"patents for economic advantage: economic advantage “show me the money!” show me the...
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Bratislav Stankovic, PhD, JDTRANSCRIPT
PATENTS FOR ECONOMIC ADVANTAGEECONOMIC ADVANTAGE: “SHOWME THE MONEY!”SHOW ME THE MONEY!
Bratislav Stankovic, PhD, JD
PATENT
INVENTION OF THE TOASTERDuring World War I, Charles Strite, a master mechanic in a plant in Stillwater, Minnesota, decided to do something about the burnt toast served in the company cafeteria To circumvent the need for continualserved in the company cafeteria. To circumvent the need for continual human attention, he incorporated springs and a variable timer, and filed the patent application for his pop‐up toaster in 1919.U S Patent No 1 394 450 for “Bread Toaster” issued in 1921U.S. Patent No. 1,394,450 for Bread Toaster issued in 1921.
TOASTER ROYALTIES FOR MAY 1930
Charles Strite l iroyalties notes:
[royalty rate = 3%]
PCT PATENT APPLICATIONS
NUMBER OF USPTO PATENT GRANTS
In 2009: 485,000 patent applications were filed with the USPTO (3x in 20 years)
NUMBER OF PATENT APPLICATIONS IN MKПатентни пријави по години, ДЗИС, годишник 2009
Година Домашни Странски, национална Вкупно Назначувања Издадениод а До а С ра с , ац о ал афаза
у опредДЗИС
аз а у а а здадерешенија
ДСОП(PCT)
ЕПЗ(EPO)
ПредДЗИС
ДСОП(PCT)
ЕПЗ(EPO)
2003 48 23 363 386 434 87469 3883 105
2004 44 9 399 408 452 38076 4545 102
2005 53 15 368 383 436 3381 4639 373
2006 55 4 403 407 462 3 4879 463
2007 150 13 365 378 528 0 5415 524
2008 34 5 401 406 440 0 5555 3282008 34 5 401 406 440 0 5555 328
2009 39 11 371 383 422 0 3785 334
Вкупно 423 80 2671 2751 3174 128929 32701 2229
ДСОП = Договор за Соработка во Областа на Патентите [PCT = Patent Cooperation Treaty]ЕПЗ = Европски Патентен Завод [EPO = European Patent Organization]
NATIONAL (MK) PATENT APPLICATIONS IN MACEDONIAMACEDONIA
90
100
70
80
90
50
60
70
30
40
50
10
20
30
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
NATIONALIZED (PCT) PATENT APPLICATIONS IN MACEDONIAAPPLICATIONS IN MACEDONIA
100
80
90
60
70
40
50
10
20
30
0
10
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
US PATENT RECIPIENTS, TOP 10 IN PRIVATE SECTOR 2009PRIVATE SECTOR, 2009
COMPANY Number of granted patents, 2009
1. International Business Machines Corporation 4,887
2. Samsung Electronics Co. Ltd. 3,5922. Samsung Electronics Co. Ltd. 3,592
3. Microsoft Corporation 2,901
4. Canon Kabushiki Kaisha 2,200
5. Panasonic Corporation 1,759
6. Toshiba Corporation 1,669
7. Sony Corporation 1,656y p ,
8. Intel Corporation 1,534
9. Seiko Epson Corporation 1,328
H l P k d D l C i10. Hewlett-Packard Development Corporation 1,269
US TOP PATENT RECIPIENTS, UNIVERSITIES IN 2009UNIVERSITIES, IN 2009
RANKING, UNIVERSITY Number of granted patents, 2009
83. University of California System (10-campus) 251
153. Massachusetts Institute of Technology 134
173 WARF UW-Madison 115173. WARF, UW-Madison 115
178. Stanford University 110
191. University of Texas 98
198. California Institute of Technology 93
266. University of Illinois 65
TECHNOLOGY TRANSFER
Moving innovations to the marketplaceUniversity tech transfer centers [Bayh Dole Act University and Small BusinessUniversity tech transfer centers [Bayh‐Dole Act = University and Small Business
Patent Procedures Act, 1980]Case study: the WARF (Wisconsin Alumni Research Foundation) story: Founded in 1925 to manage a University of Wisconsin‐Madison vitamin DFounded in 1925 to manage a University of Wisconsin Madison vitamin D
discovery The foundation has developed a model of technology transfer based upon true
partnership with the UW‐Madison and industry To date, > $300 million revenue from vitamin D royaltiesWARF has contributed more than $1 billion to UW‐Madison
