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If NPEs can make the patent system work for them, others can too

As was widely reported this month, a number of leading companies in the telecoms industry, including AT&T, Hewlett-Packard, NTT DoCoMo and ZTE, have linked up with technology licensing firm Via Licensing to form a patent pool for Long Term Evolution (LTE) wireless patents. According to a press release, the programme “significantly reduces the risk of litigation for those organizations that are building products or services based on the LTE standard”. This week, Via Licensing announced a one-time fee waiver for any companies that sign up to the pool by next April.

At last week’s American Intellectual Property Law Association (AIPLA) annual general meeting, many delegates welcomed the move. One patent attorney who works with clients in the online advertising sector told IAM that companies in that space are seriously exploring the possibility of pooling fundamental patents with their competitors, or forming a defensive aggregation entity to corral potentially problematic patents and keep them out of the hands of NPEs. Defensive aggregation services are already offered by RPX, Allied Security Trust and Open Invention Network, but the difference here is that owners would be grouping together patents they already own rather than paying money to a third party to acquire patents on the open market (though that could also happen further down the line).

As was hinted at with Yahoo!’s abortive patent suit targeting Facebook, there is clear potential for high-cost and high-stakes litigation to emerge in the online advertising space. And, seeing as the online advertising industry is likely to be underpinned by a significant number of software and business method patents – typically (though perhaps incorrectly) considered to be the NPE weapon of choice – companies in the space may be particularly fearful of being ‘trolled’.

If companies come together, as in the example of the LTE pool, to cross-license the technologies that they deem crucial to their industry, then they all win. Each will gain freedom to operate and they will create the opportunity for greater collaboration and open innovation, while saving money and time, as those involved will each be licensing their essential patents to one another in a single transaction.

Some argue that the patent system unfairly favours NPEs and that businesses which research, invent, develop and manufacture products suffer as a result. But in truth there is no bias one way or the other. The reality is simply that NPEs have made the system work for them by finding innovative ways of leveraging patent rights to create value. Operating companies calling for fundamental reform risk diminishing the value of patents not just for NPEs, but for all patent owners, including themselves. Furthermore, their arguments for shaking up the system may be misinterpreted and misappropriated by those who want to abolish patents altogether. Let’s not forget that some operating companies work very closely with NPEs to further their own strategic goals; and, as RPX and Acacia have demonstrated, even defensive aggregators can have a symbiotic relationship with their apparent polar opposites.

By considering solutions such as industry pools, defensive aggregation and syndicated licence deals, operating companies could save themselves a lot of time, trouble and money when it comes to patent disputes with each other and with NPEs. Such arrangements will be better for business and better for consumers – and will avoid wrecking the patent system that society needs to preserve.


Jack Ellis
IAM Magazine
01 November 2012

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IP management, Licensing, IP politics, IP litigation, Patents, IP business

Comments

RE: If NPEs can make the patent system work for them, others can too

I agree with all of the above. Additionally, seen from another perspective, isn't this a logical next step after GSM, if all the more a success due to the multiplicitly of technologies in LTE compared to GSM?

Kirk Haselton, IPAL GmbH on 01 Nov 2012 @ 14:19

RE: If NPEs can make the patent system work for them, others can too

I agree with many of your comments about how operating companies should find new methods to use the patent system to their advantage. I'm less excited at the prospect of defensive aggregation and the arms-race in patent portfolios. I think that accepting NPEs as part of our intellectual property system can have some devastating consequences that undermine the rationale for protecting IP in the first place. IP is justified on the basis of social welfare, not private interest. I think it's worth remembering that when we consider how to craft effective IP policy: http://theriskyshift.com/2012/11/three-facts-you-should-know-about-intellectual-property/ .

Benjamin Gibert, University of Oxford on 08 Nov 2012 @ 11:28

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