7 Jun
2016

Google shake-up; SMEs 4 the UPC; Europe warning; China insights and more from IPBC Global 2016 Day Two

All the plenary and breakout sessions have now come to an end at IPBC Global 2016. It’s been one hell of an event. IAM’s editorial team on the ground in Barcelona – editor Joff Wild (JW); North America editor Richard Lloyd (RL); Asia editor Jacob Schindler (JS); and senior reporter Sara Jayne Clover (SJC) – bring you news, views and some of the gossip from an action-packed final day.  

Google departures - Over the last few years the members of Google’s IP transactions group – which the search giant largely inherited with its 2011 acquisition of Motorola - have earned the title of the busiest team in patents. For one thing, they put in place the Patent Purchase Promotion last year which was Google’s attempt to offer patent owners a quick and efficient way to sell their patents. That project has since morphed into the recently announced IP3, which has seen a group of major operating companies come together with defensive patent aggregator AST to once again give owners a chance to sell their IP.  Word reached us this week, however, that many members of the team - which includes the likes of Kurt Brasch and Kirk Dailey - might now be leaving the company. There’s a chance that some will move to Google’s California HQ from their Chicago base, but departures are inevitable. Given their recent track record it’s probably fair to assume that they won’t be short of a few offers. (RL)

Buying call - There is plenty of evidence that Chinese companies are a major force in the patent sales market as some of them look to acquire overseas portfolios. But attendees heard today that the reverse is also true: Chinese-issued patents are playing a larger role in acquisitions made by Western companies. In the afternoon “Buyers’ market” breakout, Kudelski Group’s Subash Krishnankutty noted “when we buy patents, we’re always looking for assets with EU and China counterparts”. But the interest extends to patents that originate in China as well. According to CEO Keith Bergelt, the Open Invention Network (OIN) has always been heavily US-focused in its acquisitions, to the tune of 98%. Over the next five years though, he says OIN will devote 10%-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, but OIN’s money should go especially far in China. (JS)

SME advance - It’s rare to find anyone running a European SME confident enough to talk in detail about patents, let alone willing to do so. That’s what made the contribution of Rubén Bonet, president and CEO of Barcelona-based Fractus, so welcome in this morning’s “Europe’s chance to lead” plenary session. The company is a designer, manufacturer and licensor of optimised antennas, and 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 US and elsewhere. That, of course, makes it an exception. As Bonet acknowledged, most SMEs do not engage with the patent system, regarding it as a waste of time and money. The UPC, though, 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 you have predictability and with that you have the ability not only to plan long term, but also to attract investment. There is nothing more disastrous for a tech-based SME, Bonet observed, than to be awarded a patent, to build a business around it and then to have it invalidated a few years further down the line. The delivery of high-quality patents makes that scenario far less likely. In terms of UPC predictability, Bonet said, it will be important to get the damages regime right and also to ensure the availability of injunctions. With these things in place, plus high-quality grants, he stated, 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 VCs and may even make it easier to secure money from banks against the assets. What’s not to like from an SME perspective? (JW)  

No entry - There was plenty of discussion surrounding opportunities presented by Europe’s emerging unitary patent system this morning, but also some acknowledgement of the threats it poses. The risk to Asian businesses – in particular those from China – is especially acute. Daniel Maier of Siemens, a company that each year spends billions of Euros on R&D and files around 4,000 patents, noted that under the current system, his team typically relies on patent registrations in perhaps four key European jurisdictions. But companies from Asia, he noted, typically enter the European market first through smaller countries such as those in Eastern Europe, where there are far fewer patents in circulation. That has meant that even if Siemens wants to try to keep Asian infringers out of its home continent, it has to wait until they launch in a country like Germany or France. Of course, 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. Europe has been important for the first wave of Chinese companies to go global, especially for those like Huawei that have been frozen out of the US market over security concerns. Whether the next generation of Chinese companies will have a similar opening is very much in question. (JS)

Beyond patents - The message that patents are not the be-all and end-all is coming across load and clear at this IPBC Global. 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. Speaking in the “Integrated approach” breakout this afternoon, head of IP at Edwards, Charles 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 they incidentally licensed in along with it. (SJC)

