Having enjoyed my time in New Orleans,
I spent a couple of days in Florida catching up with a number of US patent
attorney colleagues. A consistent theme in my discussions with them was the
pervasive view that the US economy is in a very poor state and belts that
tightened during the GFC are remaining so.
A consequence of this is that US
companies who previously would have included Australia in their global patent
strategy are often declining to do so. While this isn’t good news for
Australian patent attorneys who rely heavily on this work coming into Australia,
it does make me wonder whether there are some golden opportunities out there
for Australian companies to exploit US technology that is not being actively
protected here? It is worth spending some time and effort to investigate this if there
are US technology leaders in your area of business.
Following this I attended the Intellectual
Property Business Congress (IPBC) in San Francisco. This was a relatively small
event (500 delegates) but there were some real thought leaders in the area of
commercial use of IP in attendance, which made for some very engaging sessions.
Out of these, I made the following
observations (across a number of topic areas):
- Between now and 2015,
the USPTO and the EPO expect to greatly increase ‘shared workload’ co-operation
in the areas of searching and examination of patent applications.
- Currently, about 90%
of USPTO trade mark examiners work exclusively from home. While more difficult
to implement due to the nature of the work, they would like eventually to have
the same proportion of patent examiners working from home.
- There was a lot of
discussion about the difficulties associated with properly valuing a patent or
patent portfolio. Judge Randall Rader, Chief Judge of the Court of Appeals for
the 9th Circuit, challenged the IP community to achieve the type of valuation
certainty apparent in the real estate market. This comment was not met with
universal acclaim, mainly due to the far more limited number of IP
transactions, and the limited number of ‘buyers’ likely for any given IP
transaction.
- Microsoft says that
the driver of value of patents in their organisation is litigation value,
especially where the paten tis nearing the end of its life. If not litigation
value – the IP will be divested.
- For the
‘non-practicing entity’ – they say that a patent that has no commercialisation
within five years, the return on investment starts to look ‘ugly’, and
divestment of the IP will ensue.
- Microsoft and Alibaba Group (one of China's leading
IP owners www.alibaba.com) agree that they will NEVER settle 'unmeritorious' IP
infringement lawsuits brought against them by trolls or
competitors.
- This year, the China Technology Exchange (CTEX)
conducted the first patent auction in China. Twenty-eight Chinese patents were
sold for about USD 450,000. A second patent auction, focussed on wireless
communication and cloud computing will be held in Beijing in the northern
autumn this year.
- Chinese companies filed 13,000 PCT patent
applications in 2010. This puts China a long, long way ahead of Australia, for
example, as an international filer of patents. There may be a Chinese company’s
patent in your future …
- Chinese utility models comprise about 35% of the
patent applications filed in China.
- 48,000 patent lawsuits were concluded in China in
2010. The vast majority of these were disputes between Chinese companies on
each side. The patent litigation landscape in China is overwhelmingly about
Chinese competitors, not about the Chinese vs
Foreigner case we are more likely to hear about.
- Also in contrast to popular belief, foreign
entities suing Chinese entities over patent rights in China have a 98% win rate
in court. Chinese patent courts are reportedly very good for simple and quick
patent litigation, less so for more complex matters. Anecdotally, the results
of enforcement of Chinese court orders are better in the industrialised
north-east, than in the less developed west of the country.
- Chinese electronics and communications company
Huawei Technologies has 20 R&D centres across the globe, and have over
20,000 granted patents throughout the world, including over 500 granted US
patents, and over 2000 granted European national patents.
- Most Chinese regional governments subsidise patent
applications by locals, often to the extent of covering all of the costs
incurred. This accords with my view that the Chinese are on a path to become
net IP exporters, much the same path taken by Japan after WWII, and faster than
Japan.
“The Great Patent Debate” at IPBC pitted Prof.
Michael Meurer from Boston University and Prof. Peter Menell from the Berkeley Centre
for Law & Technology versus Mark Blaxill and Ralph Eckardt from 3LP
Advisors as the 'anti' and 'pro' sides.
The ‘anti’ patent argument was based on the idea
that for most industries, the proliferation of patents presently hinders
innovation. Among other things, they argued:
- that the patent system works well for the
chemical/industries, but it is an economic drag on other industries
- poor examination means there are too many weak
patents: not used against actual copyists, but against other innovators
- Microsoft did an enormous amount of innovation in
its early years – but developed no patents
The ‘pro’ patent side countered that:
- companies and regions heavily involved in
electronics and other manufacturing industries cite economic benefits from
patenting
- the rate of patenting in the US against GDP is
flat, and lower than it was in 1979, refuting the idea that companies are
increasingly stuck in an IP quagmire;
- Patent litigation is ultimately a failure of
negotiation. Stronger patent rights will equate to greater certainty of
outcome, which would lead to less litigation.
Ultimately, neither
side of the debate argue that the patent system should be dismantled, but
perhaps there is room to consider moving away from the ‘one size fits all’
system of incentives that the present patent system represents. Both
sides agreed the patent system would work better if there was a better market for
negotiating the value of patent rights.
The session on ‘open innovation’ explored the
following points:
- Collaborative IP sharing can drive better
outcomes for the participating businesses.
- Patent pools have the advantage of mitigating
group risk.
- Whole new
businesses can be built from the shared IP of two or more companies who are
willing to share IP.
- However,
some organizations have difficulty sharing their "crown jewel" IP by
participating in patent pools, collaboration etc.
- For open
source collaboration to work, EVERYONE has to play ball - any hold-outs are
likely to cause the collaboration to fail
- The
attitude that "We have no patents, we open-source everything" equals
a non-fundable company, according to Erin-Michael Gill of MDB Capital. However,
he says that if you focus on great proprietary positions - there will be real
returns. He also says that open
source licensing agreements are confusing, which creates uncertainty for
investors.
- Skype is a
great example of reaping the benefits of keeping key IP assets close to the
chest.
Finally:
- As the number of IP trade transaction increase,
proper management of ‘chain-of-title’ assumes crucial importance, because the
IP value can be lost completely if this area is neglected.
- Successful companies not only understand their own
IP, but also their competitors’ and their CUSTOMERS’ IP.
- Companies who tend to defend a lot of litigation
see the value and benefit in paying for external IP.
- As SME’s tend to get
smaller, IP in some form is becoming their main asset and output.
Technical IP often dominates intangible asset value early, but this leaches
into brand value over time, as the brands support the IP.
- American Express sees
a future role and business opportunity as an IP market place facilitator. They
see the hurdles to a functional IP marketplace presently as a lack of
uniformity in patent claim interpretation and a lack of transparency around IP
transactions (in contrast with the publicly available record of real property
transactions). One of the issues I see with this also is that the
value of IP is not necessarily intrinsic - it will vary with the situation of
the purchaser/licensee.
That concludes my ramblings from IFT11
and IPBC 2011. Next year these two conferences clash with one another on the
same weekend in Las Vegas and Lisbon, Portugal respectively so I won’t be able
to cover both. Happy to take suggestions on which one I should cover!
by Adam Hyland
