Category Archives: Patent Licensing

How to Dispose of Patent Demands without Licensing, Litigation or Outside Counsel

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The Wall Street Journal generated controversy last week when it published an article titled, “The Best Way to Fight a Patent Demand May be to Do Nothing.” The author surveyed 223 tech startups and found more than one-fifth resolved patent demands not by fighting or settling, but by “doing nothing.” She explained that patent owners often lack the resources or desire to litigate and suggested “doing nothing” might be a rational, cost-saving response.

Readers pounced, accusing the author of advocating reckless strategy and immoral disregard for the rights of inventors, but apparently most missed the point. Admittedly, the author expressed her point poorly, because she didn’t mean to suggest actually doing nothing. Instead, she explained that “doing nothing” means “looking at the claim, determining a license isn’t needed – and then filing the letter away rather than responding.”

I would go a step further. As former Legal Director at a $7 billion tech manufacturer, I received over 100 licensing demands and disposed of almost all without licensing, litigation or outside counsel, so I agree with the general sentiment. Most licensing demands can be evaluated and disposed of at no cost. However, the evaluation should be far less cursory than the above article suggests and one should almost always respond to the demand. Below is a rough outline of the types of matters that should be considered. Continue reading →

When is Foreign Patent Licensing Subject to U.S. Antitrust Law?

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confused-lawyerPatent law and antitrust law have long had an uneasy relationship. A patent is a legal monopoly, but antitrust law favors market competition and abhors monopolies. Consequently, U.S. courts have struggled for over a century to define reasonable boundaries between the two disciplines.

In the U.S., the Sherman Antitrust Act is at the core of most antitrust litigation. In the early years of the Act, patents were seen as almost immune from its reach, with the Supreme Court stating a general rule of, “absolute freedom in the use or sale of rights under the patent laws. . . The very object of these laws is monopoly.” E. Bennett & Sons v. National Harrow Co., 186 U.S. 70 (1902). But laws evolve and today courts usually apply a “rule of reason” approach when evaluating whether conduct unreasonably restrains competition, with the Supreme Court declaring “patent and antitrust policies are both relevant.” FTC v. Actavis, 570 U.S. 756 (2013).

Globalization further complicates matters. While a patent basically confers rights only within the country in which it is granted and the doctrine of comity disfavors interfering in the affairs of other nations, global manufacturing and sourcing of components, “is increasingly common in our modern global economy, and antitrust law has long recognized that anticompetitive injuries can be transmitted through multi-layered supply chains.” Lotes Co., Ltd. v. Hon Hai Precision Industry Co., Ltd., No. 13-2280 (2d Cir. 2014).

However, the test for application of the Sherman Act to foreign parties and foreign conduct has become increasingly clear, in particular with several U.S. cases decided earlier this year, one of which involved allegations of egregious patent licensing conduct in China. Continue reading →

Best Practices for Licensing Patents to Companies in China

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Patent licensing generally is fraught with risks, but licensors who do business in China face special challenges. Common practices and contract provisions that may work elsewhere often prove ineffective in China. Consequently, before entering into such an arrangement, the prudent lawyer will review some of the key issues faced by licensors in China.

Notably, foreign companies are increasingly being forced to defend their licensing terms before China’s antitrust regulator, the National Development and Reform Commission (“NDRC”). US patent-assertion entity InterDigital recently settled a dispute with the NDRC, by agreeing to lower its royalty rates in China and make other changes to its terms. The NDRC raided Qualcomm’s Beijing and Shanghai offices and launched an investigation into the US chip-maker’s licensing terms. And, when Microsoft announced plans to acquire Nokia’s business (but not its patents), several competitors demanded China’s government impose restrictions on the deal, prohibiting Microsoft and Nokia from raising their licensing rates in China.

But anti-trust compliance is just one challenge faced by licensors in China; other challenges relate to restrictions on technology imports, under-reporting of royalties, difficulties with audits, dispute resolution and more. This article will summarize a few relevant laws and challenges licensors should be aware of and best practices for dealing with them. Continue reading →

Nokia settles with HTC, adds to Patent War Chest

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After two years of litigation in seven countries involving more than fifty of Nokia’s non-essential patents, Nokia announced a global settlement with HTC that should conclude all patent litigation between the two companies, but add to fears that Nokia is transforming itself into a formidable patent troll.

The announcement came this past Friday, just days after Nokia scored its fourth victory over HTC in a German court (three in the past two months) and days before the U.S. International Trade Commission was scheduled to review a preliminary ruling finding HTC infringed two of Nokia’s U.S. patents.

Although Nokia and HTC have a “long standing” agreement concerning licensing of Nokia’s patents that are deemed essential for practicing industry standards, Nokia has been battling with HTC over non-essential patents since Nokia fired the first shot in 2012, followed by victories in England, Wales, Munich, Mannheim and the U.S. Continue reading →

Should Ongoing Royalties be Enhanced for Bad Attitude?

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In January 2013, Taiwan’s InnoLux Corp. filed an appeal with the Federal Circuit, requesting the Court to overturn an award of enhanced post-judgment (“ongoing”) royalties that appeared to be enhanced, at least in part, because the trial judge took offense at an out-of-court remark made by the defendant’s CEO, after losing at trial.

Specifically, in the case of Mondis Technology v. ChiMei InnoLux Corp., et al., No. 2:11-CV-378 (E.D. Tex. Sept. 30, 2011), a jury found InnoLux liable for infringing certain computer monitor patents and ordered it to pay $15,000,000 in damages, plus royalties of 0.5% per monitor sold in the final months prior to judgment, for which sales figures had not yet been available.

