http://www.ipprotheinternet.com/ipprotheinternet/IPPro_issue_009.pdf

The Licensing Executives Society (LES) has created a new fair, reasonable and non-discriminatory (FRAND) licensing standard committee.

According to LES, the committee will focus on the creation of an industry-wide, consensus-based business process standard that gives all parties a clear understanding of their responsibilities in the FRAND standard-essential patent (SEP) licensing process.

Members of the committee include ACT | The App Association, Ericsson, and Unified Patents.

Matteo Sabattini, director of IP policy at Ericsson, and Brian Scarpelli, senior global policy counsel at ACT, will be co-chairs of the committee.

LES launched the committee via the ANSI-accredited LES Standards programme, in an effort to bring together industry experts and LES Standards programme members who act as principals or agents in SEP licensing on FRAND terms.

LES said that by collaborating on best practices to provide this clarity, the standard will “reduce the cost and the management time to licence SEPs.

Bob Held, chair-elect and president-elect of LES of LES, commented: “The developers and implementers of technical standards will benefit from a flexible and yet standardised framework for licensing SEPs on FRAND terms.”

“We have therefore established a committee in LES Standards to spell out and enhance efficient industry best practices for this important area of the innovation ecosystem.”

Bill Elkington, current chair and president of LES, added: “Matteo Sabattini and Brian Scarpelli are ideal chairs of this committee because they represent stakeholders from throughout the innovation ecosystem.”

“As an ANSI-accredited standard developer in the field of intellectual capital management, and with Sabattini and Scarpelli’s leadership, LES is well-positioned to develop consensus guidance on FRAND licensing practices.”

Interested parties can visit the LES Standards committee website to join.

Originally published in IPPro The Annual 2014/15

The innovation economy has never been so vibrant and essential, and at the same time, at such risk. Intellectual property rights are the foundation of new markets, and the cornerstone of commerce. In the absence of sound, predictable, and enforceable IP rights, new business ventures cannot gain a foothold, and society is deprived of the fruits of their intellectual achievements. Yet IP rights are under attack, and vested interests are eager to deny innovators this valuable property right.

The Licensing Executives Society (USA and Canada) (LES) is devoted to the development and growth of new markets spurred by a vibrant innovation economy and the orderly exchange of IP rights. Diminishment of those property rights threatens economic development, and is contrary to the public interest. LES is working with legislators and the licensing community as a whole to promote sound IP policy in furtherance of the public good.

Of the congressional power to confer copyright and patents granted by the US Constitution, James Madison, famously said: "The utility of this power will scarcely be questioned. The copyright of authors has been solemnly adjudged, in Great Britain, to be a right of common law. The right to useful inventions seems with equal reason to belong to inventors. The public good fully coincides in both cases with the claims of individuals." The acknowledgement that IP rights inure to the benefit of both the individual and society in equal measure is critical to this debate.

Without this property right, investors deploy resources elsewhere, inventors are mere hobbyists, and vast intellectual resources are wasted. It is far better to reward the commercial employment of the inventive mind. How else to cultivate in our youth the same awe and reverence for the inventor as for the professional athlete?

The exclusive right conferred by a patent is, in effect, a public resource. Regrettably, public resources are occasionally diverted for purely personal gain. A certain few notoriously use patents in bad faith to demand payment where none is due. This is a breach of the social contract that trades disclosure for that exclusive right. The illicit acts of a few, however, should not frustrate the legitimate interests of the rest.

LES is committed to promoting the progress of the useful arts, and dedicated to doing so consistent with the public good. LES has a unique voice. It is the largest member society of Licensing Executives Society International (LESI), the only global professional society dedicated exclusively to taking technology to market by sharing IP rights through licensing.

