16 Jun
2015

Patent values about to climb, heroic inventors, the US's patent failure, hope for SMEs, and much more at the IPBC

The first full day of the IPBC Global in San Francisco is now done and dusted. Here, IAM’s editorial team – Joff Wild, Richard Lloyd, Jack Ellis and Sara Jayne Clover – pick out a few of the highlights from the sessions and from the conversations taking place during the networking breaks:

Patents are not lawsuits - It was a simple point, but no less important for that. Speaking at the start of the Inventor insights plenary – in which four world class inventors shared their stories with IPBC delegates – session moderator David Kline, best known in IP circles as co-author of Rembrandts in the Attic, stressed that patents are about much more than monetisation. “If you asked the man on the street what patents meant, they'd more than likely respond with litigation,” Kline lamented. “As an industry, we need to make patents mean invention again rather than lawsuits.” For those engaged in the business of intellectual property, Kline stated, it can be easy to forget the individuals that are changing the world with their innovations, but it is their outstanding work that has created the IP market. Hear, hear. (SJC)

Golden future, maybe - The opening plenary on the future of patent sales and acquisitions was an outstanding session featuring five market experts – Anders Arvidsson of GN Store Nord, Russell Binns of AST, Brian Hinman of Philips, Art Monk of TechInsights and John Veschi of Marquis Technologies - expertly moderated by Sullivan & Cromwell’s Nader Mousavi. Given recent events in the US, many delegates might have been forgiven for wondering whether there is a future at all; if so they would have been reassured – at least to an extent. Transaction volumes in the US have been healthy during 2015, Binns reported, with sales continuing on the upward curve seen last year. Prices, though, remain stagnant and may actually be falling. In part that is down to the amount on offer (Monk talked about an average of 90 brokered packages coming onto the market each month) and quality (Hinman mentioned that 99% of what comes across his desk does not pass muster). However, despite this the consensus seemed to be that there is good stuff out there and lower prices make it less risky to take a punt. Even in the post-Alice world software can be interesting, said Veschi, especially as at some stage it is almost certain the pendulum will swing back - especially if the Supreme Court ever gets round to taking a case in which it sets out what kinds of patents it does think are OK, rather than ones that it does not like. Binns noted that applications to the USPTO are now falling for the first time, something that he thinks could herald a swing to higher quality patents as companies become more careful about what they submit and how they present it. Were that to happen, it would lead to fewer IPRs and less concern about validity generally –something which, in turn, could push prices higher; especially if the passing of patent reform legislation in Congress also creates a level of certainty. Throw in increasing demand for patent assets focused on both Europe and China, and the chances are that the transactions marketplace could well be set for a significant and sustainable uptick.  Of course, a cynic might say that what is really going on is that companies are abandoning patents for trade secrets; but if this panel turns out to be right, worried IPBC delegates may have reason for cautious optimism that the next few years could turn out to be a golden time for the IP market. (JW)

SME relief – Speaking in Monday afternoon’s ‘Small but perfectly formed’ breakout, Soryn IP’s Michael Gulliford made it clear that in his view, it has probably never been a more difficult time to be an SME patent owner in the United States. The high expense of obtaining and then enforcing a patent, coupled with the looming threat of being hit by an IPR as soon as you try to assert your right, means that the traditional approaches to monetisation – licensing, selling and litigating – are steeped in huge risk for companies with few resources at their disposal. However, these difficult times may end up presenting new and exciting opportunities in IP value creation for SMEs. Gulliford pointed out that carefully constructed deals, collateralisation of IP assets for debt financing and securitisation of royalty streams were all becoming more commonplace as SMEs and their advisers seek innovative ways of getting a financial return on their investments in creating intellectual property. A prime recent example combining elements of all three was BlackRock’s recent $300 million debt financing deal with Jawbone, he noted. (JE)

The heart of the matter - One of the recurring themes from the second session of the morning, featuring a panel of top inventors, was the central role that IP had played in the success of their start-up companies. Laura van ‘t Veer, co-founder and chief research officer of medical diagnostics business Agendia was clear that its IP “allowed us to interest investors in the company”. Patents have been particularly central to the success of Spanish tech company Fractus, a pioneer in the mobile space, which moved from being a manufacturing business to taking a licensing approach when it realised that as a small operator it could never satisfy all of the demand for its products from the tech industry. As the company’s co-founder and chief scientist Carles Puente talked about Fractus’s evolution, it was hard not to think about how licensing businesses are so often demonised. But the fact is that Fractus’s patented inventions are used in 90% of the world’s cell-phones and thanks to Puente’s invention these sit in our pockets and not in holdall bags. This is patented technology that has been actively involved in the proliferation of the mobile market and which has made the handset a much more attractive and useful product. In short, Fractus is an inventor created company that has helped to change the lives of billions across the world; yet some would call it a troll. Anyone in that plenary room this morning knows that such demonisation is not only wrong, it is offensive too. (RL)

