Acquired Patent Licensing: Guest Post by Prof. Risch

By: Michael Risch, Professor of Law, Villanova University School of Law

Read the whole draft here, forthcoming in the George Mason L. Rev. It is about half the length of a typical law review article, so I call it an essay.

Back in October, I presented at the Center for the Protection of Intellectual Property Conference on The Commercial Function of Patents in Today’s Innovation Economy. I spoke on a panel entitled “Patent Licensing: New Business Models and New Opportunities.” I decided to focus on the commercialization benefits of licensing patents purchased from another – thus, my highly creative title: Licensing Acquired Patents.

This was actually a tall order. On the one side, licensing has been around for 150 or more years, so arguing that licensing acquired patents is a new opportunity took some work. On the other side, economic theory holds that late stage licensing (that is, ex post licensing) offers the least commercialization benefits, so convincing skeptics (read: licensees) that there are commercial benefits to the practice was also no easy task. This is why acquisition is important. Original owners usually have a chance at early stage licensing. Acquirers almost never do.

I begin the essay with a short section on the stages of patent licensing, but I’ll start here with the historic part. There’s no real dispute that there has long been licensing, sale, and other secondary market activity for patents, dating into the early 1800’s. Economic historians have done a great job of tracing this history, and I cite several articles and books in my essay. But a sustained business model of acquiring patents and licensing them was not really common. For the most part, secondary markets involved inventors attempting to sell or license patents to those who would practice the invention, not to those who would – in turn – license others.

Of course, there were exceptions, and I focus on them in the essay. The big ones were railroad, agriculture, and dental patents. In each case, there were a few higher profile non-producer patent buyers who attempted to license others (and sued those that refused). While there is a smattering of other activity, licensors aren’t discussed by name in the press and they did not buy and license more than two or three patents each. In the essay, I discuss what we might learn from the rise and fall of these patent “sharks,” which appeared to thrive only in limited industries at a very particular time in our patent history. Both laws and producer behavior were part of the equation.

Following the history discussion, I turn to commercialization benefits of licensing. I make some key assumptions in the paper about such licensing – most primarily that pricing is negotiated in good faith. In other words, if a patent owner refuses to acknowledge low quality patents and insists on too high prices, then commercial benefits are unlikely. Similarly, if manufacturers refuse to acknowledge high quality patents and insist on too low prices, then commercial benefits are unlikely. And finally, I note that there may be private commercial benefits that are not socially beneficial (that is, they enhance private but not total welfare).

I discuss several commercialization benefits. The first is a signaling benefit. There are a lot of patents, and even if a company attempted to find all of them associated with a complex product (which often doesn’t happen), it likely will not. But owners know what patents they have. Thus, owners are the least cost information producers, and informing manufacturers of relevant patents can have some commercialization benefits. Even if the patents are of low quality, the manufacturer is in a better information position than before; it can buy, license, or challenge the patents.

This signaling leads to a second benefit: some freedom to operate that was unavailable before, assuming a reasonable license is entered. At least one study shows that litigation costs more than simply “litigation costs.” Litigation can also hamper investment in the product itself. This is not surprising, of course: litigation is a drag, literally and figuratively. So avoiding litigation can enhance commercialization of the accused product.  I acknowledge that investment would be really enhanced if nobody enforced their patents, but that’s an unlikely scenario and this is an essay about licensing.

I make a few other suggestions of commercialization benefits, and finally discuss how licensing acquired patents may help drive licensing toward the earlier, more beneficial stages of licensing – where technology licenses predate investments in products, even if it winds up cutting out the acquirers. I give a few examples of how this might happen and how the process has already begun.

There is more in the essay than I can write about here. If you are interested, please take a look at the full version.

95 thoughts on “Acquired Patent Licensing: Guest Post by Prof. Risch

  1. I’ve read parts of this. What strikes me about your writing is that you appear to be making many assumptions about how the system works without trying to identify those assumptions. Maybe you are one of the few academics on this board. if so, I think you would want to strive to identify the underlying assumptions you are making. Just as an example, I have worked for a large corporation. In our analysis of build our own, buy their company, or buy their product/license their product was always IP. And, the price we were willing to pay could be calculated on how much it would cost to build our own and whether they could sue. That would be baseline price to negotiate. And, this was with one of the top engineering firms in the world at the corporate headquarters. Those that act as if IP is worthless or does not provide a massive incentive to innovate have never worked in the real world of engineering. Without the IP to back you up, a big corporation can EASILY copy anything you have done. I had thousands of engineers I could turn to and outside engineering firms including the top ones in the world.I could give you many other real world experiences that I have had which may give you more of an understanding why I am so skeptical of the academics. I know you have lots of experience as a litigator. I have actually litigated against your old law firm. But litigation provides a very narrow view of the world.And, where the rubber hits the road on my example above is this. Without IP what price is a product worth?

