IP Market Updates

February 9, 2018

Climbing Down the Innovation Ladder

Abraham Lincoln (an inventor in his own right and strong supporter of the patent system) once wrote the following: “The US patent system adds the fuel of interest to the fire of genius in the discovery and production of new and useful things”. This was true then; it still is now.
Last year, we learned that the US Patent System, once the gold standard worldwide for patent rights protection, had slipped from its perennial 1st place to the 10th spot on the US Chamber International IP Index. See table below. It just slipped another two spots in 2017, as reported a few days ago It is interesting to see that European social democracies are now leading the way, followed closely by Japan.

Source: US Chamber International IP Index. 5^th Edition

This should not come as a surprise to most of you. Take away the “fuel of interest” that a strong patent system provides, and it won’t take too long for the “fire of genius” to dwindle in turn. Indeed,  a Bloomberg report released on January 22 of this year shows that the United States has now also fallen out of the top ten most innovative countries worldwide! See below:

Source: Bloomberg

If you look at the countries listed above, many of those are the same as those listed in the first table. It is absolutely fascinating to see the strong symmetry (6 out of 10 of the countries are the same) between a vibrant IP environment and the level of innovation that results thereof. Although the Innovation Index measures specific metrics in addition to the patent system, such as R&D intensity, productivity, researcher concentration, etc., it is clear that one affects the other. Smart money is more likely to fund innovative activities that incubate in a stronger IP ecosystem, less they be copied before the company even has the opportunity to reach a critical size.

Last week in Davos, President Trump lashed out against IP theft (mostly directed at China):

“The United States will no longer turn a blind eye to unfair economic practices, including massive intellectual property theft, industrial subsidies, and pervasive, state-led economic planning. These and other predatory behaviors are distorting the global markets and harming businesses and workers not just in the U.S. but around the globe.”
 

The criticism is fair on that point and one should not confuse the recent Chinese government pro-patent stance from the still rampant trade secret and industrial espionage against foreign corporations. However, the US administration would do well to address the mess in its own backyard and ensure US patent owners (regardless of their country of origin) can trust their  IP rights will be protected and fully enforceable against infringers. Otherwise, in twenty years, there won’t be much IP to steal that will originate from here…

Sadly, we are seeing this trend emerging already.  In 2017, of the top 50 assignees in the US, more Asian (50%) than US (44%) companies obtained patents with the USPTO. Assuming that Asian companies for the most part innovate in Asia and then file patents around the world (including in the US), this shows one of two things; either (1) US companies innovate less than they used to, or (2) US companies no longer bother to file as many patents in the US. Neither of these 2 options is good, especially when one is reminded that Intellectual property (IP) now accounts for a staggering 38.2 percent of total U.S. GDP and 30 percent of total national employment!

A parallel and maybe even more troubling phenomenon is apparently also taking place: class warfare among inventors. There have been many reports that some large companies are having an easier time getting their patents allowed with the UPSTO than small inventors. As well-known patent US attorney and author Rob Sterne recently put it in its FOCUS column:

“So why are factors such as who owns a patent, the size and type of owner, and whether the patent is being commercialized so important in today’s patent environment? In other words, why does a patent, if owned by a rich, powerful, and politically-connected enterprise, appear to receive much better treatment by the USPTO and the courts? There is certainly disagreement about whether we have essentially created a class system in the US patent environment – one class for large companies and another for small inventors and non-practicing entities. My research over the past several years supports the conclusion that we have, whether intentionally or inadvertently, created a “two-class” environment. This is based from interviews with hundreds of the most informed people in the U.S. patent environment.”

We have seen over time the influence of money in politics. Influencing IP policy is no different, and as long as the system will encourage deep pocket companies to dictate their views to the legislators, it will be increasingly more difficult for small inventors to get fair treatment from the very system they fund year in and year out with their own taxes. If there is a silver lining at the end, it is the formal appointment (after a unanimous vote earlier this week) of new USPTO director Andrei Iancu. While Mr. Iancu’s politics are not widely known (nor should they matter), he is well-respected in the IP community and has been on both sides of the pro-patent v. anti-troll narrative so far. As such, he steered clear of signaling any early bias during his nomination process, but did clearly indicate that he understood the uncertainty that the current legal (Alice) and regulatory (PTAB) framework have created for patent owners. Assuming he is going to pursue an approach that is aligned with the Trump administration’s talking points, there is finally hope for a sliver of meaningful change coming from within that could bring back “the fuel of interest to the fire of genius”. We shall see, and it will be important for the IP community, who lauded Mr. Iancu’s appointment, to keep his feet to that fire.
 

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Our State of the Union

We are pleased to announce that we recently brokered the sale of a 150 assets portfolio owned by well-known French Sovereign Patent fund (SPF), France Brevets, in the Automotive & Self-Driving and Unmanned Vehicles area. The portfolio had been originally developed by a large French defense contractor and contained assets covering LIDAR, RADAR, HUD and other detection related technology.