A Unique voice in industry

LES uses its unique voice in support of prudent IP policies. Earlier in 2014, LES convened a focus group of leaders of the innovation economy to discuss standards of sound licensing. Led by LES trustees Bill Elkington, senior director of IP management at Rockwell Collins, and Bob Held, vice president of intellectual asset management at TeleCommunication Systems, the LES standards focus group convened in July to debate whether such a standard setting initiative could be carried out, how it might be done, and what the end product might look like. The debate focused on whether the initiative could deliver well defined standards of IP management applicable throughout the community, from fully-integrated manufacturing concerns to research-oriented enterprises to financiers and brokers. The undertaking reflects LES's belief that the principles of sound and responsible IP management prevail regardless of the business model or the industry sector. We are an equal opportunity professional society.

LES is well positioned to convene the seemingly disparate voices of the diverse licensing community, and to bring those voices to a more harmonious consensus. LES members come from all industry sectors, from high technology and communications to healthcare. LES provides a unique forum for experts of various competencies in the licensing value chain to come together to network, share best practices, and foster more efficient business development.

The LES Standards Initiative is born of the belief that the innovation economy can police itself, and can come to agreement on codes of conduct that respect the competing interests of the marketplace, while honouring traditional notions of ethics and responsible business behavior. We believe there is more to be gained by devising a set of common codes than any one organisation or industry sector will lose by committing to abide by those codes. LES is dedicated to transparency and inclusion in this process. The more voices we have at the table, the better. However, we will not be dissuaded or diverted by private interests in conflict with the public good.

The next scheduled dialogue on the subject of LES standards will convene at the LES 2014 Annual Meeting, 5 to 8 October, in San Francisco. There, on 5 October, at a morning workshop, the LES Standards Focus Group will discuss further the rationale for moving forward with an LES Standards pilot programme, what the work product of the committees might look like, and what sorts of committees the various members might find relevant to their business interests. The LES board of trustees will then consider a proposal for further action, and will decide whether to take the LES standards concept forward.

We encourage all interested parties to attend and participate. As envisioned, the initiative will result in the cooperative development of international standards relevant to IP transactions, IP management, and IP-based products. In doing so, LES acknowledges the essential requirements of openness, balance, consensus and due process.

However, the deliberations of each approved LES standards committee will be conducted under Chatham House Rules, and input and access will be limited to the members of each committee. Each LES standards committee will be open to all, but subject to a membership fee.

Each LES standards committee's recommended consensus standards will ultimately be published for comment. The terms and conditions under which the proposed consensus standards will be presented for comment are yet to be determined. It is envisioned that the LES standards development process, and the standards themselves, will be accredited by a national standards organisation such as the American National Standards Institute.

A unique voice on IP policy

LES has also exercised its voice in public policy over the past year. The recently implemented America Invents Act is the most significant change to the US patent system in 60 years. Its effects are wide-ranging and profound, and largely indeterminate. The wisdom of deferring further reform would seem self-evident. Yet, there is a movement afoot to attack other perceived weaknesses in our patent system. LES believes that the blunt instrument of legislation must be used sparingly, and only where the consensus is that a systemic, rather than merely anecdotal, problem exists. We are convinced that such consensus does not prevail. The LES public policy committee has repeatedly informed Congress of the society's view that legislative reform must be undertaken only upon a full and impartial hearing from diverse interests, and with proper deference to that input. Efforts to push legislation without consensus, and without a full and fair hearing for all concerned, is profoundly undemocratic, and risks systemic damage to the most potent economic engine ever devised.

We further believe that the innovation economy, and the economy as a whole, will best be served by strong, reliable, and enforceable IP laws that protect equally the sole inventor and the multinational manufacturer, and without regard to the business model or core competency of either.

LES will remain active in public policy and legislation. We are monitoring legislation for a federal right of enforcement for trade secret misappropriation. We are generally of the view that such legislation will enhance the protection of IP, and so have a beneficial effect for both individual enterprise and the public good. However, this does not diminish our commitment to due process and a full and fair hearing for the user community.

A valuable voice for members

LES is a nimble and forward thinking professional society that respects the views and interests of its members. We abide by an ethos consistent with our longstanding dedication to educating, mentoring, and networking. Our educational model emphasises open exchange of ideas, and sharing of best practices. We lead our society in much the same way.

