Interview With An Inventor, Part IV

When last we left our inventor hero, he had answered all but two of my original 10 questions.  Question nine is really the heart of the matter to me in some ways.  As we all know, there’s not a definitive way to decide if a company is a patent troll, just like there’s no one right way to decide if an inventor is just out to stick it to the big guy or wants his just desserts for a lot of hard work.  This question helps with that.

And finally, I wanted to address all this governmental ballyhoo associated with patent troll legislation.  Not.a.fan.  But let’s see what our inventor says, shall we?

Here are the final two questions:

9.  How much time and effort do you put in to determining if infringement actually has taken place prior to filing suit/sending a demand letter? What resources do you use, meaning do you try and reverse-engineer products or technologies to see if competitors are infringing?  What’s your due diligence process, in other words?

10.  What are your feelings about the recent failure of the Senate to pass a patent reform bill? What would you like to see in a bill?

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9.  How much time and effort do you put in to determining if infringement actually has taken place prior to filing suit/sending a demand letter? What resources do you use, meaning do you try and reverse-engineer products or technologies to see if competitors are infringing?  What’s your due diligence process, in other words?

The standard for sending someone a letter vs starting a lawsuit against them is quite different.  In both instances however I make it a mission to make sure that I am extremely confident that the target is using the patent in question.  I think it kills your credibility when you make accusations that are not substantiated, or your proof looks very thin or unreliable. 

Furthermore I can tell you from extensive interactions that no reputable litigation attorney on the planet is going to help you with a case on contingency unless they are 100% sold in their own mind on the merits.  Patent cases are just too expensive to make mistakes so counsel (that I deal with anyway) tend to be very discriminating.  Again I’m sure there are people out there gaming the system but I think they are outliers and can be dealt with conventional bad faith rules/tools.

The cost of ascertaining may be simple in some cases where my patent covers something that I can readily buy and assess without too much effort. In some instances I cannot get access to a real product because it is only distributed through specific channels, or infringement is impossible to determine without “insider” information because the product is relatively opaque. So we have to rely on indirect information such as user guides, instruction manuals, and similar technical literature from the company.  Generally speaking though we try to directly analyze, test the item in question.  In some instances we have had to resort to an expert to fill in some gap in data that we can’t seem to solve in some other way.

Even when we do this, sometimes innocent mistakes do occur. We find that someone has stopped selling the product for example, or that the literature does not correctly describe their product/service.

IPTT Comments:  Your point about lack of reliable proof is a good one, and that’s one of the problems with demand letters v. actual suits.  Agree completely that the standards are different, and that’s what allows the trolls to troll.  Sending a demand letter, you’re not legally bound (currently) to provide much more than idle threats.  But what so many people don’t realize, and the trolls count on, is that you are not obligated to respond to a demand letter.  Instead, you should go look on That Patent Tool and see if anyone else has received a similar letter on the same or a similar patent and get in touch with them.  Shameless self-promotion, I HAZ IT.

10.  What are your feelings about the recent failure of the Senate to pass a patent reform bill? What would you like to see in a bill?

As you can imagine I am not terribly upset that the bill failed because I think it was overly partisan and biased heavily against small inventors.  What I would like to see is a return to the prior “rational” environment where technical and business persons would exchange information freely about patents, products, licensing demands, etc., over the course of several months without automatically triggering a lawsuit.    The worst decision – in terms of its impact in the the patent world – was the Medimmune decision, which handed a victory to large patent defense firms, because it meant that they were now able to file a lawsuit against the patent owner pretty much anytime the latter sent a letter that requested a serious discussion about taking a license.  This opinion absolutely destroyed all the typical pre-lawsuit discussions that used to occur between parties. Patent lawsuits were rare because the interested parties had all the time in the world to discuss/argue the merits of the patents, and only when that process failed did a lawsuit (sometimes) occur.

Nowadays patent owners know there is no point in sending a letter to a company, because some underemployed large firm attorney looking for another payday will immediately initiate a lawsuit in some remote region against that patent owner to try and gain an advantage.  As a result of course now patent owners simply file their own lawsuits first to preempt the defendants’ filings.  The patent world has become a sue first negotiate later atmosphere.  The Medimmune decision is effectively the patent litigators perpetual employment act.

