Fordham International Intellectual Property Conference, Breakfast Roundtable: Monetization of Patent and Other IP Rights
Fordham International Intellectual Property Conference
Breakfast Roundtable: Monetization of Patent and Other IP Rights
– Not a verbatim transcription —
[David S. Bloch]
There are no copyright trolls. By definition, trademark has to be used. So, also, no trademark trolls (but cybersquatters looked like this).
We do see the beginnings of holding patents with intent to solely license, arising post 1982 and the creation of the Fed.Cir.
We have seen the rise of patent aggregators. Buying up patents for defenseive purposes. Taking patents off market that would have been used against group members in the market. As contrasted with “Patent trolls” who are pure monetizers, so they don’t react to the threat of litigation as do actual producers, who must also license other patents.
Finally, there are patent holding companies. Well funded, but all they do is collecting patents. At some point, they must start doing something, or else it is the world’s dumbest business model! they are on the horizon that are interested in the monetization process.
[Joel Lutzker (Ocean Tomo)] We try to be a leveler, try to provide an open and transparent marketplace for patent transactions. A number of platforms developed to do this — Most well known for patent auctions. But, something new in development: Unit License Right (ULR), offer through the intellectual property exchange.
Unit License Right is a right to make and sell a certain amount of covered product. Manufacturer can buy an anticipated number of ULRs to satisfy its production requirement — if under-buy, it can buy more later. If it over-buys, it can attempt to sell the ULRs later. You could have the ULR restricted to certain types of goods.
The ULRs could be offered in a series of tranches. As the market demanded, can roll out additional tranches.
ULRs will be traded on intellectual property exchange in Chicago, but also talks about doing a European exchange.
A way for traders to more directly place a bet on some technology space.
Original issue, 144A. Owner establishes a special purpose vehicle, which owns the ULR. Owners assigns rights to the SPV. An underwriter involved that will take down some quantity of the ULR. Also an IP adviser involved in the process, to help present the IP to the community. when offering made public, there is an offering memorandum. Issuer would enter into a management agreement with the exchange, IPXI. IPXI would oversee enforcement, as well as auditing the use of the ULR.
Secondary market — a qualified buyer would work through the exchange to be matched with buyer. In transparent bid/ask process, the sale proce would be determined.
Enforcement is a huge part of the process. Because the license is merely a covenant not to sue. Only way to settle is through the sale or purchase of ULRs on the secondary market. Enforcement is tied to market.
Defensive rationalization for having patents tends to falter … Patents have a purpose as an asset class. this is becoming apparent with these markets.
At the patent preparation stage, patent is only beginning to be formed. Have to apply for patent before it ever gets used–unlike trademark which is created by use, or copyright which gets protection after creation.
When writing a secification, have to have multiple examples; multiple ways it can be used.
In the prosecution stage, it sits in a drawer for a few years, then when it comes out, you are either practicing the patent, or you have given up. If you have a product, you could try to capture the standard. At that point the value of the original application is what you wrote in the application! If trying to target new licensing opportunities, you may not be able to successfully monetize what you have. Need to have the magic words to capture the new markets.
When you have a target that is acquired, you try to patent what someone else does.
Inequitable conduct is a massive problem in the US. If you bring up an argument or prior art you can be brought up on it — if you dont bring up argument or prior art, you still can be brought up on it!
Only affects litigators. While you can’t choose inventor, you can choose the prosecuting attorney. Must choose well — you are backing all ability to enforce on this person.
Continuations are taking the first application and basically just change the claim slightly — creating whole families of claims. If you know what you are going after, you can create multiple patents for individual licensing to different parties. If there are incorrect words in claims, which turns out to be harmful, you have to change the wording. Gold standard is to keep a continuation application open.
[Moderator] What strategy should Ocean Tomo be taking? Also, can we have exchange traded copyrights and trademarks?
[Panelist: Roya Ghafele]
Definitely a market for those other things, but haven’t taken off. Neither have exchanges for patents taken off yet.
Not a question of the business model or the ideas. It is the market.
Trying to create value for the client through litigation. But this is only one strategy! If you look at it as a property right, then a whole new paradigm opens up for strategic management of the assets. This whole conference should be about monetization of IP! [*laughter*] Must look at how can client create value.
About IP exchanges, seems to be very complicated…
[Lutzker] There are bells and whistles that are necessary for the securities laws.
[Ghafele] The market is basically for bringing buyers and sellers together, for an exchange. the Internet is enabling many different kinds of markets — eBay, dating sites …
Another challenge to patent exchanges is that people are very cautious. No one wants to tell who owns which patent — who has sold what to whom.
For trademark and copyright … as long as we have a perception that “IP = patent” we will have trouble setting up these other exchanges. It is a question of shifting the perception. No reason why trademark or design right couldn’t be traded on an exchange.
For any government who supports a knowledge-based economy, they should support this sort of undertaking.
[Lutzker] at least in the Us, there is prohibition of naked licensing of trademarks, so it does create challenges for the free trading of TMs. There are more challenges here.
[McEwen] There are other markets .. for example a bookstore! It is a market for copyrights.
But for trade secrets, not a huge market, so it wouldn’t take off as an exchange.
To get a trademark, you buy the entire company, and product line.
Patents have been unique because there is a need for intermediary to monetize.
[Question] Sandra Sherman:
Looking at the market for mortgages …
Is this creating another opportunity for another bubble, and crash?
[Lutzker] It is difficult to roill out new tradeable products in this environment. but we aren’t talking about derivatives …
ULRs would only be offered to companies who are purchasing for their own use (at least initially not open to speculators).
[Bloch] You have seen a large amount of speculation in some traditional markets — forum shopping with contingent fee law firms in Marshall, TX.
The issue is whether a more transparent and efficient market can reduce this behavior. It would allow inventors to monetize IP without gumming up the wheels with all these lawsuits.