Patent Pools andNon-Practicing Entities

Brian T. Moriarty, Principal

July 10, 2012

The Feared Patent Troll

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Trolls – “Not Invented Here”

Did not invent the technology

Did not prosecute patents

Are not “real” companies

Are too litigious

Litigate in far away places Cost the U.S. $29,000,000,000 (Boston University -

School of Law; Research on Innovation, Michael J. Meurer, Boston University – School of Law June 28, 2012)

Trolls in it for the $$$

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Attacking the Troll

“No employee or officer of _______ or any affiliated company conceived of, reduced to practice, or developed the alleged inventions claimed in the eight patents acquired from non-practicing entities. In fact, the applications for many of these patents predate ______ itself.”

- Yahoo’s claim in litigation

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Who are Today’s Trolls

Many companies are now “trolls”

So much so, they have a new name.

“Non-Practicing Entities” (“NPEs”)

Includes publicly traded companies that are NPEs

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Response to Trolls and NPEs

Judge Posner:

"It's a constant struggle for survival. As in any jungle, the animals will use all the means at their disposal, all their teeth and claws that are permitted by the ecosystem.”

"It's not clear that we really need patents in most industries. You just have this proliferation of patents [on parts of software]. It's a problem."

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Response to Trolls and NPEs

Mutual cooperation to common threat

Patent pools– “public pools” vs. “private pools”

Can be pro-competitive– Reduce risks– Allows small players to grow into an industry– Improve ability to survive in era of rapid

technological innovation

Long history – of good and bad– Sewing machines 1856– Shoes 1899 (antitrust violation 1954)

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Industry Standard Pools

Presently viewed, generally, as positive, particularly if Fair, Reasonable and Non-Discriminatory (“FRAND”) patent commitments established

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“[w]hile intellectual property licensing arrangements are typically welfare-enhancing and procompetitive, antitrust concerns may nonetheless arise” particularly “when a licensing arrangement harms competition among entities that would have been actual or likely potential competitors in a relevant market in the absence of the license (entities in a ‘horizontal relationship’).”

(FTC Antitrust Guidelines for the Licensing of Intellectual Property)

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Industry Standard Pools

Tech: MPEG-2, MPEG-4, Blue Tooth, 4G etc.

Some effort to create pharma pools (Not needed because of Hatch-Waxman Act immunity law)

“Given the dynamics of biotechnology research and development, the reliance by the industry on cooperative market-based technology transfer strategies through patent pools . . . may be inevitable. If so, the prospects for future success will likely depend on the swift acceptance and implementation of such collective rights programs.” (February 8, 2002. Lawrence M. Sung. Greater Predictability May Result in Patent Pools)

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Another Response toNPEs and Trolls

Defensive Patent Pools

“Insurance like”

Industry members license patents to pool all relevant patents

Pledge not to sue other members

Unfair to primary movers and shakers in industry

Not effective troll protection

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Next: Private Patent Pools

Public Pool Private Pool

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Private Accumulation of Patents

FaceBook – 750 patents

Google (Motorola $12.5B; 17,000 patents)

Apple/MS/etc. (Novell Patents) $4.5B

RIM patents for sale? - 80% value is patents >$3B

Kodak patents for sale?

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Why Spend Billionson Patents?

“The members of the . . . consortium have claimed that they purchased the Novell patents to keep them out of the hands of patent trolls.”

Some patents added to industry/ public pools

Some kept in war chest/private pools

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NPE Litigation

Continues as usual– Small players– Medium players– Big players– Huge industry giants

Overwhelmingly in software and computer arts

Growing in life sciences?– Basic research patents– Drug formulations

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NPE Litigation

Initial questions for defendants– Who is the plaintiff?– Are you one of multiple defendants?– Transfer? Move to dismiss?– Are they seeking many small settlements?– Strategy: delay litigation costs, disclose product

information and prior settlements, settle “A Fast Nickel is Better than a Slow Dime”

– > 90% defendants settle

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NPE Litigation

Initial questions for plaintiff

– Who to sue?

– Where to sue?

– Test case first? Establish value and validity

– Entire industry? Small players? Big player?

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THANK YOU!

