Patent Law Insights : Software Patent Lawyer & Attorney : Perkins Coie Law Firm : Intellectual Property & Technology Law

Entities sometimes need to determine what a patent or a portfolio of patents is worth.  Valuation of a portfolio may be useful when, among other things, an entity desires to:

• determine whether to pursue a patent application;
• evaluate a company's value (e.g., for merger, acquisition, or stock price); or
• estimate damages.

The value of a patent can depend on a multitude of factors including but not limited to: 

• breadth of a patent claim;
• scope of the patent claim given up during prosecution;
• validity of the patent given changes in patent laws;
• price customers would be willing to pay for a product embodying the claimed invention;
• license fees paid for similarly important components; and
• costs to substitute the claimed technology with an alternative.

Often, the value of a patent is not publicly known because parties often settle matters out of court.  Other times, the value of a patent becomes abundantly clear after a blockbuster court case.  For example, a jury yesterday awarded nearly $1.7 billion to Johnson & Johnson, whose patent the jury determined was infringed by Abbott Laboratories' drug, Humira.  Abbott Labs plans to appeal the verdict.

Valuing a patent can thus require the skills of someone who understands both legal as well as business issues, or at least an interdisciplinary approach.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I was a co-chair of a convention for attorneys that recently concluded.  Some panels at the convention related to intellectual property issues, and several legal process outsourcing vendors attended.  I asked one of the vendors what effect the guidance the USPTO published last year on the scope of foreign filing licenses had on the vendor's business. She informed me that while the USPTO's guidance confused some of her clients, her outsourcing business continues to flourish.

In these trying economic times, it is likely that many companies and their counsel are trying to reduce costs wherever possible, including by outsourcing some services to service providers with foreign operations. However, sending information overseas for preparing a patent application that is to be filed in the United States (or for other reasons) is not without risk.

In general, U.S. applicants must first receive a "foreign filing license" from the USPTO before filing a patent application outside the U.S. Sometimes, the applicant is ordered not to file the patent application abroad (this can occur, e.g., when the applicant's technology relates to military use.) When a patent application is filed abroad despite an order not to do so, the applicant can be barred from receiving a patent. (35 U.S.C. §§ 182 and 185.) Moreover, the applicant and anyone involved can be fined and/or imprisoned. (35 U.S.C. § 186.)

As a corollary, it is possible that a patent that issues from an application prepared abroad based on information sent by a U.S.-based applicant without first receiving permission from the Department of Commerce could similarly be invalid, and may even subject the patent applicant and anyone involved to fines and imprisonment. (Because offshoring patent work is a relatively recent activity, there is scant authoritative information on point.)

Some applicants may nevertheless feel that rewards deriving from the use of foreign labor are worthwhile. One way to mitigate the concomitant risks may be to first request and receive permission from the Department of Commerce before transmitting information overseas, as the USPTO's guidance suggests.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Deloitte recently published a report on venture investment trends after surveying venture capitalists (VCs) worldwide. According to the report, more VCs anticipate growing their investments in Asia than in the United States. For example, 50% of VCs anticipate increasing their investments in Asia whereas only 17% of VCs anticipate increasing their investments in North America. Thus, it appears likely that as we emerge from the global recession, research and development (R&D) will continue to increase outside the United States, and especially so in China and India. 

Savvy patent applicants already take advantage of the Patent Cooperation Treaty (PCT) to protect their inventions outside the U.S., including in China and India.  However, some companies are understandably reluctant to do so because of the potential costs involved. One way to control these costs is to limit the countries in which patent protection is sought, such as to countries in which a market and/or competitors are likely to exist. 

A question clients often ask is what the point is in filing patent applications in countries such as China, India, and Russia, where intellectual property rights can be difficult to enforce.  China and India are both members of the World Trade Organization (WTO), and the Russian Federation is an "Observer government." According to the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), governments are required to ensure that intellectual property rights can be enforced under their laws, and that the penalties for infringement are tough enough to deter further violations. Over the last few years, these countries have made strides in improving their intellectual property enforcement activities.  Moreover, as their domestic industries mature, these countries are even more likely to enforce the laws because domestic and foreign pressures to do so will mount. 

To remain competitive, U.S. companies will need to seriously consider increasing not only their R&D expenditures, but also their patenting activity -- both in the U.S. and abroad. As I wrote in this blog approximately a month ago, a majority of patent applications filed last year were by inventors located abroad. If American companies fail to protect their inventions, they could lose both domestically and internationally. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Sister blog ChipLawBlog reports that IBM's David Kappos has been nominated to be the new Commissioner of the Patent and Trademark Office.  Several commentators reported about a month ago that he was being considered, including IPWatchdog, Dennis Crouch, and others. 

ChipLawBlog summarized some points Mr. Kappos made during his testimony on patent reform.  As he awaits Senate confirmation, it may be interesting to consider these additional points he made when he summarized IBM's patent strategy in an IPReview article published in February, 2007:

• Patent applicants are responsible for the quality and clarity of their patent applications.
• Patent applications should be available for public examination.
• Patent ownership should be transparent and easily discernable.
• Pure business methods without technical merit should not be patentable.

If Mr. Kappos helped to craft this strategy for IBM, it may be an indication of the patent policy he could strive to implement.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Almost everyone who has completed university training in computer science knows who Professor Donald Knuth is.  When I was completing my undergraduate computer science degree, I remember referring to his textbook many times.  As they were quite expensive for me, I could not afford to buy them and so would review them in the university's library.

He has apparently written to both the USPTO (in 1994) and the EPO (more recently) explaining why he thinks software should not be patentable.  However, his letter to the EPO reflects a misunderstanding many people have about what is patentable and what is not.  His letter provides an example in support of his argument:  

"For example, it would be terrible if somebody were to have a patent on an integer, like say 1009, so that nobody would be able to use that number "with further technical effect" without paying for a license."

Professor Knuth is arguing that something (software) should not be patentable by comparing it to something else (a number) that was never patentable.  To my knowledge, no patent office in the world has or would ever award a patent on a number or other fundamental "truths of nature."  Patent laws are designed to award innovation, and an innovative algorithm that is novel and not obvious should be awarded a patent no differently than a machine.  To say that an algorithm can be explained mathematically and should not be patent eligible is equivalent to saying that a machine merely employs laws of physics and should not be patent eligible. 

Just as Professor Knuth was rewarded for writing his excellent textbooks, innovators in all new fields of human endeavor should expect that their innovations will be fruitful.  When drafting Article I of the Constitution of the United States, the founding fathers recognized that having a world full of copycats would not lead to progress.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Supreme Court of the United States today granted certiorari in the Bilski case.  The primary question the Supreme Court has been asked to answer is:  whether the Federal Circuit's "machine-or-transformation" test is the appropriate test to determine whether a claimed process should be patentable subject matter.  To be valid, a claimed invention must (1) fall within one of the specified categories of patentable subject matter, (2) be novel, and (3) not be obvious.  This case deals with the first threshold issue of patentability. 

Although the original Bilski case involved a pure business method (i.e., not implemented in software), it is likely that the Supreme Court's decision could have an impact on software patents because many patent applications directed to software recite "method" or process claims.

A large number of patent practitioners and their clients will be watching this case closely.

• Email This
• Print
• Comments
• Trackbacks
• Share Link