The Merger of ipCreate and Article One Partners

Earlier this year, ipCreate and Article One Partners, perhaps best known for enabling crowd sourcing of prior art, announced a merger.  Here is part of the announcement about the merger:

Founded in 2012, ipCreate will continue to provide industry leaders in the US, Europe and Asia with on-demand patented inventions at the chokepoints of disruptive market change, with the patents themselves and related landscape opportunity systematically vetted by AOP’s global network of prior art researchers adding to quality assurance.  With poor quality patents a growing burden on business and the subject of mounting challenges by the courts and the U.S. Patent and Trademark Office (USPTO), the integration of patent quality control processes early in the invention process is expected to fill a vital customer need.

“One of the lessons my three-and-a-half years as head of the Patent and Trademark Office taught me is that businesses benefit greatly from a systemic approach to improving the quality of their patents — and the earlier in the innovation process, the better,” said David Kappos, ipCreate advisor and former Director of the USPTO. “With this merger, ipCreate has now put all the pieces in place to provide clients with high-value innovation on demand backed by unusually high-quality intellectual property.”

. . .

John Cronin, CEO of ipCreate, was also instrumental in the merger. “When I was IBM’s top inventor and ran its ‘patent factory’ in the 1990s, some people thought it was just a numbers game — about having the most patents. That was never what it was about,” he explained. “Our goal was to develop high-quality patented inventions in disruptive technologies. That’s how IBM invented the future. With Article One Partner’s help, that’s what we intend to do again. Only now we plan to invent “on demand” to suit the specific needs of our partners and to the highest standards of quality.”

Article One Partners brings much to the table. "The merger is expected to provide a number of strategic benefits including the ability to leverage AOP’s existing customer base, strong “white-hat” branding, enhanced patent intelligence, patent quality services and increased depth in executive leadership through the addition of Marshall Phelps and the AOP management team."

The board of directors and the advisory group is impressive, including Marshall Phelps, Jr., John Cronin, Peter Holden, Robert Armitage, Ruud Peters, David Kappos and Mike Brochu.  The leadership team is also a distinguished group. 

So, the game is not so much about amassing patents, but strategically acquiring one or a small set of quality patents (read Alice) “at the chokepoint[].”   True enough, most agree that quality patents are not so much a problem; however, litigation “abuse” is something that I am sure others will complain about.  But, I think this group will “work around” that problem with sensible licensing practices. 

Here is a blurb about the philosophy of ipCreate:

Our mission is to forecast the direction of innovation in the fastest-growing new product markets and then create strategic patent portfolios in the disruptive high-value technologies driving that growth. We know first-hand that the greatest value in the IP asset class belongs to a small minority of foundational patents. By working with select leaders in industries undergoing rapid technological disruption – whether dominant players in the market or visionary startups – we will employ ipCreate’s proprietary tools and resources to identify promising innovation areas and rapidly create foundational patents at the chokepoints of looming market change.

With major financial backing, we expect to fund and execute more than 100 strategic invention and IP creation projects and produce thousands of foundational patents by the year 2017. By restoring the historic link between patents and invention (rather than litigation), ipCreate also hopes to strengthen a patent system that is crucial to U.S. competitiveness.

I think the merger with Article One Partners is a pretty damn good idea.  Who doesn't want to wear a "white hat?"  I do wonder how many of the researchers will go along with the new venture.  [I have to say that I also like how they put “ip” in lower case letters and capitalize the “C” in create.]  What do you think?

Crowdsourcing against "Bad" Patents and Patent Trolls: But Not All Black and White

The notion that there are "bad" patents, which I take to mean that the patent should never have been granted -- or that even if it was granted, the scope of the claims are too broad -- is widely expressed. There is a parallel Darth Vader patent notion, namely, the deleterious effects of the patent troll. Here, it is presumed that some little-known and, more or less, penurious patentee, is the owner of an over-broad patent, which he has transferred to the patent troll, who then seeks to terrorize multiple persons acting within the industry covered by the patent.

It is not my purpose here to focus on the correctness of the claim that there are "bad" patents and that such patents are sometimes abused by patent trolls. Rather, let's assume for purposes of this discussion that there is a basis for such views. As such, the question becomes: how can persons who perceive themselves threatened by bad patents and patent trolls combat this challenge?

One particularly interesting response was described in an article in the January 17, 2013 issue of Bloomberg BusinessWeek as "Crowdsourcing the Fight Against Tech Patent Trolls" here. Written by Olga Kharif, the article focuses on the activities of a company called Article One Partners here, which is described as "a website where more than 27,000 researchers sift through obscure public domain materials including scientific papers, Ph.D. theses, and even product manuals to poke holes in legal claims—and possibly earn thousands of dollars."

The business model seems to be as follows. The company charges prospective clients either a one-time fee (the range of which was not indicated) or an annual membership fee (the cost of which was also not indicated). Corporate client include companies such as Philips (which asked Article One in 2011 to examine 33 patents), Microsoft and Sony. The company pays an amount ranging from $3,000-$5,000 to the researchers who come up with what is described as "the best research". Since the creation of the company in 2008, it has paid $3.69 million to researchers; half of this amount was paid for studies carried out in 2012. It is reported that 8% of the approximately 27,000 researchers earn more than $50,500 per annum.

The Company uses an algorithm to winnow research submissions in order to find materials deemed most germane to the client's matter. Five members of the company's staff then further narrow the search results and the client itself is able to refine the search through tools available on the company's website. Gerard Pennekoek, CEO of a start-up called International Property Exchange International here, observed that ""crowdsourced model works better than any grouping of staff that you bring in-house" (although, to be balanced here, two of the members of the board of directors of International Property Exchange International are listed on the company's website as Ruud Peters, the chief intellectual property officer of Philips and an apparent source of the information about Philips Electronics' use of the services of Article One described below, and Marshall Phelps, formerly head of intellectual policy and strategy at Microsoft and a reported investor in Article One Partners). The article describes how Philips Electronics paid Article One approximately $100,000 to find conclusive prior art that convinced a would-be plaintiff to back down from a threat of filing an action for infringement. Philips had turned to Article One because, according to the report, its own in-house lawyers had found it difficult to come up with "a viable defense."

While all of this sounds jolly good, I have a some concern about discussions concerning this crowdsourcing-based business model have been bolted onto a form of IP morality play (who can be against rooting out "bad" patents and tempering rapacious patent trolls). In particular, the article does not bring any example of a small company, with limited resources, which has been able to deflect a claim for infringement by relying on research results from Article One. I agree that patent litigation, especially in the U.S., can be ghastly expensive. However, the real victim in the cost structure of patent litigation is not the multinational company (who may well be tomorrow's infringement plaintiff), but the small entity who cannot afford to defend, and as a result, often will seek an early, usually unfavourable settlement or engage in all-out capitulation, even when the legal basis for the case is flimsy. Until Article One and like companies can be shown to provide an effective and cost-effective service to such small entities, the morality play dimension of their activities must be taken with a proverbial grain of salt.