  2. Be nice if one of these professors wrote a paper such as “Would Microsoft Have Built a Corporate Research Center Without Patents?” Or, “How Ronald Reagon Ended the Malaise of The 1970’s With Patents.”Or, “How Patents Ended Non-Disclosure Clauses in Employment Agreements.”Or, “Why Corporations Hate Patents. Why If You Do Not Innovate Someone Will Own Your Product With Improvement Patents.”Or, “How Patents Put A Fire To Everyone’s Ar$e.”Or, “How Anti-Patent Writers are Making a Buck Off of Burning Our Patent System Down.”Or, “Why Google Does not Want Patents—Those that Own the Market See Patents As Disruptive.”Or, “A Survey of the Backgrounds of the Anti-patent Crowd. The Shocking Truth That Almost None of Them Have Ever Worked in Innovation.”Or, “The Rapid Growth of Innovation Correlated with the Rise of the Patent.” (rapid growth in spending of research.)Or, “How the Federal Courts Lack of Science Background Hurts Our Patent System—subtitled: Many at the Supreme Court Still Believe in a Mind Body Separation and Believe that Their Thinking is Independent of physical form.”Or, “How Licensing Has Insured the Continuation of Corporate Research Centers.”Or, “How Google is Using Its Enormous Power to End Our Patent System. A factual based tracing of following the buck.”Or, “A Simple Solution to Fixing the Patent System: Move the PTO to Wheeling West Virginia.”Gee, now if only I had Google’s budget I could get the engine of academia working on those papers and get an army of paid bloggers pushing those points.

  3. ” I acknowledge that investment would be really enhanced if nobody enforced their patents”Lulz lulz lulz lulz lulz. Well at least you’re willing to acknowledge the plain fact of the matter. Perhaps I might read your piece after all. I wonder if you’d consider doing an article in the future about how the patent system ultimately ended up an entitlement program and why there are so few people in the patent industry willing to cop to that simple fact of the patent system matter.

  4. Professor Risch, did you write a very well researched article on patent reform — circa the mid 1800’s? I think that now that we have undergone another round of reform, a link to that article might be an interesting read for most here.

    1. I’ve written a lot of articles that deal with that time period. Colleen Chien wrote an article specifically on 1868 patent reform. We see things a bit differently, but that article is worth a read for context.,

  5. Just my take:1. Companies developing products where their competitors are investing as well and where there are bound to be overlapping patents should proactively cross license. Cross-licensing buys freedom of action with respect to the vast bulk of potentially blocking patents at very little cost.2. Some of our basic industries, such as the broadcasting industry, began as patent pools where members cross-licensed mutually blocking patents: RCA is an example. FRAND is another (that needs to be better developed as a model.) Patent pools/FRAND licensing should be encouraged. 3. Companies should conduct clearance studies with respect to new products and avoid infringement if at all possible. If not possible, the troubling patents should be invalidated or licensed proactively to reduce downstream damages/costs.4. If a wild card patent or portfolio emerges that is arguably valid and infringed, don’t waste money on litigation. Take out an early license. They typically are cheap. Any license is far cheaper than any litigation.If a company is routinely getting in trouble with its competitors or with respect to competitor patents sold to a licensing entity, they are violating one of these rules. Their management is the problem, not the patent system.Also, never adopting the technology of a small startup and laugh about crushing them with competing products in e-mails. Think i4i.

    1. You actually raise some good points.I appreciate point 4. This is relevant to the topic at hand in that small entities (e.g., small companies, solo inventors) oftentimes have patented inventions that are infringed by the large entities. However, many of the large entities won’t take out the cheap license but would rather play hard ball (because they have a huge war chest and can afford to do so). Ultimately, the small entity may be forced to sell the patent portfolio to someone that can enforce the license. In those situations, what could have been $1.5M license can be transformed into a $100M judgment (potentially tripled) with ongoing royalties.If infringers were more willing to take licenses to valid patents (or there was a cheaper mechanism for patent holders to force a license), then there wouldn’t be a need for 3rd party entities to purchase and assert the patents. The farmer selling grain has the same problem. They don’t have the ability to sell their product to the end user — they need a middleman (oftentimes more than one), and each middleman adds their own profit. With patents, the profit added becomes greater because of the high risk. However, the problem is still the same.

