Sunday 27 August 2017

The World Turns on IP: Trump, China and New Balance

As the world turns on intellectual property, Trump has refocused efforts on China and intellectual property.  He apparently leaned off China supposedly because of concerns with obtaining China’s help with North Korea.  Now he’s apparently back on track.  Interestingly, The New York Times has recently published a strongly worded Op-Ed by Dennis C. Blair (“former director of national intelligence and a former commander in chief of the United States Pacific Command”) and Keith Alexander (“former commander of the United States Cyber Command and a former director of the National Security Agency”) titled, “China’s Intellectual Property Theft Must Stop.”  The Op-Ed is strong endorsement for Trump’s focus on China’s asserted intellectual property theft.  The Op-Ed states in part:

Chinese companies, with the encouragement of official Chinese policy and often the active participation of government personnel, have been pillaging the intellectual property of American companies. All together, intellectual-property theft costs America up to $600 billion a year, the greatest transfer of wealth in history. China accounts for most of that loss.

Intellectual-property theft covers a wide spectrum: counterfeiting American fashion designs, pirating movies and video games, patent infringement and stealing proprietary technology and software. This assault saps economic growth, costs Americans jobs, weakens our military capability and undercuts a key American competitive advantage — innovation.

Chinese companies have stolen trade secrets from virtually every sector of the American economy: automobiles, auto tires, aviation, chemicals, consumer electronics, electronic trading, industrial software, biotech and pharmaceuticals. Last year U.S. Steel accused Chinese hackers of stealing trade secrets related to the production of lightweight steel, then turning them over to Chinese steel makers.

Perhaps most concerning, China has targeted the American defense industrial base. Chinese spies have gone after private defense contractors and subcontractors, national laboratories, public research universities, think tanks and the American government itself. Chinese agents have gone after the United States’ most significant weapons, such as the F-35 Lightning, the Aegis Combat System and the Patriot missile system; illegally exported unmanned underwater vehicles and thermal-imaging cameras; and stolen documents related to the B-52 bomber, the Delta IV rocket, the F-15 fighter and even the Space Shuttle.

Citation to data backing up the claims in the Op-Ed would be helpful.  It is important to remember though that back in 2015, the New York Times published another article concerning China’s new antiterrorism rules for various foreign companies doing business in China.  The upshot of the rules basically required access to computer source code as a condition to doing business in China.  Industry was objecting at that time for several reasons, including national security as well as intellectual property.  It looks like that problem has not gone away. 

On a positive note, reports from China seem to indicate an uptick in enforcement for intellectual property law theft.  I’ve heard some say this is part of China’s transition to an innovation/services based economy and that they are hard at work at changing beliefs concerning intellectual property.  Notably, New Balance recently received a $1.5 million award concerning trademark infringement from a Chinese company in Suzhou.  This is reportedly the largest award by a Chinese court against a Chinese company in favor of a foreign company.  This award follows the recent decision favoring Michael Jordan and another $500,000 award in Hangzhou concerning New Balance. 

Trump Nominates New Head of USPTO

Trump has nominated Andrei Iancu to lead the United States Patent and Trademark Office.  Mr. Iancu is managing partner of the very well respected Los Angeles based law firm Irell and Manella.  Irell and Manella is home to one of the leading intellectual property law litigators in the United States: Morgan Chu.  Here are a few observations about this pick: 1) former Chief Judge of the Federal Circuit, Randall Rader, was not chosen; 2) Andrei Iancu is based on the west coast in Los Angeles; 3) His clients are from many different industries: biotechnology companies, medical device companies, medical research institutions, computer hardware and software companies, and internet companies; 4) He's handled at least one trademark matter and appears mostly to handle patent cases; 5) He co-teaches patent law at UCLA Law School; 6) He has written a number of papers of varying length concerning patents, including inter partes review proceedings, software patentability and the Eastern District of Texas; 7) He has co-authored (with two associates) a relatively clear and balanced analysis of the pros and cons of inter-partes review proceedings; 8) He has a background in aerospace engineering; 9) He obtained over $1.6 billion in payments for his client TiVo against AT&T, Motorola, Microsoft and Cisco among others; 10) He represented Ariosa Diagnostics against Sequenom; and 11) His firm represented Trump among others involving copyright claims and The Apprentice television show.  This appears to be a strong pick by the embattled Trump Administration. 