In the summer of 2014, at the request of LES president, Russell Levine, president-elect Pamela Demain convened the LES board and various sector and committee leaders for a two-day strategic planning retreat. Topics included the organisational structure of LES, and member benefits, and participants debated modifications that might more effectively meet members' needs. While the initiatives and objectives of the resulting plan remain under development, a report to members will be produced explaining the plan and mapping its implementation.

Ever more competitive markets favour the nimble, efficient enterprise. Licensing promotes economic efficiency through market segmentation and specialisation. As such, licensing, as an industry, will continue to grow in scope, significance, and sophistication.

LES will continue to play a vital role in the evolution of that industry, and is eager to work with the licensing community as a whole and our elected leaders in doing so.

Download the pdf version of the article here.

US legislative action against so-called 'trolling' could have negative consequences, Catherine White reports

Originally published in the Intellectual Property Magazine December 2013/January 2014 Edition

Bob Goodlatte's US Innovation Act to stop 'frivolous' patent claims is a so-called "fix" that will likely create "profound and unintended" negative consequences, Brian O'Shaughnessy, RatnerPrestia shareholder and  regional vice president of the Licensing Executives Society (LES) told IPM.

In an exclusive interview, O'Shaughnessy said while the bill has some merits and good intentions, certain members in Congress are trying to "utilise an ill-informed sense of urgency" to push through the legislation without getting sufficient user community feedback. 

He added that "with all the changes being implemented as a result of the America Invents Act, it is imperative to the health of the system that we approach further change cautiously, and with extensive input from the user community".

The HR 3309 bill, discussed at the US House Judiciary Committee in October by Goodlatte and other Congress members, is designed to keep the patent law up-to-date, while amending the US' 'damaged patent system' that has resulted in a litigation playground.

However, O'Shaughnessy, who chairs the LES public policy committee, believes that the most effective way to remedy litigation abuse is through evolution of case law, where judges might become more "assertive" with their use of Rule 11 under the Federal Rules of Civil Procedure, which provides for sanctions against frivolous cases, or failure to conduct appropriate due diligence before bringing suit.

"If more judges bring the power of Rule 11 to bear more aggressively, then lawyers themselves know they will be on the hook, and this will in turn be an effective means to shut down abusive litigation," he said.

O'Shaughnessy called the claim that the US patent system is 'broken' a "complete fallacy", and accused its advocates of trying to disrupt the patent system for their own gain.

"I think the patent system in the US is the best in the world. It is extremely well run, that's not to say there isn't room for improvement – especially in the area of patent quality – but this is a problem that is relatively easy to fix," he said.

"For example, by reinvesting all the money the US Patent and Trademark Office collects in fees back into its infrastructure and personnel, we can then get the quality of examination that everyone wishes we have."

He added that the bill will not stop 'frivolous claims' and its attempt to either define 'trolls' or 'trolling behaviour' invites gamesmanship.

"We all know that as soon as the bill passes, there will be lawyers looking over it, trying to figure out how they can continue to do what they're doing today merely by exploiting the intricacies of the bill. Because legislators are not in the business of IP exploitation or enforcement, they don't really understand the rudiments of the game. As a result, those who wish to do so will likely devise ways to subvert the aim of the legislation," he said.

There are currently seven bills targeting 'patent abuse', with the Electronic Frontier Foundation calling Goodlatte's bill "the best patent troll-killing bill yet".

O'Shaughnessy said if HR 3309 bill comes into force there could potentially be serious ramifications for the US, innovation, economic growth and IP.

"I'm concerned it will result in the diminished value of IP because if it's harder to enforce IP, then the IP itself has less value. If IP has less value, then there will be less innovation, so this will result in fewer new life improving products.

"The founding fathers were very clear that the patent system was designed for a particular purpose – to promote the progress of the useful arts. These bills have very serious potential to diminish that progress," he warned.

Download the pdf version of the article here.

This article is being reprinting with express permission from IPPro Life Sciences. More information is available at http://www.ipprolifesciences.com.

Download the Article

Mark Dugdale Reports

A troll lives under a bridge, spending its time eating whoever crosses, except, as the tales tell, goats. It also reportedly lives in a cave, and can be described as a dwarf or a giant. In modern parlance, a troll spends his or her time plaguing internet forums with insults in a bid to upset users and get a reaction. The modern-day troll also targets 'the little guy', presumably because it is bigger and it can.

