March 3, 2006 4:00 AM PST
Patent auctions: Lawyer's dream or way of the future?
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The next morning, the same people will gather for a patent auction that could lead to some really nasty lawsuits.
Chicago-based Ocean Tomo, a patent consulting firm that includes Ross Perot as an investor, will put on the auction block approximately 400 patents applicable to semiconductors, RFID (radio frequency identification), wireless communications, automotive technology, food, energy and the Internet. The patents will be grouped in 68 blocks ranging in estimated value from $100,000 to more than $5 million.
The offerings include patents for Motorola bar code technologies and biochip technology, which is commonly used in the medical field. They'll also be offering patents for a Clorox bleach activator and a Ford four-wheel steering system.
A 310-page glossy catalog lists complete summaries of the patents.
Patent auctions are the kind of thing that fuel the current anxiety over intellectual property. Companies large and small say they are fending off an increasing number of demands for royalty payments. They are also fending off lawsuits, like the one that threatens to shut down the BlackBerry network.
Some fear that intellectual property companies such as Acacia Research and Intellectual Ventures, which has amassed more than 3,000 third-party patents, will build portfolios just to extract settlements from others.
The Ocean Tomo patent consulting firm plans to hold auctions twice a year.
CEO Jim Malackowsky said the critics' fears are both exaggerated and misplaced. Intellectual property--embodied in patents, copyrights and trademarks--has become an indispensable asset to most companies.
The problem, he said, is that we haven't evolved mechanisms--other than expensive lawsuits and tortured licensing negotiations--for making money off of it.
"IP is the largest asset class today and it is the most inefficient," he said. "It is illiquid and it is challenging to value."
This is where Ocean Tomo comes in. Like other patent consultants, the company conducts intellectual property inventories and consults on transactions. But the company also claims it has devised a more comprehensive way to put a dollar figure on a patent. AT&T has hired the company to help it sell the intellectual property behind Internet pioneer Prodigy. (In 2004, Ocean Tomo auctioned off 39 patents from CommerceOne for $15.5 million.)
The firm has come up with more than 50 metrics--including the number of citations in other patents, the area of technology and the number of claims--to attempt to give intellectual property owners and potential licensees a more accurate value on the patent.
Malackowsky likens Ocean Tomo's work to the work conducted by the early merchant banks such as Morgan Grenfell. These banks started out as merchants and morphed into financiers, issuing credit and guaranteeing payments for fellow traders.
"Everything that they are doing today is what they did for their own assets 150 years ago," he said.
The analogy might be somewhat stretched. Unlike commodities, such as wheat or iron, the quality and value of patents differ drastically. Nonetheless, a more efficient marketplace for intellectual property could dovetail with the strategies of companies like IBM, Microsoft, Hewlett-Packard and other giants. These companies are mining their portfolios for royalties. IBM gains about $1 billion a year in IP licensing while HP has seen royalty revenue nearly quadruple in the past few years.
Ocean Tomo, Malackowsky added, doesn't shop in the bargain bin. The firm examined more than 1,200 patents and selected what it believed were the most marketable for the auction. The firm also invests in start-ups with intellectual property it finds interesting. The investments are in the form of loans: If the firm goes under, Ocean Tomo reclaims the patents under a mortgage.
"This is not a liquidation where people are selling as a last resort," he said. The gala dinner is a way of "giving (the patents) the dignity they deserve."
Still, the number of patents going on the block is quite large, which means bidders may not have an accurate picture of what they are bidding on.
"If there are some gems in there, it would be tough to find them and expensive to evaluate them," said Lee Van Pelt, a partner at the Silicon Valley intellectual-property law firm Van Pelt and Yi. "This sort of event appeals to potential plaintiffs. It also appeals to companies that want to take things off the market."
Like other patent consultants, Malackowsky bristles at the notion that his company is a so-called patent troll--an organization that seeks to exploit the loopholes in intellectual property for gain. Contrary to public perception, most intellectual-property lawsuits tend to be grounded in legitimate disputes, he asserted. The financial risks are also high for the plaintiffs.
"Everyone is always in angst about patent trolls, but (try to) name 10 of them," he said. "There are some junk patents and lawsuits, but by the time a patent gets through the patent office, gets through the pretrial phase, gets through the Markman hearing (to determine the scope of a patent), the trial and the appeal process, it is a pretty good patent."
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Electronics & Computers Deals here!
Game Theory can be utilized to establish the
ground for exchanging IP. The complexity can be
visualized in 3-Dimensional scenario and the
transfer of IP can be assessed from many degrees.
IPs are powerful. They are a manifestation of
knowledge and know-how. But they come with time
value (mostly). It is here that most legal
entities found suitable playing ground.
The days are going to change. In addition to
legal angle, an IP provider can come up with
very clear indications/implications of some
of the potential roadblocks his/her IP may
face. An aspect that legal guys may not be fully
able to satisfy which has lead to complications
in the past.
