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As a company that serves a diversified customer base, we understand that evolving patent laws and market developments - in the US and abroad - affect these market participants differently. We aim to touch upon these events in our blog. Guest contributions are welcomed!
Posted by: In: Uncategorized 06 Sep 2013 Comments: 0

Anyone who has a pulse on technology and innovation has at least anecdotally heard of patent lawsuits being filed on behalf of known or relatively obscure entities. Most prevalent, among the well-known, are the cases surrounding Apple – as these are the most publicized. Apple vs. Samsung. Apple vs. HTC, Apple vs. Nokia. Engadget, Gizmodo, and tech blogs down the line will cover these stories.

Despite the increased attention placed on Fortune 100 tech companies involved in patent litigation, the “problem” extends far beyond these lawsuits you hear about from time to time. The tables below show the extent to which patent suits have been not only targeting these expected product companies, but also companies that really don’t place technology advancement as a primary strategic goal (the underlying data sourced from news.priorsmart.com through the end of August; also, please note that this is just a subset of the 2,500+ patent lawsuits that have been filed in 2013):

lawsuit defendants

Interesting should really be the word that summarizes the above tables. Maybe one would expect 17 cases against T-Mobile, but 4 suits filed against Bed Bath & Beyond?

Why is this case? Well – and trying not to oversimplify here – companies today need to use technology to compete and increase shareholder value. This ranges from using QR codes on theirs goods for item identification and tracking, “securing their website” with various authentication protocols, offering the ability for customers to pay with “digital wallets”, enhancing the efficacy of their website search engine, and down the line. The question becomes, “who is building this technology?” Certainly not Bed Bath & Beyond. Like Guitar Center, like Aeropostale; they’ll partner with or become customers of third party vendors who will supply these incremental, but necessary technology enhancements.

Ultimately, however, it does not matter if Bed Bath & Beyond did not make these technologies themselves. Patent Law 101 would tell you that patents “provide the right to exclude others from making, using, selling, offering for sale, or importing the patented invention for the term of the patent.” Thus, even if hypothetical Company ABC provides the back-end supply-chain management system for Bed Bath & Beyond, that doesn’t change the fact that Bed Bath & Beyond is still using that third party system in its day to day operation.

So what? What are the implications here? It often boils down to “why solely sue the third party vendor who 1) may have less than 1% of the revenues of BB&B and probably doesn’t have large reserves of cash on hand, and 2) is less likely to settle quickly because they just haven’t been down this rodeo before (in combination with not having the money)?” In many cases, suing the downstream end-users provides the highest possible financial outcome for the patent asserting parties.

– Brian Bochicco

Posted by: In: Uncategorized 14 Aug 2013 Comments: 0

The more patents become a hot button issue – particularly with the increasing amount of tech startups being hit with infringement suits – the idea of IP risk mitigation becomes even that much more of a priority.  Whether your organization licenses a subset of Intellectual Ventures’ 40,000+ drove of patents, aligns with the Allied Security Trust’s patent pool (granted you meet their criteria), or seeks protection through Unified Patents’ anti-troll efforts, many new business models exist to help mitigate the threat of patent litigation.

And these models make perfect sense to a large extent for SMBs and large corporations alike.  By having this intermediate layer of protection, these organizations can have increased certainty that their commercialization efforts will not get interrupted down the road from an unanticipated patent infringement lawsuit.  This also makes sense since most SMBs and still, many Fortune 500 companies don’t have robust, internal patent groups and the requisite resources to make well informed freedom-to-operate decisions themselves.  They would rather off-load at least some of this burden to an organization that does this type of work full-time, thereby freeing them to stick to their product development roadmap.

But to the greater point here, it could be extremely beneficial for companies to understand which patents are no longer active (based on the patent term expiring or the inventor not paying the requisite maintenance fees).

And since, it’s generally accepted that less than 20% of patents are actually commercialized, I’m willing to bet the entirety of the remaining 80% aren’t worthless.  Just because an inventor or company failed to commercialize (e.g. lack of funding, premature market, inexperienced management team, failed execution) doesn’t render those inventive concepts worthless.  Let’s take two scenarios here that would embody this concept.