      1. The farmer selling grain … don’t have the ability to sell their product to the end userOf course they have that “ability.” I have friends who grow grain and sell it directly to “end users.”the small entity may be forced to sell the patent portfolio to someone that can enforce the license. The “small entity” can “enforce the license”. The question is: what does the “small entity” believe that he/she is entitled to, and why?Let’s say the “small entity” is a patent attorney who sits around and dreams up computer-implemented “inventions”, claims them as broadly as possible, in functional terms, of course, appeals everything endlessly, and does nothing else (because this “inventor” couldn’t program himself out of a paper bag). Then he takes his patent and threatens deep pocketed businesses who actually provide products and services to people and who never even heard of his junk patent. Why on earth would anyone believe that this person is “entitled” to anything more than, at best, a couple pennies? Serious question. what could have been $1.5M license can be transformed into a $100M judgment (potentially tripled) with ongoing royaltiesLOL. The vastly more realistic and far more typical scenario is that a $40,000 license can be transformed into a worthless piece of paper.But keep drinking the kool-aid. You guys have pushing this “small inventor” and “little guy” patentees as the “Greatest Americans and Source of All Knowledge” baloney forever. You’re not nearly as important as you think you are. Get over yourselves and take your crucifixion complex with you.

      2. The farmer selling grain has the same problem. They don’t have the ability to sell their product to the end userI personally know grain farmers who sell their product to the end user. what could have been $1.5M license can be transformed into a $100M judgment (potentially tripled) with ongoing royalties.This applies to maybe one patent in a million, and one “small entity” patent in ten million. the small entity may be forced to sell the patent portfolio to someone that can enforce the licenseThere is no “forced.” It’s a choice. Just like filing the application in the first place and then maintaining it is a choice. For example, any decent patent attorney can write computer-implemented junk using functional language and many decent patent attorneys are in great positions, strategically, to do so because they are aware of trends in technology and because they have the knowledge and ability to prosecute their “inventions” themselves (saving themselves some money). And then they can find the most “willing” deep pockets to license the junk. But most patent attorneys don’t do this. It’s a choice people make.It’s worth remembering this otherwise you risk falling into the sad trap of blaming your victims for your own poor behavior.

      3. many of the large entities won’t take out the cheap licenseGiven the well known fact that computer-implemented patents are poorly examined by the USPTO and therefore difficult to enforce (in litigation, where the defendant has the skill and motivation to explain why the patent is junk), it should not be surprising that most large entities (who employ skilled attorneys) arent interested in licensing most patents presented to them, or aren’t interested in paying much for the patents (particularly if the license is non-exclusive).What’s “cheap”? It’s ridiculous to throw out phrases like ” $100M judgment (potentially tripled) with ongoing royalties” and then define “cheap” as “significantly less than that.” It’s these bizarre expectations on the part of “small entities” and “little guys” that seem to fuel their pathological tendencies.

      1. The complaint was crawled by the RECAP project at archive.org (helpful users of PACER use a browser plugin that uploads the requested documents to archive.org, so that the public can actually find out what their government is doing for free), but the exhibits were not included in that for some reason.

  6. That’s one of the best-written summaries I’ve read in long time. Looking forward to reading this, Michael. Thanks!

  7. You know I have a serious question. What are these posts from professors? I want to know who these professors are. Where does their money come from? What are they up to? Are they really like private practice partners and have hit the lottery in being able to market themselves? I suspect that there are two ethical issues that are being ignored. 1). If these professors are being paid to post these articles and not disclosing this, then I think their universities would have a problem with them presenting work product as academic work.2) If these professors are under retainer by companies that are parties to litigation, then I suspect they may be violating their state bar ethics since they may be engaging with other party litigants without disclosing their interests.And, there is the softer issue of shouldn’t we as the reader get to know who we are dealing with? Are we reading posts paid by Google? Are they fishing for litigation gigs? These professors should disclose their interests so that we know if these are really scholarly works or not. Or they should remove “professor” from their title, which I think implies that they posting scholarly work.My guess is that the law journals have turned into money factories for “professors.” Certainly every recent professor that has posted on here likely makes far more money from their private practice than their what must be a part-time job as a professor.And, you down voters, let’s hear why otherwise I will assume you are one of the anti-patent crowd.

    1. NWPA,I would be careful about questioning Professor Risch’s motives. I’ve got concerns about the motives of some other IP professors but Risch isn’t one of those. I may disagree with Michael sometimes, but I’ve found him to generally be on the “up and up” when it comes to patent law.

      1. I would be careful about questioning any of their “motives” unless you’ve got something far more substantial for us than “I suspect that they’re unethical.” Disagreeing with you on the state of the present law or on which direction it should go is not evidence of bad “motives.” NWPA’s repeated grumblings, like “I suspect they may be violating their state bar ethics,” are at best the paranoid rantings of an unstable personality, and at worst are libelous.I’m sure that I’m already considered one of the “anti-patent crowd” by you, NWPA, but that’s the reason for my down-vote.