From UPC to UIPC - It’s no great secret that the European Patent Office was not best pleased when the Office for Harmonisation in the Internal Market (OHIM), which grants Community trademark and design rights, was rebranded the EU IP Office earlier this year. It looked like a bit of a land grab, given that even though the agency has no patent remit patents are a big part of the IP family. At the very least, it was argued in Munich, the name change might cause confusion and give an opportunity for unscrupulous operators to fleece unsuspecting punters for a few Euros. With that in mind, it was interesting to hear Margot Fröhlinger – the EPO’s Principal Director of Patent Law and Multilateral Affairs and a 2016 inductee into the IP Hall of Fame – talk about her hopes for the Unified Patent Court during her induction speech. Fröhlinger has spent long years, first at the European Commission and latterly at the EPO, helping to drive the UPC agreement, and it was her fervent personal hope, she said, that once it is up and running the court’s remit should eventually be extended to cover trademarks, designs and other forms of EU-wide IP rights – a UIPC, if you like. There is no doubt that such a view would not be terribly popular in EUIPO headquarters down the coast from Barcelona in Alicante; but although there would be a number of practical issues to resolve before such a move could take place it does make some sense for a continent that for a long time has seen merit in specialised IP dispute resolution fora. (JW)

The Huawei effect - What exactly constitutes fair and reasonable in the licensing of standard essential patents (SEPs), as well the general licensing climate for SEPs, has become one of the key points of discussion in many recent IPBC events. The change last year to the IEEE’s patent policy has helped fuel the debate as have various court decisions such as Motorola v Microsoft in the US. Last year the European Court of Justice also had its say in the Huawei v ZTE case as the court laid out what should be expected of licensors and licensees in FRAND negotiations. That decision was not surprisingly the topic of discussion in one of this afternoon’s sessions on “FRAND futures” with panellists (and the audience) divided on the effects of the case. To Robert Pocknell of the Fair Standards Alliance, it has led to a much more aggressive assertion climate with threats of injunctions, rising legal costs and even entrance fees to enter into licensing negotiations. Against this backdrop Pocknell made the claim that patent holders should not be rewarded according to the overall value of a product but according to the specific technology that their patent is a part of. It’s 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 that decision, SEP licensing conditions in the EU were largely back to normal, pointing out that it confirmed his company’s approach. So where does this divide leave us? Well, probably waiting a little longer to see the full impact of the ECJ’s decision as it plays through national courts, while keeping an eye on whether the small group of companies who refuse to comply with the IEEE’s policy can force the standards body to change its terms. As ever with SEP licensing, progress is slow but the impact is significant. And one final thought: the ongoing framework for Europe’s FRAND and SEP regime has been created by a dispute involving two Chinese companies. If you want to know just how far the country has travelled patent-wise over the last 10 years what better illustration could there be? (RL)

Value questions - The subject of value has arisen repeatedly over the last few days here in Barcelona, both in the sessions themselves and during conversations in the breaks and at the receptions.  What is clear is that ‘value’ not only means different things to different people, but is also a seriously complex issue. In the final plenary of the Congress, former Philips CIPO and IP Hall of Fame inductee Ruud Peters argued that developing a system which makes the contribution of IP to the value of your company explicit to the board is essential, but that without a licensing programme which delivers hard cash this can be a struggle. Education of the C-suite is essential in such circumstances, he said, so that they can understand the many indirect ways in which IP builds revenue or saves costs.  Peters’ co-panellist, Randall Rader, argued that there are three clear ways to identify value: cash, cost and market value. But while a cash value can be easy to demonstrate if you have a licensing programme, and a cost value can be determined by asking the company to consider how much money it would take to get access to the IP they need to operate their business, the market value is trickier to determine; but maybe it can be found in innovation. After all, he stated, innovation is the hallmark of every advertising campaign - it’s what is novel about a product that makes consumers feel they need to go out and buy it. (SJC)

Hear the roar - Yesterday, Google’s patent chief Allen Lo spoke extensively about the dangers of unreasonable patent royalty demands killing the host. In other words, if patent owners seeking licensing income ask too much from an operating company they put at risk its ability to make a profit and kill its incentive to create products, so destroying their chances of getting any royalties at all. Perhaps the biggest audience reaction we have ever had at an IPBC Global event came today when Randall Rader, former chief judge of the CAFC, stated: “I do not think there is any greater irony than Google complaining that the legal exercise of property rights is killing hosts.” The applause was long-lasting and loud. Many involved in the US patent scene – attorneys, operating company IP managers and NPE executives alike – blame Google advocacy for much of what they see as the diminution of patent rights in the country over recent years. 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. (JW)