I often refer to our firm as being an “equal opportunity” intermediary, in that we do not discriminate whether buyers of our clients’ patents are operating companies, NPEs, IP funds, defensive aggregators, etc. The most important thing to us is to return the highest value to our clients and contribute to a vibrant patent market that ultimately benefits all by finding a better home for underutilized assets and great innovations. Similarly, we do not discriminate between patent owners and represent all sellers, from individual inventors to Fortune 50, as long as the patents are of very high pedigree (which means we broker less than 5% of assets we see each day). We firmly believe that large portfolio owners will tend to take a more balanced view of the patent climate if they themselves are trying to monetize their patents on the secondary market. In this regard, we announced a couple of months ago having been retained exclusively by Google to help them sell some of their patent assets as they are entering the secondary market. In the same vein, and after a thorough vetting process, we are pleased to announce that we have also been retained exclusively by HP Enterprise to broker several of their patent portfolios, as well as by Allied Inventors (formerly Intellectual Ventures’ Invention Development Fund), which manages an innovation portfolio of more than 5000 IP assets and equity investments in a number of start-up and early-stage companies. We will be bringing these high-quality portfolios to market in the coming weeks and months. Stay tuned.

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Tell us what are you looking for
 

We maintain a large database of patent areas of interests that many buyers share with us from time to time. This really helps us in sifting through the 4-5 portfolios we are asked to broker daily. More importantly, it gives those organizations who have shared their priorities with us an early preview to some of the portfolios that have yet to hit the market. So If you or your clients have some specific needs, please contact us at info@tangibleip.biz and we will follow up directly. All information is for internal use only remains confidential.
 

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Recent Buyers & Sellers

There was a flurry of activity on the patent acquisition front these past weeks. Besides the deal we reported recently,  we learned that Chinese smartphone maker Oppo obtained 37 US assets formerly owned by Intel. Meanwhile, Swedish manufacturer Välinge has acquired patents from the Swiss Krono Group pertaining to various flooring solutions.
Closer to home, Motorola surprised many by forking $1B on Vancouver (Canada) based video surveillance and patent rich Avigilon. Finally, after sealing two deals recently with Asian companies TSMC and Panasonic, Ottawa-based publicly traded NPE Wi-LAN signaled that it may acquire other semiconductor assets.
The most surprising rumor though had well known patent enforcer Erich Spangenberg making a run at acquiring large defensive aggregator RPX, which has fallen on harder times lately given the current patent landscape. This would definitely be the ultimate irony, given that Spangenberg has led one of the most of the most successful NPEs of this past decade, while RPX was busy on the other side acquiring patents litigated by NPEs on behalf of its 300+ members. Sounds like a match made in heaven!

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Winners & Losers

First, the winners: publicly traded IP (PIPCO) and cyber security company Finjan reported spectacular revenues for 2017, continuing to buck a trend that saw most NPEs lose money in 2017.  It did not hurt that it was able to quickly capitalize on a recent patent acquisition from IBM. Nokia recovered some in 2017, due in part to profits that were boosted by a one-off catch-up patent payment of 210 million euros from China's top smartphone maker Huawei.
Cashing into the bitcoin frenzy, Marathon Patent Group Inc. shares surged 20% after the company said it has agreed to acquire four patents related to the transmission and exchange of cryptocurrencies between buyers and sellers.

Canadian NPE Conversant (formerly MOSAID) won an important appeal from Korean manufacturer LG after the Federal Circuit Court ruled that patents in its core wireless portfolio were valid and had been infringed by the Korean tech giant. Meanwhile, Aspen Aerogels, a UK manufacturer of aerogel insulation announced a series of judgments from a German court against a Dutch retailer of an aerogel product for which Aspen claims it holds patents. In California, an important ruling was issued in favor of Searchmetrics in the four-year-old patent infringement lawsuit that SEO platform BrightEdge filed against its competitor when the court invalidated all 5 of BrightEdge patents.

Some others were not that fortunate: Native tribes who have been relying on their sovereign immunity to shield them from IPR challenges in front of the PTAB are finding that their path to what appeared as a preferred route to patent assertion is meeting significant resistance, starting with the PTAB itself.

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I’ll see you in court

While patent litigation in the US has declined in 2017 (while IPR petitions were in sharp increase), many companies are still bringing new claims to make sure their patent rights are being respected. It just happens more often outside of the US these days. For instance, Chinese smartphone maker Coolpad announced last week that it has sued larger rival Xiaomi in Shenzhen for infringing three invention patents. Meanwhile, only a few weeks after being sued by Micron for trade secret misappropriation, Taiwan’s UMC retaliated by asserting its own patents in Fujian against the US chip manufacturer.
Closer to home, TiVo has announced that its Rovi company filed lawsuits against Comcast in Massachusetts and California, saying the service provider’s X1 platform infringes upon Rovi patents. Those patents cover technology including voice functionality, advanced DVR features, multi-device pausing and resuming, and more.

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Around the world
 

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