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Apple Wants to Compete on Patent Portfolio, Not Products

(Cross-posted on DisCo)

Apple has been an odd player in the patent debate. On the one hand, it’s the company that gets sued by patent trolls more than any other. As a result, it supports most of the patent reform bill, and Apple uses the Covered Business Method (CBM) program far more than any other company. (As of today, Apple has filed 17 CBM petitions, while the next biggest user of CBM, Liberty Insurance, has filed only 10 CBM petitions.)

On the other hand, Apple is using its own software patents to go after Samsung. And Apple strongly opposed any expansion of the CBM program, apparently for fear that Samsung might use it to challenge Apple’s patents.

This schizophrenic approach to patents might explain why Apple didn’t file an amicus brief in the Alice v. CLS Bank case: Apple is victimized by software patents more than anyone, but it needs its software patents to try to crush Android.

Apple’s whole approach seems strange. In its case against Samsung, Apple is demanding around $40 per phone, even though all the accused features are part of Android. Android is free. And the software patents Apple is using are questionable at best.

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Progress on Patent Reform Takes a Little Time

As you may have heard, we basically have a deal on patent reform in the Senate Judiciary Committee. While lawmakers couldn’t quite get it done before recess, they left town with what Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) described as a “broad bipartisan agreement in principle” on patent reform. I’m hearing from sources that nearly everything is worked out except the fine tuning of language.  We can expect to see the manager’s amendment in a couple of weeks when the Senate returns. The members of the Senate Judiciary Committee spent weeks listening to stakeholders and conducting a lot of in depth substantive discussions. And lest you think that this bill sprang out of nowhere, provisions to deal with patent trolls were debated as part of the America Invents Act; that’s 8 years in the making. This deal comes after the House passed the Innovation Act 325-91, with Democrats supporting it 2 to 1. Chairman Leahy is working in collaboration with Chairman Goodlatte of the House Judiciary Committee, which really improves the chances of getting the House and Senate to agree on a bill pretty quickly. Another sign that we’re nearly there is that some big companies seem to be accepting the inevitability of reform. One harbinger is the recent news that Intellectual Ventures, the “gentleman gangster” of patent trolls, is having trouble with some of its early funders. Reports late last week in Reuters and National Journal say Apple and Intel—both previous financial backers of IV—have demurred on investing in its latest acquisition fund. Some analysts say the decision by Apple and Intel to shut off the spigot to IV has more to do with IV’s diminishing rate of return than with politics. But I have to believe that the impending reality of patent reform played a major role. On the other hand, pronouncing patent reform doomed due to partisan bickering is a provocative narrative, so some commentators are running with it. MORE >>

A Troll in Inventor’s Clothing

Sometimes this debate over patent reform seems surreal. “Small inventors” are coming out of the woodwork to make bizarre claims, like arguing that making it easier to penalize patent owners who bring frivolous litigation will destroy innovation.

Here’s an example. Last week, an inventor named David Barstow published an op-ed in the Austin American-Statesman, pleading with Congress not to include fee-shifting reform in the final package.

According to Barstow,

The little guys already are at a great disadvantage in litigation — big guys with deep pockets can win, even when they are wrong, simply by outlasting the little guys.

He points to his own story as an example:

In the late 1980s, my brother and I invented a way of using telecommunications and computer simulation to allow fans to follow live sports events like baseball games on their home computers. My brother and I patented our technology, thinking the patents would protect us from the big players who dominated the sports media industry. Unfortunately, we were wrong.

At first, the big players ignored our technology. When we started providing sophisticated real-time animation of Major League Baseball games on the Internet, some of the leagues tried to stop us, claiming that we were violating their media rights. Ultimately, the leagues and media companies started providing their own play-by-play simulation services, and by the early 2000s, the technology had become pretty widespread.

Barstow certainly tells a sympathetic story. It’s a shame it’s not, you know, true.

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Patent Trolls Keep On Suing

Well, the numbers are in for 2013, and it seems that patent trolling shows no signs of slowing down. According to RPX, trolls sued over 4,800 companies last year, up from the 4,282 they sued in 2012.

Now, some argue that it’s not patent trolls that are the problem; it’s big companies “stripping garage inventors of their rights.” What are poor patent trolls to do?

As I said a panel this past Friday, with apologies to Shakespeare,

Hath not a patent troll eyes? Hath not a patent troll hands, organs, dimensions, senses, affections, passions? If you prick a patent troll, does it not bleed?

(Yes, I did say this, which is why you should try to attend any panel I’m on.)

Seriously, do you expect us to believe that, for example, Google and Apple ripped off a few “geniuses” a month in 2013?

The number of companies targeted by entities that do nothing but make money from patent litigation is increasing steadily. The Government Accountability Office, for example, which was fairly conservative in its estimates, found that the number quadrupled from 2007 to 2011.

When you start to look at the scale of the patent trolling, it becomes harder and harder to swallow the argument that this is mostly inventors (and their proxies) defending their hard work.

Yes, it’s possible that the number of companies intentionally ripping off innocent inventors quadrupled over a five year period, and increased 13% from 2012 to 2013 (notwithstanding all the media coverage of extraordinary damages in patent cases coming out at the same time).

But isn’t it more likely that this growth in patent trolling represents a simple expansion of a profitable industry? I’m thinking that Occam’s Razor (which suggests that the theory with the fewest assumptions is most likely the correct one) supports this explanation.