Here is where Game Theory comes-in handy. It is
possible to put an IP into a Game Theory based
tool-box and analyze its scope with friends and
enemies.
IP Transfer by any means requires a lot of
clarity. Every IP can be pre-assessed and be in
a pro-active state to face challenge from
multiple angles rather than submit to long
lasting law-suits.
The larger the market scope, it is better to
equip with pro-active barriers and be prepared.
Looks like the time has come to look at IPs from
'non-lawsuit' and more productive angle. I am
sure, in future, IPs will be released with full
knowledge of repercussions, be it legal,
political, economic, market oriented,
geographical, etc.
To see a real "troll" look up what the Lemelson Foundation spent most of the 20th century doing. That was trolling at its best. Did they stop all invention? Better yet, did anyone hear about them before this time?
Patents are property! They only lead to nasty lawsuits when they have real value and when some well heeled large corporate patent pirate tries to pillage the owner's property and guns down an owner who dares to object..
Some corporations have a policy of examining the assets of a patent holder and then dividing the patent holders into two groups.
The first group has great enough assets that the patent pirate decided it would be unwise to tangle with that owner and they negotiate a license and all parties move on to mutual profit.
The second group are individuals or small companies whose apparent assets imply that they are easy marks and the patent pirate does not negotiate. They ignore those patent holders based on two factors. One, the patent holder may never discover the theft of their property. And two, if they do discover such theft the big company figures they can simply gun the owners down and take their property.
You may ask how is this accomplished?
Well sometimes the patent pirate acts like they are interested in a license. They get the inventor to visit them on the inventor's dime and they will draw the negotiations out for a lengthy interval in hopes that the patent owner will get frustrated and eventually give up. The other tack is to use the inventor's presence as a cause for bringing a lawsuit in the patent pirate's jurisdiction. Usually such lawsuits take the form of a declaratory judgment action and these typically cost the patent owner something between $100,000 and $300,000. Most individual inventors or small businesses cannot afford this kind of money and if the patent owner ends up bankrupt the patent pirate is home free.
If the patent owner survives the only possible response is to file an infringement lawsuit. This is usually followed by a ta-ta over venue. At this stage the stakes are often approaching $500,000. An infringement lawsuit taken to completion runs at least $2,000,000 and may go up to tens of millions.
Now that you understand the process I want to discuss how the patent auction will benefit everyone. For the small business patent holder it creates an efficient way to market the intellectual property in a way which gets the best price and avoids the problem of a patent pirate bleeding the patent owner with abusive litigation. The reason is simple, that the competition is between well heeled players and not between the patent holder and ONE well heeled company.
Marketing a patent is fraught with pitfalls because there are many treacherous players. It is much like the wild west, where some gun slinging arrogant patent pirate would just as soon destroy the small business as not. Moving marketing of a patent from the back alley to a very public forum greatly lowers the chances that the patent owner will get shot in the back.
Ronald J Riley, President
Professional Inventors Alliance
www.PIAUSA.org
RJR (at) PIAUSA.org
Change "at" to @
RJR Direct # (202) 318-1595
We believe that RIM has been built on a rotten foundation. Canadians should not be proud of RIM for the same reasons that many Americans are not proud of our multinationals. Might , PR, and lobbying do not make right.
Mr. Balsillie, chairman and co-CEO of Research in Motion (RIM) has very efficient public relations and lobbying operations which plead his case in media and on the Hill while a multitude of RIM's victims for the most part suffer in silence. As you will see below - we of the Professional Inventors Alliance (PIAUSA.org) strongly believe that he and his company RIM - are clearly the "patent abusers" and we are disappointed that most of media does little more than repeat RIM's self serving propaganda! We understand that big money speaks loudly in the political process but are disappointed that most of media is failing to do due diligence before writing about these issues.
Based in part on the information detailed below, we believe that RIM has demonstrated an exceptional appetite for others? intellectual property.
The best known case is RIM?s attempt to deny inventor Thomas J. Campana and his family justice in the RIM v. NTP dispute. So many innovators' stories are tragic because well heeled predators decide to take their inventions. In this case, an American inventor and small business person died in 2004 without seeing justice. Justice delayed is truly justice denied. We should all pause to think about the injustices American innovators may be suffering at the hands of RIM and all the other inventors who are suffering similarly across America.
In addition to the NTP case where RIM was caught red handed trying to foist contrived evidence on the court, RIM was sued by the University of Texas for patent infringement and paid $1.8 million dollars to settle that case. RIM also was alleged to have infringed a patent held by Antor Media Corporation.