        1. LB: that is nonsense. There is nothing wrong with asking. I have accused him of nothing. In fact, if I were in his position, I would see nothing wrong with someone asking me the question and consider it a proper question. Moreover, the issues I raise are VALID. And, the fact that not one professor has come out and said that their work is pure scholarship should raise eyebrows. Moreover, LB (paranoid???)!!! I think not given the problems the medical profession and professors have with taking money from big pharma and given the criticism of some weather researchers for taking money from oil companies.So, get real. Asking and vetting is not accusing. And “be careful”? Be careful of what? And why? What would a libel suit look like? He asked me to disclose my interests and whether the article was scholarship. How dare he.

          1. There is nothing wrong with asking. I have accused him of nothing.LOL, of course you haven’t.”Certainly every recent professor that has posted on here likely makes far more money from their private practice than their what must be a part-time job as a professor.”How about you start going by “NWP”, because the “A” implies that you’re speaking as a competent Attorney with ethical obligations.if I were in his position, I would see nothing wrong with someone asking me the question and consider it a proper question.Funny, that’s not how you react every time you’re reminded that all your clients pay you to take the same barely-tenable positions you take on this board every day.Funnier still is that you don’t seem to think it affects your own impartiality or credibility, but you always “just ask” everybody else where their money is coming from as if it completely invalidates their well-reasoned opinions.And you really need all those downvotes explained? Seriously?

            1. You are not an attorney nor an academic. You obviously have no appreciation for these issues. You even believe that paid posters are fine and that paid posters should not have to disclose that they are paid posters.The down votes are likely paid posters.

              1. Not that you’re accusing me of anything…Nothing in my post requires me to be an attorney, so how about you try responding to it again. This time, like a grown-up.

                1. Like a grown-up…?LOL – that’s like Leopold admonishing only certain people to be mature while saying nothing about (and even consistently upvoting) those who are the very worst of non-grown-up posting.As I have said consistently and since Prof. Crouch asked me directly: the blight on this blog comes from the low quality posting techniques that are fully embodied in Malcolm (and to a large extent, you IANAE).Asking somebody to respond in a way that you refuse to is duplicitous at best.

                2. that’s like LeopoldMalcolm (and to a large extent, you IANAE).Hey, no fair! Why did 6, Ned, and MaxDrei get left out this time?

            2. Anything posted by IANAE is immediately suspect.Here for example, the ASSumption of well-reasoned opinions. The number of times ‘well-reasoned’ cannot in fact be reasoned in light of counter-points (well-reasoned counterpoints at that) presented simply eviscerates IANAE’s propaganda.

      2. EG: you may be right. But, is it wrong to ask for the professors? Be careful? Why?!! Nonsense. If we can’t ask these questions, then we are slaves.

        1. NWPA,Saying ” we are slaves” if we fail to question “motives” when we have no clear evidence to suggest those “motives” are questionable is pretty strong, especially when you’re questioning the ethics of the person involved. When you question “motives,” that can turn your questioning into an attack on the person, something I’m very loath do to do. And from my direct personal experience in dealing with Professor Risch, I might disagree (as anon has done) with what he says, but would never question his “motives” based simply on what he says in this essay.

          1. EG: Maybe I just know more than you. (in general and not about the professor.) Maybe you are being naive. And, maybe in this world we live in right now what you are saying is wrong. I think 30 years ago I would have agree with you. Now I do not.

            1. Maybe I just know more than you.If you knew anything at all, you’d back up your accusations with some facts. I don’t recall you doing that even once.The only thing you “know” is that nobody could possibly disagree with you unless they were being paid to do so.

          2. EG,I think “the professors” as a whole have only themselves to blame for anyone questioning them as NWPA is doing here.That being said, Risch in particular is one of the professors who does swim against the general professor-bias mindset. He does try at least.(and Mossoff is another – nice note)

            1. NWPA,I’m not “naive,” I’m simply cautious about engaging in “personality attacks,” as opposed to debating the view(s) being expressed. I also share your view of being “skeptical” about what law professors (and especially IP law professors) say, and especially how much credibility their views should get until subjected to appropriate scrutiny, including how much “real life” experience that particular professor has had. Peace.anon,You’re correct that the law professors have likely brought this “skepticism” on about their views, especially in terms of how much credibility they deserve (and there are several who I’m very “skeptical” of about their views). I’m just careful about “overgeneralizing.” I know Professor Risch from personal experience, and Michael is here to debate, not to pontificate. Another IP professor I respect greatly is Adam Mossoff at George Mason.

              1. “You’re correct that the law professors have likely brought this “skepticism” on about their views, especially in terms of how much credibility they deserve (and there are several who I’m very “skeptical” of about their views).”Attorneys sanctimoniously smearing academics and suggesting that the academics have little credibility – that’s some pretty funny stuff, right there.

                1. Why would you say that? Are you inferring that who teaches you is your cookie cutter make up? Why exercise the mind if the exercise is the same?

