Category Archives: Intellectual Property

What is a patent troll, and how can you defeat it?

trollWhen witnesses appear before committees of the British House of Commons, they are not told in advance what the questions will be. When IP Draughts and Dr Daniel Nelki of Wellcome Trust appeared before the Science and Technology Committee in December, we were not expecting to be asked “what is a patent troll?”, but we tried our best to answer the question.

IP Draughts burbled on for a while about non-practising entities, pointed out that universities fell within this description but should not usually be considered as trolls, and suggested that (a) it was a particular, aggressive way of pursuing patent litigation that was troll-like, rather than the assertion of patents per se; and (b) patent trolls were more of a US than a European phenomenom.

In IP Draughts’ understanding, though he is not a litigator and certainly not a US litigator, a number of factors create a favourable environment for patent trolls in the USA:

  1. The poor quality of some patents in the USA, which should not have been granted. These sometimes claim developments that are used widely across an industry, thereby creating a large pool of potential infringers.
  2. texas2The pro-patent bias of some courts in the USA; the United States District Court for the Eastern District of Texas is a particular favourite for patent owners. Or just a lack of understanding of patents in some non-specialist courts, which creates uncertainty of outcome of patent actions.
  3. The possibility of jury trials in patent cases, which also adds to uncertainty.
  4. The cost of litigation in the USA, partly as a result of very extensive discovery procedures.
  5. The absence of a general “loser pays” approach to legal costs (except in “exceptional” cases – see below). This reduces the risk to a patent owner who bring a speculative law suit; he won’t be hit with a large bill for the defendant’s legal costs if he loses the case.
  6. The availability of legal representation on a contingency fee basis, where the patent owner has no obligation to pay its lawyer’s legal costs other than a percentage of any damages that the owner wins in the litigation. This also reduces the risk to a patent owner who brings a speculative law suit.

These factors sometimes encourage patent owners to bring spurious claims, and make it easier for a defendant to pay a “nuisance value” amount to a patent owner rather than defend a patent claim, no matter how weak the patent.

reachOccasionally, IP Draughts’ UK clients have asked him about letters from US law firms asserting patents in terms that were considered troll-like. In one case, many years ago now, the patent was for a method of testing for a chemical compound. It was a US patent, probably weak, and the client was based in the UK so it was unlikely there would be any immediate infringement. However, the patent had broad claims that included products discovered using the testing method, known as reach-through claims. If these claims were upheld in relation to the client’s products, and if the products were sold in the USA as was hoped, the patent could have done significant harm to the client’s (future, hoped-for) business.

The client consulted specialist patent attorneys, who advised that the risk of infringement of a valid patent was low.

But how should the client respond to the US lawyer’s letter? The letter claimed that many companies in the industry had taken licences and that a good deal could be struck if the client responded promptly. It also claimed that the inventor (who had assigned the patent to a non-practising entity) was a US academic who was going to use the royalties for the benefit of science. This last part seemed designed to position the plaintiff as a “good guy” in any future jury trial.

In the end, the client decided to ignore the letter and subsequent follow-up letters and eventually the US law firm stopped writing. Perhaps a small biotech company in a foreign land was not the primary focus of the patent owner’s efforts.

An alternative approach to dealing with a non-practising entity is to stand up to it and devote resources to fighting any litigation. If you have enough money, and the right judge, this may work.

coteIt is heartening, in this context, to read the recent decision by Judge Denise Cote, of the United States District Court for the Southern District of New York, in the case of Gust, Inc v Alphacorp Ventures, LLC and Richard Suarez, of December 8, 2016, reported here.

Not only did the judge decide the patents were invalid, she awarded costs against both the patent owner and their lawyers. It seems from the report that the patent owner is unlikely to be able to pay the approximately $500,000 awarded to the defendant, so their attorneys may be forced to pick up the tab.

