[Ip-health] Keeping Score in the IP Game

[Thiru Balasubramaniam]

>
>
> <SNIP>
>
> Who will gain and who will lose if the bill becomes law? Basically,
> lobbying on the legislation has pitted the IT industries=97including
> electronics, computing, and semiconductors=97against the biomedical and
> pharmaceutical industries, which together account for most U.S.
> patents,
> says Frank.
>
> Biomedical and pharmaceutical companies want ironclad patent
> protection,
> because they depend on a tiny handful of blockbusters to defray the
> billions of dollars they spend investigating hundreds of drug
> candidates
> that never pan out. Those blockbusters typically stand or fall on one
> or
> two patents. In IT, on the other hand, a winning product often results
> from a great many patents=97MP3, Wi-Fi (IEEE 802.11), and 3G cellular
> telephony are excellent examples. Here, =93things are less clear-cut=94
> than
> with pharmaceuticals, Frank says, as it's less obvious that any
> particular patent is essential to accomplishing any particular thing.
> The big IT companies typically worry about being held liable by too
> many
> different parties for exorbitant damages.
>
> Lobbyists include, on one side, the Business Software Alliance
> (composed
> of Microsoft, Apple, Hewlett-Packard, and a host of others) and on the
> other side, the Biotechnology Industry Organization and the Coalition
> for 21st-Century Patent Reform (representing, among others, drug maker
> Eli Lilly & Co. and consumer goods maker Proctor & Gamble). But even
> within the broad IT and pharmaceutical groupings, there are significant
> differences of opinion.
>
>
>
> -------------
>
> Keeping Score in the IP Game
> By William Sweet
> http://www.spectrum.ieee.org/nov07/5645
>
> A U.S. federal jury in February ordered Microsoft to pay Alcatel-Lucent
> US $1.52 billion in damages for infringing its intellectual property in
> MP3, the ubiquitous music-encoding software. Although in August an
> appeals judge reversed the decision in part and canceled the damages,
> the new ruling did not address Microsoft's main complaint, namely that
> U.S. patent law encouraged the jury to put excessive value on the IP in
> question. Microsoft may ultimately obtain a settlement it considers
> completely fair, but that could take so many years of costly litigation
> that even if the company wins, it will have lost.
>
> The Microsoft-Alcatel MP3 case is just one of many that suggest to some
> that the patent system itself has lurched out of control, giving too
> much power to those laying claim to intellectual property and allowing
> too much leeway to patents of dubious quality or worth. Surely the case
> that has most captured the public imagination was the dispute over the
> technology of the BlackBerry personal communicator=97which went on for
> years between Research in Motion, of Waterloo, Ont., Canada and NTP, a
> patent holding company in McLean, Va. Finally, last year RIM paid NTP
> upward of $600 million, complying with a court judgment.
>
> The BlackBerry case drew attention to another much-criticized effect of
> the U.S. patent system: the presence of =93trolls,=94 who allegedly acqui=
re
> patents, sit on them hoping that one or more will turn out to have
> crucial business applications, and then go to court to obtain what
> critics call extortionist payouts.
>
> The data on U.S. patent awards for 2006 show that the patents in any
> given field still go to a few top companies, that there is little
> change
> from year to year among the dominant firms, and that big gaps yawn
> between the leaders and the runners-up. In almost all branches of
> electronics, computing, and telecommunications, awards made to the
> leading company jumped mightily from 2005 to 2006=97by as much as 48
> percent in semiconductor manufacturing, 60 percent in
> telecommunications
> equipment, and 65 percent in electronics [see table, =93Patent Push=94
>
> Steven J. Frank, a patent lawyer in Boston and author of the 2006 book
> Intellectual Property for Managers and Investors (Cambridge University
> Press), cautions that such studies of patent concentration and impact
> should be treated warily. =93Just looking at the leaders, you have to ask
> what their game is,=94 Frank muses. =93Are they just trying to look like =
IP
> dynamos? Are they engaged in a kind of land grab?=94
>
> Of course that goes, too, for smaller companies making big jumps in the
> ranks [for some examples, see table, =93Patent Performers on the Move=94]=
,
> some of which might be emerging stars, while others might be merely
> padding their patent portfolios as a public relations exercise. To take
> the numbers at face value, however, and to judge from the fields in
> which the companies are shifting position most radically and
> frequently,
> computing, semiconductors, and telecommunications appear to be among
> the
> most dynamic areas in what the patent world broadly calls information
> technology (IT). Presumably, some chip and telecom companies are being
> truly innovative, while others may be acquiring patents mainly to
> defend
> themselves against possible litigation and position themselves to
> bargain effectively in cross-licensing arrangements.
>
> /IEEE Spectrum/'s compilation of patent awards and patent impact was
> prepared by 1790 Analytics, a Haddonfield, N.J., company that
> specializes in evaluating intellectual property. This is the second
> year
> that the firm, which takes its name from the year the first U.S. patent
> was awarded, has provided its data to us.
>
> The methodology this year is essentially the same as last year's [see
> =93Patent Power,=94 Spectrum, November 2006 at
> http://spectrum.ieee.org/nov06/4699 This year, however, 1790 added a
