They made an impression …
IAM has identified 10 IP Personalities of the Year for 2015. They all made a significant impression on the market, but for very different reasons
Each January IAM reviews the events of the past 12 months to identify its IP Personalities of the Year. We define a ‘personality’ in very broad terms; you don’t have to be a human being, or even a single identifiable entity, to qualify. Basically, the term encompasses whatever we want it to encompass – it’s all about who and what caught our eye during the year.
For the 12 months just passed, we have chosen 10 personalities – most of them are people, but there are some companies too, and even one country. What unites them is the mark they made in 2015, albeit for very different reasons. They are profiled in alphabetical order below.
$1.5 billion of IP revenues for Ericsson in 2015
Just before Christmas, Ericsson signed a deal with Apple that ended all litigation between the two companies. It involved a standard-essential patent (SEP) cross-licensing agreement, a technology collaboration and a one-off payment from the latter to the former, to be followed by ongoing royalties. For Ericsson’s chief IP officer, Kasim Alfalahi, the deal brought a very satisfying year to a close – one which saw the company enjoy considerable direct litigation success in India and Brazil, as well as proxy victories over Google, Huawei and Samsung in the United Kingdom via non-practising entity (NPE) partner Unwired Planet. Alfalahi, who has run the Swedish company’s IP operation since 2005, will also have appreciated the European Court of Justice’s SEP-related decision in Huawei v ZTE, especially given how it has been interpreted in Germany (see below). Less pleasing was the change in the Institute of Electrical and Electronics Engineers’ (IEEE) patent policy – something which led Ericsson to state that it would not offer licences under the new rules. When Alfalahi began to report direct to Ericsson’s CEO in 2012, the company’s annual return from intellectual property was Skr4.6 billion. Following the deal with Apple, income in 2015 was projected to be between Skr13 billion and Skr14 billion, or over $1.5 billion at current exchange rates. By anyone’s standards, that is a superb performance.
Kyle Bass (top) and Erich Spangenberg (bottom)
Contend that manipulation of the patent system is forcing Americans to pay more for their medicines
Kyle Bass/Erich Spangenberg
Kyle Bass and Erich Spangenberg normally move in very different worlds, but last year they came together to throw a grenade at Big Pharma and a major spanner in the US patent reform process. The first inter partes review petition that the Coalition for Affordable Drugs filed before the Patent Trial and Appeal Board (PTAB) was targeted at Acorda Therapeutics in February; since then, over 30 more have been submitted. While a number have been rejected, many others have been initiated. Significantly, the PTAB has made clear that there is nothing wrong with a strategy that is motivated by a search for profit. Although shorting is clearly part of what is driving the pair’s partnership, a considered analysis of what they are doing indicates that it is actually a lot more sophisticated than that. Speaking exclusively to IAM in the summer, Bass made a powerful case that some of the motivation is also to expose what he and Spangenberg clearly view as a manipulation of the patent system that forces Americans into paying a lot more for their medicines than would otherwise be the case. As for the life sciences sector, it has made its displeasure abundantly clear and has called for an exemption for its patents from the inter partes review process. If that is not forthcoming – and US Patent and Trademark Office (USPTO) Director Michelle Lee has stated that she for one is opposed – then it is hard to see patent reform legislation getting out of Congress any time soon.
Although Google has been a prominent player within the patent market for a number of years now, it is only relatively recently that a coherent – as opposed to piecemeal – deals strategy has emerged. Two of the company’s major initiatives in 2015 were the Patent Purchase Promotion and the Patent Starter Programme, both of which were aimed squarely at the small and medium-sized enterprise and start-up sectors. The mastermind behind the two schemes was senior transactions manager Kurt Brasch, who joined Google in 2012 following its acquisition of Motorola Mobility. With many years of deal-making experience behind him, Brasch has all the skills and experience necessary not only to develop such headline-grabbing projects, but also to drive the major cross-licensing deals that Google has concluded with the likes of Cisco. It is people such as Brasch, operating under the leadership of Allen Lo, that make the company’s patent operation one of the very best in the world.