Adjacent spaces - Despite signs indicating that the patent marketplace is going through some tricky times, growing interest in new technological areas could prove to be its salvation. Speaking in the opening plenary session, Philips’ CIPO Brian Hinman underlined the opportunity his company sees in the medical space, with its increased number of patent transactions in relation to medtech. Marking a contrast to what we have typically seen with wireless and telecoms patents, he suggested, competitors are primarily focused on building an exclusive position in the consumer market and getting medtech products onto shelves as quickly and cheaply as possible, with licensing revenues and defence much further down the list of priorities. Therefore, he said, issues such as royalty stacking should not be a big problem. However the number of NPEs getting in on the act would suggest otherwise, said AST’s Russell Binns, who highlighted the number of significant medtech patent acquisitions made by such entities in recent years.  Moreover, the connectivity that will be a core feature of many next-generation medical technologies – as well as next-generation automobiles, wearable devices and ‘smart home’ products – means that wireless, telecoms, semiconductor and software patents will all have a relevant role to play, suggested TechInsights’ Art Monk. As a result, their value – to operating companies and NPEs alike – is set to rise again. (JE)

German hesitancy – The unitary patent and the unified patent court may help to establish Europe as the global centre of the patent market, but don’t expect to see them up and running any time soon. Things always take a long time in this most slow-moving of continents and there are a couple of big obstacles in the way of the UPC before it can kick-off. As most of those attending the IPBC Global know, the new system can only start once 13 countries – including France, Germany and the UK – have ratified. So far, eight have; but of the big three only France has finalised its accession. The UK’s EU referendum issues are well-chronicled and could hold things up for a couple of years, but it is less clear why the Germans – a driving force behind the UPC – have not yet taken the plunge. According to a few of those in the know here in San Francisco, though, it comes down to one thing: money; namely, how much the country’s patent office could lose once the new system comes into being. As things stand, Germany is going to see the amount of cash it currently receives from the EPO reduced dramatically – perhaps more than any other EU member state. Don’t expect the Germans to ratify until that thorny issue is sorted out, or until they can be persuaded that taking a short-term hit will be worth it for the long-term gains that the UPC can deliver. Of course, in the meantime Germany benefits from the current system – not only in terms of funds from the EPO, but also thanks to the growing amount of international patent suits the country’s courts are being asked to hear. The incentive to come to a final decision is not really there. (JW)  

It’s the global economy, stupid- Not surprisingly there was a fair amount of talk about patent reform in the first two plenary sessions of the day. Even though they were on vastly different topics – the first covered patent sales and acquisitions, while the second (inventor insights) featured a panel of world class inventors – the panellists were acutely aware of the wide-ranging impact of the debates currently taking place in Washington DC.  John Veschi, former CEO of Rockstar and now the head of Marquis Technologies, claimed, both in hope and expectation, that the current legislative round would be the last time US politicians tackled the patent market for some years. With new moves for change coming so soon after the introduction of the AIA in 2011, it’s hard to disagree with Veschi’s point that everyone is going to be tired of tinkering with patent law by the time the next piece of legislation makes it to President Obama’s desk. Interestingly, Veschi also revealed that he was among those who spoke to the powers that be at the White House about replacing David Kappos as head of the USPTO. Imagine how things might have turned out if the head of what was then one of the world’s largest NPEs had replaced Kappos when he stepped down in 2013. Another interesting view of the reform debate came in the second session of the morning from Carles Puente, co-founder and chief scientist at Spanish tech company Fractus. “The truth is that for a long time inventors around the world have come to the US to defend their rights,” he said. “For decades it’s been the best patent market in the world and we’re astonished to see it’s now going in the other direction. It’s a big concern because it’s not just about the US economy it’s about the global economy.” His words should resonate with everyone on Capitol Hill. (RL)