Scenario 1 – Your company wants to build out its mobile device division and wishes to identify what power management technologies (for mobile devices) could be implemented free and clear.  In searching our engine about this concept, the first few records that appeared in the result set were:

Search Results 1

It could very well make sense for your chief engineer to review these results in order to avoid reinventing the wheel .  This information transfer may not only save money and time, but should reduce the risk of future of patent infringement.

Scenario 2 – You want to start a company, at least partly based on under-the-radar technology in interactive television technology space.  What is out there as far as expired patents go?  Who are the inventors?  And, perhaps your company hires those 2 engineers listed on the patent (and not the management team that failed to execute the idea).   Taking a look at some of the most related patents in a search, I came across:

Search Results 2

So using this information, both as a freedom-to-operate guide as well as a competitive/market research study, could be incredibly useful.  Personally, I never heard of 4 of the 5 entities on that above list.  Are these other entities still operating in this space?  What other patents have they filed since then (that are still in force)?  The answers to these questions will help you better understand the market landscape to help form your commercialization strategy, and will help you better answer due diligence questions during fundraising efforts.

Ultimately, I believe the prevailing attitude is that commercializing patent-pending technologies represents a substantially more attractive proposition because of 1) they are new, and 2) there’s the assumption that it will be granted with exclusivity for the 20 years after filing period.  Yet, despite not having exclusivity, the idea of commercializing expired patents is still very attractive as 1) you still may have the first mover advantage with a dormant or non-commercialized technology concept, 2) you may be more certain that you have the freedom-to-operate the idea.  The idea of making a concerted effort in combining the acquisition of patents rights (through prosecution, licensing, or brokerage efforts) and the integration of sound technological concepts outlined in expired patents seems logical, IMO.

– Brian Bochicco

Posted by: In: Uncategorized 13 Jun 2013 Comments: 0

On June 13, the Supreme Court ruled in Association for Molecular Pathology v. Myriad Genetics that human genes cannot be patented in a unanimous decision. Myriad Genetics had obtained patents after discovering genetic mutations that increase a patient’s risk of breast cancer and ovarian cancer, the BRCA1 and BRCA2 genes. This discovery led Myriad to create diagnostic tests that could be used to determine if a patient had these genetic mutations. A group of plaintiffs brought suit to invalidate Myriad’s patents arguing that they claimed unpatentable subject matter, namely products of nature.

Justice Thomas delivered the unanimous opinion of the court, which held that “a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring”. The opinion makes clear, however, that no method claims before the Court. The process that Myriad used to isolate the BRCA1 and BRCA2 genes was well known in the field and could not be patented. But, had Myriad created a new method for isolating or manipulating the genes, that method would likely be patentable. Similarly, applications of the information Myriad obtained about these particular genes would also be patentable.

The plaintiffs and their supporters argue that this decision is a win for women everywhere who were not able to access the diagnostic tests created by Myriad. Now, they argue, these tests will be cheaper and more available, hopefully leading to fewer cases of breast and ovarian cancer. The defendants and their supporters argue that this decision removes incentives for innovation and will lead to less research and development in the area of genetic diagnostics.

Whether this decision will have any impact on research in this area will only be known with time. Genetic research is a fast growing area in biotechnology and pharmaceuticals, a fact that will likely continue even in the face of Myriad. But, one thing is certain: the discoverers of genetic markers and mutations will obviously have to adopt new strategies for protecting their innovations, such as patenting the applications of their discovery instead of the gene itself.

– Suzy Fitzgerald

Posted by: In: Uncategorized 10 Jun 2013 Comments: 0

From May 13-17, I had the pleasure of attending the Patent Law Institute hosted by the Duke Law Center for Judicial Studies in association with the American Intellectual Property Association. The Institute was held at Duke University and was attended by a variety of patent practitioners, including prosecutors, litigators and in-house professionals. The week-long intensive program focused on the many changes in patent law that have occurred over the last few years, especially the America Invents Act (AIA).

