1. PATENTS FOR ECONOMIC ADVANTAGE: ECONOMIC ADVANTAGE“SHOW ME THE MONEY!” SHOW ME THE MONEY! Bratislav Stankovic, PhD, JD
3. INVENTION OF THE TOASTER During World War I, Charles Strite, a master mechanic in a plant in Stillwater, Minnesota, decided to do something about the burnt toast served in the company cafeteria. To circumvent the need for continual served in the company cafeteria To circumvent the need for continual human attention, he incorporated springs and a variable timer, and filed the patent application for his pop‐up toaster in 1919. U.S. Patent No. 1,394,450 for Bread Toaster issued in 1921 U S Patent No 1 394 450 for “Bread Toaster” issued in 1921.
4. TOASTER ROYALTIES FOR MAY 1930 Charles Strite royalties notes: li[royalty rate = 3%]
5. PCT PATENT APPLICATIONS
6. NUMBER OF USPTO PATENT GRANTS In 2009: 485,000 patent applications were filed with the USPTO (3x in 20 years)
7. NUMBER OF PATENT APPLICATIONS IN MKПатентни пријави по години, ДЗИС, годишник 2009Година Домашни од а До а С ра с Странски, национална ац о ал а Вкупно у о Назначувања аз а у а а Издадени здаде фаза пред решенија ДЗИС ДСОП ЕПЗ Пред ДСОП ЕПЗ (PCT) (EPO) ДЗИС (PCT) (EPO) 2003 48 23 363 386 434 87469 3883 105 2004 44 9 399 408 452 38076 4545 102 2005 53 15 368 383 436 3381 4639 373 2006 55 4 403 407 462 3 4879 463 2007 150 13 365 378 528 0 5415 524 2008 34 5 401 406 440 0 5555 328 2009 39 11 371 383 422 0 3785 334Вкупно 423 80 2671 2751 3174 128929 32701 2229ДСОП = Договор за Соработка во Областа на Патентите [PCT = Patent Cooperation Treaty]ЕПЗ = Европски Патентен Завод [EPO = European Patent Organization]
10. US PATENT RECIPIENTS, TOP 10 IN PRIVATE SECTOR, 2009PRIVATE SECTOR 2009COMPANY Number of granted patents, 20091. International Business Machines Corporation 4,8872. Samsung Electronics Co. Ltd. 3,5923. Microsoft Corporation 2,9014. Canon Kabushiki Kaisha 2,2005. Panasonic Corporation 1,7596. Toshiba Corporation 1,6697. Sony Corporation y p 1,656 ,8. Intel Corporation 1,5349. Seiko Epson Corporation 1,32810. H l P k d D Hewlett-Packard Development C l Corporation i 1,269
11. US TOP PATENT RECIPIENTS, UNIVERSITIES, IN 2009UNIVERSITIES IN 2009RANKING, UNIVERSITY Number of granted patents, 200983. University of California System (10-campus) 251153. Massachusetts Institute of Technology 134173. WARF173 WARF, UW-Madison 115178. Stanford University 110191. University of Texas 98198. California Institute of Technology 93266. University of Illinois 65
12. TECHNOLOGY TRANSFER Moving innovations to the marketplace University tech transfer centers [Bayh‐Dole Act = University and Small Business University tech transfer centers [Bayh Dole Act University and Small BusinessPatent Procedures Act, 1980] Case study: the WARF (Wisconsin Alumni Research Foundation) story: Founded in 1925 to manage a University of Wisconsin Madison vitamin D Founded in 1925 to manage a University of Wisconsin‐Madison vitamin Ddiscovery The foundation has developed a model of technology transfer based upon true partnership with the UW‐Madison and industry To date, > $300 million revenue from vitamin D royalties WARF has contributed more than $1 billion to UW‐Madison
13. NUMBER OF US PATENTS, BY STATE
14. NUMBER OF US PATENTS, BY COUNTRY
15. PATENTS CAN MEAN SERIOUS BUSINESS
16. THE SELDEN ROAD‐ENGINE Patent attorney George Selden, despite never having produced a working model of an automobile, had a credible claim to have patented k d l f bl h d d bl l h dan automobile in 1895 [U.S. Pat. No. 549,160]. Application filed in 1879. Amendments filed to delay issuance of the patent until 1895, by which time the automobile industry was growing. t t til 1895 b hi h ti th t bil i d t i No interest in manufacturing his invention. Under threat of suit, almost all of the manufacturers took out licenses from Selden, or from the Association of Licensed Automobile f S ld f h A i i f Li dA bilManufacturers (ALAM), to whom he sold the patent [0.75% royalty on all cars sold]. The Selden patent was declared invalid 1 year before it was set to end. Th S ld t t d l d i lid 1 b f it tt d
17. PATENT LITIGATION IS COMPLICATED AND EXPENSIVE Pleadings Initial disclosures Discovery (increased exposures & risks) Pretrial Trial “American lawyers…have never been accused of asking for too little. Like the y g Rolling Stones, they hope that if they ask for what they want, they will get what they need.” McPeak v. Aschroft, 202 F.R.D. 31, 34 (D.D.C. 2001). Percentage of patent cases that settle: 2005: 85.9% 2006: 86.5% ‐P f P lJ i k U i Prof. Paul Janicke, University of Houston Law Center, Patent Litigation i fH L C P Li i i Remedies: Some Statistical Observations