NUMBER OF US PATENTS, BY STATE
NUMBER OF US PATENTS, BY COUNTRY
PATENTS CAN MEAN SERIOUS BUSINESS
THE SELDEN ROAD‐ENGINE
Patent attorney George Selden, despite never having produced a k d l f b l h d d bl l h dworking model of an automobile, had a credible claim to have patented
an automobile in 1895 [U.S. Pat. No. 549,160].Application filed in 1879. Amendments filed to delay issuance of the t t til 1895 b hi h ti th t bil i d t ipatent until 1895, by which time the automobile industry was growing.No interest in manufacturing his invention.Under threat of suit, almost all of the manufacturers took out licenses
f S ld f h A i i f Li d A bilfrom Selden, or from the Association of Licensed Automobile Manufacturers (ALAM), to whom he sold the patent [0.75% royalty on all cars sold]. Th S ld t t d l d i lid 1 b f it t t dThe Selden patent was declared invalid 1 year before it was set to end.
PATENT LITIGATION IS COMPLICATED AND EXPENSIVEEXPENSIVE
PleadingsPleadingsInitial disclosuresDiscovery (increased exposures & risks)PretrialPretrialTrial
“American lawyers…have never been accused of asking for too little. Like the y gRolling Stones, they hope that if they ask for what they want, they will get what they need.” McPeak v. Aschroft, 202 F.R.D. 31, 34 (D.D.C. 2001).
Percentage of patent cases that settle: 2005: 85.9%2006: 86.5%P f P l J i k U i i f H L C P Li i i‐ Prof. Paul Janicke, University of Houston Law Center, Patent Litigation
Remedies: Some Statistical Observations
WHY PATENT?
A grant to the patentee of the right to exclude others from: ki h i imaking the invention
using the inventionoffering for sale selling the invention [throughout the United States]importing the invention [into the United States]
Patents are a method of publicationPatenting translates an inventor’s work into a product that will benefit societyPatent holders can prevent abuse or misuse of their inventions and researchInventors, their labs and departments benefit from licensed inventions
THE UTILIZATION OF A PATENT’S ECONOMIC POWERECONOMIC POWER
IP V lOut-license InjunctionsIP Valuefor revenue Injunctions against infringers
Damages awards against infringers
X-license leverage
Market exclusivityForce competitorsto design around
Image/marketing
PATENT ROYALTY RATES
Importance of the patent and its value to the productsScope of claims; type of patent (e.g., research tools; up‐ or down‐stream;Scope of claims; type of patent (e.g., research tools; up or down stream; fundamental or improvement patent ); whether other patents need to be licensed in order to practice itOften computed as a percentage of the value of the finished product
d b i th t tmade by using the patentTypical rates for gross sales within the U.S. pharmaceutical industry:
a pending patent on a strong business plan, royalties ca. 1%issued patent, 1% –2%issued patent, 1% 2%the pharmaceutical with pre‐clinical testing, 2–3%with clinical trials, 3–4%proven drug with US FDA approval, 5–7%drug with market share, 8–10%
Rates of royalty payments in the industry: over a 16‐year period, for 458 license agreements an average royalty rate of 7 0% (range 0% ‐ 50%)license agreements, an average royalty rate of 7.0% (range 0% ‐ 50%). Licensing Economics Review, 2002.
A MATTER OF PERSPECTIVE
Increasing phenomenon of large companies “monetizing” their portfolios in market segments where they are no longer active.portfolios in market segments where they are no longer active.“In America alone, technology licensing revenue accounts for an estimated $45 billion annually; worldwide, the figure is around $100 billion and growing fast.”
