Undoubtedly, the biggest news in the IP community in the past few weeks was the verdict from a California jury that hammered Samsung on May 24th with a $539M award in favor of Apple for literally…cutting corners as per image below.
A Samsung and Apple smartphone are displayed on August 6, 2014 in London. (Peter Macdiarmid/Getty Images)
The main ground for the violation and the resulting damages arose from the fact that Samsung replicated the smooth curved edges of the then iPhone, which was a new design (remember those purely rectangular phones?) and one which Apple had protected by a design patent. This was the latest chapter in a legal saga that could be considered a sweeping novel with several storylines dedicated to the court system. Samsung was already found liable in a 2012 trial, but the parties disagreed over the amount to be paid (Samsung already paid $399M last year after losing before the US Supreme Court). This led to a retrial over damages.
To the uninformed, this looks like a great victory for Apple. In reality, the clear winner here is Samsung and here is why: by imitating rather than innovating, Samsung clearly exposed itself to the wrath of the legal system as the court recognized that it had “slavishly” copied some elements of the iPhone. But by reducing the perceived differences between the iPhone and Android-based Galaxy, Samsung gained over the years significant market share over a then dominant Apple, each percentage point of which being worth in the billions of dollars. So what’s the gain in market share worth to Samsung? It would appear the settlement decisions are a small price to pay for 7 years in market capture opportunity. And the only reason we tell the story is that the players were both Fortune 50 companies. Just replace Apple by any smaller company and this case would have been closed 7 years ago with a free or low fee license by a patent owner who just could not afford to pick a fight with Goliath.
Whether you agree or disagree with this analysis and while nobody is going to shed tears for either behemoth, this story serves as a powerful metaphor that cutting corners when it comes to intellectual property does pay off most of the time. Forget patent trolls; the real winners of the IP power game are those we call “efficient infringers”, i.e. companies who “deliberately choose to infringe a patent given that it is cheaper than to license the patent”, as the term is defined by the George Mason University’s Center for the Protection of Intellectual Property.
Efficient infringers chose to “aggregate” other companies’ IP rather than innovate themselves, as the cost is free, the risks are low and the consequences, if they ever occur, are spread over many years and generally much less expensive than having to come up with the innovation in the first place. This is why large US tech companies have lobbied extremely hard over the past decade to water down patent rights, as a weak patent system is fertile ground for efficient infringement. As their anti-troll narrative has been greatly debunked in the past year, they have found new creative ways to pursue their agenda such as impersonating startups and SMEs alike, who happen to be the primary victims of efficient infringement. Indeed, it was reported a few days ago that a Washington D.C. startup advocacy group called Engine “that purports to be a voice for startup tech companies is actually a sock puppet for Google”, with its formation and early membership pointing straight to Mountain View. (Note: While Google does disclose that it supports Engine among 21 other non-profits, it does so in the context of its Policy Fellowship Program only, a kind of summer internship program.) This is just the tip of the iceberg however and Big Tech has been quite adept for some time at doing “stealth lobbying” and creating or co-opting several organizations that one would expect to be at the extreme opposite of their agenda and yet end up pushing a narrative that is somewhat sympathetic of their apparent foes. This goes back to comments I made in a previous column where I was deploring the politicizing of the US IP institutions, with massive sums of money being poured into creating a system that favors the large incumbents.
This is definitely an area where they haven’t been cutting corners!
Buyers & Sellers:
The Chinese patent market continues to maintain its robust activity level, as smartphone company Oppo enlarged its portfolio by acquiring assets from Intel, Sharp and a small US-based tech company. Another important transaction involved the news app giant, Toutiao, who has finally penetrated the US market through several recorded patent assignments. These assignments constitute a first effort for the multi-billion dollar company to establish its presence in the US market, preparing for upcoming patent disputes.
Also in Asia, Sony transferred more than a hundred patents to a subsidiary of the Marconi Group, WiFi One LLC. This transaction marks the third assignment from Sony to the Marconi Group, who already participated in two previous patent pools.
Meanwhile, the privateering model is still alive and well, as one can look no further than a recent transaction whereby IBM assigned more than 40 patents to NPE Finjan, all related to cybersecurity. Speaking of NPEs, WiLAN also just acquired an important portfolio from Panasonic; including 34 families, for a total of 96 patents, all related to security camera surveillance technology. It can easily be inferred that all the transactions highlighted above have one thing in common: an enforcement is on the horizon.
Once again, large technology companies have pooled their efforts to invite inventors and patent owners alike to submit fixed priced patents for sale through AST who will be overseeing the process. If past years may serve as a predictor of the outcome, expect a very small number of deals at a very low price per patent, much lower indeed than when selling on the secondary market via a reputable broker.
Winners & Losers:
In addition to the well-reported Apple verdict against Samsung discussed above, Apple also had another great win (along with Fitbit) as the PTAB invalidated the wearable health metrics patent design held by Valencell which had been asserted against them. While it was a good 2 weeks for Apple, the same cannot be said for Samsung, who was unsuccessful at convincing the PTAB to allow an IPR on a semiconductor technology with alleged infringement. While patent litigation has found a better life in Germany and China as patent owners fare much better odds, it does not mean they win all the time. In Germany, Firecomms won its challenge to the lawsuit brought by Broadcom as the suit involved resonant cavity emitting diodes (RCLED) patents and was dismissed with prejudice against Broadcom.