Not that I expect the argument that big companies are a bunch of thieves to go away. As Upton Sinclair famously said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Patent Progress's Guide to Patent Reform Legislation

There are now twelve bills that have been introduced this Congress to deal with some aspect of the patent troll issue. We thought it might be helpful to give you a quick rundown of each of the currently pending bills:

There are a few basic areas that are being addressed:

  • making the Covered Business Method review program available to more industries to allow them to deal with existing bad patents patent trolls often assert

  • curbing abusive litigation tactics patent trolls use

  • protecting end-users

  • adding transparency to get at who is really supplying patent trolls with patents and with funding

I’ll go through them individually below.

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Will SCOTUS Do Anything About Fee-Shifting?

Yesterday, the U.S. Supreme Court heard arguments in two related patent cases, Octane Fitness LLC v. ICON Health & Fitness LLC and Highmark Inc. v. Allmark Health Management Systems. Both cases have to do with the standard for fee-shifting in patent cases, but it’s the Octane case that is the most relevant.

The statute, 35 U.S.C. § 285, says that,

The court in exceptional cases may award reasonable attorney fees to the prevailing party.

In the Octane case, the question is pretty simple: when is a case “exceptional”? It turns out that the answer isn’t so simple. As the New York Times reported, the Justices were all over the map in trying to figure out how to draw the line. They really struggled in trying to understand what Congress intended.

One argument we’ve heard against patent reform is that the Supreme Court was going to take up the whole fee-shifting issue and might fix everything. After yesterday, I wouldn’t bet on the Court being able to fix fee-shifting or even improve the status quo.

The fact is, we need legislation, a clearer statute that makes it less profitable to be a patent troll. (The Cornyn and Hatch bills both do this.)

So keep going, Senate!

Patent Troll Victims Speak

The patent troll debate can get abstract, with people debating numbers and data. But there’s a real, human toll.

Here’s a powerful video that tells the story of two patent troll victims in Illinois and the real consequences:

[youtube_embed id='WQmOt97IVi0']

 

Irony Death Watch: Intellectual Ventures Forms PAC

I just heard the news that Intellectual Ventures formed a political action committee, apparently to lobby against patent reform. It’s certainly an interesting use of IV’s funds at a time when the company is laying off workers.

I completely understand IV’s desire to improve its image. But I think that this move will be perceived kind of like potholes forming a PAC to lobby against road maintenance.

At some point, IV may just have to face the reality that the hate directed towards it isn’t just about a poor product launch. Americans instinctively don’t like it when someone comes along to claim a piece of something he didn’t have any part in building, but that’s how IV makes its money.

Intellectual Ventures can buy political ads and donate to candidates, but I really don’t think patent trolling is going to become politically popular, no matter how much IV spends.

Obama Administration Stays Focused on Patent Quality

President Obama on PhoneLast June, the Obama Administration announced a number of executive actions to tackle the patent troll problem and improve patent quality. President Obama also talked about patent reform in his State of the Union speech this year. Today, the Administration followed up with a progress report and some new actions.

Overall, there are good developments to report. The USPTO has moved forward with rules requiring patent owners to disclose the full chain of ownership, which should help deal with the problem of patent trolls using shell companies to hide the real owners. The USPTO is also launching a pilot program that will try to use glossaries in patent applications to make patent claims clearer.

Today the USPTO launched the website http://www.uspto.gov/patents/litigation to provide information to “main street” businesses that get sued by patent trolls.

And the Administration announced today that it’s reaching out to industry to get help gathering prior art and training examiners in current technology.

These are all positive steps, and the Administration’s recognition of the need for dealing with poor quality patents and patent trolls has been a major factor in moving reform forward. The Administration has renewed its push for patent reform legislation as well.

The House of Representatives passed the Innovation Act late last year, and now the Senate needs to pass similar legislation; the PTO needs the help to deal with low quality patents that are too often the basis for costly, abusive and frivolous litigation by patent assertion entities.

Only Congress can put a stop to abusive patent litigation tactics and make patent trolling less profitable. Hopefully, the Administration’s attention to the issue will help patent reform keep momentum in the Senate so that we can get a good bill done this year.

USPTO Issues Patent to Fraud

[caption id="attachment_4239" align="alignleft" width="258"]Photo by Alex E. Proimos, licensed under Creative Commons 2.0 Photo by Alex E. Proimos, licensed under Creative Commons 2.0[/caption]

This story is so embarrassing for the U.S. Patent & Trademark Office and the patent system, I almost don’t want to write about it.

You might remember that about a decade ago, a South Korean scientist, Hwang Woo-Suk, claimed to have cloned a human embryo. Then, it turned out that the work was a fraud, and a few years ago Hwang was fired and convicted of various crimes in South Korea.

And yet, he just got a U.S. patent on his work. That is, the work that didn’t exist.

According to the NY Times article, the USPTO knew about the fraud and issued the patent anyway. But it’s much worse than the Times article describes.

According to the prosecution history of the patent, the USPTO actually relied on an affidavit from Hwang in issuing the patent. And the affidavit was submitted four years after his conviction in South Korea for embezzling his research funding.

This is what happened: The examiner rejected Hwang’s application as not teaching how to perform the cloning technique Hwang claimed. That makes sense, because Hwang didn’t actually know how to do it — he’s a fraud.

But just last year, Hwang submitted an affidavit claiming that he had actually done the things the examiner cited, and giving his expert opinion that they were within the skill of an ordinary person in the art.

One might expect the examiner to respond with peals of laughter followed by throwing the affidavit in the trash. Nope.

The examiner accepted the affidavit and issued the patent.

Inventors submit such affidavits all the time, and the affidavits are presumed to be accurate. But this is hardly a normal situation.

Hwang is a known fraud, who admitted falsifying the results from the supposed invention that he was trying to patent!

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