FTC report has no harsh words for patent trolls

On October 6th, Fortune published an article discussing the recent patent assertion entity (PAE) study released by the Federal Trade Commission (FTC). The title of the Fortune article reads, “The FTC Patent Report Has Some Harsh Words for Patent Trolls.”

Interestingly, however, the FTC did not have harsh words for patent trolls. In fact, the FTC report specifically explained that using the term “patent troll” is unhelpful. Early on in Chapter One of the report, it reads: “In the Commission’s view, a label like ‘patent troll’ is unhelpful because it invites pre-judgment about the societal impact of patent assertion activity without an understand of the underlying business model that fuels such activity.”

What the FTC’s report did address was several interesting issues posed by what is referred to as “nuisance litigation,” or in the view of the FTC, litigation that leads to licenses less than $300,000. The FTC chose $300,000 as the threshold because it is the lower bound for early-stage litigation costs. But what does the cost of litigation defense have to do with whether an assertion of patent rights is merely for nuisance value?

“The $300,000 line in the sand gets back to a point I’ve spoken on before,” explained Jaime Siegel, CEO of Cerebral Assets and Global Director of Licensing for the Open Invention Network (OIN). “Built into the system is a mismatch in valuation. Not every patent license is worth $1 million. I’m aware of patents that were valued at a $25,000 license, which was set not to be a nuisance, but rather because the alternative was a $50,000 work around, so the appropriate price was less than that amount. A patent license should be based on how much value is in the license, and it isn’t always $1 million.”

“$300,000 is a completely arbitrary number that attempts to put patent licenses into buckets and suggests that if it is $300,000 and below it must be a sham claim, and that generalization is absolutely untrue,” Siegel explained. “What makes a nuisance claim a nuisance claim is when a patent is not infringed or is almost certainly invalid; that is what makes a case a nuisance settlement. When a patent owner says we know we have a lousy patent, but we know the defendant will pay us X dollars because it costs so much to litigate, that is what makes a nuisance case.”

Of course, Fortune did not explore the merits of the FTC report, which is odd given it has long been regarded as one of the preeminent business publications. Instead, the Fortune article continues to force a ‘patent troll’ narrative on false pretenses. Indeed, the article obviously leaves out important facts and maybe gets other facts wrong, and seems to wrongly conflate PAEs with non-practicing entities (NPEs). Whereas a PAE is an entity that obtains patents to license or enforce them on other parties already practicing the technology, the FTC report defines NPEs separately as “patent owners that primarily seek to develop and transfer technology.” Technology transfer is a different business model than patent assertion, and something Fortune should be well aware of, but somehow seems to have missed.

That is improperly reporting what was said in this very important FTC report that will undoubtedly be used come January 2017 by those seeking further patent reform. But given the rather obvious errors in this article and Fortune’s past history of siding with the infringer lobby, legitimate questions can and should be raised.

FTC finally releases long-awaited report on PAEs

On September 27th, 2013, the Federal Trade Commission (FTC) announced that it had voted to collect public comments and gather information on 25 companies known as patent assertion entities (PAEs). The study was intended to shed more light on the PAE business model and create a better understanding of how their patent litigation activities affect innovation and competition in the U.S. economy. As defined by the FTC, PAEs are companies that do not produce, manufacture or sell goods but rather acquire patents from third parties which the PAE monetizes through negotiating licenses or litigating against an alleged infringer.

On October 6th, 2016, the FTC released the long-awaited findings of this report, titled Patent Assertion Entity Activity: An FTC Study, which includes analysis of 22 PAE respondents and more than 2,500 affiliates and related entities, conducted between January 2009 and mid-September 2014. The report’s findings and recommendations for legislative and judicial reform were intended to “balance the needs of patent holders with the goal of reducing nuisance litigation,” according to a quote attributed to FTC Chairwoman Edith Ramirez in the FTC’s official press release. Specifically, the FTC had concerns about the ex post nature of PAE patent transactions, in which licenses or settlements occur after a target has already developed a technology for marketing.

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The dearth of women in patenting cannot be explained completely by the lower numbers of women in STEM careers

A recent study released from the Institute for Women’s Policy Research (IWPR) reveals that much progress has been made to close the patent gender gap over the last four decades. Sadly, despite the fact that the number of women inventors has quintupled since the 1970s, less than 20% of issued U.S. patents have at least one woman inventor and only 7.7% of issued U.S. patents list a woman as the primary inventor. Much work still needs to be done in order to take advantage of the vast resources of creative potential in this largely untapped talent pool.

To further the discussion, I recently conducted a roundtable interview with three women who have given this matter a great deal of thought. One of them, Jennifer Gottwald (pictured left)  is a Licensing Manager in the Technology Commercialization Department at the Wisconsin Alumni Research Foundation (WARF). I asked her whether there are fewer women on patents simply because there are fewer women in STEM fields? Her answer: No. The lack of women as inventors who use the patent system goes beyond the mere fact that fewer women pursue STEM careers. Read the rest of this entry »

10.12.16 | Patent Issues, posts | Gene Quinn

Hearing on Examiner Fraud Leaves No Resolution

In mid-September, the House Judiciary Committee held what seemed like it was going to be an oversight hearing to address the allegations of timekeeping fraud by patent examiners made in the Inspector General’s recent report. Prepared statements released in advance of the hearing talked tough, but that was pretty much it. Insofar as getting to the root of the problems identified in the IG report the hearing turned out to be a big, fat nothing.

Congressman Jerrold Nadler (D-NY) (pictured left at the hearing) defended the Office in his prepared remarks, explaining that there were flaws with the methodology of the IG study, which make the conclusions unreliable. For example, it is entirely possible that patent examiners were indeed working while they were not logged into the Patent Office computer systems. After all, examination is a job that requires a lot of reading and contemplation, much of which might occur without being logged into the server. Of course, that, at best, means there is no way to know whether patent examiners are working or not, which is why the IG report recommended the sensible step of requiring patent examiners to log into the Office computer systems whenever they are working.

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10.11.16 | Congress, Patent Issues, USPTO | Gene Quinn

“Shark Tank”-funded inflatable, solar-powered LED company receives first patent

Earlier this summer, LuminAID issued a press release to announce that it had been issued a patent grant from the U.S. Patent and Trademark Office which covers its inflatable solar-powered LED technology. The patent is U.S. Patent No. 9347629, issued under the title Inflatable Solar-Powered Light. The inflatable solar-powered light claimed in this patent has an expandable bladder and a solar-powered light assembly positioned on a plastic surface and having a circuit board, a rechargeable battery, a solar panel and at least one LED; the plastic covering the solar panel and other components is both substantially transparent and waterproof.

As the patent’s background section notes, one of every six people in this world lack access to stable electricity. Often, people without access to electricity will use kerosene, a dangerous and toxic substance that can cost up to 30 percent of a person’s income in underdeveloped regions. This solar-lighting solution achieves the favorable outcomes of being easy to transport while eliminating recurring energy costs as well as the limited resources of non-rechargeable batteries.

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09.28.16 | Patent Issues | Gene Quinn

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