PublishedOctober 9, 2017

IPR Successes: A Bridge To Sovereign Patent Funds

Patent trolls are a familiar concept at this point, but a “sovereign patent fund” (SPF) might not be.  This isn’t the kind of sovereign I wrote about recently in regard to sovereign immunity.  In essence, an SPF is simply a patent assertion entity (PAE) with backing from a national government.  

While government-funded companies that create patent portfolios have been around for quite some time, such as South Korea’s ETRI, they typically functioned as operating companies and research institutions first, obtaining patents from their own research, and only secondarily as patent litigators.  It’s only over the past few years that the first generation of sovereign patent funds has arisen, acquiring patents from external sources.  These SPFs are formed for various reasons, but they all generally have a protectionist bent, focused on protecting local industry and keeping IP in local hands.  IP Bridge, a Japanese SPF, openly states that one goal is to “aggregate [patents] and use them, for example, to support domestic[1. “Domestic” is used here to refer to the companies resident in the country that set up the sovereign patent fund.  So, Japanese companies for IP Bridge, French companies for France Brevets, etc.  Similarly, “foreign” refers to companies outside of the sovereign patent fund’s home country, including U.S. corporations.] SMEs [small and medium enterprises].”

So what can you do if a company backed by the resources of an entire foreign government targets you with a patent infringement lawsuit?

You can file a petition for inter partes review.

The Big Three SPFs

There are three SPFs considered to be first generation SPFs; France Brevets, Japan’s Godo Kaisha IP Bridge, and South Korea’s Intellectual Discovery.[2. China has followed suit, creating IP Bank, and there have been efforts to push the Canadian government to create their own sovereign patent fund.]

 These companies are set up with an investment of funding from the national government—for example, 90% of IP Bridge’s initial funding was provided via the Japanese government—and the majority of their initial patent portfolios come from corporations headquartered in the same nation.  Again using IP Bridge as an example, their portfolio was created using patents from Panasonic and NEC.   

In other words, these funds are at least in part formed to use government funding and patent law as a weapon in order to protect domestic industry.

This isn’t an idle threat.  IP Bridge has been an active litigant in a number of cases.  It has sued several companies in the past, primarily semiconductor makers like Broadcom and Xilinx.  Just last Friday, IP Bridge filed a new lawsuit against Intel.  IP Bridge claims Intel infringes 9 patents, including semiconductor manufacturing patents they’ve previously used to threaten chip designers.

TSMC is a major chipmaker for companies that design chips but don’t manufacture them—companies like Broadcom and Xilinx.  And when IP Bridge sued Broadcom and Xilinx, TSMC filed IPR petitions to defend their customers—one of the notable uses for IPR I’ve previously described.  [1][2]

TSMC (And Others) Challenge IP Bridge’s Patents

TSMC wasn’t alone in this regard.  GlobalFoundries, another chipmaker who works with Broadcom, also filed IPR petitions against IP Bridge’s patents.  These petitions included two of the patents IP Bridge has asserted against Intel; the remaining seven hadn’t been asserted against Broadcom and were not challenged in IPR.

But of the two patents in the new Intel case that were challenged in IPR, the Patent Office has made an initial determination that neither one is valid, subject to confirmation in a final written decision. [1] [2]  The final decisions are expected within the next few months in both instances.  And of course, Intel may file its own IPRs against the patents first seen in their case—Intel has filed IPRs against approximately 20 patents over the past few years.

The fact that its patents are in trouble didn’t stop IP Bridge from filing a lawsuit claiming infringement, of course.  One of the advantages of being a sovereign patent fund, as opposed to a standard PAE, is that you have more financial resources behind you and less pressure to keep your costs low, since your goals are broader than just maximizing your litigation and licensing profits.  Because of this, IP Bridge can be more comfortable asserting patents, even if it might need to withdraw them later, simply to increase costs on the foreign entities targeted.  In this case, companies like Intel.

Stays and IPRs

IPRs might not have stopped IP Bridge from filing this case, but what it can do is help Intel postpone the litigation until after the PTO has had a chance to review the patents.  By determining if the patent is valid ahead of time using the relatively inexpensive IPR procedure, courts can limit how often a much more expensive trial on infringement happens on a patent later found to be invalid.  This produces an economic benefit by using a cost-effective IPR procedure in place of the expensive litigation procedure.  However, staying litigation pending the resolution of an IPR is necessary to make sure that the validity determination happens first.

In general, judges are likely to stay a case when the PTO has issued a favorable institution decision on a patent, and somewhat less likely, though still willing, to stay a case prior to institution.  In 75% of cases where all of the claims at issue are being reviewed, judges grant stays.  But these numbers vary significantly depending on the venue the motion is heard in.  Fortunately, after the recent Cray decision, it’s going to be much harder for plaintiffs to keep cases in courts like the Eastern District of Texas.  The Eastern District grants only 24% of motions to stay—in contrast, the Northern District of California grants stays more than twice as often.  Given that IPR primarily provides its economic benefit when a stay is granted, the Cray decision will likely increase the overall rate of stays by helping transfer cases to appropriate jurisdictions—ones which are less plaintiff-biased than the Eastern District of Texas.

A Sovereign Issue IPR Can Definitely Solve

While sovereign immunity may present challenges in IPR proceedings, it doesn’t apply to foreign entities such as sovereign patent funds.[3. 

In Intel v. CSIRO, the Federal Circuit determined that foreign sovereign entities, unlike tribes and states, do not receive sovereign immunity when they act as commercial actors, such as by engaging in patent licensing and litigation campaigns.]

 And the unique challenges presented by sovereign patent funds—a generally well-funded patent owner with non-monetary motivations like trade protectionism—are ones that IPR can solve.  

By allowing defendants to question the validity of a sovereign patent fund’s patents, the only assets that an SPF has, IPR provides defendants with an efficient way to respond to SPF assertions of invalid patents.  And, as we saw with TSMC and GlobalFoundries, and with scanner makers and realtors faced with normal trolls, when an SPF targets customers, manufacturers can use IPR to defend their customers.  While the increasing presence of SPFs will create new issues for U.S. manufacturers and product makers, the availability of IPR will help them defend themselves.

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

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