Patents play different strategic roles in different industries. Because patent law is independent of industry structure, capital needs, R&D patterns, or the relationship between innovation and commercialization, however, elements that are critical to some industries threaten others. Yet every patent, regardless of quality, is a presumably valid federal license authorizing its bearer to restrict, reduce, restrain and contest all products in its sphere of exclusivity. Armed with patents, big companies can police their competitors; small companies can secure hefty license fees or investment stakes; and non-practicing entities (NPEs) can file strategic lawsuits. Inattention to this terrain courts disaster. Any company possessing patentable technology must recognize that someone else may patent it first. Any company possessing patents must learn how to extract maximum profitability from intangible assets. And every company must appreciate that success invites litigation and explore preventative and defensive steps. Learning Objectives: - Understand the role that patents play in the economy - Highlight key aspects of the legal terrain - Revisit the roots of the modern era of patenting - Recognize how to counsel companies in light of the current patent terrain - Identify different types of patentees and the strategies they favor - Recognize key strategic and valuation questions - Appreciate the importance of a Strategic Patent Counsel

1. Patent Strategy in the Modern
Economy
Presented by Bruce Abramson, Ph.D., J.D.
bdabramson@gmail.com
www.bdabramson.com

2. Introduction:
Why Patents?

3. POLICY OBJECTIVE
…. to promote the progress of science
and useful arts, by securing for limited
times to authors and inventors the
exclusive right to their respective
writings and discoveries.
U.S. Constitution, Art. I, Cl. 8

4. THE CAREFUL BALANCE
Patent law protects exclusivity;
Exclusivity ”promotes” knowledge by
motivating disclosure;
Exclusivity is a societal cost and a private
benefit;
Knowledge is private contribution and a
societal benefit:
Innovation economics explains the tradeoff;
All elements of patent theory are debated.

5. The Basics:
Patenting
Today
cc image courtesy of flickr.com/julianbleecker

6. SELECTED LEGAL TIDBITS
20 year patent life
First to file since
March 2013
Claims explain what
the patentee owns
“Patentability”
controversies surround
software, business
methods, & genetics
Invention must be novel
and nonobvious
Specifications & file
wrapper explain/constrain
the claims
"Prosecution" is a dance
between inventor & PTO
Patents, once issued, are
presumed valid

7. PATENT LITIGATION
A patent is the right to file a lawsuit;
Standards for filing a “nonfrivolous” lawsuit are rising, but still modest;
Patent litigation is a strategic endeavor;
Large companies often complain about “Non-practicing entities” (NPEs,
a.k.a Trolls);
There are many different types of NPEs;
Lobbyists are actively trying to change the rules of patent litigation.

8. EXCLUSIVITY ECONOMICS
Free markets hate exclusivity;
Antitrust law polices exclusive behavior;
Patents enable exclusivity
Economic views of both antitrust and patents change over time;
Legal views may lag, but eventually follow economic views;
Current view is that competition and innovation are both pro-growth.
cc image courtesy of flickr.com/robnguyen01

9. History:
Roots of Patent Power

10. ANCIENT HISTORY
1790
1890
Mid 20th
Century
U.S. patent law
U.S. antitrust
Mid-20th
dates back to
law dates back
century view:
1790;
to 1890;
"Big is bad;"
Strong antitrust
enforcement;
Unfavorable view of
patents

11. THE PROBLEM
The 1970’s, an era of economic malaise;
JAPAN
OBSERVATION #1
Japan & Germany
surpass U.S. in
commercialization
GERMANY
U.S.A
OBSERVATION #2
U.S. leads in
innovation

12. THE SOLUTION
Revitalize the American patent system;
Turn patents into useful tools of business
strategy.
HOW?
Strengthen patents and add
coherence to patent law.

13. DAWN OF THE MODERN ERA
Between 1980 and 1984
1980
1984
Bayh-Dole Act
FCIA
Hatch-Waxman Act
motivate universities to
commercialize
centralize patent
appeals
alter pharma
relationships
Diamond v.
Chakrabarty
Diamond v.
Diehr
End of the
Nine No-Nos
synthetic organisms are
patentable
algorithms are
patentable
loosen antitrust scrutiny
over patentees.

14. THE GOOD NEWS
IT WORKED!
U.S. retained its lead in innovation;
U.S. regained its lead in commercialization;
U.S. economy boomed for more than two decades.

15. THE BAD NEWS
The patent
Thirty years is
You have to
system is stuck
long enough
deal with the
in “strengthen”
for people to
consequences.
mode.
find loopholes.

16. Upshot:
What's it to you?

17. THE QUESTION
How can today’s inventors, entrepreneurs, innovators,
entrants, and incumbents navigate the contemporary “strong
patent” terrain?
How should lawyers and strategists counsel such clients?

