Filling the Alice gap, the Microsoft/Xiaomi deal and the other big US patent stories of 2016
Since 2014 we have finished the blogging year with a rundown of what we think were the most significant patent stories in the US. We do this through a typical IAM lens, focusing on those stories that we think were the most significant in terms of IP value creation. As with previous years (here’s the list for 2015 and for 2014) we have ranked them in order of importance – something which we accept will cause plenty of debate and disagreement among our readers. We wouldn’t have it any other way.
Since the Supreme Court issued its decision in Alice Corp v CLS Bank, large parts of the tech community had been looking for further explanation from the courts on what constitutes patent eligible subject matter. This summer the Court of Appeals for the Federal Circuit started to clear up some of the uncertainty in a series of decisions – Enfish LLC v Microsoft, Bascom Global Services Internet Inc v AT&T Mobility and McRO Inc v Bandai Namco Games (also known as Planet Blue) - that helped add a little clarity post-Alice. There are still concerns that the law remains opaque and a possible drag on R&D spending, but there appears to be greater reason for optimism.
The May agreement between Microsoft and Xiaomi was undoubtedly the IP deal of the year and it was also an excellent example of how patents can play a role in broader commercial agreements. Under the terms of the deal, Xiaomi undertook to pre-load Microsoft products on to more of its mobile devices, the two sides agreed to a cross-licence and the US software giant transferred 1,500 patent assets to the Chinese company. The transaction provides an excellent foundation for Xiaomi as it looks to grow its business in the US and for Microsoft as it continues its penetration of the Chinese market.
After Google launched its patent purchase promotion in 2015 to give patent owners an easy way of selling their assets (and a great opportunity to get a useful overview of potential patent problems), this year it was back as part of a coalition of companies – including Apple, Microsoft, Facebook, Ford and IBM - to launch the Industry Patent Purchase Promotion (IP3) along with Allied Security Trust (AST). Another mechanism designed to bring greater efficiency to patent deals, IP3 was the kind of pan-industry patent initiative that has been sorely missing from the market and may point to similar programmes in the future.
For some IP owners it was won one, lost one as the Supreme Court issued its decisions in two closely watched patent cases. First up was Halo/Stryker, two cases in which the court ruled that greater deference should be given to district courts in making a decision on willful infringement in a patent lawsuit and therefore on whether enhanced damages should be awarded. But then in Cuozzo v Lee the court left intact two pillars of inter partes reviews (IPRs) which had been sharply criticised by some. The justices ruled that the decision to institute a review was not appealable and that the Patent Trial and Appeal Board (PTAB) was right to use the broadest reasonable interpretation standard when assessing patent claims.
It had been clear since the first quarter of this year that the number of new patent cases in the US was lagging well behind last year’s total and was close to the lowest point since the 2011 America Invents Act (AIA). Although confirmation of the final number is still a few days away, the total is expected to be around 4,500, the first time it has been below 5,000 since 2011. The first few months of 2017 will give further indication of whether this is a long-term trend or a short-term blip, but the patent litigation landscape appeared to shift significantly in 2016.
After facing off against each other for years in a series of infringement lawsuits, a fight over a couple of design patents was perhaps not the case in the Apple v Samsung imbroglio that many predicted would make it all the way to the Supreme Court. But in October the eight justices heard the court’s first design patent spat in more than a century and gave top billing to the defining patent conflict of the smartphone litigation wars. The decision, that Samsung should not pay damages equating to the entire profits from the infringed Apple phone, was not a surprise neither was the lack of direction from the court on how an article of manufacture should be determined or how damages should be calculated. As any patent observer knows, we’ve been here before.
7. PanOptis buys Unwired Planet’s patents
Running an NPE these past few years has been tough; running a listed NPE, in the full glare of the public markets, however, has been particularly tortuous. In the last few years or so Unwired Planet seemed to have found some of the right ingredients for success – it had appointed a licensing veteran (Boris Teksler) as CEO, it had acquired a portfolio of good quality assets formerly owned by Ericsson and had seen a string of court victories in Germany and UK after a series of losses in the US. But investors remained unconvinced and in April private NPE PanOptis put in a bid for the firm’s patent portfolio at the relatively bargain price of up to $40 million, plus an additional undisclosed payment to Ericsson. The deal was finalised in the summer and provided more evidence that patent licensing in the current climate is best done in private.
After a long career at Ericsson as chief IP officer during which he grew annual licensing revenues to more than $1 billion, Kasim Alfalahi announced in February that he was stepping down to take the reins of a new licensing platform focused on the Internet of Things (IoT). Known as Avanci, it launched in September and gave Alfalahi another position from which to help shape and direct a key part of the licensing market.
The NPE market remained fairly bleak in 2016 but Marathon undoubtedly provided one of the bright spots. In August it announced that it had acquired a portfolio of just over 300 worldwide assets from Siemens and had entered into a strategic relationship with a large fund and an unnamed Fortune Global 50 company to commercialise and monetise more than 10,000 patents in a particular industry vertical. After bringing on board IPNav founder Erich Spangenberg in May, the two deals added to an already formidable portfolio of assets.
When Lenovo announced in November that Laura Quatela was joining the company as chief legal officer, it added another highlight to one of the best resumes in the world of IP. After a long stint at Kodak, a position on the board of Technicolor, a key role in leading Alcatel-Lucent’s IP strategy in the run-up to its merger with Nokia and setting up her own consultancy business along with former Kodak chief IP officer Tim Lynch (with Dan McCurdy due to come on board at the start of next year), Quatela has joined a business that has moved quickly in recent years to build its US portfolio and an impressive IP team. That has helped give it freedom to operate in the highly competitive smartphone market, but as it continues to grow, particularly in the US, Quatela’s experience should prove particularly valuable.