    2. While I disagree with the tone and assumptions in this comment, I do agree that sponsored research should disclose the sponsors. That said, I also believe that people read far too much into such sponsorship, and should instead judge work on the merits. I certainly would hate for my own very hard work – costly work that can only be paid for with grant money – to be discounted based solely on who cared enough about the questions I was asking to sponsor that work.To answer the question here, neither this post, nor the article was paid for by any particular entity. I was paid a small honorarium by CPIP, the conference sponsor, to write and present an article, any article, on a topic of my choosing, with content of my choosing. And that’s what I did. I have no idea who funded the conference for CPIP, and I don’t care.I post here because I think it’s important work that should generate interest among readers, whether good or bad, and Patently-O provides a forum of interested readership. I only ask that you judge it on the merits.On a related note, I only wish that my “non-professorial” pay dwarfed my professorial pay. Alas, not so.

      1. Thank you for that. A simple thing to consider: should one spend time engaging in debate a paid poster? Now I am far more likely to read something you wrote and engage you in debate.

        1. A simple thing to consider: should one spend time engaging in debate a paid poster?As long as “the poster” is capable of articulating and/or discussing his/her point(s) of view (and the views of others), and as long as you are interested and capable of discussing the same, why should it matter to you if “the poster” is being “paid”? Just enjoy the dialogue. Of course, when there is no dialogue and any attempt to reach agreement on even the most trivial issues is swatted away with insults or paranoid ranting, then one might reach a different conclusion.

          1. Except for the fact that the rules of blogging here indicate that blog posts are to be of your own personal nature.And there is a very good reason for that.As can be seen in certain situations, paid bloggers will refuse to actually get into discussions in which their views will be shown to be, well, short of well-reasoned. Paid bloggers will not (at least on their own accord) address the full ramifications of law and facts.

                1. I can – and I have even linked to it in the past.The reason I ask the question is to see if Malcolm understands where to obtain the full set of rules (emphasis added – if Malcolm cannot even bother knowing where the rules are…) by which posters are supposed to follow. Well, almost the full set, as Prof. Crouch has added in a comment that no lying is allowed (not that Malcolm allows such petty rules to constrain his blatant 1ies anyway all that much)

                2. the full set of rules by which posters are supposed to follow.I don’t remember Dennis ever saying that “blog posts are supposed to be of your own personal nature.” I’m not even sure I know what that means but I’m pretty sure that it’s very difficult if not impossible to determine whether someone else’s post is “of their own personal nature.”As for the “the full set of rules”, please direct everyone to them or repost them. They seem to mean a great deal to you, in particular, as you never stop bringing them up. So let’s see “the full set of rules.” Thanks.

  8. “I acknowledge that investment would be really enhanced if nobody enforced their patents”Hmm, think not – ever hear of reductio ad absurdum?If nobody enforced their patents, then no patents would be obtained – your strawman is ablaze.

    1. Yes, I make that point in the article. My point here was about the pure ex post world, where we have patents already. And then I say that’s not the world we live in.

      1. My point here was about the pure ex post world, where we have patents already.Even in those circumstances, I would disagree with your assertion that “investment would be really enhanced if nobody enforced their patents.”The cost of copying is almost always cheaper than the cost of inventing. While an inventor may derive some benefits from being first to the market, this is becoming less and less important since copying can be performed very quickly today (China is very good at it). As such, being first to the market provides very little benefit.Thus, in a competitive environment, the advantage goes to the copier, who has less overhead to cover. This means that copying will be really enhanced — not inventing.While this “race to the bottom” may initially be good for consumers who will get the same products cheaper, there really isn’t much of an incentive for manufacturers to spend significant resources to develop new products.

        1. Yes, I agree, but that’s still an ex ante argument. And it’s obviously complicated – depending on whether we are talking about component versus whole product patenting, and whether the infringement is really “copying” or simply parallel development.

            1. In the context here, I’m discussing that litigation dampens investment in improvement and sales of existing product lines. I argue in the article that licensing can limit the negatives of litigation, but the obvious response from licensees is “but we have to pay for the license, and that dampens investment.” So my response to that is, well, of course, if nobody ever sued you, then you would never have to pay a license fee, but that’s not the world we live in, so given that fact, licensing may be a better option than litigating.

              1. I still don’t see the enhance investment aspect. I also don’t agree with the statement “but we have to pay for the license and that dampens investment.”If the license is for new technology, then an acquirer should not have to invest (or should be able to invest less) in that technology, which should be better for the acquirer.However, if the investment is in a different technology (than the license), then whether or not that investment is a good investment is independent on the license. Whether or not an investment should be undertaken should be based upon costs/revenues associated with that investment alone — not with unrelated costs.