The program began with an introduction to the AIA, including the major provisions of the act, the rationale for these provisions and the legislative history. It even included a guest speaker who helped to formulate the legislation and ensure its passage. Then, the program moved into the specifics of the AIA, including discussions on first-to-file, third-party prior art submissions, and new post-grant proceedings. There was also a full day on patent validity requirements and the current status of patentable subject matter at the Federal Circuit and the Supreme Court. Finally, the program concluded with a discussion on patent assertion entities, standards and antitrust.

In addition to the discussions of substantive patent law, the program included practical applications of the new provisions and case law. Each topic was given separate time to discuss the impact on patent prosecution, patent litigation and patent licensing. The speakers did a terrific job of explaining each topic’s impact on the different facets of a patent practice, providing specific examples and posing hypothetical questions. Even where there is an unsettled issue of law or a question that has not been addressed, the speakers were able to provide guidance to the audience.

The most interesting part of the program was the guest speakers. Every day there was at least one guest speaker that had personal knowledge and experience about the topic. The speakers included Chief Judge Randall Rader, Judge T.S. Ellis III, Patrick McBride and Jorge Contreras, among others. All of the guest speakers were very informed and provided practical insights on the impact of the topic of the day. The speakers really helped to take esoteric topics and make them concrete and real.

Overall, the Patent Law Institute was an incredibly helpful week. It provided a crash-course in the new aspects of the AIA and posed critical questions that practitioners will face in the near future. For me, just being able to be in the presence of such accomplished speakers and practitioners was a great honor. I hope I can attend next year as well!

 

– Suzy Fitzgerald

Posted by: In: Uncategorized 03 Jun 2013 Comments: 0

About a month ago, we tweeted about the startup Ditto being sued for patent infringement by a non-practicing entity.  Ditto’s 15-person business focuses on allowing its customers to “try-on” glasses and other eyewear virtually, thereby eliminating the need to go to your nearest LensCrafters to physically try on a pair of frames – an awesome, “Why didn’t I think of that” idea in my opinion.

And so when this non-practicing entity, 1-800-Contacts, slapped Ditto with this patent infringement claim, I felt more compelled to check up on the validity of this US 7016824 patent (which has a priority date of 2/6/2001).  Using AI Patents’ search engine to “strength-test” this patent by copying and pasting claim #1 of the ‘824 and limiting by 2/6/2001 date, I quickly uncovered several patents that appear to help Ditto’s mission to defeat this NPE.  Before going into the prior art, it’s important to see the main independent claim of the ‘824:

 

1. A method for commercializing pairs of eyeglasses over a network, the method comprising: providing an interactive platform that can be displayed on a computing device;requesting a 3D face model from a user to be used in the interactive platform; determining characteristics of the 3D face model with respect to a 3D reference frame; retrieving a 3D representation of a pair of eyeglasses when a request identifying the pair of eyeglasses is received over the network; and placing the 3D representation of the glasses onto a default position with respect to the 3D face model in accordance with the characteristics thereof.

 

And the prior art (all of which was previously not cited in the patent prosecution by the Examiner or Applicant):

 

US6944327 – Method and system for selecting and designing eyeglass frames (priority date: 11/4/1999)

Excerpts from the first and third paragraphs in the Brief Summary of the Invention:  “In one embodiment, a user utilizes a method and system to design, select, and purchase eyeglasses. The user accesses the system and visualizes an inventory of eyeglass styles and shapes previously stored in a database and displayed by the system. The user selects a particular eyeglass style and “virtually tries on” the selected eyeglasses in a size that matches the user’s facial features. In addition, the method and system allow the user to interactively modify the choice by changing the shape, style, and color of the eyeglass frames… More particularly, the present method includes receiving at least one digital image of a face of a person, performing basic image processing operations such as color or light compensation, displaying to the user a variety of eyeglass shapes and styles available from manufacturers and retailers, matching a size of a selected eyeglass frame to a facial size and features of the person, and receiving input information such as inter-ocular distance or prescription details.”