Being the best - So how do you judge whether an individual is a top IP strategist or one that just runs with the crowd? I liked this that I got from Nader Mousavi of Sullivan & Cromwell: the best people have the ability to make sophisticated decisions in a climate of uncertainty and more often than not make the right call. Grace under pressure is what Ernest Hemingway called it, I believe, and in today’s IP market it is a skill that becomes more important as each day goes by. (JW)  

A new chief assassin - Talking to the many lawyers at the IPBC one of the popular topics of conversation is who is going to be appointed as chief judge of the Patent Trial and Appeal Board (PTAB) following Judge James Smith’s resignation in May. With the runaway popularity of the new re-exam procedures and the claims in the market that too many patents are being knocked out (leading some to refer to the “death squads” at the PTAB), who replaces Smith will be closely watched. Many patent owners may agree that the PTO should look outside current PTAB ranks to an executive at a major operating company for the next chief judge. One (very) dark horse candidate is apparently Phil Johnson of Johnson & Johnson who was also in the running to replace David Kappos as Director of the USPTO before Michelle Lee’s eventual confirmation earlier this year. Johnson’s appointment may be a remote possibility, but someone with his track record and gravitas would surely find favour among much of the market. With the huge impact that re-exams have made, it’s not just members of the patent bar who are ultimately interested in who replaces Smith. (RL)

Blowing bubbles – When you are in a bubble, you don’t know that you are in one, observed Marquis Technologies’ CEO John Veschi in the first plenary; but now we can state that 2011 was a bubble, he said. The year of the Nortel auction and Google’s Motorola purchase was, many thought, the start of something big. But it did not turn out that way. Instead, Rockstar – the NPE that Veschi ran for three and a bit years - is no more and many of the big ticket investors that saw patents as a cash cow have slunk away after realising that they are not. Actually, though, that could be good news: those that remain are committed to the market and want to make it work. And so say all of us. (JW)

California is cool – One thing that this first-time visitor to California did not expect is to be shivering with cold every time he steps out into the June sunshine. Granted, he has been away from his native - and decidedly subtepid - Britain for some time, and his adopted Hong Kong home is currently sweltering in the low 30s celsius (high 80s to low 90s fahrenheit); but there’s no doubt that the relative chilliness of San Francisco has come as a surprise – as has its denizens’ apparent insistence on wearing shorts and sandals in such seemingly inclement conditions! Perhaps they come from Newcastle. That’s a reference all true Brits will understand. (JE)

The big shift - This blog and others have written about the shift in the market that has led the prevailing question in many patent lawsuits to be whether the patent is valid, rather than whether it has been infringed. That shift was encapsulated in one of the final sessions of the day entitled ‘Validity is king.’ Part of the reason behind the change has been the rise of IPR proceedings, which give defendants in a suit the opportunity to challenge the claims in a patent and potentially scupper the plaintiff’s case. Kenyon litigation partner Michael Lennon stated that almost all patent litigation involves an IPR these days, while Intel’s Dana Hayter made the point that there was now “no reason not to do a re-exam”. As he talked about the impact of these changes on IP monetisation, Hayter made the point that it means that technology licensing rather than pure patent licensing is increasingly attractive. Given the ongoing uncertainty in the patent market, that might be a trend that continues for some time. (SJC)        

Patent reform, part 8,346 - Of course, US patent reform keeps on cropping up in conversations. As reported yesterday, the general consensus seems to be that something will be agreed – probably based around the Senate’s PATENT Act and probably with many more compromises relating to IPRs, joinder and end-user rules - but not everybody thinks so. One senior player in the tech space who supports reform told me that he believes there is a danger that the closer things get to 2016 and election year, the less chance there will be that anything will be done; legislators, he said, will have too many other things on their minds. By contrast an old European hand was pretty sure there would be change. He figured that as most US patent grants are now made in favour of non-American owners, the US has far less incentive to offer strong patent protection; economically, weaker patents may suit the country’s perceived short term interests better.  There could be something in that. (JW)     

Running with the dogs - If defending patent owners is about the size of the dog in the fight, then Unified Patents might want to have considered offering delegates a larger giveaway than the cute and cuddly bulldogs that have taken centre stage on the firm’s stand in the exhibition hall. Unified was obviously keen to get the message across that it’s a reliable guard dog for operating companies against NPE challenges, so the pint-sized pooch was a nice touch. Besides, as the company’s executives would no doubt insist, it’s always about the size of the fight in the dog. (RL

Joff Wild

Author | Editor-in-chief

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Joff Wild