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?  

Linking legal and marketing theories regarding secondary pharma patents

Although the seminar which takes place on the afternoon of Thursday 3 November, 5.00pm to 6.30pm, is officially an IPKat event, its subject matter is one which may appeal to many readers of this weblog too. The speaker is Dr Galit Gonen (head of European patent litigation at Teva Pharmaceuticals) and the title of her paper is "Linkages between legal and marketing theories regarding secondary patents for pharmaceuticals". The venue is the London office of Olswang LLP, 90 High Holborn, where incidentally the IP Finance weblog held its first meeting in January 2008.

A panel of experts will comment briefly on the paper (which is based on Galit’s PhD thesis) before it’s thrown open to the floor for general discussion. Mr Justice Arnold (Patents Court, England and Wales), Professor Jo Gibson (Intellectual Property Institute and Queen Mary Intellectual Property Research Institute) and Chris Stothers (IBIL and Arnold & Porter) will be there and it is hoped that the Intellectual Property Institute's Economics Unit will also be represented.

Refreshments will be provided and registration is free. If you'd like to attend, please email Jeremy at the IPKat here and tell him. He will acknowledge your email when he can.

But who will value the patent-valuation patents?

From last week's Tech Transfer E-News (Wednesday April 22, 2009) comes this fascinating information about the fact that the "secondary patent market" has begun to generate its own intellectual property. This news item cites the work of Aaron R. Feigelson (right), an IP attorney at the Chicago law firm Leydig, Voit & Mayer and author of the 12:01 Tuesday blog.  Feigelson reports that least 14 patents US have been directed to valuing or marketing IP, and 11 of these were issued in the past 30 months. This is his list:

• 7,493,262 – Method for valuing intellectual property
• 7,386,460 - System and method for developing and implementing intellectual property marketing
• 7,346,545 - Method and system for payment of intellectual property royalties by interposed sponsor on behalf of consumer over a telecommunications network
• 7,346,518 - System and method for determining the marketability of intellectual property assets
• 7,315-836 - Method for obtaining and allocating investment income based on the capitalization of intellectual property
• 7,292,994 - System and method for establishing value and financing of intellectual property
• 7,272,572 - Method and system for facilitating the transfer of intellectual property
• 7,269,566 - Method for obtaining and allocating investment income based on the capitalization of intellectual property
• 7,228,288 - Method of repeatedly securitizing intellectual property assets and facilitating investments therein
• 7,216,100 - Method for obtaining and allocating investment income based on the capitalization of intellectual property
• 7,188,069 - Method for valuing intellectual property
• 6,959,280 - Method of protecting against a change in value of intellectual property, and product providing such protection
• 6,330,547 - Method and apparatus for establishing and enhancing the creditworthiness of intellectual property
• 6,018,714 - Method of protecting against a change in value of intellectual property, and product providing such protection

There's an opportunity for some splendid circularity here, since the patents listed here are themselves potential subject-matter for their own valuation methodologies.  European patent practitioners are probably heaving a sigh of relief that the business methods exclusions under the European Patent Convention would either render these patents invalid or cast a dark cloud over their value.