (and the audience) divided on the effects of the case. For Robert Pocknell of the Fair Standards Alliance, it has created a much more aggressive assertion climate in Europe, with threats of injunctions, rising legal costs and even entrance fees to enter into licensing negotiations. Against this backdrop, Pocknell claimed that patent holders should be rewarded not according to the overall value of a product, but according to the specific technology that their patent is a part of. It is fair to say that his position was not popular with parts of the audience, even eliciting some impolite hissing. Philips’ Jako Eleveld painted a more positive picture of Huawei v ZTE, insisting that in light of the decision, standard-essential patent (SEP) licensing conditions in Europe are largely back to normal.

In the “Europe’s chance to lead” plenary, panellists extolled the virtues of the continent’s examining corps for turning out high-quality patents, the advantages of courts (particularly in Germany) that still give patent owners some prospect of injunctive relief and the low cost of bringing cases in many countries. Europe’s advantages were also highlighted in the “View from the pantheon” plenary, with former US Patent and Trademark Office Director David Kappos pointing out that the ability to secure patent grants in key sectors is particularly attractive. “It’s now easier to get patent protection in Europe and Asia in software and biotech than it is in the US,” he commented.

The panel for the “FRAND futures” breakout, from left: Robert Pocknell, chair, Fair Standards Alliance; Claudia Tapia Garcia, director, IP rights policy, Ericsson; Giustino de Sanctis, CEO, Vectis (moderator); Jako Eleveld, head of IP licensing, Royal Philips (hidden); and Iain Richardson, CEO, Vcodex Ltd

Kappos also bemoaned the seemingly relentless tampering with the system that occurs in what is still the world’s largest national IP market. “Europe has managed to avoid the change-on-change scenario that we have gotten ourselves into in the US, where we don’t let one change settle,” he stressed. “As an engineer, you would quickly reach the conclusion that’s the way to create instability.”

But while Europe has definitely become a far more attractive venue for patent owners, this is arguably as much to do with what has happened in the United States as any developments on the continent – and nothing has happened by design. As one of the panellists in the “Europe’s chance to lead” plenary warned, things can change very quickly. “Any system is susceptible to excess at any point,” cautioned Phyllis Turner-Brim, chief patent counsel at Intellectual Ventures. Europe does have the advantage of being able to learn from US mistakes, she pointed out; but that does not mean that patent owners might not start to see the same uncertainty developing in the Europe as has emerged across the Atlantic.

Two members of the “Inside the inter partes review regime” panel: Pat Kennedy, founder and chair, Cellport Systems (right); and Erich Spangenberg, CEO, nXn Partners

Missed opportunities

Of course, IPBC Global took place before the UK referendum on EU membership was held. As a result, much of the enthusiasm about the Unified Patent Court (UPC) and unitary patent regime expressed at the event will subsequently have been dampened; but enthusiasm there was.

For Ruben Bonet, president and CEO of Barcelona-based company Fractus, the UPC represents an extraordinary opportunity. Fractus is a designer, manufacturer and licensor of optimised antennae, which was spun out of the Universitat Politécnica de Catalunya in the late 1990s. It holds over 200 patents and applications covering 50 inventions, and is no stranger to the courts in the United States and elsewhere. That, of course, makes it an exception.

Philips CIPO Brian Hinman is interviewed by IPBC TV presenter Mark Laudi

A packed room for the “Peace not war” breakout session

As Bonet – who is also chair of the SME Committee of IP Europe – acknowledged, most small and medium-sized businesses in Europe do not engage with the patent system, regarding it as a waste of time and money. The UPC, however, could change that, he said. The key would be to maintain current quality output at the EPO and to ensure that the new court regime also functions to the highest standards.

With such quality comes predictability, Bonet explained, and with that the ability not only to plan long term, but also to attract investment. There is nothing more disastrous for a tech-based SME, he observed, than to be awarded a patent, build a business around it and then have it invalidated a few years down the line. The delivery of high-quality patents makes that scenario far less likely.

In terms of UPC predictability, said Bonet, it will be important to get the damages regime right and also to ensure the availability of injunctions. With these in place, plus high-quality grants, litigation would actually be less likely, as parties would have a much clearer idea of what the outcome of going to court would be. All of this would make SMEs with European patent portfolios more attractive to venture capital and may even make it easier to secure money from banks against such assets.

