Monday, June 11, 2012

Leveling the Patent Playing Field, by Peter Detkin

I re-read Peter Detkin's article Leveling the Patent Playing Field tonight. It explains how the US patent system doesn't treat small entities fairly when it comes time to monetize patents and why patent aggregators have an important role in this regard.

Let me highlight some points made in Mr. Detkin's article:

1. Many important inventions have come from small companies, universities, and individual inventors rather than large companies. In fact, small entities such as individuals, business with less than 500 employees, and non-profits filed 43% of the US patent applications in the 1990s.

2.  Even worthy inventions by small entities may be difficult to monetize. Beside the expense of getting a US patent, small entities face difficulties in  finding a manufacturer and/or investors. Further, they face difficulties in licensing inventions even when they offer major advantages. For example, Dr. James Cunningham, a chemical engineer and an electrical engineer, had 46 patents as an employee of six semiconductor companies including Texas Instruments (TI). Some of Dr. Cunningham's inventions allowed microprocessor companies to switch from aluminum circuitry to copper which greatly improved performance of the microprocessors. He had fundamental inventions and decades in the fields yet he did not know who to approach about licensing the inventions.

3. Corporate licensing professionals are trained to avoid paying "crackpot" inventors or trolls. Their job is to limit payment to such "crackpots" not pay them! So they play interminable rounds of phone tag for months and reschedule the meeting at the last minute. Then after a few months pass they discuss and argue whether the invention has any merit for 6-18 months more even if they are currently infringing the patents!

4. Licensing negotiation rarely lead anywhere, leaving litigation as the only viable option. Large companies can out-resource even a veteran such as Dr. Cunningham at all stages so after a long dragged out process the big company ultimately says no we don't want to license your patent. And such was the case for five of the seven major companies Dr. Cunningham sought to license. With this result is it a wonder that some choose to sue for patent infringement? No, but little guys rarely win these cases.

5. Small entities cannot participate in the successful vast patent portfolio licensing of an IBM and the well capitalized patent licensing of Qualcomm, Rambus, or TI or the corporate patent pools in support of industry standard technology such as MPEG or DVDs. Unlike most small entities, major tech companies typically have huge numbers of patents, lots of money and lawyers to enforce them, as well thought out licensing programs.

Mr. Detkin notes models of patent monetization that will help the patent system regain balance. He suggests consultants, e.g., Thinkfire and ipValue will help large companies evaluate and exploit their patents. Ocean Tomo can run patent auctions, develop a stock index to track patent strength in companies, and create a centralized IP exchange. Companies like Acacia Research and Mosaid can purchase and assert the patents individually rather than as a broad portfolio. And his own firm Intellectual Ventures can purchase small entity patents such as those from Dr. Cunningham as well as seek patents on its own inventions resulting in portfolios that permit rational licensing for multiple technology products. Mr. Detkin notes Intellectual Ventures presents pre-screened patents and expertise in licensing and patent defense that allow it to reach an efficient agreement like that of a veteran real estate broker who negotiates with individual condo and apartment owners standing in the way of a skyscraper to be built.

Mr. Detkin states the above business models can match patent owners with patent users, ensure fair and efficient compensation for inventions, improve the public's access to new products and services, ensure bad patents do not receive unreasonable compensation, and restore balance to the patent playing field so more can play the patent game enriching our society.

In the end a great article, but Intellectual Ventures' daily actions will determine if they achieve these goals.

Copyright © 2012 Robert Moll. All rights reserved.