Her reasons for awarding costs, on an exceptional basis, included the fact that the patents were clearly invalid, and the aggressive way in which the patent owner, via his attorneys, had conducted the litigation. From a quick scan of the decision, this seems to have included:

  1. The patents claimed methods of raising money via crowdfunding, albeit dressed up as the use of software for this purpose.
  2. It was obvious in light of the Supreme Court’s 2014 decision in the Alice case that these patents claimed unpatentable material. The patent owner had “attempt[ed] to masquerade its otherwise abstract idea by highlighting allegedly ‘inventive’ elements… But these generic computer elements do not confer patent eligibility”.
  3. The case was initially brought in the Eastern District of Texas (and, according to a press report, a jury trial was sought) “a venue that bears no relationship to the parties or facts at issue in this case …further supports a finding of inappropriate motivation”.
  4. When the defendant managed to get the case transferred to New York, the patent owner tried to withdraw its case by providing a covenant not to sue (see article about that subject on this blog). However, the defendant didn’t accept that this brought the matter to an end.
  5. The patent owner, which was a non-practising entity, had pursued the case in an aggressive way despite acknowledging that it was “not worth litigating”. Its goal was “not to secure a reasonably royalty for infringement of a valid patent, but rather to extract a nuisance settlement …on the theory that Gust would rather pay an unjustified albeit minimal license fee than bear the costs of the threatened expensive litigation in a distant venue”.
  6. Awarding costs against the patent owner’s attorneys, the judge commented on the attorneys’ “bad faith motivation” in bringing the case in Texas, and conducting it in the way that they did.

Heady stuff. This is just one case, though according to the final paragraph of the judge’s Wikipedia entry she has form in awarding costs in patent cases. It will be interesting to see if other US judges follow this judge’s approach and make the USA a less attractive environment for non-practising entities bringing patent infringement actions.

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Use restrictions in contracts of sale

pink or black for court?

pink or black for court?

Long-term readers of this blog may recall earlier articles about whether a seller of a product may restrict the use that the purchaser can make of that product, and whether such restrictions are binding on subsequent owners of the product. For example, may the original seller exercise its IP rights against a subsequent owner to enforce any such restrictions? This subject raises questions of public policy that, in different jurisdictions, are channelled into legal principles such as exhaustion of rights, non-derogation from grant, and the first sale doctrine. See, for example, the EU UsedSoft case, discussed here in 2012.

This subject was forced back into IP Draughts’ mind by the recent spat between two artists, Sir Anish Kapoor and Mr Stuart Semple, reported here.

Apparently, Sir Anish has acquired an exclusive licence, in the field of art, to use Vantablack, the “blackest black” in existence, which is a technology based on carbon nanotubes. According to an FAQ on the website of Surrey Nanosystems, the creator of Vantablack, it seems that what Sir Anish has a licence to is a variant of Vantablack, known as Vantablack S-VIS:

Vantablack is generally not suitable for use in art due to the way in-which it’s made. Vantablack S-VIS also requires specialist application to achieve its aesthetic effect. In addition, the coating’s performance beyond the visible spectrum results in it being classified as a dual-use material that is subject to UK Export Control. We have therefore chosen to license Vantablack S-VIS exclusively to Kapoor Studios UK to explore its use in works of art. This exclusive licence limits the coating’s use in the field of art, but does not extend to any other sectors.

Let’s leave the interesting export-controls point to another day. It is not entirely clear what IP is being licensed, though presumably there is at least some know-how involved. Another FAQ indicates that:

Vantablack is a globally registered trademark and recognised brand owned by Surrey NanoSystems Limited. Companies would need written permission from SNS to use the Vantablack name in their products.

Incensed by Sir Anish’s actions in taking this exclusive licence, and the consequent restraint on artistic freedom, fellow artist Mr Stuart Semple has created the “pinkest pink” and is selling pots of the stuff, subject to the following condition:

Note: By adding this product to your cart you onfirm [sic] that you are not Anish Kapoor, you are in no way affiliated to Anish Kapoor, you are not purchasing this item on behalf of Anish Kapoor or an associate of Anish Kapoor. To the best of your knowledge, information and belief this paint will not make it’s [sic] way into that [sic] hands of Anish Kapoor.

Sir Anish has apparently responded to this provocation with a photograph of (inter alia) his hand:

pink

According to Surrey Nanosystems, one of the stated benefits of Vantablack is “its ability to absorb light energy and convert it to heat”. Mmm…

Readers are invited to comment on whether they think the contractual restriction on supply to Anish Kapoor is enforceable, and what the measure of damages for breach of contract might be.

