Patent Strategy in the Modern Economy
Presented by Bruce Abramson, Ph.D., J.D.
www.bdabramson.com
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Introduction:Why Patents?
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POLICY OBJECTIVE
…. to promote the progress of
science and useful arts, by
securing for limited times to
authors and inventors the
exclusive right to their respective
writings and discoveries.U.S. Constitution, Art. I, Cl. 8
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THE CAREFUL BALANCE
Patent law protects exclusivity;
Exclusivity is a societal cost and a private benefit;
Knowledge is private contribution and a societal benefit:
Innovation economics explains the tradeoff;
All elements of patent theory are debated.
Exclusivity ”promotes” knowledge by motivating disclosure;
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The Basics:Patentin
g Today
cc image courtesy of flickr.com/julianbleecker
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SELECTED LEGAL TIDBITS
First to file since March 2013
20 year patent life “Patentability” controversies
surround software, business methods, &
genetics
Invention must be novel and
nonobvious
"Prosecution" is a dance between inventor & PTOPatents, once issued,
are presumed valid
Specifications & file wrapper
explain/constrain the claims
Claims explain what the patentee
owns
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PATENT LITIGATION
A patent is the right to file a lawsuit;
Standards for filing a “nonfrivolous” lawsuit are rising, but still modest;
Patent litigation is a strategic endeavor;
Large companies often complain about “Non-practicing entities” (NPEs, a.k.a Trolls);
There are many different types of NPEs;
Lobbyists are actively trying to change the rules of patent litigation.
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EXCLUSIVITY ECONOMICS
cc image courtesy of flickr.com/robnguyen01
Free markets hate exclusivity;
Antitrust law polices exclusive behavior;
Patents enable exclusivity
Economic views of both antitrust and patents change over time;
Legal views may lag, but eventually follow economic views;
Current view is that competition and innovation are both pro-growth.
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History:Roots of Patent Power
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ANCIENT HISTORY
1790 1890Mid 20th Century
U.S. patent
law dates
back to 1790;
U.S. antitrust
law dates
back to 1890;
Mid-20th
century view:
"Big is bad;"
Strong antitrust enforcement;
Unfavorable view of patents
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THE PROBLEM
The 1970’s, an era of economic malaise;
OBSERVATION #1
Japan & Germany
surpass U.S. in
commercialization
OBSERVATION #2
U.S. leads in
innovation
JAPAN GERMANY U.S.A
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THE SOLUTION
Revitalize the American patent
system;
Turn patents into useful tools of business strategy.
HOW?
Strengthen patents and add coherence to patent law.
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DAWN OF THE MODERN ERA
1980 1984
Between 1980 and 1984
Bayh-Dole Act
motivate universities to commercialize
FCIA
centralize patent appeals
Hatch-Waxman Act
alter pharma relationships
Diamond v. Chakrabarty
synthetic organisms are patentable
Diamond v. Diehr
algorithms are patentable
End of the Nine No-Nos
loosen antitrust scrutiny over patentees.
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THE GOOD NEWS
U.S. retained its lead in innovation;
IT WORKED!
U.S. regained its lead in commercialization;
U.S. economy boomed for more than two decades.
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THE BAD NEWS
The patent
system is
stuck in
“strengthen”
mode.
Thirty years
is long
enough for
people to
find
loopholes.
You have to
deal with the
consequences
.
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Upshot:What's it to you?
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THE QUESTION
How can today’s inventors, entrepreneurs,
innovators, entrants, and incumbents navigate the
contemporary “strong patent” terrain?
How should lawyers and strategists counsel such clients?
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THE TERRAIN
Uniformity independent of industry structure, capital needs, R&D patterns, or the relationship
between innovation and commercialization;
Variance in tools and training leads to highly variable patent
quality;
Presumption of validity authorizes patentees to reduce, restrain, and contest all products in or near its claimed sphere of
exclusivity;
All recent and current legislative proposals represent tinkering at
the edges.
cc image courtesy of flickr.com/banjaxx
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THE MESSAGE
Get used to it!
