Q&A: Patents portfolio management and licensing

FW moderates a discussion on patents portfolio management and licensing between Paul Collier at Kirkland & Ellis LLP, Brian Hinman at Philips, and Joeeta Murphy at Stratagem IPM Ltd.

FW: Why is it important for companies to adopt robust patent portfolio management practices? What trends and developments have you observed in this area over the past 12 months or so?

Collier: Patents remain one of the most important tools to protect a company’s intellectual property, and the US Patent and Trademark Office (USPTO) continues to issue patents at record levels. In 2015, the USPTO issued over 350,000 patents, almost 100,000 more than it issued in 2010. While companies still seek patent protection, statistics suggest a growing reluctance to enforce their patent rights over the past few years. For example, 2016 saw a decrease in patent suits filed in US district courts, which continues a five-year trend. According to estimates, the number of suits filed in 2016 is expected to be around 4500, the lowest level since the America Invents Act (AIA) reformed patent law in 2011. There is little doubt that the reduction in district court filings is linked in part to the AIA and its establishment of post-issuance proceedings to challenge patent validity before the USPTO. Over the last five years, these administrative trial proceedings, most notably inter partes review (IPR), have become a prominent tool for those accused of patent infringement. Numerous reports have touted their ‘kill rate’ for invalidating patents, earning them the ‘patent death squad’” moniker. Nevertheless, there is reason to believe that this may be changing. This year has seen a plateau in IPR filings, with filings this year estimated to be roughly the same as 2015 levels. Although largely attributable to the decrease in district court filings, thereby reducing the need for an IPR, it also comes at a time when the USPTO’s bar for instituting an IPR trial appears to be rising – USPTO statistics show that institution rates have dropped materially from 2014. Whether this means that IPR proceedings are becoming less attractive for accused infringers, especially with the risk of estoppel for any invalidity arguments that are raised or reasonably could have been raised, is yet to be seen.

Murphy: Registered protection in the form of patents, design and trademarks are all costly to create and maintain, and can quickly become a liability if not managed. A good analogy is building a house to live in, let or sell. No one builds a house, a costly asset to create and maintain, to leave it standing empty. This is the equivalent of filing a patent or several patents and not managing them, merely paying the costs as they arise without ensuring the rights are worth having. To obtain a return on that investment, a robust management practice involving evaluation and re-evaluation of what each and every part of the portfolio is contributing to the business as it evolves is essential. As uncertainty with Brexit and the US government changes take effect, such ongoing review is even more essential in case action is needed to deal with a changing legislative environment.

Hinman: Companies are seeing drastic changes in the patent environment which may result in their hesitation on spending the money to expand their patent portfolios and hence to pursue robust patent portfolio management practices. Indeed, the validity challenges which have gained some success in the patent offices worldwide, and decisions like Alice Corp. v. CLS Bank International, in the US, have resulted in many patents not surviving such scrutiny. In Alice, the issue in the case was whether certain claims about a computer-implemented, electronic escrow service for facilitating financial transactions covered abstract ideas ineligible for patent protection. The patents were held to be invalid because the claims were drawn to an abstract idea, and implementing those claims on a computer was not enough to transform that idea into patentable subject matter. This decision has resulted in setting a precedent for other such cases where such patentable subject matter is in question. However, in my opinion, such decisions as well as the increasing frequency of validity challenges should not stop companies from pursuing a more robust patent portfolio approach.

“The key to effective licensing is to understand the market, as well as the full potential of the technology protected by the patent rights.”