IP Market Updates
November 22, 2016
I was a guest speaker a few days ago in New York City at the 3rd Annual IP Dealmakers Forum, where the who’s who of the IP market and investment community meet every year to reflect on the latest developments. No doubt, the talk of the day was the potential impact a Trump administration might have on the patent and innovation ecosystem going forward. I wrote about this topic last week and turns out my take on it was largely shared by other speakers. Indeed, despite the lack of specificity during the presidential campaign, there was a general consensus that the narrative against patent rights that has been prevalent under the Obama administration should gradually subside and we shouldn’t expect the patent reform crusade on the hill to be a high priority for the new administration. Furthermore, with the upcoming resignation (as she is a political appointee) of current USPTO director Michelle Lee, there is a short-term opportunity for her replacement to come in and change the tone -at both the PTO and PTAB levels- to make those groups more patent owners friendly.
Here are a few other highlights from the conference:
- We’ve now hit rock bottom: Call this wishful thinking if you want, but there was a definite sense that we had hit rock bottom in terms of patent valuations as an asset class in the US. This is due in part to factors I wrote about these past months, namely i) a lower test for enhancing damages against infringers; ii) more clarity on patent eligible subject matter and iii) a general understanding by even the most anti-troll supporters (except, as always, for Google) that this has gone too far and the current weakening of the US patent system is stifling innovation. This seems to be reflected in the asking price per patent that has been offered by the brokerage community, as we saw a slight increase in the last quarter over the preceding one (see table below). Since many patents never sell and most transactions are not reported, it is always hard to determine an average price per patent actually sold (let alone that this is an exercise in futility as each patent is unique). Nevertheless, the facts that the asking price is increasing quarter over quarter reflects a level of confidence by sellers that the market is shifting in the right direction, even though buyers have not necessarily adjusted yet to this new reality.
- China and Germany are where things are happening: We heard ample evidence from speakers and participants alike that Germany and China are now in the process of supplanting the US in terms of where the next patent battles are waged. Both countries have a very strong patent enforcement system (yes, even China- keep reading), their decisions are issued within months, enforcing patent rights there costs only a fraction of the price of a similar lawsuit in the US and their judges are not shying away from issuing injunctions. The most surprising data is coming from China where patent plaintiffs win 75% or more of the time and, surprisingly, foreign patent owners do much better than Chinese ones. Chinese IP courts also issue injunctive relief in almost 100% of the cases where the plaintiff are victorious (see table below), thus making sure infringing goods never leave the plant where they are assembled. It is to be noted that courts in Germany or China do regard patents as a property right and therefore do not discriminate between the inventor or any subsequent acquirer, such as a Non-Practicing Entity (NPE). This in turns provides the then patent owners with a huge lever, as it used to be the case in the US before the Supreme Court decision in eBay. We also heard that the relatively low level of damages awarded in China for patent infringement up to this day is about to change; going forward, a patent owner will simply have to state the level of damages it believes to have suffered from infringing activities to see the burden of proof shift to the defendant to dispute these numbers. We predict that this procedural change will have a major impact going forward. We therefore renew or guidance that patent owners file their core inventions in China, especially if the invention is likely to cover goods that are usually manufactured there. The same guidance avails for Europe in general, and Germany in particular.
Source: Erick Robinson, Rouse
- The US Federal Circuit is adapting: The Federal Circuit hears all appeals from lower court and PTAB cases that pertain to patents. In the past years, it has taken a definite anti-patent bias in many of its decisions. More recently though, it seems to be slowly coming to terms with the idea that software patents are valid after all, as it tempers its own decisions that followed the Supreme Court in Alice. One speaker found that 11 different judges on the Federal Circuit have now ruled in favor of the eligibility of software related inventions. The Court has also started to curb some of the excesses of the PTAB and we saw no later than Monday a decision stating clearly that the PTAB’s position on Covered Business Method (CBM) patents (essentially invalidating every single patent it was reviewed) has gone too far and is at odds with the intention of Congress when it enacted this new post-grant review. This should have an immediate impact on the outcome of future CBM reviews.
- Inter Partes Reviews “kill rate” is down: Recent statistics show the 90% + institution rate for IPRs is now down to about 60%. The actual “kill rate”, i.e., how many patent claims are invalidated after a full review by a panel of judges, is also coming down. This suggests either i) that most “weak” patents have now been eliminated, or ii) the fact that the PTAB is reacting to widespread criticism that it is politically motivated to invalidate as many patents are possible. We think this is more a function of the latter and if the invalidation rate continues to go down further new guidance from the White House and/or a new PTO director, we will have strong evidence that it was likely the case.
Below is news of interest on these and other related topics.
- Trade Secrets are in: While patents are trying to make a comeback, the new federal law on Trade Secrets protection should elevate this type of intellectual property rights to a new level by harmonizing law across all states (although it was fairly consistent to start with) and, more importantly, by making it a federal offense to misappropriate trade secrets.
After US election many agree that patent reform is on hold and hope Trump may be pro-patentee
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