Knowledge-Based Capital and the Patent Marketplace. Professor Colleen Chien

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1 Knowledge-Based Capital and the Patent Marketplace Professor Colleen Chien

2 What s the Value of a Patent Asset? Vehicle of Technology Transfer (TTO)

3 What s the Value of a Patent Asset? Facilitator of Technology Sharing (Standard)

4 What s the Value of a Patent Asset? Protection, Deterrence

5 What s the Value of a Patent Asset? Protection, Deterrence

6 What s the Value of a Patent Asset? Lodsys v. Rovio Exclusionary Value (PAE)

7 What s the Value of a Patent Asset? Vehicle of Transfer Pricing

8 What s the Value of a Patent Asset? Vehicle of Transfer Pricing

9 What s the Value of a Patent Asset? It depends on the context

10 Key Questions What are the contexts? What are the private and social values of transfers? What are the implications for policy design? For governments and the private sector?

11 hat are the contexts of patent transfers? Seller Rights Buyer PAE Brokered Defensive Sale Pool/Standard TTO/Tech Transfer $/equity/uptake

12 hat are the contexts of patent transfers? Seller Rights Buyer PAE Brokered Defensive Sale Pool/Standard TTO/Tech Transfer $/equity/uptake

13 hat are the private and social value of transfers?

14 hat are the contexts of patent transfers? Seller Rights Buyer PAE Brokered Defensive Sale Pool/Standard TTO/Tech Transfer $/equity/uptake

15 Many infringed patents, many possible enforcers ~250K patents cover a smartphone

16 Many infringed patents, many enforcers, many lawsuits? Traditionally Not Obstacles to Assertion 1. Counterassertion 2. Disruption 3. Cost 4. Reputation e.g. Apple v. Motorola spawns

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18 Patent Assertion Entity (Troll) = efficient provider of patent enforcement An entity focused on assertion of patents rather than transfer of technology - Does not make anything - Does not sell anything Vernetix (VHC) is a tiny company with a handful of patents and little or no ongoing R&D is worth billions of dollars. Seekingalpha.com - Not a startup/university

19 VirnetX stock is up 700% in three years

20 Many infringed patents, many infringers What Apple has to worry about when it sues 1. Counterassertion 2. Disruption 3. Cost 4. Reputation What Trolls have to worry about when they sue 1. Counterassertion 2. Disruption 3. Cost 4. Reputation Apple v. Google Infinity Search LLC v. Google

21 Many infringed patents, many infringers Troll Tactics that Drive down the cost of assertion - Sue many Ds - Same patent - Contingent fee lawyers - Friendly venues Economies of Scale What Trolls have to worry about when they sue 1. Counterassertion 2. Disruption 3. Cost 4. Reputation Infinity Search LLC v. Google

22 Don t Call them Trolls

23 Troll Tactics that Drive down the cost of assertion - Sue many Ds - Same patent - Contingent fee lawyers - Friendly venues Economies of Scale What Trolls have to worry about when they sue 1. Counterassertion 2. Disruption 3. Cost 4. Reputation Infinity Search LLC v. Google

24 What are the contexts of patent assets? Seller Rights Buyer PAE Brokered Defensive Sale Pool/Standard TTO/Tech Transfer $/equity/uptake

25 Social v. private costs: Not all transfers are created equal Seller Rights Buyer 25% of direct cost + essen & Meurer 2012) 85% of direct cost + hien 2012)?? PAE 86% = 100% 15% Brokered = 100% Defensive Sale Pool/Standard TTO/Tech Transfer $/equity/uptake

26 Not all transfers are created equal Seller Rights Buyer PAE Brokered Defensive Sale Pool/Standard (Technology) TTO/Tech Transfer (Technology, Know-How, People) Context $/equity/uptake

27 Policy Design: How do we encourage socially desirable transfers? Should we? Seller Rights Buyer PAE Brokered Defensive Sale Pool/Standard (Technology) TTO/Tech Transfer (Technology, Know-How, People) Context $/equity/uptake

28 Policy Design: How do we encourage socially desirable transfers? Should we?

29 Example traits: Intrinsic traits

30 Example traits: Acquired traits (Chien 2011) Issuance Ownership Investment Financing Citation Enforcement Transfer Maintain Securitize Forward Citation Litigate Size Change Reexamine 1 % Intrinsic Traits Acquired Traits

31 Traits internal and external to the patent system (The Promise of Big Data ) What s being searched What technology terms are trending Patent attorney trends Public disclosures (Call me if you are interested!)

32 Traits internal and external to the patent system

33 Policy design: should/how do we encourage socially desirable transfers?

34 Context- Driven Information Defensive Context Example he Ability to Search among patents and readily find.. In-force patents (maintenance fee and invalidation) The owner of a patent Intrinsic and acquired traits Relevant patents A solution to the sorting problem, that leverages xisting and encourages further disclosure of context nformation

35 How to Do This Leveraging Existing Data onsolidate multiple patent information databases ake patents searchable by: whether in-force (here and abroad), various owners f record, types of conveyances, family information foreign/continuations), etc., litigated or not, who s itigating patents in this area lassify patents according to industry definitions

36 How to Do This Creation of New Data arking Registry Virtual Marking provisions of the AIA Reinvigorate the marking requirement dministrative changes/carrots to encourage isclosure of context data icensing Registrty PCT applicants can request that the Int l Bureau ake information available on its PATENTSCOPE ebsite

37 Carrots/Administrative Tweaks for Context Disclosure/Dissemination?

38 Markets for other IP assets (NSF 2012)

39 Policy Design ho should do what? hat transfers can/should the patent system acilitate? Patent rights Knowledge Technology