‐ The Economist, A Survey of Patents and Technology, October 22, 2005
IBM: For 17 years running, Big Blue has been granted more U.S. t t th th li t ki i d t d 4 914patents than any other applicant, raking in an ‐unprecedented 4,914
in 2009. press release about the patent figures of 2002 – 3,288 US patents in 2002; company collected $10 billion IP royalties in 10 years.Qualcomm collects almost all its revenue—$10.4 billion in 2009—Qualcomm collects almost all its revenue $10.4 billion in 2009from selling licenses for and making the chips containing its patented 3G mobile‐phone technology, known as CDMA.Pfizer relies on a single set of patents covering cholesterol drug Lipitor
$for a fourth of its total sales, an estimated $11 billion last year.
PATENT TROLLS
What is a “patent troll” ?
Troll: to fish by trailing a line or net…………………Troll: a Scandinavian folkloric creature, hostile to men, lives under
bridges and seizes those who try to cross without paying………………g y p y g
“Patent Troll:” a neologism:– “A patent troll is somebody who tries to make a lot of money from a patent that they are not practicing and have no intention of practicing and in most cases have never practiced.”
‐ The Recorder, Trolling for Dollars, July 30, 2001
Patent trolls buy patents cheaply from entities not actively seeking to enforce them. A company may purchase hundreds of patents from a technology company forced by bankruptcy to auction its patents.technology company forced by bankruptcy to auction its patents.
THE SUCCESS OF PATENT TROLLS
Patent law provides the patent owner with the “right to exclude others from making, using, or selling an invention,” regardless of whether or not the g, g, g , gowner manufactures it.Patents that trolls obtain are relatively inexpensive, making it easier and
more enticing to acquire them in masses.
Nathan Myhrvold's (former Microsoft technology chief) Intellectual Ventures posted $700 million in licensing revenue in 2010 Licensing revenue of Intellectual Ventures is $2 billion to date
Polaris IP has sued Google, Yahoo, Amazon, Borders, AOL, and IAC over a patent on automated e‐mail responders [patent titled "Automatic message interpretation and routing system" ] Filed in 1998 the patent was awardedinterpretation and routing system ]. Filed in 1998, the patent was awarded in 2002 to a company called Brightware.
PATENT AUCTIONS
E.g., Chicago‐based Ocean Tomo’s model of business: $500‐per‐ person cocktail reception and awards dinner at the Palace of
Fine Arts in San Francisco. Then put on the auction block approximately 400 patents applicable to
semiconductors, RFID (radio frequency identification), wireless i ti t ti t h l f d d th I t tcommunications, automotive technology, food, energy, and the Internet.
Patents grouped in 68 blocks ranging in estimated value from $100,000 to more than $5 million.
PATENT INFRINGEMENT
Making, using, selling or offering to sell the claimed invention.
Four flavors:Direct = you do it yourself; § 271(a); strict liability ‐ knowledge and
lintent are irrelevantContributory = you supply a key component that has no substantial
noninfringing use; § 271(c); knowledge requirementInducement = you actively cause someone to infringe; § 271(b);
knowledge requirementWillful = with knowledge; possible treble damages
PATENT INFRINGEMENT ‐ ASSESSMENT
K d d d h kKnow and understand the marketProtect the competitive advantages of the inventionSuing your competitor rather than your customerHigh‐tech does not necessarily mean big dollarsHigh volume‐high profit translates to big dollarsCustomer acceptance issuesRegulatory issues
REMEDIES FOR PATENT INFRINGEMENTInjunctive Relief
Preliminary injunctionPermanent injunctionPermanent injunction
Monetary DamagesLost profits including profits on lost sales and profits from price erosionLost profits, including profits on lost sales and profits from price erosionReasonable royalty
Goal: to place patent owner in same position as before infringementp p p g“damages adequate to compensate for the infringement, but in no event less than a reasonable royalty”; 35 U.S.C. § 284
Current theories of recoveryLost profitsPrice erosionReasonable royaltyEntire market value rule/ conveyed sales
WHO ARE THE INFRINGERS AND WHERE IS THE MONEY?WHERE IS THE MONEY?