 

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Filed under Contract drafting, Humour, Intellectual Property, Licensing

Lessons from visiting Parliament

commons-appearanceLast Wednesday morning, from 9.30 am, IP Draughts and Daniel Nelki of Wellcome Trust spent an hour answering questions from the House of Commons’ Science and Technology Committee, in relation to their investigation on the subject “Managing Intellectual Property and Technology Transfer”. A recording of the event can be found on the Parliament TV website here.

With recent experience of giving evidence to a House of Lords committee, IP Draughts knew roughly what to expect, which reduced the stress levels considerably. He is grateful to Iana Vidal of the Law Society’s public affairs team, who chaperoned him during both of his recent visits to Parliament. Daniel had his own chaperone, from the Wellcome Trust’s public affairs team. IP Draughts wonders how many people give evidence to Parliamentary committees without such a supporter. He suggests that the Parliamentary authorities should ask witnesses whether they will be accompanied, and offer such a service to those who attend on their own, including collecting them from outside Parliament, guiding them through security, escorting them to the committee room, and making conversation with them until they are called in to be grilled.

The committee rooms in the Palace of Westminster are on the second floor, all overlooking the river. Next to them is a corridor, several hundred yards long, with an entrance half-way down. To the left of this entrance are the Commons’ committee rooms, many of which are named after former Prime Ministers. To the right, the Lords’ committee rooms. The rooms themselves (or at least the two IP Draughts has seen) are Victorian, wood-pannelled, tall-ceilinged, and well-designed for public conversation.

IP Draughts learnt several new things this week about Parliamentary committees, including:

  1. The importance of the chairman setting a relaxed tone to proceedings. From this witness’s perspective, Stephen Metcalfe MP did a good job. Last month, Lord Saville did his best, and came out to speak to the witnesses before the hearing, which was appreciated, but he was rather ‘hands off’ and remote.
  2. Elected MPs are more engaging than members of the House of Lords.
  3. But some members of the House of Lords are more focussed on the core issues at hand than some members of the Commons, and more familiar with the subject-matter. A few of the questions that IP Draughts was asked last week were, shall we say, peripheral to the subject of university/industry collaborations.
  4. Unlike the Lords’ proceedings that IP Draughts attended, where the questions were set in advance and written down, in the Commons’ committee the witnesses had no advanced notice of the questions. This has some advantages of spontaneity, but it risks gaps emerging, where key questions are not asked by anyone. With hindsight, IP Draughts regrets not being asked about Dame Ann Dowling’s assertion that negotiations over IP are a major source of frustration among all the players – particularly industry and academics – other than the TTOs themselves. She gave evidence immediately after IP Draughts’ session finished and repeated this contentious point. Fortunately her fellow witness, Professor McMillan, gave a different view on this issue (as he did in his written report to HEFCE).

dowlingThe other main point that IP Draughts learnt, and he is still recovering from this insight, was that after the evidence hearing had finished, several MPs rushed to have a selfie taken with Dame Ann Dowling. No-one asked IP Draughts for a selfie.

If you watch Dame Ann’s evidence, you will see one of the committee members asking her, a little sycophantically, whether she can remember all the initials and qualifications that appear after her name. No-one asked IP Draughts this question.

While he cannot compete with Dame Ann’s academic and professional eminence, for the record, IP Draughts received in the post this week a certificate from the European Union Knowledge and Technology Transfer Society stating that IP Draughts has been awarded the title of Expert. One of IP Draughts’ partners reminded him that, according to a former Lord Chancellor, “we have had enough of experts“, and that he might want to keep quiet about this EU qualification.

 

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Filed under Intellectual Property, Legal policy

National reviews of IP are universally poor: discuss

radio-4Until a month ago, the closest IP Draughts had come to participating in national affairs was asking a question on the UK radio programme, Any Questions, in about 1981. The question he (neutrally) asked, which was whether a system of student loans should be introduced for UK students, provoked loud boos from some members of the audience, who were mostly fellow students at the University of Durham. As it happens (but nothing to do with IP Draughts’ intervention), a few years later the government introduced such a system, which is still in force today.