The multiple applications of 'troll', while varied in their realism, are consistent in their negativity. 'Patent trolls', more respectfully known as nonpracticing entities (NPEs), are litigious beasts that amass portfolios of unproven patents and enforce them against all and sundry, usually those who cannot afford to prove invalidity and find it easier to settle.

These entities are considered to be the worst form of NPE, and are commonly referred to as patent assertion entities (PAEs), although not here where possible, as that description is unreliable in its scope. Indeed, a number of speakers at the recent London Patent Summit bemoaned the use of the PAE label, arguing that it describes almost any entity that enforces a patent.

Intellectual Ventures, a holder of 70,000 intellectual property assets, of which nearly 40,000 are actively being monetised, earning the company $3 billion in cumulative licensing revenue, is largely considered to be an NPE.

But the company's co-founder and vice chairman, Peter Detkin, takes issue with both the "patent troll" and NPE labels. He says: "As the political fight heats up the word 'troll' has been stretched to the point where it has almost no meaning and where legitimate market players are being swept in with the bad actors."

"And the polite term for 'patent troll', non-practicing entity, is misleading and reflects a serious misunderstanding of how the patent system is supposed to work. We propose something much simpler: 'patent holder'. That's all that really matters, and puts the focus where it should be—on the patent itself. There isn't a need to categorise the holder beyond that."

Political pursuit

Whatever the description, the patent troll scourge—hyperbolic, but read on—has prompted a backlash in the US. In fact, it is such a contentious issue that President Barack Obama has waded into the fray. At the Fireside Hangout in February 2012, he said: "[PAEs] don't actually produce anything themselves. They're just trying to essentially leverage and hijack somebody else's idea and see if they can extort some money out of them."

The White House issued a report into the behaviour of these entities a year later, on 4 June 2013. It also issued executive actions that the Obama administration is taking, and legislative measures that it is asking US Congress to pass to protect American innovators.

The issued report details the extent of the problem in the US, with estimates putting the cost of NPE settlements at $29 billion in 2011, a 400 percent increase from 2005.

The result, said Gene Sperling, director of the national economic council and assistant to the president for economic policy, is "costing the economy billions of dollars and undermining American innovation".

In his blog post, he added: "Today, some of the largest innovators in high-tech spend more money on patent litigation and acquisition than they do on research and development for new products. Smaller companies are getting hit just as hard, and 40 percent of technology startups targeted by patent trolls reported a significant impact on their business operations due the suit or threat thereof."

"It's clear that the abuse of the patent system is stifling innovation and putting a drag on our economy. The trolling has gotten out of control, and it's time to act."

Trolling is the verb

Among the steps that the Obama administration wants to take will require patentees and applicants to disclose the 'real party in interest'.

"[It requires] any party sending demand letters, filing an infringement suit or seeking [patent office] review of a patent to file updated ownership information, and enabling the [patent office] or district courts to impose sanctions for non-compliance", said a White House statement.

Commenting in June on the 'real party in interest' administrative action, an Intellectual Ventures statement said: "[The company] believes 'real party in interest' proposals are misguided and merit further discussion, but we will of course comply with whatever regulations are enacted."

Brian O'Shaughnessy, shareholder at the IP Law firm RatnerPrestia and regional vice president of the US at the Licensing Executive Society USA & Canada, where it is his job to act as public policy coordinator for statements that the society wishes to make on US legislative initiatives, points back to comments made by US Supreme Court Justice Potter Stewart when he was faced with a case covering pornography. He tried to define 'obscenity', but in frustration acknowledged that it defied definition. Instead, he said he would know it when he saw it.

"The same parallel applies here," explains O'Shaughnessy. "Troll behaviour is something that defies definition. You cannot call someone a troll without having to write more exceptions into the rule that consume the rule itself. Once you start writing exceptions, then you invite gamesmanship. We can try to carve out universities and government labs, but then you have to carve out other entities, and the more you start doing that, the more you dive down into a rabbit hole that legislators are ill equipped to deal with."