Daniel Maier, head of IP licensing and transactions at Siemens, saw significant advantages in the proposed new regime for larger businesses too. He noted that under the current system, his company typically relies on patent registrations in perhaps four key European jurisdictions. But businesses from Asia, Maier pointed out, typically enter the European market first through smaller countries such as those in Eastern Europe, where there are far fewer patents in circulation. This has meant that even if Siemens wants to try to keep Asian infringers out of its home continent, it must wait until they launch in a country such as Germany or France. That will no longer be the case if and when the unitary patent comes online – instead, one right will cover all EU member states that have ratified the UPC Agreement.

For IP Hall of Fame inductee Margot Fröhlinger, who has been closely involved in the negotiations to create the UPC, its establishment will be just the first step towards a much bigger goal. During the speech in which she accepted her induction certificate, Fröhlinger – the EPO’s principal director of patent law and multilateral affairs – stated that it was her fervent personal hope that once up and running, the UPC’s remit will eventually be extended to cover trademarks, designs and other forms of EU-wide IP rights – a UIPC, if you like.

Don Merino of Merino IP Consulting makes his pitch in the “End of US patent leadership” debate as Professor Colleen Chien of the Santa Clara University School of Law looks on

China focus

China was another jurisdiction that came in for much discussion. Lulin Gao, one of the principal architects of the country’s patent system and the first commissioner of the State IP Office, was another IP Hall of Fame inductee for 2016. During his induction speech, he revealed several projects currently underway in China that could someday make big waves globally.

They included the development of a database of IP decisions by Chinese courts, aimed at increasing transparency in the judiciary; and – as a follow-on to the recent establishment of specialist IP courts in Beijing, Shanghai and Guangzhou – the establishment of an appeals court to hear IP cases, which Gao compared to the Federal Circuit in the United States. Should this happen, he stated, it would promote consistency and predictability in Chinese patent litigation.

But Gao was not the only one talking China. One thing that Randall Rader, Ruud Peters and David Kappos all have in common, aside from being members of the IP Hall of Fame, is that they are all spending a lot of time in the Middle Kingdom these days. They discussed their experiences during the “View from the Pantheon” plenary, a session moderated by Dave Brown of Thomson Reuter, in which all of the panellists were IP Hall of Fame inductees.

Running the refreshment gauntlet at the opening reception on Sunday evening

Sunday’s opening reception in full flow

Rader now lectures frequently in China; while Peters, Philips’ former chief IP officer, is involved in education there – he has participated in setting up an IP management institute to train Chinese students and professionals in using intellectual property as a business asset. Kappos, now a partner at Cravath Swaine & Moore, makes regular trips as well. He shared his back-of-the-envelope calculation that more total patents may well be filed annually in China (2.7 million) than in every other country combined; but he added that the so-far small amount of licensing revenue collected by Chinese companies shows that in the market’s view, many of those patents have no value.

It is time, Kappos argued, for authorities to eliminate the subsidies that are propping up application levels and instead to focus on quality. It is no surprise that such high-profile figures have turned their attention to this up-and-coming market. As Rader made clear, IP owners ignore it at their peril. “The good news,” he said, “is that the Chinese believe in patent law. The bad news is that they really believe in patent law.”

Chinese companies are becoming a major force in the patent sales market as they look to acquire overseas portfolios; but IPBC Global attendees heard that the reverse is also true, with Chinese-issued patents playing a larger role in acquisitions made by western companies. In the “Buyers’ market” breakout, Kudelski Group’s Subash Krishnankutty noted: “When we buy patents, we’re always looking for assets with EU and China counterparts.”

Speaking in the same session, Keith Bergelt, CEO of the Open Invention Network (OIN), explained that the organisation has always been heavily US focused in its acquisitions, to the tune of 98%. Over the next five years though, he stated, OIN will devote 10% to 15% of its purchasing activity to Chinese patents. “If we’re going to be relevant to support open source,” Bergelt concluded, “we need to own Chinese assets.” It’s a buyers’ market everywhere, he continued, but OIN’s money should go especially far in China.

The rumour mill

When hundreds of senior operators from the various parts of the IP world come together, you can expect some big stories to emerge – and that was certainly the case in Barcelona. For a start, a major shake-up in the Google IP function came to light, with the news of large-scale departures from its patent transactions team, which the company largely inherited with its 2011 acquisition of Motorola.

