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The Nortel Six – $4.5 Billion Peace of Mind?

Monday, July 18th, 2011

My thanks to Jim Hallenbeck, of Schwegman, Lundberg & Woessner, P.A., for this guest post:

The Nortel Six – $4.5 Billion Peace of Mind?

The recent Nortel Patent Auction has been the buzz in the patent and wireless communities.  Late on June 30, 2011, Nortel announced the $4.5 Billion winning bid made by an industry consortium including Microsoft, Apple, Ericsson, EMC, Sony, and Research in Motion (the “Nortel Six”).  Considering the auction lot included approximately 6,000 patents, the going rate per patent was $750,000.  As about anyone with even trivial patent valuation knowledge can imagine, $750,000 is a considerable amount per patent when the value of the portfolio has been questioned.  See http://gametimeip.com/2011/07/05/how-do-the-nortel-patent-auction-numbers-measure-up-a-look-at-comparable-ip-monetization-efforts/ (); but see http://blog.sunlightresearch.com/?p=85 (The Patent Research Review Blog by Sunlight Research identifies some Nortel portfolio gems).  Nonetheless, there are likely about 60 patents in the portfolio that are “real diamonds” according to Joff Wild of IAM Magazine.  $4.5 Billion is a large number for a patent portfolio, but the Nortel Six are quite sophisticated and certainly have a good handle on the Nortel portfolio value.

Determining the value of patents and patent portfolios is a black science.  There are various models that accountant-types use to determine values including cost, market, and income models.  The cost model identifies the cost of replacing the patented technology with other technologies.  The market model is akin to valuation of real estate based on comparable sales.  The income model bases value on projections of future income.  In my opinion, the income model approach is the most illustrative of true business value as dollars in the door are what most reasonably results in value.

Under the income model, potential revenue streams are evaluated.  With regard to patents in the telecommunication and electronic fields, a patent that is essential for implementation of an industry standard is quite helpful in generating revenue.  According to a Reuters article dated December 9, 2010, Nortel owns seven of the 105 patent families likely to be essential to 4G wireless technologies, such as LTE.  Add into this equation that on June 1, 2011, Infonetics Research projected that $245 Billion will be spent on mobile infrastructure between 2011 and 2015, most of which is likely to be 4G infrastructure.  Although I can’t predict what portion of that revenue will be paid in patent license fees or what portion of the patent license fees will be attributable to the Nortel portfolio patents, the Nortel portfolio is likely to generate some serious revenue.

Thus, from an income model perspective, the $4.5 Billion winning bid for the Nortel portfolio does not seem quite as unreasonable.  $4.5 Billion is under two-percent of the projected five-year, $245 Billion market.  Despite some of the Nortel portfolio patents having limited patent term remaining, some will certainly extend for years thereby extending the revenue stream beyond 2015.

But in arriving at the $4.5 Billion bid, the Nortel Six likely had more in mind than just revenue.  The Nortel Six almost certainly considered many other factors.  The easy factors to identify are the prevent Non-Practicing Entities from gorging the wireless industry, ensuring their access to the patented technologies, and removing infringement litigation exposure.  These are factors which are resolved for the Nortel Six by acquiring the Nortel Portfolio.  There is value in certainty and predictability, or stated otherwise, there is value in peace of mind.

The not so apparent consideration is patent pooling.  While industry standards are an important step in moving the wireless industry in a new direction, patent pools can encourage more rapid adoption of a technology.  Patent pools operate as agreements between patent holders to provide industry access to essential patents on standardized terms.  In a fragmented patent landscape, such as with 4G wireless, patent pools simplify license availability and cost-competitiveness between competitors.  In a technology industry dominated by standards, patent pools simplify freedom-to-operate analysis as many of the patent licenses needed to clear a product will be available from the patent pool.  Ease in licensing through a patent pool encourages companies to bring products to market and thereby speeds adoption of the pool technology.

The formation of patent pools with regard to an industry standard is a difficult feat, especially with wireless technologies.  Despite the efforts of many, a patent pool was not formed for 3G wireless technologies.  With 4G wireless technologies, there are three groups attempting to form patent pools.  These groups include Sisvel, MPEGLA, and Via Licensing.  For a patent pooling effort to be successful, agreement must be reached by the patent holders that are to contribute patents to the pool.  If a party holding standard essential patents decides to forego a pool targeted at a standard, the pool is less useful and is more likely to fail in formation.  Consolidating the Nortel portfolio with the Nortel Six, which includes holders of patents essential to 4G wireless standards, some boundaries to forming a patent pool are removed and others are certainly prevented thereby enhancing the likelihood of patent pool formation.  Thus, patent pooling may well have been another Nortel Six consideration.