"I'm very concerned because I have a great fear that legislators using a tool that is terribly ill-suited to this issue will wind up trying to use a bomb instead of a scalpel."

An example of new legislation aimed at addressing abusive patent litigation came on 23 October, in the form of a US House Judiciary Committee bill. The bipartisan Innovation Act "builds on the reforms that were made last Congress in the America Invents Act and addresses certain abusive practices taking place in our courts", according to a statement.

The bill primarily aims to target abusive patent litigation, which its political backers stressed will tackle behaviour rather than individuals. It will not "diminish or devalue patent rights in any way", while introducing heightened pleading standards and transparency provisions, and a modernised version of fee shifting.

House Judiciary Committee Chairman Bob Goodlatte said: "The bipartisan Innovation Act is designed to eliminate the abuses of our patent system, discourage frivolous patent litigation and keep US patent laws up to date. These important actions will help fuel the engine of American innovation and creativity, creating new jobs and growing our economy."

The Intellectual Ventures statement in June went on to discuss legislative initiatives that had already put in place, namely the America Invents Act (AIA).

"Intellectual Ventures supports improvements to the patent system, and we supported the president when he introduced the American Invents Act in 2011. The AIA received broad, bipartisan support and represents an ambitious overhaul to the current patent system."

"Although we appreciate some of the president's current proposals and believe they could help alleviate some of the issues that persist in the current patent system, Intellectual Ventures would encourage lawmakers to continue pursuing the bold changes set forth as part of the AIA since they have yet to be fully adopted."

Two aspects of the AIA specifically sought to examine and address NPE litigation. Article 34 of the act, which came into effect in March, obliged the US Government Accountability Office to assess the consequences of patent litigation brought by NPEs.

The office released its report in August, finding that NPEs are responsible for around 20 percent of patent litigation in the US.

The report described that, after fluctuating only slightly between 2000 and 2010, the number of patent infringement suits brought in the US increased by about a third in 2011. Attempting to explain this increase, the report noted that increasing numbers of "patent trolls" might have played a part.

It stated: "Stakeholders knowledgeable in patent litigation identified three key factors that likely contributed to many recent patent infringement lawsuits. First, several stakeholders [the office] interviewed said that many such lawsuits are related to the prevalence of patents with unclear property rights; for example, several of these stakeholders noted that software-related patents often had overly broad or unclear claims or both."

"Second, some stakeholders said that the potential for large monetary awards from the courts, even for ideas that make only small contributions to a product, can be an incentive for patent owners to file infringement lawsuits."

"Third, several stakeholders said that the recognition by companies that patents are a more valuable asset than once assumed may have contributed to recent patent infringement lawsuits."

Section 19 of the AIA, already in effect, prohibits defendants from being joined in a suit unless there are questions of fact common to all of them. "The AIA had a rather notable effect on patent cases, in that it is now very difficult to name more than one defendant in a lawsuit," says O'Shaughnessy.

The high bar for naming defendants in patent suits might also have affected the studies on NPE litigation carried out since its implementation.

O'Shaughnessy says: "Each defendant has to be named in an individual lawsuit. A troll might have brought a lawsuit against 15 different defendants a year ago, but today it's 15 lawsuits. Consequently, that can be exploited to make it look like the number of lawsuits have increased dramatically due to troll activity, when the real fact of the matter is that litigation has not changed, merely the number of lawsuits."

He adds that the premise behind legislative initiatives, and the studies used to support them, "is flawed—that NPE litigation is somehow crushing our judicial system".

"In fact, when measured relative to the number of patents issued, the data show that the number of patent lawsuits today is below historic highs, and has remained steady for many decades."

Unwanted attention

Another US agency taking an interest in NPEs is the Federal Trade Commission (FTC), which recently voted to seek public comments on a proposal to gather information from 25 companies that could make the NPE picture all the clearer.

In 2012, the anti-trust division of the Department of Justice along with the FTC sponsored a workshop to explore the impact of NPE activity on innovation and competition.