Tuesday 22 August 2017

Two New Valuation Seminars

There are two interesting valuation seminars coming up.  The first is by the American Intellectual Property Law Association and is free.  It is tomorrow, Wednesday, August 22, 2017 and remote participation is possible.  The event is titled, “Assessing the Value of Intellectual Property in Rapidly Changing Markets and Law.”  Here is a summary of the event:

Rapidly changing markets and products affect the value of intellectual property.  Traditional methods of valuation are highly challenged, as comparable transactions, costs to develop "equivalent" IP and measuring income streams are all compromised by abbreviated time lines.  So, too, innovation at an increasing pace in certain sectors and rapidly changing intellectual property law (Alice, PTAB developments) heavily impact valuation approaches and outcomes.  Listen to our panel discuss these intriguing challenges.

The Speakers: Philip W. Kline of 284 Partners, LLC; Brian Scarpelli of ACT | The App Association; and David Stein of Cooper Legal Group, LLC

Wednesday, August 23rd, 2017, 12:30 PM ET

The Southern Methodist University Dedman School of Law in Dallas is holding a symposium titled: “The Value of Intellectual Property.”  The description states: “A one-day symposium exploring the latest news, legal developments, and judicial decisions, including panels on: What Drives Innovation; Perspectives on the Value of Intellectual Property; Patent Eligibility; Patent Valuation and Complex Products; The Supreme Court’s Recent IP Cases; and The Patent Trial and Appeal Board.”  The “featured speakers” are: Manny Schecter, Chief Patent Counsel, IBM and Phil Johnson, Senior Vice President – Intellectual Property Strategy and Policy (ret.).  The event is on Friday, September 29, 2017 in Dallas at SMU, Dedman School of Law. 

Wednesday 16 August 2017

USPTO Releases Report on Public Views on Patent Eligibility Rules

The United States Patent and Trademark Office (USPTO) has released a report titled, “PATENT ELIGIBLE SUBJECT MATTER:  REPORT ON VIEWS AND RECOMMENDATIONS FROM THEPUBLIC” (Report) concerning the comments of participants at USPTO sponsored roundtables concerning the patent eligible subject matter requirement, particularly post-Alice/Mayo.  The USPTO summary of the Report states:

Much of the feedback we received highlighted the complexities of determining the appropriate boundaries of patent subject matter eligibility. Commenters confirmed that the recent Supreme Court cases have significantly changed the standards for determining patent subject matter eligibility. Several commenters expressed concern that these decisions have created inconsistency, uncertainty, and unpredictability in the issuance and enforcement of patents, particularly in the life sciences, software, and e-commerce industries.

A diverse group of representatives from academia, industry, law firms, and legal associations proposed legislative changes aimed at reversing the recent trend in the law and restoring, in their view, a more appropriate dividing line between eligible and ineligible subject matter. In contrast, a sizable portion of representatives from the software industry argued that the Court’s two-step test provides an appropriate standard for patent subject matter eligibility. This group cautioned against legislative redress and instead recommended that the common law should be allowed to evolve.

The following is a list of the views against the new rules: “1) Decisions are Legally Flawed; 2) Exceptions are Overbroad; 3) Two Step Test is Unclear and Causes Unpredictability; 4) Preemption Conflates 101 with other Patentability Requirements; 5) Jurisprudence Stifles Innovation and Hurts Business; and 6) Consistency of U.S. Law with International Norms.” Here is a list of the views in favor of the new rules: “1) Common Law Process at Work; 2) Weeds Out Overbroad Patents; 3) Requires Claiming a Specific Way and Not a Result; 4) Litigation Tool Against Patent Assertion Entities; and 5) May Give U.S. Entities an Advantage.” 