                1. Have you read the full paper yet? Take a look – it might clear things up. We’re talking about late stage licensing – licensing patents whose inventions have already been implemented in products. This is not about new technology, nor is it about incentives to make the investment in the first place. This is about what manufacturers facing post-shipment patent enforcement think about.Any payment by an infringer to license that patent – no matter how valid and valuable it may be- is a cost on an already budgeted product upgrade and revenue plan. I cite a pretty good empirical study that shows companies faced with such costs will shift future development away from challenged products and toward unchallenged products, even if the unchallenged product is older and not as good. Thus, I don’t think it’s unreasonable to say that the licensee’s optimal world will see the cost of late stage patent enforcement/licensing against its products go down to zero. Can you find me a manufacturer that would rather pay for such a license than not? If so, I’d like to interview its managers for future work.

                2. I have (mostly) read it.Any payment by an infringer to license that patent – no matter how valid and valuable it may be- is a cost on an already budgeted product upgrade and revenue plan.OK … licensing impacts the profitability of a current product. However, we were talking about investment.I cite a pretty good empirical study that shows companies faced with such costs will shift future development away from challenged products and toward unchallenged productsThat doesn’t support your position that investment will be really enhanced. All it establishes is that investment will be shifted — not necessarily enhanced.Can you find me a manufacturer that would rather pay for such a license than not?The issue I raised was about investment — not the profitability of current product lines. Don’t confuse one with the other.The simple fact is that for every $ that is spent on investment, that $ has to be recouped from the resultant product. The more $$$ you spent, the more $$$ you have to recoup. Explain to me how a manufacturer can recoup those $$$ and be competitive when its competitors merely have to copy and pay a fraction of the $$$ to do so.

                3. I think Patent Guru you have the key here. The dynamics of the system are what are being simplified. Why should Microsoft have a corporate research division without patents? It is corporate waste without patents. Also, one thing that people don’t put in the mix is disclosure.

                4. …or dialogues based on the fact that the item under discussion has protection – in other words: the amount of ‘disclosure’ tends to be at least an order of magnitude more than most pundits realize.

                5. “Why should Microsoft have a corporate research division without patents?”So that they aren’t relegated to the dustbin of history in a decade’s time (or less)? The same reason as now?

                6. First, so what? What makes you think MS’s business is sustainable “copying”? Second, you’ll need a copying division.

                7. Again, so what? You premise your argument on the assumption that they’d still be relevant as a company if they simply copied. They would not be.

                8. Ask i4i for a clue 6.” If we lose MS’s lab, and gain a thousand more in other companies, so be it.”So very Pollyanna.

                9. So when MS incorporated a forgettable functionality into their huge flagship product that somehow impacts whether they’d be relevant in 10 years? Please ta rd.

                10. I get that such is what you’d like the whole premise to be. The fact that such is simply not how the big boys become and maintain their big boy status completely eludes you.

                11. Oh I agree to some extent anon, make no mistake, I do. And I also take many of you guys at your sincere word that what you say is your learned opinion. I’m also keenly aware that it is your opinion and that we have very limited hard data in this particular area. I however, unlike you guys, am all about gathering said hard data.

                12. You premise your argument on the assumption that they’d still be relevant as a company if they simply copied. They would not be.Sure they would be. MS has a huge advantage is that most people have either used (or are currently using) their OS.If small company XYZ creates a novel (yet unpatented) feature, MS has the manpower to recreate that feature and distribute before XYZ even begins to dent the market. MS could easily exist as a copier (some argue that they already do).

                13. “Sure they would be. MS has a huge advantage is that most people have either used (or are currently using) their OS.”And 10 years from now you don’t think some innovative young buck of a company would take them downzors? If not, you’re a bigger ta rd than most people already think you are. That market is too much moolah for others to not seize the opportunity to dethrone them. You can’t really believe that MS is pro-patent now because it is against their interests, or because it is in the public interest can you? Come on. Give me a break. “If small company XYZ creates a novel (yet unpatented) feature, MS has the manpower to recreate that feature and distribute before XYZ even begins to dent the market.”Oh I entirely agree. And this is where your ta rdation truly shines through. You focus on a, as in a singular, “feature”, or even some few “features” (by which you really mean just functions I presume). But what matters is, and where MS et al shine is, the product as a whole. And that is where they would eventually be beaten without themselves leading. And that is also what really shows your ta rdation for what it is. Where you presume that I’m talking about a small guy taking them on. You ta rds in the software space are really all about the lone wolf/small team/company taking on huge groups of people working together (known as large corporations) and winning. There’s no reason to believe that a small guy could or should, be able to, or ever could, take them down or take a big ol share of their market. It could be another big boy, or it could be a mid-sized company moving on up. Bottom line is, eventually they become irrelevant if they don’t lead forward. That is in fact one of the founding premises of many silicon valley companies. The same is true in my art. Me and my buddies aren’t going to challenge the big boys in my field anytime soon no matter how innovative we are or how strong patents are. We may get some royalties, sure, but if they choose to roll over on a small business we make, they will do so. A patent might protect our “features” for awhile, aka i4i, if we get really lucky while paying out the nose for legal bs but chances are against that. There is no reason for software to be the exception to this, especially when the patents they’re proposing to rely on are crp nobody with a brain gives two shts about in the first instance. Of course mid-sized or small large cap companies can and do take on the big boys with many innovations coming together in whole products. And if the big boys don’t keep up they’ll be gone. And not to mention that we’re talking about more arts than software here. If we lose MS’s lab, and gain a thousand more in other companies, so be it. This is all about the “economy” aka the manner in which you arrange your house. But all that is neither here nor there when it comes to simply straight up what he stated in the article.