Even more recently an American inventor of predictive text Howard Gutowitz, who owns a small company named Eatoni Ergonomics, tried to license his inventions to RIM. RIM responded with a lawsuit. This is a common tactic of deep pocketed companies, which often is a ploy to bankrupt financially weaker inventors. Our organization, PIAUSA.org has helped this inventor make contact with those who are in a position to stay the course until justice is achieved. http://www.eatoni.com/wiki/index.php/Litigation
It is our opinion that RIM's litigation with Howard Gutowitz may well become as contentious and self destructive as their battle with NTP. How will investors and end users react when they discover that RIM is facing a very similar situation to the NTP case? What businesses will deploy RIM services when they have legitimately licensed alternatives such as Visto and Good Technology and the Palm Treo? Why isn't our government switching to reputable service providers who respect American innovator's intellectual property? And perhaps the most important question is why some of our representatives are backing patent pirates!
In light of RIM?s rash actions, can investors or users have any confidence that RIM will not make similar decisions in the future?
Mr. Balsillie made some outrageous claims in a WSJ editorial letter regarding NTP?s abuse of the patent system. It is our understanding from off record USPTO sources that RIM lobbied the USPTO to initiate reexaminations of NTP's patents and in concert with their PR and political efforts also made many reexamination requests through normal and back channels as evidenced by Rep. Tom Davis (R-Va.) outrageous comments. Rep Davis has been reported to have said the BlackBerry case exposed inefficiencies with how the Patent and Trademark Office operates. We agree, in that it has exposed how someone who is dead wrong appears to be able to buy influence both with the legislature and the USPTO.
What the RIM case demonstrates is that American inventors' are being discouraged by patent pirates at a time when we desperately need those inventors and the jobs they create. This sin is being compounded by the sin of a coalition of patent pirates vision of a reformed patent system which would make inventing a kings sport. A system where innovators do not have a prayer of building the next generation of innovative companies.
During a reexamination an inventor is entitled to add claims as long as such claims are supported by the original disclosure. Seeking the full coverage which an inventor is entitled to under law is not an abuse of the system. This is especially true when the reexamination was forced on the inventor. We did not find RIM's claims of patent system abuse by NTP to be credible, and the large number of reexamination requests made by RIM is a perfect example of how an opponent of an inventor who has deep pockets can and does abuse the patent system to create delays and unduly burden invention based small business with the goal of bankrupting them. When an inventor is crushed financially, the infringer wins by default.
The USPTO has become increasingly politicized over the last decade. When faced with a hot potato like the RIM v. NTP case and the fact that RIM is politically savvy while NTP and the other victims of an insatiable appetite for other's invention are not, the USPTO is anxious to lob the hot potato into the appellate courts. This is not the first case PIAUSA.org has seen such conduct from the USPTO. It is unfortunate that the agency can be influenced by companies who pirate inventors property and a gross injustice to America's inventors and the public.
In light of RIM's pattern of patent disputes, PIAUSA finds it hard to believe that RIM is always the injured party.
It is common for young successful companies to feel invincible. There are a number of contemporary examples of such companies who act like bullies when it comes to their use of the intellectual property of others.
While such tactics may often work for years, sooner or later companies who take others intellectual property do meet their match. The results often take a severe toll on them. Those who live by the sword, eventually die by it. It is those companies who unjustly appropriate other's intellectual property who are howling for changes to the patent system which would cement their positions and legitimize their appropriation of other's property.
It seems that what RIM may lack in an ability to invent for themselves, they make up in marketing, public relations, and lobbying savvy. There is no doubt that RIM is very sophisticated in those areas.
Mr. Balsillie makes some rather sweeping claims about America's patent system, claims which Mr. Davis parrots. Like other companies who are being held accountable for taking liberties with others' inventions, they claim our patent system is deficient. On the contrary, it is that patent system which has fueled our economy and there is no question that America is the greatest economic success story in the world today in large part due to our exceptional patent system.
Many foreign competitors would like to see our successful country pulled down to their levels. The reforms which RIM and our own multinational companies are promoting are designed to protect those company's vested interests but would kill the patent system which has made America, truly the land of opportunity.
Some companies who pirate others intellectual property make self serving claims that there is consensus among experts supporting their agenda for ?reforming? the patent system. These claims are false. Dr. Irving Kayton, a top IP law expert in the US is adamantly opposed to the changes being proposed as was recently deceased former patent commissioner Don Banner and a multitude of other intellectual property experts and patent practioners also oppose so called patent reform.
Inventors and the companies they form are the seeds of new industries ? examples being HP, Apple, Edison, the Wright brothers, Gordon Gould (LASER), Wilson Greatbatch (Pacemaker), and Dr. Ray Damadian (MRI). They create jobs and tax base. As long as inventors control their companies their ties to the community keep those businesses in those communities. When American innovators? property is taken -- society's losses are greater than the loss the inventor suffers. When an innovator?s life blood is sapped by protracted litigation -- their ability to innovate and build businesses is crushed along with the businesses they can no longer support and nurture. When large companies get away with taking inventions the benefits of those inventions generally end up in a low wage country while the patent pirate's business unjustly profits from its acts. In the end it is the American public that is impoverished.