18. WHY PATENT? A grant to the patentee of the right to exclude others from: making the invention ki h i i using the invention offering for sale selling the invention [throughout the United States] importing the invention [into the United States] Patents are a method of publication Patenting translates an inventor’s work into a product that will benefit society Patent holders can prevent abuse or misuse of their inventions and research Inventors, their labs and departments benefit from licensed inventions
19. THE UTILIZATION OF A PATENT’S ECONOMIC POWERECONOMIC POWER Out-license for revenue IP Value V l Injunctions against infringers X-license Damages awards leverage against infringers Force competitorsMarket exclusivity to design around Image/marketing
20. PATENT ROYALTY RATES Importance of the patent and its value to the products Scope of claims; type of patent (e.g., research tools; up or down stream; Scope of claims; type of patent (e.g., research tools; up‐ or down‐stream; fundamental or improvement patent ); whether other patents need to be licensed in order to practice it Often computed as a percentage of the value of the finished product made by using the patent d b i th t t Typical rates for gross sales within the U.S. pharmaceutical industry: a pending patent on a strong business plan, royalties ca. 1% issued patent, 1% 2% issued patent, 1% –2% the pharmaceutical with pre‐clinical testing, 2–3% with clinical trials, 3–4% proven drug with US FDA approval, 5–7% drug with market share, 8–10% Rates of royalty payments in the industry: over a 16‐year period, for 458 license agreements, an average royalty rate of 7.0% (range 0% ‐ 50%). license agreements an average royalty rate of 7 0% (range 0% ‐ 50%) Licensing Economics Review, 2002.
21. A MATTER OF PERSPECTIVE Increasing phenomenon of large companies “monetizing” their portfolios in market segments where they are no longer active. portfolios in market segments where they are no longer active. “In America alone, technology licensing revenue accounts for an estimated $45 billion annually; worldwide, the figure is around $100 billion and growing fast.” ‐ The Economist, A Survey of Patents and Technology, October 22, 2005 IBM: For 17 years running, Big Blue has been granted more U.S. patents than any other applicant, raking in an ‐unprecedented 4,914 t t th th li t ki i d t d 4 914 in 2009. press release about the patent figures of 2002 – 3,288 US patents in 2002; company collected $10 billion IP royalties in 10 years. Qualcomm collects almost all its revenue—$10.4 billion in 2009— collects almost all its revenue $10.4 billion in 2009 from selling licenses for and making the chips containing its patented 3G mobile‐phone technology, known as CDMA. Pfizer relies on a single set of patents covering cholesterol drug Lipitor for a fourth of its total sales, an estimated $11 billion last year. $
22. PATENT TROLLS What is a “patent troll” ? Troll: to fish by trailing a line or net………………… Troll: a Scandinavian folkloric creature, hostile to men, lives under bridges and seizes those who try to cross without paying……………… g y p y g “Patent Troll:” a neologism: – “A patent troll is somebody who tries to make a lot of money from a patent that they are not practicing and have no intention of practicing and in most cases have never practiced.” ‐ The Recorder, Trolling for Dollars, July 30, 2001 Patent trolls buy patents cheaply from entities not actively seeking to enforce them. A company may purchase hundreds of patents from a technology company forced by bankruptcy to auction its patents.technology company forced by bankruptcy to auction its patents.
23. THE SUCCESS OF PATENT TROLLS Patent law provides the patent owner with the “right to exclude others g, g, g , gfrom making, using, or selling an invention,” regardless of whether or not the owner manufactures it. Patents that trolls obtain are relatively inexpensive, making it easier and more enticing to acquire them in masses. Nathan Myhrvolds (former Microsoft technology chief) Intellectual Ventures posted $700 million in licensing revenue in 2010 Licensing revenue of Intellectual Ventures is $2 billion to date Polaris IP has sued Google, Yahoo, Amazon, Borders, AOL, and IAC over a patent on automated e‐mail responders [patent titled "Automatic message interpretation and routing system ] Filed in 1998 the patent was awardedinterpretation and routing system" ]. Filed in 1998, the patent was awarded in 2002 to a company called Brightware.
24. PATENT AUCTIONS E.g., Chicago‐based Ocean Tomo’s model of business: $500‐per‐ person cocktail reception and awards dinner at the Palace of Fine Arts in San Francisco. Then put on the auction block approximately 400 patents applicable to semiconductors, RFID (radio frequency identification), wireless communications, automotive technology, food, energy, and the Internet. i ti t ti t h l f d d th I t t Patents grouped in 68 blocks ranging in estimated value from $100,000 to more than $5 million.
