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Wednesday, September 18, 2019

Former Federal Circuit judge: Patent licensing ‘best practices’ are well-intentioned, though unrealistic

By Jessica M. Karmasek | May 15, 2015

WASHINGTON (Legal Newsline) - Though well-intentioned and commonsensical, companies adopting and adhering to a list of “best practices” is not the answer to the ongoing patent reform debate, one former federal judge contends.

Judge Paul Michel, who served more than 20 years on the U.S. Court of Appeals for the Federal Circuit until his retirement in 2010 and is considered an expert on intellectual property law, commended cyber security technology company Finjan for crafting such a list and attempting to educate federal lawmakers.

But the idea is problematic, he said.

“In principle, I like best practices. But they’re just not very realistic or workable,” the former judge said. “At least one party isn’t going to want to follow best practices. They are going to see the advantage to not following them.”

He continued, “Lawsuits are like wars. When someone sues someone else, that someone else fights back -- and they ought to fight back.”

And while intended to foster good patent behavior, best practices sometimes have unintended consequences, Michel argued.

“They become handicaps,” he said. “They end up hurting the good people, while the bad people who refuse to follow them go the other way.”

Michel explained that, years ago, there used to be an “honors system” or a “code” within the patent community -- similar to best practices.

“If a company was practicing an invention you made and you pointed that out to them, they would take a license,” he said. “Because they would see that they’re infringing a patent and they want to avoid a lawsuit and they want to be a good corporate citizen, they’d say, OK, I better pay and buy a license.

“We’ve totally gone the other way now.”

Attorneys are now advising their clients not to take a license and to fight the claim, Michel said.

“They’re telling these company owners that they can probably get it knocked out and that even if they don’t succeed, that they can outlast the patent owner, so don’t take a license no matter how clearly you’re infringing,” he explained.

As a result, the licensing of patents has gone into a “freefall” and the value of patents themselves has “plummeted,” Michel said.

The former judge said adopting best practices might have worked a couple of years ago, but since then “things have been turned upside down.”

“The current debate in Congress is preposterous,” he said. “Most of the legislation is way off-base, not based on facts, statistics, hard numbers or logic. It’s simply based on public relations, propaganda, campaign contributions and distorted views.

“I’m shocked by what a disaster it has become.”

Adam Mossoff, a law professor at George Mason University and senior scholar at the university’s Center for Protection of Intellectual Property, also commended Finjan for its efforts to adopt and follow licensing best practices.

He said the company is part of a growing number of businesses and groups within the patent community working on such a policy.

In November 2013, Conversant Intellectual Property Management Inc., based in Plano, Texas, issued its own 10-point set of ethical patent licensing practices while condemning the abusive behavior of some non-practicing entities.

“It’s time for patent licensing professionals who are concerned about the integrity of the patent system to stand up for ethical practices that will help curb these abuses,” Scott Burt, Conversant’s senior vice president and chief intellectual property officer, said at the time.

“Our goal in proposing these guidelines is to spark conversation about how our industry should be operating. Principled patent licensing is a two-way street that requires licensors and licensees alike to conduct themselves ethically and responsibly in order to achieve mutual economic benefits.”

Marshall Phelps, the former chief of IP at both IBM and Microsoft, said Conversant started a “very important discussion.”

Bernard J. “Barney” Cassidy, a patent policy expert and former president of Tessera Intellectual Property Corp., who has testified frequently on Capitol Hill on patent issues, at the time called Conversant’s principles “a breath of fresh air.”

“These principles, or ones like them, should be embraced by all legitimate patent licensors,” Cassidy said. “Conversant has made an important contribution to the ongoing dialogue about abusive litigation tactics.”

Mossoff, who is very much against federal overreach and lawmakers’ attempts to drastically alter the patent system, said licensing best practices are another form of self-regulation and could prove beneficial when combined with recent U.S. Supreme Court decisions.

“The ongoing development of ‘best practices’ principles by patent licensing companies and trade associations confirms that when rhetoric and junk science studies are stripped away from the policy debates, companies in the innovation industries are working to ensure that a vibrant patent licensing market continues to function properly,” he said. “This is incredibly important, because patent licensing has long been essential to the success of the 225-year-old American patent system in fostering the innovation economy.

“Companies like Finjan and Conversant are thus continuing a longstanding tradition in which patent owners have created innovative, market-based systems to efficiently deliver patented innovation to consumers -- from sewing machines in the 19th Century to tablets and smart phones today.”

He continued, “In short, true reform of the patent system is already occurring, from the judges who are awarding attorneys fees and punishing the relatively few bad actors to the companies who serve the key economic function as market middlemen in converting inventions in the lab into real-world technological innovation purchased and used by people the world over.”

The Licensing Executives Society, a trade association of businesspersons and attorneys who license patented innovation, is developing its own set of licensing principles similar to Finjan’s.

Brian O’Shaughnessy, executive director of LES USA Canada and a patent attorney, said he believes following a set of licensing principles or best practices could be a “very, very effective step” in the fight against so-called patent “trolls.”

“I think going through the exercise would cultivate a certain body of knowledge,” he said. “We can point out that these practices are legitimate, but those practices over there are not consistent with the public interest.

“We would eventually have people or companies who commit to those standards and then could advertise that. We could tell you whether a company is compliant or not.”

But developing its list of best practices is a tedious process, O’Shaughnessy said, noting that federal lawmakers should follow suit, and take their time, when it comes to patent reform legislation.

“LES is very much in a go-slow mode,” he said, adding that the group is “very concerned” about how the House, especially, is treating legislation.

“They’re trying to ramrod legislation down our throats,” he said of lawmakers. “They insist they have a cure without really listening.”

O’Shaughnessy said his group has tried to engage with them, but with no success.

“Our thinking is, let’s get the experts engaged in this process and people who deal with this on a regular basis,” he said.

“If they go too far in one direction and kill protections in favor of the anti-troll side, then they’ll make it very risky and very difficult to enforce IP. If you can’t enforce IP, patents don’t have much value and innovations don’t have much value, and then investors don’t want to invest. Then the economy suffers.

“We could get caught in a very damaging downward spiral.”

From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.


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