On the point in favor of the new rules based on May Give U.S. Entities an Advantage, the Report states:

Even if the Supreme Court’s new eligibility standard differs from standards abroad, a few commentators projected that the difference could actually operate to the benefit of the United States. For example, one commentator argued that because foreign entities have an increasing stake in the U.S. patent system, “[g]eopolitical considerations . . . weigh heavily in favor of” the Supreme Court’s Mayo and Alice decisions.246 In fact, she cautioned that if the U.S. were to adopt an overly expansive patentability standard, then not only would “American inventors, American companies, American investors, and the American public” benefit, but an “equal or greater benefit [would] inure to foreign inventors, foreign companies, and, in some cases foreign governments.”247 Another participant asserted that “if a company is innovating because it can get patents in Germany or Europe but it may not be able to get as much protection in the U.S., that innovation is still happening.” 248 And, she added, “if our consumers can benefit from the additional competition that a lack of patent [protection] provides and pay lower prices here” and “the innovator can still get their investments recouped by getting monopoly profits elsewhere” that may not be a bad deal for our consumers.249

Members of the life sciences community were relatively united in their critique of the new patent eligible subject matter rules.  The computer/related technologies community was apparently less united on whether the patent eligible subject matter rules were a good thing or not. 

There are also several legislative proposals for change, including: Replace the current test with a technological arts or useful arts test; Expressly define exceptions to eligibility; Distinguish eligibility from other patentability requirements; and Establish a research exemption to infringement. 

The text concerning the research exemption states, in relevant part:

Several commentators proposed a legislative amendment to recognize a research exemption from patent infringement for experimentation conducted to better understand or improve a claimed invention.427 According to these commentators, such an amendment would address the Supreme Court’s preemption concerns, i.e., concerns that patents on foundational technological tools may stifle scientific progress by tying up the basic building blocks of human ingenuity.428 One commentator suggested that the exemption could be tailored such that “patents on research tools would be unaffected, but research on a patented invention itself would not be subject to infringement allegations.”429  

The USPTO should be applauded for its hard work in trying to make the patent eligible subject matter rules and their application accessible, and obtaining the public’s viewpoint. 

Tuesday 15 August 2017

University Endowment Size and Patenting

The National Association of Colleges and University Business Officers has released its report concerning U.S. University Endowment Size in 2016.  The top 10 in endowment size, include: 1) Harvard ($34,541,893,000); 2) Yale ($25,408,600,000); 3) University of Texas System ($24,203,213,000); 4) Stanford ($22,398,130,000); 5) Princeton ($22,152,580,000); 6) MIT ($13,181,515,000); 7) University of Pennsylvania ($10,715,364,000); 8) Texas A&M University System ($10,539,526,000); 9) University of Michigan ($9,743,461,000); and 10) Northwestern ($9,648,497,000).  I recently reported on top universities for patenting in the U.S. in 2016. The top 10 of the list includes: 1) The Regents of the University of California: 505 patents; 2) MIT: 278; 3) Stanford: 244; 4) Cal Tech: 201; 5) Tsinghua University/Graduate School at Shenzen: 181; 6) Wisconsin Alumni Research Foundation: 168; 7) John Hopkins: 167; 8) University of Texas: 162; 9) University of Michigan: 142; and 10) Columbia University: 118. There is some overlap on the list, including, MIT, Stanford, University of Texas and University of Michigan.  Interestingly, the endowment of Cal Tech is ranked at 39th at $2,106,724,000 and the University of Wisconsin is at 23rd at $2,419,161,000.  Additionally, universities in the University of California System have separate endowments which appear to be different from the overarching University of California endowment, which is 13th in endowment size at $8,341,072,000. 

Saturday 12 August 2017

The PTAB Ruining the American Dream (?)