                14. You sure write a lot to say a little.You can’t really believe that MS is pro-patent now because it is against their interests, or because it is in the public interest can you?Like Google, MS is pro-patent or anti-patent when it suits them. Because of their size, they don’t NEED patents, but they understand their value.That is in fact one of the founding premises of many silicon valley companies.Silicon Valley? Really? We are talking MS here.

                15. How is what? I just told you “why do research when you can ‘just take'”. Either you don’t like the answer or you don’t understand the answer, which is it?

                16. Ok, so you just don’t like the answer. Gotcha. Np brosefus. In the future, if you’d just say that and save us all the time and trouble then I’d appreciate it.

                17. First, thanks for actually reading it! Second, I get the sense that we’re talking past each other here. I agree with everything you write.I think the disconnect is two things:1. I’m talking about further investment in improvement and commercialization of an already existing product. Profitability doesn’t just roll in – it takes money to extend life and maximize diffusion.2. I’m not saying this as a core point of my paper. The ex ante/ex post debate is a really important one. But here I’m just tying to knock down a straw-person argument that all other things being equal, licensees would rather pay zero than pay something for a license, and for that reason will argue that even if licensing is better than litigation, no licensing is better than licensing for late stage patents. I stand by that view, and don’t think it’s terribly controversial.

                18. I’m talking about further investment in improvement and commercialization of an already existing product.First, you need to make that clear. Your original statement did not include those qualifies. Second, you are still wrong for the reasons I discussed above. Further investment needs to get paid off. How can a manufacturer justify that investment when a competitor can enjoy the fruits of that investment for pennies on the dollar?To be clear, I am attacking the premise that no patents (or patents not enforced) = more investment (i.e., your statement that “investment would be really enhanced if nobody enforced their patents”)

                19. Well, if you read the whole paragraph above, it makes very clear that it is about investment in commercialization of products. You’re taking this one sentence out of context. And I’m arguing that the license allows for enhanced investment (and that no enforcement would ALSO allow for that enhanced investment, and even moreso because there’s no license fee). But I’m NOT arguing that investment will NECESSARILY be enhanced in every case. You are right that companies might not do so. But note that your skepticism cuts both ways – it also means that my original premise about improved investment in commercialization through licensing must also be false, because sometimes that won’t happen.I don’t see it that way, because I’m talking about marginal incentives – all other things being equal, what can be done. You are right that competitive conditions may make it unwarranted, but that doesn’t mean there are no commercialization benefits of licensing,

                20. You’re taking this one sentence out of contextI’m not the only one who read it the way I did. One of our resident anti-patent folk, 6isnotvalidindisqus, read the same sentence the same way I did — except that he believes it to be true.it also means that my original premise about improved investment in commercialization through licensing must also be falseI never said that, and I don’t see how my comments would lead you to believe that is my position.that doesn’t mean there are no commercialization benefits of licensingMy comments were not directed to the benefits of licensing. My comments were directed to the misplaced belief that no patents = more investment.

                21. Yeah, I’m not concerned with 6 taking it out of context. But note that my statement wasn’t no patents = more investment. That’s just not what it says. And if you think that’s what it says, then I apologize for the unclarity.

                22. Michael, see my post elsewhere on best practices of a corporate patent counsel, but if a company is infringing a patent it is their problem — a problem of management primarily. Cross licensing, clearance studies, and proactive licensing, or early licensing of the wild card patents should keep a well management company free from patent litigation.

                23. Yes, these are all true, and I discuss most of them in the last part of the paper. But this is not a paper about infringement by companies. It’s a paper about the benefits of licensing patents long after the claimed invention has already been incorporated into products. The goal was to avoid the crutch of, “well, you’re infringing, so pay up” – that’s not faring so well in policy debates at the moment, and it’s already been said by others.