Make it work for you!
You must understand this terrain and how it applies to your industry!
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Strategy:The Players
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BIG INCUMBENTS
Build big portfolios;
Shape relationship with direct competitors:
Police entrants:
CROSS-LICENSING; LITIGATION; NEGOTIATION;
STANDARD-SETTING;
TRADE ORGANIZATIONS.
ESTABLISH BARRIERS TO ENTRY;
LEVERAGE INTO
ADJACENT MARKETS;
PRACTICE DEFENSIVE LITIGATION.
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SMALL COMPANIES
Choose between practice and enforcement;
Leverage critical patents to punch above their weight;
License in ways that constrain larger companies;
Litigate;
Attract investment capital;
Grow quickly.
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NON-PRACTICING ENTITIES
Source: Patent Troll by Bob MacNeil
Inventors, aggregators, investment funds, trial
lawyers, universities, and others qualify as
NPEs.
NPEs possessing patents but no products can file—or simply threaten—strategic lawsuits of varying quality against anyone even plausibly
encroaching their claims;
Numerous strategic opportunities;
Untapped investment potential.
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Strategy:Considerations
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PATENT ECONOMIC GROWTH
Someone must deploy the patent's teachings in a product or service.
Three candidate sets:
THE PATENTEE
(PRACTICE)AN AUTHORIZED
USER
(LICENSE)
AN INFRINGER
(LITIGATE)
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PATENT DISTRIBUTION
Sales
Why buy a patent?
One step closer to practice;
Improved defensive position;
Improved negotiating leverage;
Greater fool theory.
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DUE DILIGENCE
When building a portfolio or divesting patents
Verify ownership; Explore prior art;Check for liens and
encumbrances;
Review prosecution
history.
Inquire about
enforceability issues;
Shenanigans at the PTO?Maintenance fees?
ALSO...Assess backward, forward, and internal citations;
Consider market potential and ease of workaround;
Study prior litigation/proceedings.
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FREEDOM TO OPERATE
Can you work around existing patents?
Often formal in Pharma, but critical everywhere;
Specific to a jurisdiction;
Requires inquiries into validation and claim construction;
Notoriously difficult;
Impossible to guarantee;
Can be quite expensive;
Is it right for you?
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VALUATION
An "Art and Science;"
Makes sense only in context;
Must posit a growth scenario;
Many unknowns, many theories;
ACCOUNTING; BOOK VALUE;
GEORGIA PACIFIC
FACTORS;
LICENSING RULES OF THUMB;
REAL OPTIONS; COST BASIS;
etc.
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VALUATION?
Do you really want to know the value? Or are you just trying to satisfy:
IRS; SEC; COURTS;
Due diligence requirement;
Done deal.
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DEFENSES
No magic, but;
Understand the terrain;
Preempt;
Invest in analysis;
Negotiate;
Conduct FTO;
Be smart.
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SPOTTING OPPORTUNITIES
No magic, but;
Understand the terrain;
Preempt;
Invest in analysis;
Negotiate;
Conduct FTO;
Be smart.
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Closing QuestionHow Many Grains
of Salt?
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ABOUT BRUCE ABRAMSON Partner, Rimon, P.C., www.rimonlaw.com;
Ph.D. in Computer Science (Columbia), J.D. (Georgetown) & Registered Patent Attorney;
Former Law Clerk (CAFC), CS Professor (USC), & Economic Consultant (CRA);
Strategic practice leverages client ideas into business plans;
Transactional practice provides IP valuation & licensing services;
Litigation practice offers expert testimony on damages, technology, and industry practice;
Research focuses on the IP/Antitrust interface.
Firm tailors corporate, transactional, IP, and litigation services to tech companies.
Client-sensitive value-based pricing;
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QUESTIONS????
www.bdabramson.comwww.rimonlaw.com/professionals/bruce-abramson
Bruce Abramson, Ph.D., J.D.
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Thank Youfor Your Time.
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