Imagine what would happen now if they had passed the “patent owner pays” provision!  It would be like throwing gasoline on a fire because defense counsel would know not only can they start their own lawsuits, they are guaranteed payment at the end.

IMO any new bill should include a provision that substantially tightens the requirements for initiating and filing a declaratory judgement against the patent owner and thus eliminates the incentive to engage in lawsuits to settle disputes.  There should be a real and verifiable threat from the patent owner to imminently sue the company on a specific patent, product, etc. – in other words, use the same standard that is being proposed to be imposed on patent owners initiating an infringement lawsuit.  This is why I say the majority of the provisions are one-sided and do not account for protecting patent owner rights.

Court rooms, judges and jurors are inefficient mechanisms for resolving the merits of a dispute. They should literally be the forum of last resort and restoring the prior balance would eliminate 50% or more of all lawsuits.  You can compare the number of patent filings in 2005-2007 and then compare 2008-2010 and see readily what effect the Medimmune decision had on the patent world. It blew up everything.

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The patent world has become a sue first negotiate later atmosphere.  

and

The Medimmune decision is effectively the patent litigators perpetual employment act.

Those are gold quotes, my friend.  And both destined to become blog topics at some point.

Thank you a million times over to my favorite inventor for taking the time to answer these questions and provide insight into “the other side”.  I like getting a different perspective now and then, even if, and especially if, I don’t agree with all of it.   That’s how one grows and learns, by seeking out the opposite of what they think is true.

Man, I better think of something snarky and off-color here, that sentence up there was almost like I’m…human or something.  Blerg.

This concludes this series.  Next up will be Interview With a Patent Attorney, one from both sides.  I had hoped that we’d get a fisticuffs going when Article One Partners did something similar on a webinar a summer ago but alas, it didn’t come to fruition.  Maybe this time?  One can hope…

IPTT

Interview With An Inventor, Part III

Slight delay in publication of Parts III and IV, which is why I try never to set a public schedule for these things.  The minute I do?  The universe says, “Nope.  Not happening.”  *sigh*

But here we go, Part III of my Q&A with an inventor will cover these three questions:

6.  Do you acknowledge the existence of Patent Trolls? If so, which company would you name as an example?

7.  Outside of legislation, what do you think can be done to update the patent system so that it is more inventor-friendly? This can include adjustments at the Federal level to do with the USPTO, or things at the local level, like educational events for kids.

8.  Do you think that “loser pays”-type litigation rules will hurt the small inventor? If such rules were universally adopted in the US, do you think it would make you less likely to sue a potential infringer?

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6.  Do you acknowledge the existence of Patent Trolls? If so, which company would you name as an example?

What I do acknowledge is that like a lot of different businesses, there are a small number of folks who operate on the margins and try to exploit small businesses by confusing them as to their coverage of the patent, don’t do any real due diligence to see if the company is using the technology, make unrealistic royalty demands, etc., with no real intention of ever enforcing the patent because it would be economically unproductive.  The only company that I know of that *might* fit that bill is MPHJ, but even there I am not sure what option they have to try and monetize their invention other than mass mailing, because there are so many potential infringers of their system(s).   The reality is that sometimes the nature of your invention is such that the value lies in its use by small users; if there are a million small users, how do you go about collecting a $1 from each?  When you embark on that campaign it causes a visceral reaction because you are targeting the little guy, and you are perceived worse than if you had asked for $1m from one large company.

IPTT Comments:  This is not quite the Yes or No that I was going for here.  It seems a bit hedge-y to me, like it’s not possible at all that there are bad guys out there.  It doesn’t make you one of them, or weaken your own patent, to say that there are companies acting totally beyond the pale.  I understand that it’s difficult to take a completely consistent line on this.  Not with companies like MPHJ or Intellectual Ventures though, for example.  They are trolls, and to call them anything else is just….wrong.

7.  Outside of legislation, what do you think can be done to update the patent system so that it is more inventor-friendly? This can include adjustments at the Federal level to do with the USPTO, or things at the local level, like educational events for kids.

The most recent “improvements” to the USPTO site, again, are very one-dimensional and biased. It is full of “helpful” information on how to respond to patent owners who ask to be compensated for use of their inventions.  Yet there is nothing there that helps patent owners find out how to see if their invention is being used in the first place.  Again there is no balance in the current IP rights environment: everything is being rigged in a way to make it easier and easier for big companies to take inventions.