Featuring high-profile names such as Kurt Brasch and Kirk Dailey, the team was responsible for a number of innovative Google projects in the transactions space, including the Patent Purchase Promotion – a high-profile initiative aimed at providing patent owners with a quick and efficient way to sell their assets. This has now morphed into the recently announced IP3, involving a group of major operating companies coming together with defensive patent aggregator AST to once again give owners a chance to sell their intellectual property. Given this recent track record, it’s probably fair to assume that those leaving Google will not be short of offers.

On the deals front, much of the talk centred on a portfolio of 1,700 patent grants and 500 application that Yahoo! has put up for sale. The proposed divestment, which is being handled by Blackstone IP, was the subject of plenty of discussion, in particular regarding what it might say about the US market.

Just two years on from the Supreme Court’s Alice decision, there was much speculation about how much of the portfolio is “Alice proof” – although the Court of Appeals for the Federal Circuit’s recent decision in Enfish has helped to assuage some concerns. According to well-informed sources, perhaps 5% to 10% of what is on offer may be affected by Alice, while there are also relatively few encumbrances. The assets are said to be largely focused on technologies encompassing the Cloud and the Internet of Things; with both of those hot areas, some level of interest in the portfolio is certain. But with rumours suggesting that Yahoo! is hoping to net over $1 billion from the sale, with a short timeframe in which to get it inked, turning that interest into a transaction might prove a challenge.

A final development that most IPBC Global delegates had been unaware of prior to the event was the spin-out from Intellectual Ventures (IV) of its Invention Development Fund (IDF). IV has kept the news fairly low key, although it did disclose some details in a blog post in May. However, Paul Levins of IDF was on hand as a panellist in the “Adapt or die” breakout to give a little more insight into what the newly independent business does.

“We were the third fund of IV,” Levins told the audience. “In the course of the last three weeks, we’ve spun out from IV. What we would describe ourselves as doing is about new invention creation, invention services and product development. It’s a specific class of invention creation targeted at companies interested in doing new things in the marketplace, but who may have previously found appeal in the open innovation space. Many times you quickly discover there’s a lot of pieces missing with open innovation. Companies that work with us have a partner who’s willing to sit beside them and place bets on future technologies. We do that by creating brand-new inventions that have been outsourced from a very well-curated inventor network. You get open innovation, but you still have the benefit of getting IP protection and product development.” The general message seems to be: watch this space. A full rebrand of IDF is currently in the works, with more details to follow by the end of the summer.

The garden of the Hotel Arts was a great place to make new contacts and catch up with old ones

Dave Brown, global head, sales and services, Thomson Reuters IP & Science and moderator of the “View from the pantheon” plenary, asks a question of the session’s panellists (from left): Béatrix De Russé, IP Hall of Fame inductee 2012; Todd Dickinson, IP Hall of Fame inductee 2012; David Kappos, IP Hall of Fame inductee 2012; Ruud Peters, IP Hall of Fame inductee 2010; Randall Rader, IP Hall of Fame inductee 2011

Beyond patents and onto Ottawa

Although patents were the principal IP right discussed in Barcelona, it was noticeable that other types were mentioned far more than has been the case at previous events. In particular, trade secrets were a big topic of conversation.

In his IP Hall of Fame induction acceptance speech, trade secrets guru James Pooley compared those who fail to see the value of IP rights other than patents to prospectors in the Californian gold rush overlooking all the gold dust and ore in the blind pursuit of nuggets – imagine, he said, how much they missed out on. It was a point reinforced by head of IP at Edwards Charles Clark, when he spoke in the “Integrated approach” breakout.

Clark recalled how his company once spent a significant amount of money on annual licensing fees on a patent, only to find that it was in the five minutes during which the licensor’s engineer shared his know-how with the engineer from Edwards that the true value lay. It was not access to the patent that enabled Edwards to stand out from its competitors, insisted Clark, but rather the know-how that it incidentally licensed in along with it.

As the IP environment continues to develop at a rapid pace, there is every chance that even more of future IPBC Global events will be taken up by discussions that go beyond the patent world. Next year, we will be in the Canadian capital Ottawa, from June 18 to 20; it will be fascinating to see what talk will focus on then.

Joff Wild is editor of IAM, based in London; Richard Lloyd is its Washington DC-based North America editor; Jacob Schindler, the Asia-Pacific editor, works out of the Hong Kong office; and senior reporter Sara-Jayne Clover is based in London

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