frame1

 

US6692127 – Spectacles fitting system and fitting methods useful therein (priority date: 5/18/2000)

From the Abstract – “A spectacles fitting system including a wide-view imaging system operative to provide a wide-view of a client’s face, a 3D image processor operative to generate first 3D information describing the client’s physical features, a virtual try-on unit operative to receive the digital 3D representation of the client’s face and a digital 3D representation of a spectacle frame, to virtually mount the spectacle frame onto the client’s face and to generate second 3D information describing frame/facial fit, and a lens fitter operative to receive the first 3D information and the second 3D information and to generate therefrom at least one parameter for face-and-frame customized manufacture and cutting of the lens.”

frame2

US7062722 – Network-linked interactive three-dimensional composition and display of saleable objects in situ in viewer-selected scenes for purposes of promotion and procurement (priority date: 8/22/2000)

From Summary of the Invention – “In summary, a system is presented that allows customized virtual objects of known size to be interactively manipulated and placed into precise locations of photographically or virtually-derived scenes at the proper scale, over a digital network. Such “in context” interactive product displays are useful for evaluating visually attractive design concepts, and for product promotion and procurement… For example, the showing of virtual images of eyeglass frames upon the head of a prospective purchaser of eyeglasses is a proper subject for the display system of the present invention.

 

There are several takeaways here:

– Overall, it appears that is a host of prior art that Ditto can potentially use to challenge the validity of the ‘824; the upfront costs of hiring the legal team may likely the bigger challenge for Ditto.

– If Ditto is deemed not to have infringed the ‘824, are they infringing these other patents?  This would require more analysis and research as you would want to know: 1, are these other patents still active, and 2, how are the claims in these patents expressed? And, if indeed, Ditto, was worried about these other patents, they could always seek out more favorable terms.

– Yes, there is an assumption of validity when a US patent is granted.  Though with all the attention on non-practicing entities these days, they are not helping their case by not during their own due diligence before acquiring patents.  The more frivolous patent lawsuits there are, the more it will be perceived as a drain to the economy.

– Start-ups are not immune to patent infringement cases as it is not just Apple or Google or Samsung getting sued.  Patently-O blog recently published that that 55% of unique PAE defendants make $10M or less in revenue, and 66% make less than $100M a year.

 

I will be following how Ditto proceeds with this lawsuit.  In the future when all is said and done (and hopefully not 3+ years down the road), it will make for an interesting case study to analyze the economic breakdown of this lawsuit, including time and effort spent, opportunity costs, fees rendered, and rewarded outcomes covering all the stakeholders involved (and particularly, the owner of the original patent, the non-practicing entity 1-800-Contacts, and Ditto).

– Brian Bochicco

Posted by: In: Uncategorized 23 May 2013 Comments: 0

Last week, the Federalist Society hosted an event titled “Is the Patent System Working or Broken?” The panel consisted of Hon. Arthur Gajarsa, a former Judge on the Federal Circuit; Hon. Paul Michel, former Chief Judge of the Federal Circuit; Hon. Richard Posner, a Judge on the Seventh Circuit; and moderated by Hon. Douglas Ginsburg, a Senior Circuit Judge on the D.C. Circuit. As you would imagine, the debate was robust and spirited, but a simple “yes or no” answer to the proposed question was never reached.

Of course, no one expects a simple answer to this question. It is very complex and there are so many factors that affect the patent system and its efficiency that it is impossible to provide an easy answer. But, it seems that everyone agrees that the patent system isn’t working to its full potential. Although the panelists disagreed on several points, they all presented interesting ideas for reform.

Judge Posner recommended having variable patent terms based on the type of technology claimed. For example, a new drug might retain the current 20-year term while a software patent might receive only a 3-year term. Judge Gajarsa agreed with variable terms, however, Chief Judge Michel raised a key barrier in changing patent terms. The U.S. is bound by several treaties that require a 20-year patent term. He also cautioned that patent terms could become a political ploy, with Congress changing patent terms based on the lobbyists’ desires. This would lead to great uncertainty as to the value of a patent.