At the same time I think patent attorneys *could* do a lot more to educate the public and especially young people on the nature and merits of patents.  When I was a big firm years ago we did exactly that: I would visit high schools and give short talks on IP rights, and help kids see that their ideas could be valuable and protectable.

8.  Do you think that “loser pays”-type litigation rules will hurt the small inventor? If such rules were universally adopted in the US, do you think it would make you less likely to sue a potential infringer?

There is no question that a “loser-pays” system would intimidate most small inventors.  Under their proposal if Google the company loses a patent lawsuit, their maximum downside is they pay the inventor a small royalty, amounting to a fraction of a fraction of a percent of their daily revenues. But if the little guy loses, and is forced to pay their big firm attorney fees, that person may lose their house!  This is the type of stifling scare tactic the big companies want in place, and forms part of the multipronged attack I mentioned earlier: 1) don’t let small inventors get patents by making the PTO process difficult; 2) even if they do get a patent, make it easy to kill that patent at the PTAB with an IPR challenge; 3) even if the inventor succeeds on all of this, make it impossible to enforce the patent because few would be willing to take that kind of risk.

IPTT Comments:  I’m with you on this one.  The theory behind it is that companies will think twice before suing if they might have to pay the full costs.  The problem is that litigation is always always always a risk.  You can have the most air-tight case in the world and you then you go and get some dufus on your jury who skews the whole thing.  To make anyone bear the full burden of Joey Bag-o-donuts being on the jury is completely unfair.  And here’s where I get email from all the Europeans who remind me that they’ve had this provision since Queen Elizabeth was knee-high to a grasshopper and then I have to respond with things like “Yeah, but there’s no way to count the cost of lost revenue for people who had a great invention and a solid patent but not the bankroll to try to enforce and and also?  We wrote a really badass Declaration of Independence and I’m reminded of that every time each of my kids has to memorize the first two paragraphs of it so you can just take your stupid little loser-pays rule and stuff it in your musket.”

Or something like that.

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Part IV goes up later this week…y’all come back now!

IPTT

Interview With An Inventor, Part II

On this fair Monday morning, let’s continue our Interview with an Inventor, started last week here with Part I.  My goal in these questions was to divine how much time this particular inventor put into actually trying to get his product out there and if litigation was part of the strategy from the outset, if at all, or if it was something that ended up being a necessity because of the 400 lb gorilla companies that are (theoretically) preventing new entrants into the marketplace.

In this part, we’ll cover the next three question in the 10-question series:

3.  How have you approached the “big players” in your industry to attempt to get them to license your patent? What resistance were you met with, and how have you overcome it?

4.  What is the biggest barrier for small inventors to overcome when trying to approach the “big players” in their market?

5.  For you and your product/patent specifically, what is the single most troublesome thing about current patent reform legislation?

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3.  How have you approached the “big players” in your industry to attempt to get them to license your patent? What resistance were you met with, and how have you overcome it?

I have had extensive engagements with big companies, about a number of my patents, most of it negative unfortunately. Despite the fact that I have extensive technical educational background (a BS in EE from Caltech) and industry experience (I worked at IBM and two startups) one still universally gets the NIH response from companies.  

Let me give you an example.  In one instance a friend of mine knew the founder of the company.  He got us in touch with inhouse counsel, who proceeded to tell us he did not want to see any due diligence or evidence materials that would explain the utility of the patents, either by way of their current or future business.  This was rather amazing to me, since I asked them how I was going to demonstrate the value of the patents if they were not going to consider what materials we had prepared to show …exactly that.  This is an example of the corporate “blinders” I mentioned before.  Inhouse attorneys are taught to avoid looking at anything, or commenting on anything that relates to third party patents. This pretty much means there is no opportunity for a reasoned discussion.

Finally we reached a compromise where we agreed we would at least TALK to outside counsel on the phone to explain the relevance of the patents.  This of course was rather inefficient, awkward, etc., and prevented any meaningful assessment on their part.  We also agreed not to initiate any lawsuit during a limited grace period, all of which was fine by us.  

Despite all these handicaps this company did in fact make an offer on my portfolio. For reasons that are too numerous to list here (but I posted about it online) negotiations broke down.  Sometime after the grace period expired, I sent them a polite letter explaining to them in detail now why the patents had value – an opportunity they prevented me from doing before.  They then proceeded to try and kill my patent filings in the PTO as some kind of preemptive strike or payback.  Unbelievably they “manufactured” prior art to make it look to the PTO that they had already come up with my idea before me.  This was pointed out to the PTO after I discovered it but it was not until years later that they admitted the charade. The whole affair was just appalling to me to see what lengths they would go to not only denigrate my work.