> measure to account for self-citation, which produces lower Pipeline
> Impact ratings for companies whose patents are referenced mainly
> internally.
>
> Take Boeing as an example, suggests 1790's director of research,
> Anthony
> Breitzman: its raw Pipeline Impact value of 0.84 drops to 0.78 when
> adjusted for self-citation. Largely because of the self-citation
> penalty, Micron Technology, a semiconductor maker in Boise, Idaho,
> falls
> sharply from being last year's overall patent winner and is replaced at
> the top of the heap by Microsoft.
>
> Looking at the compilation as a whole, the impression is more one of
> stability than of change. In almost every major subfield of IT, the
> same
> two or three companies appear among the top three or four. In fact, the
> top scorer changed in only one of the nine subfields: the newly merged
> Alcatel-Lucent overtook Motorola in Telecom Equipment.
>
> The more things change, the more they stay the same, the French
> say=85until, they might add, things really do change. This year, as this
> issue goes to press, Americans may at last see some real change in a
> patent system that almost every analyst considers seriously flawed. In
> fact, Congress is debating a reform bill that appears to have been
> developed in an intellectual and rational process, an event as happy as
> it is rare.
>
> The reform proposal began to take shape about three years ago, when a
> unit of the National Academy of Sciences headed by Stephen A. Merrill
> produced a report called =93A Patent System for the 21st Century.=94 The
> report recommended creating a procedure for challenging patents after
> they are issued, bolstering the traditional standard that patents
> should
> be confined to =93nonobvious=94 ideas, and strengthening the overwhelmed
> U.S. Patent and Trademark Office. It also questioned U.S. rules that
> grant triple damages for =93willful=94 infringement and give priority to
> those who are the first to invent something over those inventors who
> are
> the first to file for a patent.
>
> The result was the proposed Patent Reform Act of 2007, sponsored in the
> Senate by Patrick Leahy (D-Vt.) and Orrin Hatch (R-Utah) and in the
> House by Howard Berman (D-Calif.) and Lamar Smith (R-Texas). It would
> establish a procedure for challenging patents after their issuance,
> limit the ability of litigants to shop around for courts deemed
> sympathetic, redefine what constitutes willful infringement, and set
> damages based on the patent's contribution to a product's value, rather
> than on the product's total value (a policy known as balanced
> apportionment). This last point addresses the issue in the Microsoft
> MP3
> case. Microsoft's penalties were evidently set according to the total
> value of MP3 use involving its Windows Media Player.
>
> Who will gain and who will lose if the bill becomes law? Basically,
> lobbying on the legislation has pitted the IT industries=97including
> electronics, computing, and semiconductors=97against the biomedical and
> pharmaceutical industries, which together account for most U.S.
> patents,
> says Frank.
>
> Biomedical and pharmaceutical companies want ironclad patent
> protection,
> because they depend on a tiny handful of blockbusters to defray the
> billions of dollars they spend investigating hundreds of drug
> candidates
> that never pan out. Those blockbusters typically stand or fall on one
> or
> two patents. In IT, on the other hand, a winning product often results
> from a great many patents=97MP3, Wi-Fi (IEEE 802.11), and 3G cellular
> telephony are excellent examples. Here, =93things are less clear-cut=94
> than
> with pharmaceuticals, Frank says, as it's less obvious that any
> particular patent is essential to accomplishing any particular thing.
> The big IT companies typically worry about being held liable by too
> many
> different parties for exorbitant damages.
>
> Lobbyists include, on one side, the Business Software Alliance
> (composed
> of Microsoft, Apple, Hewlett-Packard, and a host of others) and on the
> other side, the Biotechnology Industry Organization and the Coalition
> for 21st-Century Patent Reform (representing, among others, drug maker
> Eli Lilly & Co. and consumer goods maker Proctor & Gamble). But even
> within the broad IT and pharmaceutical groupings, there are significant
> differences of opinion.
>
> A survey last year of U.S. members of the IEEE found that they were not
> unanimous on the merits of the proposed bill. The IEEE's
> volunteer-driven lobbying arm, IEEE-USA, has submitted critical
> opinions
> about the draft legislation, saying it wants a bill but a better bill.
>
> Under the circumstances, it's more than a little remarkable that a
> bipartisan consensus has formed around a patent reform bill that
> largely
> captures the spirit of what the NAS and what other critics such as Adam
> B. Jaffe and Josh Lerner have had in mind [see =93Patent Prescription,=94
> <http://spectrum.ieee.org/dec04/3845> by Jaffe and Lerner, IEEE
> Spectrum, December 2004 Taken together with two significant Supreme
> Court decisions this year, which reinforced the =93nonobvious=94 standard
> and limited the right to obtain an immediate injunction following a
> patent victory, enactment of the patent reform bill =93would be a major
> step in the direction=94 of what Jaffe and Lerner proposed, says Jaffe,
> of
> Brandeis University, in Waltham, Mass.
>
> At press time, it's considered a toss-up as to whether patent reform
> passes this year before the presidential election cycle begins. In any
> event, Lerner, of Harvard, expresses satisfaction that at least
> =93something's finally happening after a long time of nothing happening.=
=94
>
>
>
>

---------------------------------
Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org