Adding insult to injury is the massive PR campaign being orchestrated by abusive companies. In my opinion it is truly ironic that RIM and other companies with similar mindsets are painting those they abuse as abusers. This is an example of doublespeak and of spin at its best.
Many years ago I observed that some CEO's as being similar to teenage boys, big egos - little thought before engaging those egos, short term gain orientation and marginally developed sense of ethics. The situation which RIM and several other companies who have been accused of pirating other's inventions most certainly reinforces this observation.
====
The Professional Inventors Alliance USA was created more than a decade ago to protect American invention and encourage innovation. American inventors saw a need to track congressional legislation and federal policy that impacts independent inventors, small and medium-sized businesses and colleges and universities. The Alliance is the premiere organization in the nation, providing independent inventors a united voice in order to improve public policy.
The Alliance provides legislative counsel, congressional updates and strategy development to its members through a number of vehicles. Additionally, through its speaker?s bureau, Alliance members have an opportunity to provide expert opinion to many of the nation?s top-tier business, technology and mainstream media organizations. Over the years its members have testified before Congress, offered counsel to key Senate and House committee members, and successfully pushed legislation to protect America?s independent inventors.
Since its inception, the organization has grown into one of the most vocal advocates for America?s patent system
Ronald J Riley, President
Professional Inventors Alliance
www.PIAUSA.org
RJR (at) PIAUSA.org
Change "at" to @
RJR Direct # (202) 318-1595
Article 1, Section 8, Clause 8 of the Constitution makes clear that the sole purpose for granting patents and copyrights is to encourage creative invention, which would suffer if such works were completely unprotected. In other words, the justification is utilitarian. The current situation could not be further diverged from the vision of the Founders. What is being protected is not the incentive for individuals to create, but the interests of the parasites (lawyers, mercantilists, et al) that infest the bowels of the inventive, for the purpose of free feeding on their efforts, and with the final result of sucking the life out them.
The following comment on this clause by St. George Tucker, in Blackstone's Commentaries 1:App. 265--67, was intended as a criticism of its prospective use as a justification for government-granted monopolies, but it applies just as well to the defacto monopolies created by the USPTO and the Federal courts:
"Nothing could be more superfluous, or incompatible, with the object contended for"
Since the basis of Constitutional protection of intellectual property is clearly utilitarian, and since the stated purpose of that protection has equally clearly been turned on its head, I propose that it should be eliminated by means of amending the Constitution. While that would cause come grief, it would prevent a great deal more.
Whatever did become of the "Kill All Lawyers Party", anyway?
Samiam
Most of the patents were obvious to someone with experience in the field. To someone with no experience they would have appeared valid. For example an patent on the of ergonomics in an industrial machine. Since ergonomics have used heavily in the design of furniture and automobiles their use for another type of machine is obvious.
The remainder were trivial, for example the patent on locating a grease nipple on the underside of the part being greased so that water couldn't enter the fitting (this could also be considered obvious).
The question to be asked is are there any valid patents? I'm coming to the conclusion that there aren't, and that the patent process is so fundamentily flawed that a moratorium on the issue of new patents until a complete and proper overhaul of the system is completed is in order.
Note that the patent attornies that I've talked to disagree with me on this - however none of them are competent to judge the patents that they are filing.
awarded a patent in 1945. The corporations sent
him one or two royalty checks, and then decided
that paying lawyers was cheaper than paying him.
Nobody in my family has patented anything since
then. We figure its a waste of time.
While patent trolls are not the most ethical people,
and while most patents issued fail the obviousness
test, I suspect that patent auctions are the best
thing to happen for the independant inventor since
the patent reforms of 1980. The simple reality is
that a patent is of no value unless you have the
money to litigate it. By providing a specialist
firm to take over that part of the patent process,
you improve the overall efficiency of the system.
Finally, these guys are an effective threat in
royalty negotiations: "If you don't make us a
reasonable offer, I'll sell this patent to those
trolls over there, and you can deal with them."
awarded a patent in 1945. The corporations sent
him one or two royalty checks, and then decided
that paying lawyers was cheaper than paying him.
Nobody in my family has patented anything since
then. We figure it's a waste of time.
While patent trolls are not the most ethical people,
and while most patents issued fail the obviousness
test, I suspect that patent auctions are the best
thing to happen for the independant inventor since
the patent reforms of 1980. The simple reality is
that a patent is of no value unless you have the
money to litigate it. By providing a specialist
firm to take over that part of the patent process,
you improve the overall efficiency of the system.
Finally, these guys are an effective threat in
royalty negotiations: "If you don't make us a
reasonable offer, I'll sell this patent to those
trolls over there, and you can deal with them."