Following the verdict, the defendant’s CEO was quoted in a Taiwan newspaper as having said, “The issue of patent infringement is being taken too seriously sometimes.” Continue reading →

Managing Costs of Patent Litigation

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For several years I was the lead attorney at a Taiwan company that manufactures technology and consumer electronic products, from light-emitting diodes to liquid-crystal displays. Every month we received a new demand for patent licensing or indemnification and it was my job to dispose of them at no cost, without licensing, litigation, or outside counsel. Usually it was possible, but occasionally we found ourselves mired in full-blown litigation.

It’s no secret patent litigation costs are immense. According to the American Intellectual Property Law Association, the cost of an average patent lawsuit, where $1 million to $25 million is at risk, is $1.6 million through the end of discovery and $2.8 million through final disposition. Adding insult to injury, more than 60% of all patent suits are filed by non-practicing entities (NPEs) that manufacture no products and rely on litigation as a key part of their business model.

However, whether one represents a plaintiff or defendant, manufacturer or NPE, there are actions one can take to help manage the costs.

Below are some general guidelines. Continue reading →

Ten Tips for Successful Outbound Technology Licensing

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In this age of endless corporate cost-cutting, it might seem the only way to compel a company to license ones technology is through litigation or threats of litigation. After all, why would a company agree to pay large sums of hard-earned dollars for the use of intangible property unless it absolutely has to?

Well, they do. While patent lawsuits grab the big headlines, plenty of licensing takes place without threats or coercion. Often it results from business discussions between willing participants. The licensor may be unwilling or unable to fully develop and commercialize its technology, while the licensee may believe use of the technology will generate increased revenue or other benefits that should outweigh the costs of licensing.

Take Microsoft, for example. They license out a variety of technologies that improve the performance of computers, monitors, keyboards and more. But, they hit a jackpot with their android patents, licensing their technology to cell phone manufacturers who paid more than $400 million in licensing revenue in 2012. Or consider IBM, Intel, Qualcomm and Texas Instruments, each generating roughly $1 billion in annual licensing revenue. Of course, those are extreme cases, but the point is licensing deals are often entered into not in response to litigation but as a strategic, mutually-beneficial business transaction.

Of course, it’s not easy locating potential licensing partners and convincing them that paying royalties makes business sense. In fact, it usually requires a great deal of work. But, technology licensing agreements are often negotiated as a business deal, with the licensor wielding a carrot not a stick, sparing both parties the stress and expense of litigation. I know, because my former employer, on several occasions, succeeded in doing the same.

Here are 10 tips intended to help your company out-license its technology through business means. Continue reading →

Strategic Monetization of Patents

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The value of all U.S. generated intellectual property is said to be approximately $5.5 trillion, equal to nearly 40% of the U.S. economy. From time to time that value is dramatically demonstrated, such as when Apple wins a $1 billion patent infringement verdict against Samsung, when Nortel sells a portfolio of patents for $4.5 billion, or when Google acquires Motorola Mobility for $12.5 billion, to gain control of its patents.

However, for many companies the cost of obtaining and maintaining intellectual assets – in particular patents – may be a huge waste of corporate resources, either because the company files patents indiscriminately, without sufficient consideration for which technologies, markets and regions may be most deserving of investment, or because it fails to devise and implement a sound plan for monetization of the patents.

Monetization of a patent portfolio usually begins with an IP audit. Working with the company’s business units and engineers, one should evaluate the company’s patents and divide them into three or four categories: those which are presently being used by the company; those which are not being used, but might have value to others; and those which are not being used and appear to have little value. One may also distinguish between patents that relate to the company’s core v. non-core technologies. Continue reading →

Defending Patent Licensing Demands (III of III)

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III. Prepare for Battle

In Parts I and II of this series, we discussed how to evaluate and respond to licensing demands and search for internal solutions. In this post we’ll discuss what to do when such efforts fail and litigation seems imminent.

Should one obtain a non-infringement opinion? Perhaps during product development, if one fears a particular patent, but after that it’s probably not worth the cost. In the U.S., failure to obtain an opinion may help support a finding willful infringement and enhanced damages. But most demands won’t go to trial and obtaining an opinion does not guarantee protection from enhanced damages.

It might be more helpful to explore potential cooperation with similarly-situated parties. If multiple parties share common issues, they may share legal costs and coordinate strategy by entering into a Joint Defense Agreement. However, before sharing information, be sure to enter into a Common Interest Agreement to help preserve confidentiality with respect to third parties. Continue reading →

Defending Patent Licensing Demands (Part II of III)

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II. Search for Solutions

In Part I of this series, we discussed how to evaluate and respond to a licensing demand, acknowledging the demand but requesting further information. Often that will be the end of the matter. This post will discuss what to do when the demanding party persists.

Try to pass the buck, if possible. If use of the patents arises from compliance with a customer’s requirements or specifications, talk with your business unit about requesting the customer to license the patents directly or reimburse your company for the cost of licensing.

If the patents relate to parts your company purchased, send each supplier a demand to either license the patents or defend and indemnify. Even if you have no signed agreements with the suppliers containing indemnification provisions, it still may be worth a try. Many jurisdictions recognize an implied warranty of non-infringement in connection with sales of goods, such as those found at UCC, Section 2-312(3) and UNCISG, Article 42. Ask your business unit to help exert pressure on the suppliers. And, consider switching to licensed suppliers if possible. Continue reading →