25. PATENT INFRINGEMENT Making, using, selling or offering to sell the claimed invention. Four flavors: Direct = you do it yourself; § 271(a); strict liability ‐ knowledge and intent are irrelevant l Contributory = you supply a key component that has no substantial noninfringing use; § 271(c); knowledge requirement Inducement = you actively cause someone to infringe; § 271(b); knowledge requirement Willful = with knowledge; possible treble damages
26. PATENT INFRINGEMENT ‐ ASSESSMENT Know and understand the market K d d d h k Protect the competitive advantages of the invention Suing your competitor rather than your customer High‐tech does not necessarily mean big dollars High volume‐high profit translates to big dollars Customer acceptance issues Regulatory issues
27. REMEDIES FOR PATENT INFRINGEMENT Injunctive Relief Preliminary injunction Permanent injunction Permanent injunction Monetary Damages Lost profits, including profits on lost sales and profits from price erosion Lost profits including profits on lost sales and profits from price erosion Reasonable royalty Goal: to place patent owner in same position as before infringement p p p g “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty”; 35 U.S.C. § 284 Current theories of recovery Lost profits Price erosion Reasonable royalty Entire market value rule/ conveyed sales
28. WHO ARE THE INFRINGERS AND WHERE IS THE MONEY?WHERE IS THE MONEY? Michelson v. Medtronic ‐ $1,350,000,000 award medical device; spinal fusion implant technology medical device; spinal fusion implant technology Polaroid v. Kodak – $925,000,000 award > 50 patents relating to instant photography Medinol v. Boston Scientific $750,000,000 settlement Medinol v Boston Scientific ‐ $750 000 000 settlement RIM v. NTP, Inc. – $612,500,000 settlement wireless e‐mail technology; BlackBerry settled – y to avoid effects of uncertainty or service shutdown Novell v. Microsoft ‐ $536,000,000 EMC Corp. v. Hewlett Packard ‐ $325,000,000 settlement Hoffman‐La Roche. v. Cetus Corp. ‐ $300,000,000 patent rights to PCR process Many patents and hundreds of claims Only need one claim to win Risk assessment – odds are always in patentee’s favor
29. SMALL GUYS CAN WIN, TOO Entrepreneur wins $625 million payout from Apple E i $625 illi f A l Oct 2010: Yale University computer science professor David Gelernter, founder of Mirror Worlds, won his patent infringement case against Apple A l The lawsuit, filed in 2008, claimed three Apple software features – the Cover Flow flip function, the Spotlight hard drive search tool, and Time Machine, which backs up data – violate three Mirror Worlds Time Machine which backs up data violate three Mirror Worlds patents. The jury agreed, awarding $208.5 million for each of the three infringements. infringements Federal jury in Tyler, Texas [forum shopping]
30. PATENT RIGHTS AND ECONOMIC VALUES No piece of intellectual property is inherently valuable, nor does it give anyone a ticket to print money. give anyone a ticket to print money. A patent right is only valuable if it fits into the context of a good business plan that enables it to create value. Patents that are being drafted today will have effect for the next 20 years; diversity in claiming: a patent should contain claims of many different types, styles and scope as is practical diff tt t l d i ti l A patent right is a means to an end, not an end in itself Need for development of a corporate patent strategy that provides the maximum economic power to the company
31. ASSESSING WHO ARE THE INFRINGERS AND WHERE IS THE MONEYAND WHERE IS THE MONEY Know and understand the market K d d d h k High‐tech does not mean big dollars High volume‐high profit translates to big dollars Protect the basis for consumer demand Literal Infringement & Doctrine of equivalents Direct Infringement y g Contributory Infringement Inducement Need all claim elements or their equivalent
32. PATENT UNENFORCEABILITY Due to inequitable conduct The law places a high duty of candor on those seeking patents Th l l hi h d f d h ki Failure to disclose relevant information can lead to unenforceability of the patent and antitrust liability Most often results from failure to cite known references f l f f l k f Due to patent misuse Patents obtained by fraud Patents wrongfully asserted Patent agreements that unlawfully extend the monopoly, e.g. “tying”
33. KNOW YOUR CLIENT Know your company’s businesses/ know the competition Protect the novel aspects of the invention P h l f h i i Protect the competitive advantages of the invention Two questions to ask: Why is this invention new? What is the client’s business interest? Commercial processes restrictions Customer acceptance issues Regulatory issues pp Supplier issues
34. REALITY OF PATENT DAMAGES “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty”. 35 U.S.C. § 284 Current theories of recovery: Lost profits Price erosion Pi i Reasonable royalty Entire market value rule/ conveyed sales Not so miscellaneous factors to consider: Patent maintenance fees Failure to mark a patented article 35 U.S.C. §287(a) Failure to mark a patented article ‐‐ 35 U S C §287(a) Six year limitation on damages ‐‐ 35 U.S.C. §286 Prejudgment & post judgment interest Laches & estoppel Costs Attorney fees Increased damages ‐‐ up to three times if willful infringement