China’s challenges - Transatlantic issues have been the dominant theme of the conference. But as Gao Lulin, one of the principle architects of China’s patent system and the first commissioner of SIPO, was inducted into the IP Hall of Fame this morning, he revealed a few projects in the works that could someday make big waves globally. The first is a database of IP decisions by Chinese courts, aimed at increasing the system’s transparency. As a follow-on to China’s pilot IP courts in Beijing, Shanghai and Guangzhou, Gao said the Supreme People’s Court is also working on creating an appeals court to hear IP cases, which he compared to the CAFC in the United States. Should this happen, Gao stated, it would create more consistency and predictability in patent litigation. But most important, he said, is pushing for recognition of IP as a real asset in China by promoting commercialisation, licensing and other forms of monetisation. But Gao was not the only one talking China today. One thing that Randall Rader, Ruud Peters and David Kappos have in common, aside from being members of the IP Hall of Fame, is that they are all spending a lot of time there these days. Chief Judge Rader explained that he’s helping to set up IP institutions in China, as well as lecturing; while Peters, the former Philips CIPO, is involved in education there – he has participated in setting up an IP management institute to train Chinese students and professionals in using IP as a business asset. Kappos, the former USPTO Director, is making regular trips as well. He shared his back-of-the-envelope calculation that there may well be more total patents 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 the market has concluded that many of those patents have no value. It is time, he argued, for authorities to eliminate the subsidies that prop up huge application levels and 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 own 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.” (JS)

Top Tweets – If you have been following the #IPBCGlobal stream on Twitter for the last two days, you’ll know a lot of people have been Tweeting from the event. We are grateful to all of them. So, to @PatentSolutions; @curtisbehmann; @CollerIP; @aistemos; @EI_JDoyle; @TimInBeijing; @noremacc; @msabattini; @IP_Consultant; @INTABrussels; @patentsbiz; @IP_IdeasMatter; @BenoitGeurts; @EPAttorney; @JulianManzanas; @PatentTwit; @FranceBrevets; @markdurrant; @hugocaro3; @PujalsJosep; @CanalPDA; @ipgossip; @albertcuesta; @Julia_Elvidge; @wolanyk; @metis_stephen; @hayfordpm; @InsideIPcounsel; @JulianV_11; @johnfmartin; @Tame_IP; @EPAttorney; and everyone else I have missed (apologies) – many thanks, we’ve really enjoyed reading what you have had to say. (JW)

Europe beware - It has undoubtedly been Europe’s two days in the sun at this year’s IPBC. There has been plenty of discussion on panels and among delegates that the European market is now a far more attractive place for patent owners – particularly in contrast to the US – and that the foundations being put in place around the unitary patent and the Unified Patent Court (UPC) mean that conditions are only going to improve. That was certainly the sense in the first panel of the day, “Europe’s chance to lead”, as the 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 second panel, “The view from the Pantheon”, with former USPTO 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. 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’d 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, that is arguably as much to do with what has happened in the US as anything that has taken place on the continent – and nothing has happened by design. As one of the panellists in the first session 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. As she pointed out, Europe does have the advantage of being able to learn from America’s mistakes, but that does not mean that patent owners might not start to see the same uncertainty developing in the EU as has emerged across the Atlantic.  For one thing, Turner-Brim highlighted, there is bound to be uncertainty while the new UPC builds up case law in the initial years. Plus as the US has been impacted by a series of decisions, particularly from the Supreme Court, around injunctive relief and patent eligibility so the new, harmonised European system might, over time, see similar developments that make it less attractive to patent owners. What might happen, for example, if Europe was to see its own equivalent of the Supreme Court’s eBay decision? With so much of the continent’s perceived attractiveness derived from a patent owner’s ability to get an injunction, taking that away would have a profound impact. (RL)

Canada calls –In 2017, Canada marks an important milestone in its history. For the first time, IPBC Global will take place there. Yes, we’ll be in the country’s capital, Ottawa, for our next annual meeting from 18th to 20th June. Stay tuned to the IPBC Global website for more details. Oh, and in 2017 it is also the 150th anniversary of the Canadian confederation.

Joff Wild

Author | Editor-in-chief

jwild@GlobeBMG.com

Joff Wild