Michelson v. Medtronic ‐ $1,350,000,000 awardmedical device; spinal fusion implant technologymedical device; spinal fusion implant technology
Polaroid v. Kodak – $925,000,000 award> 50 patents relating to instant photography
Medinol v Boston Scientific ‐ $750 000 000 settlementMedinol v. Boston Scientific $750,000,000 settlementRIM v. NTP, Inc. – $612,500,000 settlement
wireless e‐mail technology; BlackBerry settled –to avoid effects of uncertainty or service shutdowny
Novell v. Microsoft ‐ $536,000,000EMC Corp. v. Hewlett Packard ‐ $325,000,000 settlementHoffman‐La Roche. v. Cetus Corp. ‐ $300,000,000
patent rights to PCR process
Many patents and hundreds of claimsOnly need one claim to winRisk assessment – odds are always in patentee’s favor
SMALL GUYS CAN WIN, TOO
E i $625 illi f A lEntrepreneur wins $625 million payout from AppleOct 2010: Yale University computer science professor David Gelernter, founder of Mirror Worlds, won his patent infringement case against A lAppleThe lawsuit, filed in 2008, claimed three Apple software features –the Cover Flow flip function, the Spotlight hard drive search tool, and Time Machine which backs up data violate three Mirror WorldsTime Machine, which backs up data – violate three Mirror Worlds patents. The jury agreed, awarding $208.5 million for each of the three infringementsinfringements.Federal jury in Tyler, Texas [forum shopping]
PATENT RIGHTS AND ECONOMIC VALUES
No piece of intellectual property is inherently valuable, nor does it give anyone a ticket to print money.give anyone a ticket to print money.
A patent right is only valuable if it fits into the context of a good business plan that enables it to create value.
Patents that are being drafted today will have effect for the next 20 years; diversity in claiming: a patent should contain claims of many diff t t t l d i ti ldifferent types, styles and scope as is practical
A patent right is a means to an end, not an end in itself
Need for development of a corporate patent strategy that provides the maximum economic power to the company
ASSESSING WHO ARE THE INFRINGERS ANDWHERE IS THE MONEYAND WHERE IS THE MONEY
K d d d h kKnow and understand the marketHigh‐tech does not mean big dollarsHigh volume‐high profit translates to big dollarsProtect the basis for consumer demand
Literal Infringement & Doctrine of equivalentsDirect Infringement Contributory Infringement y gInducementNeed all claim elements or their equivalent
PATENT UNENFORCEABILITY
Due to inequitable conductTh l l hi h d f d h kiThe law places a high duty of candor on those seeking patentsFailure to disclose relevant information can lead to unenforceability of the patent and antitrust liability
f l f f l k fMost often results from failure to cite known references
Due to patent misusePatents obtained by fraudPatents wrongfully assertedPatent agreements that unlawfully extend the monopoly, e.g. “tying”
KNOW YOUR CLIENT
Know your company’s businesses/ know the competitionP h l f h i iProtect the novel aspects of the inventionProtect the competitive advantages of the inventionTwo questions to ask:
Why is this invention new?What is the client’s business interest?
Commercial processes restrictionsCustomer acceptance issuesRegulatory issuesSupplier issuespp
REALITY OF PATENT DAMAGES“damages adequate to compensate for the infringement, but in no event less than a reasonable royalty”. 35 U.S.C. § 284
Current theories of recovery:Lost profitsP i iPrice erosionReasonable royaltyEntire market value rule/ conveyed sales
Not so miscellaneous factors to consider:Patent maintenance feesFailure to mark a patented article ‐‐ 35 U S C §287(a)Failure to mark a patented article 35 U.S.C. §287(a)Six year limitation on damages ‐‐ 35 U.S.C. §286Prejudgment & post judgment interestLaches & estoppelCostsAttorney feesIncreased damages ‐‐ up to three times if willful infringement