The BBC has a wonderful video of a “patent burning” outside the United States Patent and Trademark Office.  Who is burning patents?  American inventors who are protesting the Patent Trial and Appeal Board (PTAB), once called the, “Patent Death Squad,” by former Chief Judge Randall Rader.  The inventors are upset that the PTAB is killing the American Dream and are making an appeal to President Trump to overturn the Obama Administration’s creation.  (Yes, it is the PTAB not skyrocketing home ownership costs that is ruining the American dream.  I guess that bubble will pass as well.) 

This is a nice angle to take since getting the U.S. Supreme Court to overturn itself is much more difficult.  I wonder how attempts to overturn Alice legislatively are doing in Congress. 

Wednesday 2 August 2017

More Matchmaking: Aqua Licensing Offers Access to More than 60,000 Patents

In another attempt to create an efficient marketplace for patents, Aqua Licensing is offering access to a substantial portfolio of patents—“more than 60,000.”  The patents are part of the portfolios of AT&T, Rambus, Lenovo and Entegris, among others.  According to the Aqua Licensing website:

Startups submit business plans to the pool as they would to a venture capital investor, at which point the team of patent experts at AQUA identify IP assets that will improve the defensive position of the company and contribute to its long-term growth and value potential. When a match is made, the IP is offered to the startup in exchange for equity, rather than cash, as part of their next-round of financing. This structure enables the startup to secure the Strategic IP Investment from the technology leader prior to pricing the financing round, allowing the benefits of the secured IP and strategic investment to be reflected in the valuation of that round. In many cases this allow for an immediately accretive acquisition of assets.

This sounds similar to one of Google’s recent efforts.  At least one study has shown that supposed patent trolls may target new companies near significant events such as IPOs.  This type of portfolio may provide defensive protection against practicing entities—which is a valid concern, of course.  According to Bloomberg BNA, Aqua’s program is closer to a marketplace because it can result in patent ownership. 

Trump Administration Suspends Program for Visas for Entrepreneurs

The Trump Administration suspended an Obama Administration program about to go in effect that would provide visas to entrepreneur immigrants.  According to the Wharton School of Business, the program would help create jobs in the United States and had little downside.  The program is apparently similar to others created in Canada, France and Argentina.  Notably, the Trump Administration is supporting new legislation to radically reform the immigration system in the United States by moving to a supposed “merit” based system designed to reduce immigration by 50%.  The Wharton School of Business states:

Immigrants make up about 12% of the U.S. working population, [Hsu] added. Among STEM (science, technology, engineering and math) workers, immigrants make up 24% of bachelors and 47% of doctorates, he continued. “So [immigrant entrepreneurs] are punching above their weight in the talent pool for the workforce that we desire in the U.S.,” he said. He pointed to one much-cited statistic: foreign-born entrepreneurs make up about half the founders in the so-called “billion dollar club” of startups that are worth at least a billion dollars each. 

In an Op-Ed in Crain’s New York Business, Orin Herskowitz, the Senior Vice President of Intellectual Property and Technology Transfer of Columbia University and President of Columbia Technology Ventures, states that:

The rule, one of President Barack Obama’s final acts in office, provides so-called “startup visas” long sought by Silicon Valley. It is narrow, allowing foreign entrepreneurs to live in the United States for 30 months while building their companies. To qualify, applicants must show that they have reputable investment in their company of no less than $250,000 and the potential for a positive impact on economic growth and job creation. The rule has now been delayed until next March, and the Department of Homeland Security has given notice that the administration will propose rescinding the program before then. . . .

There are other storm clouds on the horizon. The president’s proposed budget reduces funding for basic science. And the legal playing field is beginning to tilt against innovators, most dramatically through a retreat from the respect for patent protection recognized by our Constitution more than two centuries ago as a bulwark of our economy. The former director of the U.S. Patent and Trademark Office, David Kappos, points out that a series of court decisions have rendered many biotech and software inventions un-patentable or at best uncertain in the U.S., causing the abandonment of promising research, or the repositioning of that research overseas to China, where affirmative steps have been taken to strengthen patent protection.

[Hat tip to Technology Transfer Central for the lead to the articles.]