If you have any questions, please contact:

Brian MoriartyHamilton, Brook, Smith & Reynolds, P.C.530 Virginia RoadConcord, MA 01742-9133(978) 341-0036

brian.moriarty@hbsr.com

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The Effect of the Leahy-Smith America Invents Act on Collaborative Research

N. Scott Pierce, Esq.ACC America – Northeast ChapterWaltham, MA July 11, 2012

Leahy-Smith America Invents Act (AIA) of 2011

Prior to March 16, 2013 – First-to-invent

March 16, 2013 – First-inventor-to-file

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One Patent per Invention

Before March 16, 2013– Prior art– Interference

On or after March 16, 2013– Prior art– Derivation

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One Patent per Invention Interference Practice - Current

– Claiming “substantially the same invention”

– PTO rules: “if prior art,” would have anticipated or “rendered obvious”

Derivation Proceedings - AIA- Claiming: “the same or substantially the same

invention…”- Proposed rules: Originator presents claim that is:

1. “the same or substantially the same;” and 2. “[n]ot patentability distinct from the invention disclosed” to deriver

- Neither criteria go to obviousness of deriver’s claimed invention in view of disclosure

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Consequence

Inventor can disclose an unfiled and unpublished invention to another who files a patent application claiming an obvious variant.

If obvious variant is not “substantially the same,” according to the Patent Office, the inventor cannot stop deriver through a derivation proceeding.

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Why Wouldn’t Derivation be Based on Obviousness?

Obviousness under 35 U.S.C. § 103 depends upon qualification as “prior art.” “Prior art,” in turn, only relates to certain sections of the current (pre-AIA) 35 U.S.C. § 102, namely:

35 U.S.C. § 102(a) – prior [public] knowledge or use

35 U.S.C. § 102(b) – prior publication

35 U.S.C. § 102(e) – prior filing

35 U.S.C. § 102(g) - prior conception

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Why Wouldn’t Derivation…(cont’d)

“Derivation” has been dependent upon 35 U.S.C. § 102(f), which states:

“A person is entitled to a patent unless -

(f) he did not himself invent the subject matter sought to be patented”

And requires “prior, complete conception of the claimed subject matter and communication of the complete conception to the party charged with the derivation.” See, e.g. Gambro Lundia v. Baxter Healthcare, 110 F.3d 1573 (Fed. Cir. 1997).

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“Derivation” v. Obviousness

Historically Distinct

In re Bass, 59 C.C.P.A. 1342 (CCPA 1973) “of course, [§102] (c), (d), and (f) have no relation to §103 [obviousness] and no relevance to what is ‘prior art’ under §103.”

1984 Patent Act

§102(f) and (g) exempted from §103 when commonly owned.

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“Derivation” v. Obviousness..(cont’d)

OddzOn Products, Inc. v. Just Toys, Inc., 122 F.3d 1396 (Fed. Cir. 1997)

“[T]he language [of the 1984 Patent Act] that states that §102(f) subject matter is not prior art under limited circumstances clearly implies it is prior art otherwise.”

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First Problem

35 U.S.C. §102(f) does not exist under AIA.

There is no reference to any exemptions to obviousness, such as §102(f), under the new §103.

Therefore, a premise for considering obviousness to be part of derivation proceedings under the AIA when not commonly owned doesn’t exist.

So what will “substantially the same” mean in a Derivation Proceeding under the AIA?

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Hypothetical IUnder AIA

Manufacturer A prepares invention disclosure

Manufacturer A talks to vendor B

Vendor B files patent application claiming obvious variant

Manufacturer A subsequently files patent application

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First Problem..(cont’d)

Potential Solution

Statutory: Add §102(f) equivalent and make obviousness of derivation under §102(f) explicit in statute.

OR

Regulatory: Amend Patent Office rules to make obviousness of derivation explicit.

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Second Problem

Existing Act:

§103(c): provides that subject matter developed by another can not be prior art to a claimed invention under §102(e), (f), or (g) if commonly owned at the time the claimed invention was made.

New Act (AIA):

§102(b)(2): subject matter of unpublished patent application is not prior art if commonly owned at the time of the effective filing date of the claimed invention.

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Second Problem..(cont’d)

Therefore, the “prior art” effect of unpublished patent applications can be “bought up” prior to filing under a “joint research agreement” if, as stated by new §102(c)(2), “the claimed invention was made as a result of activities undertaken within the scope of the joint research agreement.”

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Hypothetical II Company A develops invention X

Prof. B of University B approaches Company A with filed, but unpublished patent application because he knows Company A is active in the field.

Company A realizes that subject matter of unpublished patent application anticipates invention X under § 102 or renders X obvious under § 103

Company A executes “Joint Research Agreement” retroactively embracing their own activities, and thereby nullifies the prior art effect of Prof. B’s work.

Company A then files patent application on invention X.

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Second Problem..(cont’d)

So, two additional morals:

1. The statute should not be read to allow retroactive “joint research agreements.”

2. If an equivalent to §102(f) that includes obviousness is added to the statute, the common ownership and joint research provisions of §102(c) should include that new provision.

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For more information, see

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“The Effect of the Leahy-Smith America Invents Act on Collaborative Research,” by N. Scott Pierce, forthcoming in the Journal of the Patent and Trademark Office Society

N. Scott Pierce

T: 978-341-0036 (X3228) E: Scott.Pierce@hbsr.com