As thoroughly documented by Joff Wild at IAM Magazine, IPXI made a brief splash 2009, announcing the appointment of Gerard Pannekoek (creator of the Chicago Climate Exchange) as its president and CEO.  In late 2011, the world still awaited the announcement of IPXI’s first members.  Since then, however, IPXI’s public activity experienced a significant uptick.  The exchange announced $10 M in funding along with Philips and other companies and universities as its initial members before the end of 2011.  IPXI released its initial rulebook in May and provided an updated list of members, including the all-important founding members, including Philips, Ford, Sony,  Rutgers, Northwestern, University of California, and Lawrence Livermore National Laboratory to name a few.

Unlike a stock exchange, IPXI’s IP exchange provides a platform for IP owners to offer a designated number of Unit License Rights (ULRs)–a contract providing its purchaser with “the right to use a pre-established unit of IP.”  In other words, rather than acquire a portion of patent ownership, purchasers acquire a limited right to use a patented technology.  However, while the exchange promises to bring much needed sunshine and transparency into the patent licensing world, the more important issue is whether IPXI will deliver on that promise.  Success in any patent monetization venture is far from guaranteed, and IPXI faces the even more daunting task of taking a non-traditional path.  For IPXI’s model to be successful, they’ll likely need an ample supply of quality patents covering technology that is easily ‘unitized’ and accurate pricing models.

Of course, while the ULRs represent a ‘consumable’ commodity transacted through the exchange, nothing obligates rights-buyers themselves to use the IP.  Instead, the model allows for speculation among sophisticated investors.  “The exchange offers the ability to speculate on patented technology.”  McClure explains that, by identifying dominant blocking patents in a particular technology, savvy investors can acquire those rights through the exchange during an early stage where unit prices might be discounted, and then sell them at a later stage to operating companies that need to acquire rights to use the technology.

IPXI’s rules also regulate enforcement of IP listed on the exchange, which may further encourage speculation.  “Any stakeholder can petition the enforcement committee if it feels someone is infringing patent rights listed on the exchange,” explains McClure.  Assuming the petition raises a colorable case, IPXI will identify IP under investigation by the enforcement committee, potentially “raising the value of the ULR contracts for the exchange.”  For patent owners, however, the enforcement committee holds far more significance.  Patent owners cannot send a notice letter, much less file a lawsuit without a positive determination by the enforcement committee.

Further protecting the exchange and any rights-owners, the rules also require any monetary settlement or damage awards to be satisfied by the purchase of a ULR or other product authorized for trading on the Exchange.  In other words, licensing–to the extent it covers infringement overlapping with a period of time that the relevant IP is listed with IPXI–must be converted to an exchange transaction.

IPXI’s control over the enforcement process may turn off some prospective participants, but consider a hypothetical future scenario where all relevant companies become members of the exchange.  Aiding patent owners–along with the guidance of the enforcement committee–is an alternative enforcement mechanism through a commercial arbitration process that could end up dramatically saving time and money.  Another benefit, over time, is the development of a liquid, transparent market for IP rights.  If patent owners can establish unauthorized patent usage, determining compensation should become straightforward over time.  McClure cites transparency as another key benefit the exchange should provide.  “If the rate at which industries adopt various technologies becomes known and predictable, parties engage in more informed decision-making.  For example, more information could help investors decide what patents to back in litigation, should that expense become necessary.”

Of course, while pricing structures might take care of itself over time, the exchange still needs to ensure an adequate supply of high quality IP.  IPXI’s selection committee takes responsibility for that role, reviewing every submitted portfolio to ensure its appropriateness for the exchange.  The listing fee, a stout $100,000 presents another barrier ensuring that only sponsors with a substantial investment step forward to use the exchange.  “IPXI will not be a bulletin board service,” stresses McClure.  “We have a strong quality-control process in place to make sure everything listed on the exchange is of high quality.  The listing fee acts not only as a barrier to entry, but also speaks to the quality of the submitted IP itself and compensates the exchange for the significant resources committed to marketing the ULR contracts.”

Prior to an initial offering, IPXI engages the relevant investment community with a series of presentations akin to a roadshow.  McClure says that such pre-marketing efforts are underway.  With first trades likely happening in the third quarter, those marketing and roadshow efforts ought to pick up rapidly in the coming months.

The selection committee itself is composed of representatives of the exchange’s member.  The existence of several operating companies, both large and small, as potential selection committee participants raises another interesting issue: managing conflicts of interest.  Operating company representatives place themselves in positions of trust, reviewing IP portfolios submitted for licensing via the exchange.  In many cases, these IP rights might impact the actual business operations of other operators on the exchange, immediately triggering a vast array of issues in the minds of lawyers everywhere.  Thus, IPXI’s rules include requirements on reporting material conflicts of interest and prohibiting conflicted individuals from voting on such decisions.  “One of the largest responsibilities of an exchange is managing conflicts,” explains McClure.  “Any exchange, whether us, NASDAQ or NYSE, must deal with conflicts on a daily basis.”