Leading Ford to the forefront of the IP strategy in the auto sector
Convergence in the auto industry – with software, telecoms and other types of high-tech becoming as important in cars as traditional engineering – has meant that companies operating within the sector have had to reassess their relationships not only with each other, but also with patents. Nowhere has this been more the case than at Ford. From a major deal with Intellectual Ventures (IV) agreed in February to a 36% rise in US patent filings announced in December, last year the company cemented its place as a significant player in the patent market. Leading the charge was Bill Coughlin, CEO of Ford Global Technologies and a man who has developed a stellar reputation for his strategic approach to IP issues. On top of the increased patenting activity and the IV hook-up, last year also saw Ford sign up with RPX and the License on Transfer Network, as well as announcing that it was opening up part of its electronic car patent portfolio to competitors via AutoHarvest, the open innovation platform that the company has been a prominent member of for several years now. Ford has also been the most active user of the inter partes review regime in the auto industry. Expect to hear a lot more along similar lines this year, as Coughlin and his team continue not only to ensure Ford’s freedom to operate, but also to engineer maximum operational flexibility in an environment that promises to become only more competitive and litigious.
Europe’s perennial patent powerhouse assumed even greater importance during 2015. Its citizens and businesses remained the continent’s leading patent filers and recipients, and its courts attracted ever-greater interest from US patent owners looking for assertion opportunities away from increasingly hostile home territory. Last year saw the likes of Acacia, Marathon and Vringo enjoy success in the country; while European NPE Sisvel secured a key verdict in Dusseldorf which suggests that the ECJ’s judgment in Huawei v ZTE could turn out nicely for SEP owners. No wonder that Intellectual Ventures has now decided to start litigating in Germany too. It is also worth remembering that it’s not only at the European Patent Office that German applicants dominate; the German patent office is by far the busiest of Europe’s national issuing authorities. All of this may help to explain why Germany seems to have gone very quiet about ratification of the Unified Patent Court Agreement. After all, why change things when they seem to be working so well as they are?
A voice that decision makers listen to in Washington DC
Last year, legislative patent reform in the United States stalled in Congress. As discussed above, one of the reasons for this was the inter partes review petitions filed by Kyle Bass and Erich Spangenberg against patents owned by life sciences companies; but it was not the only one. The other very noticeable aspect of the process during 2015 was how much more organised those opposed to the Innovation Act had become. Their lobbying efforts were far more extensive; they kicked in far earlier; and, most importantly, they were far more effective than they had been during 2013, a year that culminated in the House of Representatives voting overwhelmingly in favour of Bob Goodlatte’s proposed legislation. Among the most persuasive and persistent voices in the no camp last year was David Kappos, the former director of the USPTO and now a partner at law firm Cravath Swaine & Moore. Having steered the America Invents Act onto the statute books while in government, Kappos is very familiar with how the legislative process works, knows whom to speak to and can get meetings that others cannot. What’s more, if an Obama-appointed USPTO director is against a piece of patent legislation, this carries weight. The reasons for Kappos’s sudden departure from the agency at the start of 2013 have never been fully explained, but one thing is clear: he could not have continued in the role given the Obama administration’s current stance on reform. Whether it was Kappos or the White House that realised this first is something we may never find out.
It was a year bookended by major developments in China for Qualcomm, and one that saw plenty of action in between. The company probably ended 2015 in a much better position than it began it, though there may be shadows on the horizon. In February, it announced that in order to end an investigation by Chinese antitrust authorities, it had agreed to pay a $975 million fine and make changes to its licensing policies in the country. Throughout the rest of the year, Qualcomm sought to ink new licensing deals with individual Chinese companies, a process that took longer than expected and had a negative impact on income. But as the holiday season approached, the news got better: agreements were struck with Xiaomi and then Tianyu, Haier and QiKu. On the standards front, the company made its displeasure at the IEEE’s patent policy change very clear, but then seemed to find a way round it following the $2.4 billion purchase of chipmaker CSR. Most important of all, though, following shareholder agitation, the Qualcomm board considered whether it would be a good idea to split into two businesses – one focused on production, the other on licensing. In December, it was announced that the idea had been rejected. So, is it plain sailing from here on in? That looks unlikely. The challenge of securing sustained growth remains, while further antitrust concerns in Asia could prove bothersome and the threat of patent reform in the United States which the company has lobbied so hard against remains.