Since that time I have had an occasion to send a number of other companies what I consider fairly friendly letters inviting them to take licenses on technologies I have invented.   In almost every instance they don’t even bother to acknowledge your letter.

This is why so many small inventors seek other channels, such as through brokers, to help monetize their assets. They have neither the connections nor the muscle to get the attention of large players, who can simply ignore you until you find someone willing to represent you in a lawsuit.

4.  What is the biggest barrier for small inventors to overcome when trying to approach the “big players” in their market?

Access.  It is almost impossible, unless you know someone in the company with authority directly, to get any attention whatsoever.  If you send them a letter inviting discussions it will be ignored 99% of the time.  To some extent this behavior is a legacy of older, now defunct case law which made it prohibitive to talk to inventors, because that could expose the company potentially to a charge of “wilfull” infringement later. This created a corporate mindset that pretty much shut down any exposure to third  party ideas, no matter how useful they might be, out of fear of being called out later for having “infected” the company with an outside “virus” if you will.  Engineers in fact were routinely told (in earlier days at least) NOT to read patents of any kind, again out of fear of being “contaminated” with third party ideas.

IPTT Comments:  So this is very interesting to me. I do understand the idea of not wanting to talk to inventors because what if someone at your company actually had the same idea?  What if that idea was just a slight tweak and Mr. Big Company had actually filed a similar patent that was still pending…you don’t want to open yourself up to trouble in the form of treble damages for willful infringement if you talk to a sole inventor.  So this makes sense.  But as our inventor acknowledged and as I mentioned in my backgrounder , agent or broker companies exist to help the smaller player get in the door.  I wonder if inventors don’t want to take that route because they lose a percentage to the brokerage firm?  Does it give an inventor less street cred if they have to use a broker vs. get in the door on their own?  Not judging, just asking.

Which, by the way, I realize those brokerage firms are NPEs.  Yeah, I get it.  But let’s keep it real here:  a company that can knock on Mr. Big Company’s doors and help you get in is not the same as an Intellectual Ventures or IP Navigation who actively seek out nebulous patents and set about suing the world over them.  No, there are decent NPEs out there who serve just the type of purpose our inventor would need them for.  Like the patent Shark Tank, if you will.

5.  For you and your product/patent specifically, what is the single most troublesome thing about current patent reform legislation?

As I see current legislative efforts, they are mostly driven by an anti-patent rights bias, and therefore are almost exclusively are directed to reducing inventor/patent owner rights.  There is not a single provision in any of the proposals that makes even an attempt at balancing interests.  [In my opinion], the current (now tabled) legislation was crafted and sponsored almost entirely by large corporate interests who simply don’t want to respect or compensate small inventors for their technical contributions.  Consequently every provision is intended either to make it harder for the small guy to get a patent, to make it easier to kill that patent even if it is granted, or to make it impossible for that person to enforce it. Every aspect of the bill is engineered to facilitate what I would call “economic infringement” meaning, rigging the game to make it easier for big companies to simply take/infringe patents with the knowledge that their maximum downside is less than the economic advantage they derive from using the invention.

IPTT Comments:  I’m on record many, many times agreeing that legislation is not the way to curb patent trolling.  It’s right there in the name of the offender: “troll”.  It may slow them down temporarily, but overall, anyone called a “troll” is going to come back swinging a few months or years later with a whole new set of workarounds.  It’s impossible to stay fully head of them with laws.

That said, I don’t agree that the current legislative attempts were crafted solely to keep Big Companies from paying small inventors.  I think, rather, that they are attempts by politicians to seem relevant because patent trolling all of a sudden came into vogue.  Cool people like me have been following the problem for many, many years.  So, nice try crashing the party, Congresspeople.

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Because that’s a lot of words already I think we’ll stop here and pick up next time.  Look for the remaining parts Wednesday and Friday of this week!