Last month, after 35 years of well-deserved obscurity, IP Draughts gave oral evidence on behalf of the Law Society to a House of Lords Public Bill Committee, which had been convened to consider the Intellectual Property (Unjustified Threats) Bill. The Bill was approved by the committee in its original form. It then proceeded to the Report stage, where the government proposed a few drafting amendments to deal with points that had been raised in committee by the Law Society, Chartered Institute of Patent Attorneys, and Professor Sir Robin Jacob, respectively. IP Draughts was pleased to see that the House of Lords voted in favour of the Bill with only these few amendments. We are now awaiting the third reading in the House of Lords, which should be a formality, before the Bill moves to the House of Commons for consideration.

commonsNext week, IP Draughts has another, unexpected public assignment. He has been asked by the House of Commons’ Science and Technology Committee to give oral evidence in relation to its enquiry into “managing intellectual property and technology transfer”. Details here.

As part of his homework for next week’s assignment, IP Draughts is re-reading last year’s Dowling Review of Business-University Research Collaborations, and  this year’s McMillan Review of University Knowledge Exchange Framework: good practice in technology transfer.

Dame Ann Dowling and Professor McMillan are giving evidence to the committee immediately after IP Draughts and his co-grillee, Daniel Nelki of Wellcome Trust.

Clearly, a great deal of work has gone into these reviews, and many of their comments seem sensible. But parts of these reviews, and of earlier national reviews of IP (Gowers and Hargreaves spring to mind), give the impression that they simply report views that have been expressed to them, or which appeal to their imaginations, rather than engaging in deep analysis of whether those views are:

  • objective, rather than promoting sectional interests
  • workable, in the views of experts who understand the subject
  • affordable and likely to be funded

Examples from (if IP Draughts remembers correctly) the Hargreaves Review were the ideas of having a national Digital Copyright Exchange or “hub” for making licences easily available, and of having standard IP licence agreements. The first soon died a death (a successor is still just about alive), while the latter resulted in the IPO forming a committee to work on licence agreements, of which IP Draughts was an inaugural member. At the first meeting, IP Draughts and one or two other members expressed strong doubts about the feasibility of this task, and the committee’s remit soon morphed into one of providing guides to licence agreements for SMEs.

Perhaps the review process doesn’t lend itself to, or have the budget for, this type of critical analysis. In the case of IP-related reviews, it is noticeable how rarely the composition of the review panels includes specialist IP lawyers, who might be expected to know something about the subject and have a degree of independence from the sectional interests who make representations to the reviews.

These thoughts are prompted by re-reading some of the Dowling Review’s recommendations. For example, recommendation 22 reads:

Innovate UK, in consultation with the IPO, should explore the establishment of an independent source of advice and expertise that SMEs could call upon for support in negotiating contracts with universities.

IP Draughts’ first reaction to this was that there is already such a source of advice: IP solicitors. Then he wondered whether the recommendation was more about getting advice on the commercial terms being proposed. Or getting free advice. Later in its report, the Dowling Review explains that it has in mind a kind of commercial mentoring service for inexperienced SMEs.

ipoWe have been there before. Following the Hargreaves Review, the UK IPO was tasked with finding inexpensive sources of IP advice for SMEs. 5 years ago, IP Draughts described that idea as half-baked and, as expected, it didn’t get anywhere. But the poor IPO spent time and taxpayer’s money in various initiatives, including the ill-advised promotion of a British Standard for Commercial Intellectual Property Services. It really isn’t part of the IPO’s skill set or function to set up new professions to provide cheap advice.

IP Draughts is left with a sense that these repeated IP reviews are being conducted on the basis that if they produce several dozen recommendations, at least a few of them will “stick” and prove useful. This is a terrible way of conducting public business. Please could we have a decent pause – say 10 years – before another national review of IP policy is conducted. And when the next review is conducted, could it be written into its terms of reference that it may not produce a report unless:

  1. The report has no more than 5 recommendations.
  2. Each of those recommendations has been reviewed by a specialist IP lawyer or IP contracts manager who advises in writing that he or she considers the recommendation to be workable.

 

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Filed under Intellectual Property, Legal policy, universities