When Smartflash LLC was awarded over $530 million in February 2015 by a Texas jury which found that Apple had infringed three of its patents, the cries of ‘troll’ were as loud as they were predictable. Here was a business owned by Channel islands-based Patrick Racz that did not make a product, but had taken on and defeated one of the biggest companies in the world. It was unforgiveable. That Apple may have hastened its own demise as a result of a poor defence and that Racz may actually have had a valid case did not compute – he was a troll and deserved all the abuse he got. Except, of course, he didn’t. No one does. Indeed, it turned out that Racz is an inventor who spent millions developing technology that, he claims, later found its way into iPads, iPods and iPhones after his company’s senior R&D director moved to Apple. Despite the major boost he received in February, Racz has a long way to go before he can declare victory. In July, the jury award was set aside; while at the PTAB, Smartflash faces multiple challenges to the patents it has asserted against Apple and other big tech companies. In 2015, Racz showed that, despite everything, it is still possible for little guys to win patent trials against huge multinationals in the United States. In 2016 we may find out whether it is still possible for them to ultimately prevail. If Racz does win, many will see this as just one more troll successfully exploiting a broken patent system. If he loses, others will regard it as yet another validation of the efficient infringement business model.
WiLAN’s off-on CEO and a dealmaker par excellence
Times are tough for NPEs and being the CEO of one that is publicly quoted must often seem like a thankless task. So when Jim Skippen stated in June 2015 that he was to stand down after nine years in charge at WiLAN, it did not come as a huge surprise. Much more of a shock was the announcement a few months later that the firm’s board had persuaded him to change his mind and that he would stay on for at least another three years. Although, like others in the sector, Skippen has sometimes struggled to get investors to understand the patent licensing business model, he has undoubtedly done a tremendous job for WiLAN, most recently building strong relationships with several major Japanese companies and overseeing the acquisition of two major patent portfolios – one from Qimonda and the other from Freescale – in moves that have considerably enhanced the size and diversity of its portfolio. Above all else, Skippen is a dealmaker who places more emphasis on getting an agreement done and dusted than in extracting top dollar from every negotiation. As he explained in an interview with IAM last autumn: “It is often better to sign a deal when you are starting for less money than you really expect or want. This is because in the long run the collateral benefits will more than make up for any shortfall in the actual deal proceeds.” In today’s challenging NPE climate, this is not only a pragmatic approach, but also probably the right one.
IAM IP personalities of 2014
The IAM Personalities of the Year has been running since 2010. Those named last year were:
- Erich Andersen, Microsoft
- Ira Blumberg, Lenovo
- Doug Croxall, Marathon Patent Group
- Michelle Lee, USPTO
- William Merritt, InterDigital
- Kenichi Nagasawa, Canon
- Laura Quatela, Alcatel-Lucent
- Quanlin Paper
- Chief Justice John Roberts, US Supreme Court
- Matthew Vella, Acacia Research
- Jay Walker, US Patent Utility and Patent Properties
As everyone knows, the Chinese are on a journey that they hope will transform the country from the world’s manufacturing centre to its innovation hub. Part of this process is in evidence in the huge numbers of patent applications being submitted to the State Intellectual Property Office and increasing use of the Patent Cooperation Treaty by major domestic technology companies. The other part of the equation is acquisition – the mantra being that if you cannot build it, you should just buy it instead. During 2015, Tsinghua Holdings – the mainly state-funded investment vehicle of Beijing’s Tsinghua University – was among the most prominent of China’s technology M&A players and did a couple of deals that had significant IP angles. In May its affiliate Unisplendour agreed to the $2.3 billion acquisition of a majority stake in H3C, a company that was formed out of a merger between H3C Technologies and Hewlett-Packard’s China-based server, storage and technology services businesses. Then in October, another affiliate, Tsinghua Unigroup, paid $3.78 billion for a 15% equity stake in US hard disk drive maker Western Digital. Both deals would have been trumped had Unigroup’s reported $23 billion attempt to acquire US chip-making giant Micron come to fruition, but it was apparently stymied by US national security concerns. No matter; we will likely hear much more from Tsinghua Holdings and its various offshoots in the years to come.