IPTT

{Cool shot of Congress found here.}

 

Interview With An Inventor, Part I

I don’t often get in fights on Twitter, but when I do, it’s with IP Watchdog because he’s a bully (only sometimes, but still) or with inventors who feel that any attempt at curbing patent trolls will adversely affect them and their ability to sue people who infringe on their ideas.  OK, so maybe I exaggerate a little (or a lot because I am never prone to that) and they don’t think that any attempt is a dig at them, but it feels close sometimes.

I happen to “internet know” a couple of inventors, and one of them graciously agreed to answer some questions for me.  It’s not an attempt to appear fair and balanced because that is not something I strive for here.  It’s pretty clear where I stand because hello?  THE NAME OF THE BLOG.  But I’m not completely devoid of  a conscience and am aware that there are often other interpretations of the patent landscape that cause people not to see things my way.   Hard to believe that someone would disagree with me, I know.

Nevertheless, I put together this list of questions for some random dude my friend guy-I-internet-know my inventor:

1. How long did it take you to get a patent on your idea, from the time you originally thought up the idea, to when your patent was issued?
2. What items have you commercially produced using your patented invention?  If your invention is technology-based rather than product-based, what products have you brought to market using your patented technology?
3. How have you approached the “big players” in your industry to attempt to get them to license your patent? What resistance were you met with, and how have you overcome it?
4. What is the biggest barrier for small inventors to overcome when trying to approach the “big players” in their market?
5. For you and your product/patent specifically, what is the single most troublesome thing about current patent reform legislation?
6. Do you acknowledge the existence of Patent Trolls? If so, which company would you name as an example?
7. Outside of legislation, what do you think can be done to update the patent system so that it is more inventor-friendly? This can include adjustments at the Federal level to do with the USPTO, or things at the local level, like educational events for kids.
8. Do you think that “loser pays”-type litigation rules will hurt the small inventor? If such rules were universally adopted in the US, do you think it would make you less likely to sue a potential infringer?
9. How much time and effort do you put in to determining if infringement actually has taken place prior to filing suit/sending a demand letter? What resources do you use, meaning do you try and reverse-engineer products or technologies to see if competitors are infringing?  What’s your due diligence process, in other words?
10. What are your feelings about the recent failure of the Senate to pass a patent reform bill? What would you like to see in a bill?

This will be a multi-part series because that is a lot of words up there in those questions!  We’ll start with just the first two here to sort of set the stage.

So without further ado, I present to you an Interview With An Inventor, Part I:

Note: This is not the inventor I interviewed, as far as you know.

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1. How long did it take you to get a patent on your idea, from the time you originally thought up the idea, to when your patent was issued?

I have quite a few patents, but I will give an example of just one, namely US Patent No. 6,782,510 which deals with content filtering, a feature which is found in many corporate email systems.  It has been cited 85 times by the PTO so I am fairly proud of it.  The invention allows an administrator to control what kind of content can be distributed, on a recipient basis, so that different policies can be used for different audiences.

I thought of the idea in late 1997, and filed January 1998. It took more than 6 years to get it issued, which is not atypical unfortunately in this business.  There is a serious problem with the PTO not performing their review fairly and timely, which costs inventors because by the time you get your patent, the technology may now be obsolete, or the market may have changed.  A perfect example is US Patent No. 8700538, which deals with letting members in a community exchange playable media, such as DVDs.  I filed for this in 2004, yet the patent took 10+ years to issue. There were a number of companies that came and went in this interval that I could have licensed and helped improve their offerings to make them more commercially viable.  The PTO delays pretty much killed the entire economic opportunity there.

2. What items have you commercially produced using your patented invention?  If your invention is technology-based rather than product-based, what products have you brought to market using your patented technology?

I do not try to commercialize all my inventions because sometimes it is just a matter of economics, meaning I don’t have access to capital that can help me hire a developer or market it in an effective/competitive way against established large companies. Even if I had a perfect email filtering program for example, there is no way I could compete against a Symantec, McAfee, Google, etc.

In other instances I *have* invested gigantic sums of my own money to commercialize inventions where the big companies are not yet present.  If you look under the company name “Patent Savant” for example you will see a number of filings made by us covering patent data acquisition systems. We spent several man-years and $$ trying to bring this to fruition but have had limited success because the law changed (which reduced the value of the product) and the market became very crowded just as we were entering.  We still have all the underlying code, tools, etc., however, and may pivot to implement a different variant in the near future.

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Stay tuned for Part II!

IPTT

{Image of Doc from Back To The Future found here.}