Standards, FRAND, NPEs & Injunctions Conference: Part 2

Here's a note on the second part of this conference jointly held by Taylor Wessing and IBIL under the Chatham House Rule (click here to find out about the event and read the note on Part 1). Unfortunately, this guest Kat did not get the chance to attend all the other topics today. These were “Injunctions – The Industry view” and “How well are the courts dealing with FRAND (and are there alternatives)?” If any reader had the chance to attend it, he or she should feel free to email us -- or to express their opinion about it in the comment section!

Anyway, back in the Denys Holland Lecture Theatre after a short tea break, the topic discussed was “The market for Patent Portfolios – the latest position and predictions”. Panellists were Will Plut, from Profit International LLC, Henri Linde from RPX and Sharaz Gill, former head of patent litigation at HTC. Moderator for this discussion was Kathleen Fox Murphy from Taylor Wessing UK.

Questions under consideration were:

1. What are the market drivers (offensive, defensive, other strategies)? 

2. trends in sales and licensing 

3. Can we expect more NPEs and litigation in Europe?

The first speaker opened with a brief history of the patent market, making distinctions between three periods of time and giving examples of deals in the ITC industry. Here is what he said: IBM started to show muscles 20 years ago, creating an acquisition movement and therefore a patent market. NPEs started to acquire patents massively in 2003 and corporates have followed the same path since 2008.  From this date, the market increased in terms of volume and patent quality and new players joined the game, including defensive aggregators like RPX. In the meantime, funds spent on the market went from $750 million to $3 billion, and 98% of these deals were in the hi tech sector.

According to the speaker, 2013 is a changing point since the market is now becoming tighter (some would say "mature"). He also spoke about Twitter, which with only two patents is probably going to be the next big buyer on the market once their forthcoming IPO is completed. In the same way, former startup companies like Salesorce, Linkedin and many others will soon need patents too.

The next speaker opened his speech to describe the RPX business model and his views on the patent market. He emphasised on the need for transparency as a key element of any market. Because there is no transparency, there is no market, but just transactions occurring from time to time. Today the transaction cost and prices for patent deals are not rational and this is due to the lack of transparency. He also made a comparison with the real estate market to make his point.

Merpel found a non-patent market again.

According to this speaker, big tech companies have bought so many patents that they need to monetize them now.  Furthermore, the patent portfolios available on the market will increasingly be too important for one company to buy them. The ongoing trend therefore is for different types of companies to get together to acquire those intangible assets.

Answering a question about the future of patent market, he stated that an optimistic view for his company would be to become an insurance company within the next 5 years. To this day RPX can only insure “very good drivers”.

The third speaker related the experience of HTC in acquiring patents. According to him, people get the first impression that buying patents is better (because faster) than filing applications to build a portfolio. Indeed the aim of most of the players is to get more patents as a negotiating leverage. In his experience, acquiring patents doest not per se help in negotiation, especially because most of the patents are junk. He also rejected the idea that patent trolls were only dealing with bad quality patents.

Looking at the recent important acquisitions like those of Google, he questioned the real value of acquiring such a number of patents. He then moved on NPEs and spoke about the IPCom case.  He described it at a successful move validating the troll model for Europe. He predicted that it will create a precedent and stated that the incoming Unified Patent Court was terrifying from this view. Said he, "many well resourced trolls will come to Europe."

The same speaker later spoke about the way the European Patent Office dealt with the first mobile patent in the '90s. He described it as a badly managed process with an important lack of knowledge from the examiners to deal with this new kind of patents. He surely knew what he is talking about since he was one of these examiners. However, many of the patents granted during this period can still be enforced today, bringing more uncertainty into the European patent market.

Another point considered was standard-essential (SEP) patents: "do not acquire any" he advised, "it is way too hard to assert them. Instead, what you are looking at is a commercial essential patent, which is very different. It is a patent, non-essential but you can’t work around". 

The 'loser pays' rule was raised as well, with one participant stating that a US implementation would not significantly change the dynamic of NPEs' activities, Two other speakers however stated the opposite.

The documentation provided for the conference stated that last topic of the day would be “Judicial Plenary- How should disputes over licensing of portfolios best be resolved:  in the courts, by arbitration or other means?”. The discussion was conducted by Sir Robin Jacob, panellists being Judge Klaus Grabinski from the German Federal Court of Justice, Mr Justice Birss, Justice of the High Court of England and Wales, Judge Rian Kalden, Court of Appeal, The Hague, and Judge Robart, US District Judge for Western District of Washington.

Spoiler Alert: this question was not answered by the Panel. Not at all.

A few questions were asked of the judges, all about standard essential patents and FRAND terms.

The first question was : If somebody asked for an injunction for an SEP and the defendant responds that an license offer is not made on FRAND terms, what do you do?

One of the judges started by speaking about FRAND dispute resolutions in the Netherlands. Another continued with a German perspective, stating that the FRAND defence was often used in regard to companies in a dominant position as plaintiffs. He stressed that there was a “willingness to negotiate” which the defence has to adopt in such case -- and how hard it was to determine it.

The discussion continued with yet another judge who stated that, in the case of an SEP, the offer made by a patentee has to be FRAND. But having a set of criteria to determine if the offer is made to FRAND terms was in real life very difficult. He added: "Most of the time, they are three questions being raised: validity of the patent, infringement of that patent and FRAND terms determination. This determination can only be done if you answered the two previous questions because these answers have a huge impact on the royalty rate."

That is all for today. This guest Kat will try his best to attend and report tomorrow's session.