While workshop participants and commenters identified the potential damage that NPEs could cause, they noted that there was insufficient empirical data in the field and recommended that the FTC use its authority under Section 6(b) of the Federal Trade Commission Act—"effectively giving it a data generation authority by way of subpoena," explains O'Shaughnessy.

"Patents are key to innovation and competition, so it's important for us to get a better understanding of how PAEs operate," said FTC chairperson Edith Ramirez.

"We want to use our 6(b) authority to expand the empirical picture on the costs and benefits of PAE activity. What we learn will support informed policy decisions."

Previous studies have focused mainly on publicly available litigation data and concluded that NPE litigation is increasing. The FTC has congressional power to gather non-public data, such as licensing agreements, and patent acquisition, cost and revenue information that will provide a clearer view of NPE activity.

The FTC hopes to answer questions that stem directly from the debate surrounding NPEs, including how they are structured, and how much they earn through patent assertion. After public consultation, the FTC will submit a request to the Office of Management and Budget to comply with the Paperwork Reduction Act, seeking clearance for its proposal to send compulsory process issues to NPEs.

Russ Merbeth, chief policy counsel at Intellectual Ventures, welcomes the FTC's attention. He says: "The market for patents has grown tremendously in the last decade, and it makes sense that its impact on the US economy is being studied by the competition and consumer protection authorities at the FTC. We believe the FTC analysis would help policymakers make decisions on patent reform based on business behaviours, not business models.

O'Shaughnessy comments: "By opening up such an enquiry, they can engage entities that are involved in IP acquisition, licensing, enforcement, or whatever, and demand otherwise confidential information."

But he cautions: "This is going to be a long-term process—the FTC won't send out requests for information for at least a year, because there is a lot left to be done before it can."

Sleepless in settling

In the meantime, the patent troll problem is ongoing, as highlighted by Lodsys, which did not respond to a request for comment. It recently agreed to settle with IT security company Kaspersky Lab for nothing.

The NPE originally accused 55 defendants of patent infringement, but they have all settled with Lodsys since it was filed in the US District Court for the Eastern District of Texas, except Kaspersky Lab.

Lodsys agreed "a full and unconditional capitulation" ahead of the case going to trial on 7 October, according to Eugene Kaspersky, chief executive of Kaspersky Lab, with his company having to pay nothing to settle the litigation.

Similarly, Lodsys accused seven developers of infringing two patents in May 2011 by using iOSbased in-app purchasing technology, and later added another four to its complaint.

Apple intervened in the case, arguing that an existing licence agreement between it and Lodsys rendered the asserted patents exhausted in this case and so the developers were protected from liability.

But all of the developers settled, and US District Court for the Eastern District of Texas Judge Rodney Gilstrap granted Lodsys's motion to dismiss Apple from its case against on 24 September.

This left the patent exhaustion question unanswered, much to the annoyance of the Electronic Frontier Foundation, which filed an amicus brief asking the court to rule on the merits of the licence issue, because a ruling on "whether or not Lodsys's claims against iOS-based app developers are barred or exhausted by Apple's licence would provide crucial guidance to millions of app developers".

If an accused infringer chooses to go to court rather than settle with what it thinks is a true 'troll' that is bringing an arguably bogus case, the trial judge has tools available that can help.

O'Shaughnessy says: "The judge already has the ability to sanction abuse of conduct in the context of litigation. That is available through a couple of mechanisms, most notably Rule 11 of the Federal Rules of Civil Procedure. It obligates a litigant to do reasonable due diligence before bringing a lawsuit. If that isn't done, and the litigant perpetuates the lawsuit, the judge can issue sanctions. They can range from monetary fines to dismissing the case with prejudice."

He adds: "Judges traditionally don't use that vehicle because of a fear that an overuse of Rule 11 sanctions would chill access to the court system. But I think the kind of legislation that is being proposed is potentially far more dangerous than a more aggressive use of Rule 11 might foster."

The patent troll problem, however large, damaging and costly, is a reality, according to many. But before a solution must come understanding, and the fact that the problem has at least four different names—NPE, PAE, patent troll and patent holder—suggests that this is some way off.