                24. I’m not sure if you raised this point in your paper, but one important point that should be considered is, for lack of a better term, the domino effect.Paying for a license on technology is something that sophisticated parties (companies) do all the time. However, these companies don’t like to be the first. On the other hand, if several of their competitors have already taken out a license, then they are much more comfortable doing so.The issue here is having all the competitors on an equal footing. So long as everybody is facing the same burden, then taking a license is far more palatable to a company. However, a company is much more reluctant to be the first one to take out a license because they don’t know if their competitors will (or won’t), and if they won’t (perhaps because their competitors choose to fight), they’ll be at a competitive disadvantage.

                25. Yes, thanks- I do discuss this a bit – companies are often concerned less with the license fee and more with parity with competitors. I make clear that one of the strategic benefits of licensing is subjecting your competitors to the hassles of litigation while you don’t have to.

                26. Whether or not “that’s not faring so well in policy debates at the moment” needs a much closer look as to why.Any gloss given to the ‘propriety’ of the Infringers’ Rights movement (and unfortunately some of that gloss comes across in this otherwise finely detailed work) does a disservice to a strong patent system.

                27. Thanks for the compliment, which is how I’ll take it for the most part. I suppose some of that gloss comes through if you read it that way. As I said in the last comment, this was a paper about commercialization benefits presented at a commercialization conference. As such,I just couldn’t (and can’t) assume that every late enforce patent has commercialization value when that’s not true. As I note in the paper, late enforcement can (and should) lead to early technology transfer, but it doesn’t always. In the last section, I lay much of the blame with companies that don’t clear patents.

          1. Prof Risch,I respectfully disagree.There is no such ‘dependence’ concerning actual infringement and patent rights (the larger law) on whether we are talking about component versus whole product patenting.There is no such ‘dependence’ concerning whether infringement is really “copying” or simply parallel development (see my note to Ned herein).When you insert such distinctions that carry no difference in the larger law, you artificially create ‘heft’ where none exists. Further, what should be included in your initial paragraph is the legal nature of patent rights: being that of property – and how this country’s view on the laws affecting property have nearly always been aligned with full and unfettered alienability of property.**.**Exceptions of course involving dangerous items or true monopolies and anti-trust – a distinction that should be carefully maintained when discussing patents.

            1. You can see why I rarely please anyone with my work. Half the people say I’m to pro-patent, and the other half say I’m not pro-patent enough.Your points are generally in line with my views: copying v. parallel development are both infringing, etc.But this is not a paper about the law or the legal nature of patent rights. Other people have written those papers. This is a paper about commercialization benefits, and there is a complicated cost benefit analysis that goes into where the burden of clearance of patents should be, whether copying v. inadvertent infringement makes a difference, etc. My target audience is not a group that believes patents are property and none of the rest matters. To that audience, any analysis short of that conclusion will simply never be sufficient. This means that most of my work may never be sufficient, no matter how much it supports patents and the benefits they provide.

              1. “My target audience is not a group that believes patents are property and none of the rest matters.”Actually I will continue to disagree – it very much matters – even if (especially!) the target audience is not concerned with the legal nature of patents. One does not get to ignore those items that need to be remembered. The burdens are not placed in a vacuum, and to ignore the legal nature is to ‘court’ that vacuum. If the target audience does not believe that patents are property, then the target audience needs to be disabused of that fallacy.

                1. “Actually I will continue to disagree – it very much matters -“Who and what are you disagreeing with this time, anon? I’m genuinely curious.

              2. My target audience is not a group that believes patents are property and none of the rest matters. To that audience, any analysis short of that conclusion will simply never be sufficient.Truer words were never spoken.

        2. Patent_Guru, the free-rider is the real problem. Many industries have to invest to stay competitive, and the copier normally cannot compete because they will always be late to market. In such situations, cross licensing makes sense, and patents should be reserved just a case a non investing copier enters the market.

          1. Ned,The free-rider is NOT the only problem.To the extent that articles so constrain the subject to give that impression, well, those articles are part of the problem.Three items to keep in mind:1) Infringement is a strict liability offense2) There is no “Fair Use” or parallel development defenses to infringement.3) Using both a Carrot and Stick made for a better patent system.As to 3), we have had a watering down of the patent system through the AIA and Prior User Rights (as a start) in attempts to remove the Stick. Even the otherwise finely detailed study that Risch provides makes the mistake of giving credence to the possibility that those practicing an invention (that another fully legally and validly obtains a patent for) are somehow justified in complaining. No such complaining is justified. Such ‘justifications’ defeat the intent of the patent system. The very notion of promotion is tied to making the review of patents worthwhile and the use of the patent system something to be aimed for (through both a carrot and a stick).Spare and the rod and spoil the child is a maxim that fits – and yet through the influence of Big Corp and the desire to diminish the worth of patents, patent law has been weakened (and further weakening is so desired) by removing the stick.Further, the notion that “copier cannot compete because they will always be late to market” is not true, as it is well documented that an entire class of businesses aim to be in that second comer market: those that copy well and quick, those that let others be the ‘bleeding edge.’

Comments are closed.