IPBC Global 2015: Conference report V

The end .. or a new beginning?

Day Two of the Intellectual Property Business Conference IPBC Global 2015 opened with a plenary session titled "End of an Era". The theme was that, according to some, the pro-patent era that began in the United States in 1982 with the creation of the Federal Circuit has come to an end. Are the pessimists correct or has the pendulum still further to swing? Most important of all, in the modern knowledge economy does the US patent system still offer enough incentives to invest in innovation?

Bowman Heiden (Deputy director, Center for Intellectual Property, Gothenberg) moderated the session. He opened the session by asking for a show of hands as to who thought the (US) patent system had become too weak, was too strong or was about right. A large majority felt the system had been weakened, though a large number of people declined to go public on their opinion. 

Bowman introduced the panellists: Kurt Kjelland (Senior legal counsel, Qualcomm Incorporated), Mark Lemley (William H Neukom professor of law, Stanford Law School), Allen Lo (Deputy general counsel for patents and patent litigation, Google Inc), Randall Rader (Former chief judge, Court of Appeals for the Federal Circuit), BJ Watrous (Vice president and chief IP counsel, Apple) and John Whealan (Dean for IP law studies, George Washington University). 

The discussion opened on standard essential patents (SEPs). Their owners, waiting in the wings till their patents were adopted, could cash in once everyone was using them, and it was possible both to collect royalties for their use and to sue for infringement. However, a good set of rules is needed, both for patents and for contracts, if antitrust proceedings are to be avoided.  If 20% of the patents in a standard represent 80% of that standard's value, a royalty scheme that treats patents equally is obviously unfair. We also feel different as between standards that are truly essential and those that are standard because everyone has opted for them, though other patents could achieve the same result. Ultimately, what is a portfolio's value worth? Every standard portfolio will have patents that are invalid, and those that are not infringed -- but what we need is a "business number" for the licence rate, not the aggregated value of each individual patent.

What was needed was a figure for a bundle of SEPs that is realistic for business, avoiding the commercial threat of royalty stacking -- but how does one achieve it? Arbitration? Litigation? Litigation happens anyway, not so much as a way of establishing the quantum as establishing a duty to pay a licence royalty in the first place: this applies in respect of individual patents rather than portfolios as a whole, though. Once you have a smartphone loaded with apps, you probably have a couple of hundred thousand patents pointed at you.  Even if you knock out 90% of them, that still leaves around 25,000 patents to pay for.

Should injunctions be available in SEP settings? The panel generally felt that they should, though there may be situations in which their availability should be narrow. "Without injunctions there is no way to bring the parties to meaningful negotiations". 

Validity was also discussed.  The same institution that grants a federal patent right -- the USPTO -- is the agency that keeps invalidating them in inter partes proceedings.  This, one panellist suggested, is a disaster.  Maybe it's not so bad, added another panellist. The USPTO provides an effective screening for more than half a million patents a year, most of which are never used, lapse and cause no-one any trouble. The proportion of patents invalidated is high, but the absolute number is small. The USPTO provides a robust back-room mechanism for correcting and adjusting the results of the initial screening.  But is the USPTO applying the right rules and does it have the right tools for the job?  As it is, the burden is on the USPTO to show that a granted patent is not valid, and this can be a tough task. With better initial examination there would be fewer patents challenged. 

The US system would be better if applicants threw fewer bad applications at the USPTO, which consume time and resources [and which are sometimes granted: Jeremy]. What about a non-mandatory 'opt-in' deeper examination by three examiners? An application that survives that should be more strongly presumptively valid and should fare better in court. 

Next discussed was the quantum and strength of patents. Whether patents should be strong or weak is not the right question. Rather, do we have the right balance between having lots of patents and having good ones. The fact that there is so much litigation is a sign that we've got it wrong, one panellist opined because it indicates a volume of uncertainty, in terms of infringement at any rate. The intellectual cogency of the Mayo and Alice decisions was then discussed, in the context of the general weeding out of non-patentable inventions under s.101 of the US patent code. 

The question of timing is also important, and it varies as between technological sectors and time spent in developing a patentable concept: "By the time you file a software patent, you are always talking about an old technology".  Apart from the time-frame, there are other analytical approaches. For example, patents can be viewed from three self-explanatory perspectives, the three "a"s: "assets, actors and actions".  Under the heading "actions", the impact of the courts was considered: were they beneficial or disruptive? The consensus of the panel was that, on the whole, they improved the system. As to legislative involvement, with the increased importance of patents comes more scrutiny -- and that's fine.

The session then closed with a wide-ranging Q and A with the audience.