While revenue was certainly a factor in setting the $4.5 Billion bid, there were undoubtedly other considerations by the Nortel Six.  At the very least, the Nortel Six has removed exposure and has added some degree and certainty to their business operations.  Is $4.5 Billion too much to pay for peace of mind?  Or is this a play to help form a patent pool and accelerate adoption of 4G technologies?  Regardless of the factors, $4.5 Billion is a bold statement about the importance of patents to the overall value of a corporation.

 

EPO Board of Appeal Decisions – New publication formats and search interfaces

Tuesday, July 5th, 2011

The following guest post is from Paul Cole of Lucas and Co., UK.  My thanks to Paul for this update:

The EPO Appeal Boards had handed down some 28,000  decisions by the time that the 6th Edition  of the EPO’s case law book was published in July 2010. It is believed that that all of these are available online and computer-searchable. However, major improvements have been made this year both in the format in which decisions are made available and in the search interfaces by which they can be accessed. 

A basic search interface is available here http://www.epo.org/law-practice/case-law-appeals/basic-search.html. For example, entering the search term VICOM gives immediate access to the text of decision T 208/84 in its German, English and French versions together with some 56 subsequent decisions in which the VICOM case may be mentioned. Selecting the English language version makes the full text available on-line in computer-searchable form. Selecting Edit and Find on this page enables text searches to be carried out and, for example, the text of the decision contains 9 matches to the word “algorithm”. Cited decisions are listed (none in this instance). Very usefully,  subsequent citing decisions are also listed, giving immediate access to some 34 forward references which can be searched simply by clicking on them. 

The basic interface also permits word searches. For example, entry of “game” as a search term gives access to 54 decisions, of which the first listed T 717/05 Auxiliary Game/LABTRONIX confirms that maintaining a player’s interest can be regarded as a relevant technical problem rather than a mere psychological one. A more common term e.g. “business method” finds 307 decisions and “inventive step” finds 1420 (although possibly this reflects a limit on the number of returned results rather than the size of the database). Search terms can also be entered in Boolean form, so that  “Business Method” AND “2011” returns a more manageable 8 decisions and “inventive step” AND “problem invention”  returns a more manageable 27 decisions dealing with the issue whether recognition of a technical problem can defeat an objection of obviousness. 

An advanced search interface is available here http://www.epo.org/law-practice/case-law-appeals/advanced-search.html and includes facilities for search by case number, application number, title, EPC article, EPC rule,  IPC classification and  applicant/proprietor. The search can be limited by language of the proceedings, decision type (e.g. Enlarged Board, Legal Board of Appeal), technical board (mechanics, chemistry, physics, electricity) and date of publication for those decisions published since 2005. Of particular utility, decisions can be ranked in order of perceived importance, the hierarchy being those published in the OJ EPO, those distributed to board chairman and members, those distributed to board chairmen only and those marked “no distribution”. For example a search based on a.54 EPC inventive step returns 3220 English language decisions of which 37 are listed as being published in the OJ EPO, 756 as being distributed to broad chairmen and members, 26 as being distributed to board chairmen, and 794 as having no distribution. The above four results cover only 1613 of the original 3220 decisions, and it appears that only the more recent decisions can be sorted in this way. 

The advanced interface provides a simple way of keeping abreast of recent decisions in a field of interest. For example using a.52 EPC (patentable subject-matter) as a search term in combination with a time limitation of e.g. the last 60 days revealed two decisions, one of which T 494/07 Currency Validator/MEI confirmed that a method (in this instance of programing a currency tester) is not excluded from patentability if it involves technical means. Interestingly, failure to follow an earlier decision concerning highly relevant subject-matter (in this instance T 410/96) was held to be a mere error of judgment and not a substantial procedural  violation justifying refund of the appeal fee. 

Decisions published since 2000 can also be accessed through a “recent Decisions” button and are listed by year and by month.  Selecting the heading for a listed decision gives a plain text copy which, as noted above, is readily searchable. There is also an option to select the pdf version where available (not for older decisions) which contains a text layer which can be cut and pasted and also images e.g. of structural formulae which is of importance especially to those practising in the chemical arts. 