All three panelists agreed that litigation is too expensive and takes too long. Judge Gajarsa believes that Post-Grant Review, a new system provided by the America Invents Act, will help to reduce litigation time and costs by providing another way of challenging a patent’s validity. The panel also discussed the Patent Pilot Program, which is a ten-year program designed to enhance the district courts’ expertise in patent cases. Chief Judge Michel applauded policies that Judge Posner has implemented in patent cases he had tried that also were successful, such as keeping tight deadlines for discovery. The panel seemed to agree that discovery is the main reason that litigation is so expensive.

But, the panel was not completely in agreement on many issues. For example, Judge Posner is not a fan of patent “trolls”, stating that they are an “unmitigated disaster” and provide no social good to the system. Judge Posner is very uncomfortable with the fact that 60% of cases are brought by non-practicing entities. However, Chief Judge Michel is comfortable with that statistic, saying that a patent is a property right. Judge Posner believes that we have too many software patents (about 400,000 are currently in effect) and the software covered likely would have been created even without a patent system. But, Chief Judge Michel stated that we have no way of knowing this and Judge Gajarsa raised as an example the Google patent, which created an entirely new industry.

Although the panelists disagreed on many issues, there are areas of common ground that would be a great starting point for reforming the patent system. Overall, the key place of agreement is that the patent system is not completely broken. The system does provide incentives for some innovations and a degree of certainty in many cases. However, it can always be improved. New programs, like Post-Grant Review and the Patent Pilot Program, will hopefully bring efficiencies and positive change to the system.

The webcast of the Federalist Society’s panel can be found here:

https://www.fed-soc.org/publications/detail/is-the-patent-system-working-or-broken-a-discussion-with-four-distinguished-federal-judges-event-audiovideo

– Suzy Fitzgerald

Posted by: In: Uncategorized 15 May 2013 Comments: 0

For those of you that don’t know, AI Patents is based in Raleigh, North Carolina and has its office in the Research Triangle Park, the largest research park in the world. We enjoy being one of over 170 companies in the RTP and working among some of the most creative and talented innovators in the country. Of course, we think the Raleigh-Durham area (and North Carolina as a whole) is home to some of the world’s best and brightest, but we wanted to see how that was reflected in the number of patents issued.

The numbers are pretty interesting. Since 1999, North Carolina has seen steady growth in the number of patents issued, from just 1,734 patents granted in 1999 to 2,977 patents granted in 2012. The graph below shows this growth.

NC Patent Trend

A study published by the Brookings Institution in February 2013 shows that both the Raleigh-Cary and Durham-Chapel Hill areas rank within the top 20 metropolitan areas for patenting rate. The Raleigh-Cary area boasts 1,164 patents per million residents and the Durham-Chapel Hill area is close behind with 1,120 patents per million residents. Also, Raleigh-Cary averaged 1,273 patents granted each year from 2007-2011, ranking in the top 20 metropolitan areas. Most of the patents in the Raleigh-Cary area are related to computer hardware and peripherals while most patents in the Durham-Chapel Hill fall within the biotechnology industry.

It’s impressive that an area with a population of about 2 million people, less than 1% of the total population of the United States, produces such a large number of patents. But, it’s not a surprise to AI Patents. Everyday we hear about a new product or invention that has great potential to have an impact on customers everywhere. With the breadth of knowledge and resources available in RTP and the surrounding areas, we expect Raleigh-Durham-Chapel Hill to keep creating ground-breaking technologies and continue bringing patents to North Carolina.

– Suzy Fitzgerald

 

Sources:

USPTO:

http://www.uspto.gov/web/offices/ac/ido/oeip/taf/cst_utl.htm

Brookings Institution: http://www.brookings.edu/~/media/Research/Files/Reports/2013/02/patenting%20prosperity%20rothwell/patenting%20prosperity%20rothwell.pdf