Meanwhile, back in the US, the court ordered Ryobi, the garage door maker, to pay $11.4M to Chamberlain Group, as it trebled the amount demanded in Chamberlain’s complaint based on Ryobi’s “egregious” behavior. A US judge also reversed a jury verdict finding Novozymes Escapes liable for $7.5M to U.S. Water Services, after invalidating U.S. Water Services challenged patents. Finally, the PTAB refused Microsoft’s request to review an auto-zoom patent used by Philips in their mobile device.
Perhaps this is yet another sign that IPRs may not be the slam dunk challenge of recent past anymore…
News percolated recently that Starbucks agreed to license its series of products to Nestle for $7.15B. Thanks to that deal, Nestle will obtain the exclusive rights to sell Starbuck’s products around the world. This is one the bean counters obviously worked hard on!
Similarly, Nokia announced that it successfully concluded the sale of its Digital Health business to Eric Careel. This sale occurs after Nokia’s recent business model revision.
Several large companies have decided to settle their costly legal disputes and agree to licensing terms instead. First, LG and Hera have settled a legal dispute by agreeing to a Wi-Fi licensing deal. Similarly, Sound United and Sonos have agreedto settle their legal dispute through a confidential licensing agreement, which seems to indicate there is value and strength in the Sonos portfolio. Finally, things would not be complete without yet another licensing deal struck by TiVO, this time with giant European retailer FNAC.
I’ll See You in Court:
The court clerks’ have kept plenty busy this month. For the second time, Voip-Pal has filed a suit against Apple, alleging that the iPhone applications, FaceTime, and iMessage infringe on particular patents held by the company. Speaking of Apple, it has filed for a judgment on the pleadings asserting that four of Qualcomm’s patents, relating to the iPhone, are invalid. Meanwhile, Blue Spike has filed a lawsuit against Frontier and is looking for $210M in damages for the alleged infringement of watermark embedding technologies. And lastly, Nike put its sneakered-foot down by filing a complaint against Puma with regards to its popular Flyknit, Air and cleat technologies.
On the NPE front, an affiliate of IP Valuation Partners has filed suit against three major retail players (Home Depot, Staples and Office Depot) for infringement of patents protecting e-commerce search features.
From the Bench:
The Federal Circuit refused to declare “patentable” a financial software patent. Notwithstanding the advance in the financial field admittedly brought by the software, the claims were found ineligible for relying entirely on abstract ideas. Another victim of Alice. However, in a matter involving HP and Green Shades Software, the almost unanimous federal circuit (one dissent) has voted not to review two cases that held that patent eligibility is in part a factual issue. This is a major development as we addressed this matter in a recent column and could be a game changer in terms of the economics of a patent case. Suddenly, the licensing path may be much more compelling to a party allegedly infringing a patent if the patentability aspect is pushed to trial.
Also very important to some patent owners, on a constitutional level, this week, the Federal Circuit will address the question of whether tribal sovereign immunity can shelter a validity review from the PTAB. If those end up being shielded from IPR challenges, native tribes (and Universities) could quickly become active acquirers of patents, as they will yield a significant advantage over other patent owners who still have to account for the PTAB process.
Around the world:
Across the border, the Canadian government has been warned to watch out for Huawei’s passive usurpation of Canadian University 5G mobile technology IP. Huawei has already invested more than $50M CAD into 13 Canadian universities and has filed more than one hundred patents resulting from that research. Before the Huawei news, the Canadian government had announced its intention to invest$88.3M CAD in Canadian IP strategy and Education. This news comes as Canada has made clear its plan to move towards an innovation-driven economy.
In China, one of the highest IP tribunals has issued guidelines for Standard-Essential Patent (SEP) disputes in the field of telecommunication and other areas. The guidance addresses FRAND compliance framework, injunctive relief procurement, FRAND royalties factors, etc. Also in Asia, Singapore has kickstartedits Open Innovation Platform; a crowd-sourcing platform which aims to bridge the gap between companies and business opportunities.
Great news for South Africa; after nine years of work, the country has finally decided on its new national IP policy. Lastly, the EU has implemented a new trademark regulation which mandates for a graphic and electronic representation of the trademark, as well as digitization of the multiple-layered application process.
On the Legislative Front:
This month, the US government will implement its investment restriction scheme against China relating to appropriation of specific technologies by Chinese entities, as well as a 25% tariff on Chinese imported goods. The USPTO has also proposed to use the federal courts’ standards to interpret claims, mainly by opting for the “ordinary and customary meaning” used by the federal courts, instead of the “broadest reasonable interpretation or BRI.” Finally, two members of the House have introduced a bill that would retain the USPTO’s authority to set its fees, for the next decade. This proposal replicates a similar document presented to the Senate in March.
On the Move:
Dr. Henry Tirry has been named CTO at publicly traded NPE Interdigital, while Google has lost yet another strong IP player to Facebook. Jeremiah Chan has recently joined the social media company to become their new Head of Patents.
These and other relevant news below.Happy reading!
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