18. THE TERRAIN
cc image courtesy of flickr.com/banjaxx
Uniformity independent of industry
structure, capital needs, R&D
patterns, or the relationship between
innovation and commercialization;
Presumption of validity authorizes
patentees to reduce, restrain, and
contest all products in or near its
claimed sphere of exclusivity;
Variance in tools and training leads to
highly variable patent quality;
All recent and current legislative
proposals represent tinkering at the
edges.

19. THE MESSAGE
You must understand this terrain and how
it applies to your industry!
Get used to it!
Make it work for you!

20. Strategy:
The Players

21. BIG INCUMBENTS
Build big portfolios;
Shape relationship with direct competitors:
CROSSLICENSING;
LITIGATION;
NEGOTIATION;
STANDARDSETTING;
Police entrants:
ESTABLISH
BARRIERS
TO ENTRY;
LEVERAGE
INTO
ADJACENT
MARKETS;
PRACTICE
DEFENSIVE
LITIGATION.
TRADE
ORGANIZATIONS.

22. SMALL COMPANIES
Choose between practice and enforcement;
Leverage critical patents to punch above their weight;
License in ways that constrain larger companies;
Litigate;
Attract investment capital;
Grow quickly.

23. NON-PRACTICING ENTITIES
Inventors, aggregators, investment funds, trial
lawyers, universities, and others qualify as NPEs.
NPEs possessing patents but no products can file—
or simply threaten—strategic lawsuits of varying
quality against anyone even plausibly encroaching
their claims;
Numerous strategic opportunities;
Source: Patent Troll by Bob MacNeil
Untapped investment potential.

24. Strategy:
Considerations

25. PATENT  ECONOMIC GROWTH
Someone must deploy the patent's teachings in a product or service.
Three candidate sets:
THE PATENTEE
(PRACTICE)
AN AUTHORIZED
USER
(LICENSE)
AN INFRINGER
(LITIGATE)

26. PATENT  DISTRIBUTION
Sales
Why buy a patent?
One step closer to practice;
Improved defensive position;
Improved negotiating leverage;
Greater fool theory.

27. DUE DILIGENCE
When building a portfolio or divesting patents
Verify ownership;
Inquire about
enforceability
issues;
ALSO...
Explore prior art;
Check for liens
and
encumbrances;
Shenanigans at
the PTO?
Maintenance
fees?
Review
prosecution
history.
Assess backward, forward, and internal citations;
Consider market potential and ease of workaround;
Study prior litigation/proceedings.

28. FREEDOM TO OPERATE
Can you work around existing patents?
Often formal in Pharma, but critical everywhere;
Specific to a jurisdiction;
Requires inquiries into validation and claim construction;
Notoriously difficult;
Impossible to guarantee;
Can be quite expensive;
Is it right for you?

29. VALUATION
An "Art and Science;"
ACCOUNTING;
BOOK VALUE;
GEORGIA
PACIFIC
FACTORS;
LICENSING
RULES OF
THUMB;
REAL OPTIONS;
COST BASIS;
Makes sense only in context;
Must posit a growth scenario;
Many unknowns, many theories;
etc.

30. VALUATION?
Do you really want to know the value?
Or are you just trying to satisfy:
SEC;
IRS;
Due diligence requirement;
Done deal.
COURTS;

31. DEFENSES
No magic, but;
Understand the terrain;
Preempt;
Invest in analysis;
Negotiate;
Conduct FTO;
Be smart.

32. SPOTTING OPPORTUNITIES
No magic, but;
Understand the terrain;
Preempt;
Invest in analysis;
Negotiate;
Conduct FTO;
Be smart.

33. Closing Question
How Many Grains of
Salt?

34. ABOUT
BRUCE ABRAMSON
Partner, Rimon, P.C., www.rimonlaw.com;
Ph.D. in Computer Science (Columbia), J.D.
(Georgetown) & Registered Patent Attorney;
Former Law Clerk (CAFC), CS Professor
(USC), & Economic Consultant (CRA);
Strategic practice leverages client ideas into
business plans;
Transactional practice provides IP
valuation & licensing services;
Litigation practice offers expert testimony on
damages, technology, and industry practice;
Research focuses on the IP/Antitrust interface.
Firm tailors corporate, transactional, IP, and
litigation services to tech companies.
Client-sensitive value-based pricing;

35. QUESTIONS????
Bruce Abramson, Ph.D., J.D.
bdabramson@gmail.com
www.bdabramson.com
www.rimonlaw.com/professionals/bruce-abramson

36. Thank You
for Your Time.