Although the decisions database has been online for many years, the new search interfaces are more user-friendly, the former format for entering case numbers e.g. T_0208/84 no longer being essential, accessibility of full text decisions and where available pdf versions now being at a single click, and the forward listing not only providing an easy link to potentially relevant later decisions but also giving an immediate indication as to whether any particular case has been influential or has not been followed in subsequent decisions. It has been said that ignorance of the law is no excuse, and so far as the EPO is concerned the latest improvements to the decisions database have done much to put the knowledge base of previous decisions at the immediate disposal of every practitioner. 

Paul Cole
Chartered Patent Attorney
European Patent Attorney

Lucas & Co.

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“Particular Machine” not required: Ex Parte Dietz et al., Appeal 2009-008029, BPAI

Monday, June 27th, 2011

Ex Parte Dietz answers the question, at least as far as this BPAI panel is concerned, as to what structure need be recited in a “software claim” to bring it within the “machine” category of patent eligible subject matter. What is notable perhaps in its absence is any reference to the need to recite any “particular machine,” as opposed to simply just a “server” or the like, in order to bring a claim into the realm of the patent eligibility. Ex Parte Dietz et al In Ex parte Dietz, the following claim 1 was rejected under Section 101 for failure to recite at least one hardware element.

1. In a World Wide Web (Web) communication network with user access via a plurality of data processor controlled interactive receiving display stations for displaying received hypertext Web documents, transmitted from source sites on the Web, including at least one display page containing text, images and a plurality of embedded hyperlinks, each hyperlink being user activatable to access and display a respective linked hypertext Web document from source sites on the web, a system for controlling access activity from activated hyperlinks and their respective Web document source sites comprising:

means for applying said prioritization in the determination of the order in which the web documents linked to activated embedded hyperlinks in said web document are to be accessed.

means at said source sites for prioritizing said plurality of embedded hyperlinks in a Web document; and

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Therasense returns Common Sense to Law of Inequitable Conduct

Thursday, May 26th, 2011

Yesterday, in Therasense, Inc. v. Becton, Dickinson and Company (Fed. Cir. 2011) (en banc) (a copy is attached at the end of this post), the Federal Circuit handed down an historic and much needed update to the law of inequitable conduct.  The en banc (6-1-4) decision markedly increased the requirement for proof of inequitable conduct:  “This court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.”  The court rejected the “sliding scale” approach that previously allowed intent to deceive to be inferred from strong materiality.  The new standard makes intent and materiality separate requirements, and forbids a court from inferring intent solely from a strong showing of materiality.   Now, evidence of deceitful intent must be weighed separately from materiality, and proven by clear and convincing evidence.  The clear and convincing standard requires that a finding of deceptive intent must be “single most reasonable inference able to be drawn from the evidence.”

In addition, the court raised the standards for proof of materiality, holding that “as a general matter, the materiality required to establish inequitable conduct is but-for materiality.”  But-for materiality requires that the PTO would not have allowed a claim had it been aware of the undisclosed prior art.

The following passages from majority opinion in Therasense set forth the heart of the decision:

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Oracle Ordered to Reduce the Number of Patent Infringement Claims against Google

Thursday, May 5th, 2011

Judge William Alsup of the U.S. District Court in San Fransisco has ordered Oracle Corporation to reduce the number of patent infringement claims against Google, Inc., from 132 to three.  At the same time, Google has been told to narrow its prior art invalidity defenses as well, from hundreds to eight.

Back in August of last year, Oracle leveled seven Java-related patents against Google’s Android software development kit. The patents, owned by Oracle America, are: United States Patents Nos. 6,125,447; 6,192,476; 5,966,702; 7,426,720; RE38,104; 6,910,205; and 6,061,520, originally issued to Sun. The complaint alleges that Google has been aware of Sun’s patent portfolio, including the patents at issue, since the middle of this decade, when Google hired certain former Sun Java engineers.

See my original post on the suit:  Oracle vs. Google: The Times They are a-Changin’

Smart Phone War Matrix Makes for Interesting Reading

Wednesday, May 4th, 2011

For a great overview of all the suits in the ongoing smart phone wars, visit http://technologizer.com/2011/04/19/mobile-lawsuits/

This article has a great chart showing all the suits, countersuits, and partner suits in the phone industry.

