Nothing New in the World of Patents: "Patent Licensing and Secondary Markets in the Nineteenth Century"

In a recent blog post "Nothing New Under the Sun: “Patent Trolls” Have Been Around Forever," I discussed Professor Zorina Khan's review of Nineteenth century patent assertion entities.  In a recent essay, Professor Adam Mossoff of George Mason University Law School provides another supportive account of patent licensing and secondary markets in the Nineteenth century.  Specifically, Professor Mossoff, in a short and readable paper, "calls out" those commentators who assert that the "patent licensing business model" is a new phenomena. Professor Mossoff summarizes and reviews Professor Khan's research as well as the research of other historians that demonstrates there really is nothing new (at least not much) in the world of patents. 

Professor Mossoff provides the example of three inventors who licensed their patents.  He discusses Charles Goodyear (process for vulcanized rubber), Elias Howe, Jr. (lockstitch in sewing machines), and Thomas Alva Edison.  About Goodyear, Mossoff notes, "Some of Goodyear's assignees and exclusive licensees, who were patent licensing companies themselves, filed hundreds of lawsuits in the nineteenth century; they sued firms, individuals, and even many end-users such as dentists, for patent infringement."  He further states that, "Contrary to many claims today, end-user lawsuits even by patent licensing companies are nothing new in America's innovation economy."  

Notably, Mossoff states that Howe used "third-party litigation financing."  Howe also joined "the first patent pool in American history."  "[Howe] made almost the entirety of his fortune on the basis of the royalty stream from his license to this patent pool, which further licensed his rights to other companies."  Mossoff makes an interesting point about Edison.  Interestingly, he notes that Edison was famously a terrible businessman, but a great inventor.  The point here seems to be that specialization matters--licensing for commercialization to those who know how to do it is critical to getting patented inventions to the public. Not all inventors will be good businessmen--experts in manufacturing or finance. Edison's "employ[ment of] the patent licensing business easily meets today's definition of an 'NPE.'"  

Professor Mossoff also provides interesting examples of the secondary market, which include the classified advertisements in the magazine Scientific American. The classified advertisements included numerous "ads for the sale of patents and patent rights."  Moreover, he discusses the research of economists Naomi R. Lamoreaux, Kenneth Sokoloff, and Dhanoos Sutthiphisal: "Their research revealed the fundamental and significant role performed by a group of market intermediaries known at the time as 'patent agents.'"  Professor Mossoff asserts that these "patent agents" are "predecessors of today's patent aggregators." 

Finally, Professor Mossoff states that a historian notes "after detailing the problems for nineteenth-century inventors who usually lacked manufacturing and commercial finance skills, that 'given the risks associated with manufacturing, many nineteenth-century inventors preferred to either sell or license their patents.'"  He concludes that, "In sum, it is simply false to assert that these commercial mechanisms for bringing patented innovation to market are a new phenomenon today." What should be the role of this type of research given the state of the debate on NPEs/PAEs today?  Does it change the analysis concerning the merits of NPEs/PAEs?  

Patent Trolls Have a New Competitor: Google’s Patent Purchase Promotion Program

In an apparent effort to “clear up the secondary market for patents,” Google has launched its Patent Purchase Promotion Program.  Google is offering to purchase your patents.  The details regarding the submission process are here.  The general timeline for the program is as follows:  

April 27, 2015 Patent Purchase Promotion is Announced

May 8 to May 22 Submission Window is Open

May 23 to June 26 Submission Review Period

By June 26 Parties notified either of our intent to move on to the next stage ( e.g ., some further diligence) or our intent to pass on the opportunity.

By July 8 Parties that are notified of Google’s tentative intent to purchase must supply further information to Google regarding encumbrances, litigation, etc. and provide a signed agreement, banking information, and relevant tax related information.

By July 22 Google will further review the additional materials provided. Assuming Google remains interested in completing the transaction upon review of the above material, Google will return a fully executed agreement within about 10 days of receipt (and no later than July 22, 2015) and payment will occur within 30 business days thereafter.

As recently discussed here, patent package sales are up.  However, Google only allows you to submit one patent at a time, but a party can make multiple submissions.  This, perhaps, allows the submitter to focus on the patents of value.  Indeed, the submitter must disclose the sales price up front and is essentially “locked in” to that price (at least, I think, as a ceiling).  If a sale is approved, the submitter retains a non-exclusive, fully paid up, non-transferable, non-assignable, non-sublicensable worldwide license to practice the invention.  The sales agreement is here.  The program currently only applies to U.S. patents.  A good idea?  Google does state that the program is an experiment--perhaps patents from other jurisdictions are next. For more commentary, see Corporate Counsel’s Lisa Shuchman’s article, “Google Wants to Outfox Trolls by Buying Up Patents” (April 28, 2015).