Companies represented include:

Apple, Inc.

HTC, Inc.

Samsung, Inc.

Google, Inc.

Nokia, Inc.

RIM, Inc.

Sony, Inc.

Microsoft, Inc.

Apple Sues Samsung Over Galaxy Products

Tuesday, April 19th, 2011

As reported by Reuters (“Apple sues Samsung over Galaxy products“), Apple, Inc. has sued Samsung Electronics, claiming that Samsung’s Galaxy line of mobile phones and tablet “slavishly” copies the iPhone and iPad, according to court papers. The lawsuit, filed last Friday, alleges Samsung violated Apple’s patents and trademarks.

According to the suit, the Galaxy products use Google Inc’s Android operating system, which directly competes with Apple’s mobile software. However, according to the Reuter’s article, Apple’s claims against Samsung focus on Galaxy’s design features, such as the look of its screen icons.

HTC buys patents from ADC Telecommunications for $75 million

Sunday, April 17th, 2011

As reported on www.softwaretop100.org, HTC, the Taiwan based smartphone manufacturer, has bought a portfolio of 82 patents and 14 pending applications related to mobile technology from US based ADC Telecommunications.  HTC is no doubt trying to improve its patent position in wireless technologies, and 4G technology in particular.  HTC makes both Windows Phone 7 and Android based smart phones.

It is believed these patents relate to use of orthogonal frequency division multiplexing for telecommunications, and have priority dates going back to 1994.  Here is one of the latest patents to issue from the family:  7912138

Walker Digital Files 15 Patent Suits Against More Than 100 Companies

Friday, April 15th, 2011

As reported by PC Magazine (Priceline Founder Goes on Patent Lawsuit Binge, Sues Apple, Google, More), Walker Digital filed 15 patent suits Tuesday against more than 100 companies, including Microsoft, eBay, Amazon, Facebook, WalMart, Groupon, Apple, Sony and Google.

Look for a post here soon describing the patents.  In the meantime, there is a list of the suits and the patents in each below:

Docket Number(All cases were filed in the United States District Court for the District of Delaware) Case Name Date Filed Patents
1:2011-cv-00311 Walker Digital LLC v. Google Inc. et al 04/11/2011 7801802
1:2011-cv-00315 Walker Digital LLC v. Amazon.com Inc. et al 04/11/2011 7236942
1:2011-cv-00312 Walker Digital LLC v. MasterCard International Incorporated 04/11/2011 60187186434534

7430521

6144948

1:2011-cv-00320 Walker Digital LLC v. American Airlines Inc. et al 04/11/2011 61381056601036
1:2011-cv-00314 Walker Digital LLC v. Citigroup Inc. et al 04/11/2011 61637717844550
1:2011-cv-00322 Walker Digital LLC v. Activision Blizzard Inc. et al 04/11/2011 59701435768382
1:2011-cv-00318 Walker Digital LLC v. Myspace Inc. et al 04/11/2011 58842705884272
1:2011-cv-00313 Walker Digital LLC v. Facebook Inc. et al 04/11/2011 78314707827056
1:2011-cv-00308 Walker Digital LLC v. Compasslearning Inc. et al 04/11/2011 59477476616458

7483670

1:2011-cv-00310 Walker Digital LLC v. Arrow Security Inc. et al 04/11/2011 67209907593033

7602414

7605840

7719565

7817182

1:2011-cv-00319 Walker Digital LLC v. e2interactive Inc. et al 04/11/2011 6381582
1:2011-cv-00316 Walker Digital LLC v. Avaya Inc. et al 04/11/2011 64872916222920
1:2011-cv-00309 Walker Digital LLC v. Apple Inc. et al 04/11/2011 6199014
1:2011-cv-00321 Walker Digital LLC v. Ayre Acoustics Inc. et al 04/11/2011 6263505
1:2011-cv-00317 Walker Digital LLC v. BuyWithMe Inc. et al 04/12/2011 62497726754636

7039603

7689468

1:2011-cv-00326 Walker Digital LLC v. Cannon U.S.A. Inc. et al 04/12/2011 7924323

2009 Patent Filings Decrease from 2008

Sunday, July 25th, 2010
2009 — IPO’s IP Record reports that for the first time since 1996 the number of utility patent applications filed in the USPTO decreased in 2009.