Of course, unexpected scenarios are almost sure to arise–a truism of any new, untested business model–and IPXI has yet to officially finalize its rulebook.  As to whether they will be successful, no one can really know for sure.  But they appear to have a structure in place designed to maximize their chances of succeeding, and flexible enough adapt to chancing circumstances which is about the most you could expect from something so radically different.  As someone who has long pined for a viable licensing model more efficient than patent litigation–which is a bit like asking for a window more transparent than lead–I’m certainly hopeful for IPXI’s success.

Nvidia, already an investor in IV’s Invention Investment Funds I and II, reached out to IV after IPWireless approached the GPU maker to offer the portfolio.  Last year, Nvidia acquired Icera, a fabless semiconductor designer of 3G/4G baseband processors.  IPWireless, originally founded in 1999, had a three-year head-start on invention and technology development, offering a patent portfolio likely to be generally foundational to Icera’s technology.

But lurking beneath the press releases and headlines, a mystery involving a 13-year company history, previous patent sales and a partnership with another operating company, and the involvement of a competing patent investment fund, something Yeadon says IV was well aware of.  Explaining the long transactional history of the IPWireless patents, Yeadon said “Frankly, there are lots of assets in the market where ownership of patents can change hands many times. That’s important because we see how liquid this market is, and that’s a good thing. It’s a market for invention.”  No one seems to be saying exactly how long IPWireless took to finally find a suitor for its portfolio, but the earliest likely date these assets hit the market would be sometime in 2010.

Founded in 1999, IPWireless’ initial investors poured a reported $235M into the company, only to sell to NextWave in 2007 for only $150M.  A year later, founders of IPWireless repurchased the company for only $2M and assumption of company debt.  In 2009, IPWireless completed a funding round for $15.5 M, but shortly afterward appears to have focused on leveraging its patent portfolio.  In April 2010, the company announced a joint R&D initiative with Sony, but unannounced was the assignment of a significant portion of its US patent portfolio to Sony at the same time.

Even more interesting, when Sony recorded an assignment of 33 patent assets from IPWireless, a different company, Wireless Technology Solutions LLC, recorded an assignment of 37 more IPWireless patents on the exact same day.  Wireless Technology Solutions is believed to be a holding company controlled by the patent investment fund Altitude Capital Partners.  Interestingly enough, ACP held onto the patents for just shy of 2 years, but in March assigned the patents back to IPWireless.  Based on the timeline, and comments from both Yeadon and Nvidia General Counsel David Shannon, IPWireless approached Nvidia at some point after re-acquiring the patents.

However, Yeadon’s previous comments, consistent with comments she made to Joff Wild at IAM Magazine, suggest that IV’s first contact with the portfolio would have come directly from ACP.  Ken Lustig confirmed to Joff already that the portfolio had been through a “competitive” sale process, but with the partnership with Nvidia arising in just a few weeks time, it is unlikely that the two companies participated in an auction.  Further, IV already raised billions in investment dollars, and billions more through licensing.  In all likelihood, if IV really coveted this portfolio for a long time, it could have purchased it long ago.  So why now, and why with Nvidia?

Intellectual Ventures invests in patents and inventions generally, which means any acquisition needs to carry with it a reasonable prospect extract future value.  In our conversation, Yeadon told me  “We’re focused on making good investments in technology that is relevant today, or for technology that won’t ripen for 3-5 years. We look at patents from a value perspective and from an investment perspective.”  With no licensing history, IV could have made the decision that the IPWireless portfolio, while valuable, did not represent a good investment at the offering price–in other words, the dollars needed to acquire and maintain the portfolio would exceed the likely dollars that could be extracted from it.

Of course, without a leak, no one outside of IV, Nvidia and IPWireless will ever know what the portfolio sold for.  General Dynamics acquired IPWireless’s parent company earlier this week for an undisclosed amount, in the process, reporting that IPWireless expects to generate $65-75M in revenues this year.  Obviously, there is no indication as to whether that figure includes the sale of its patents, and as a congomerate making $32B per year, there is virtually no chance that the amount generated from the IPWireless patent sale would be material to the company’s overall financials.

Meanwhile, why would Nvidia turn to Intellectual Ventures for help?  As a publicly traded company with $2.6B in total equity, surely Nvidia could afford to buy the portfolio on its own as well.  However, acquiring patents as an operating company is more of an expense than an investment.  Operating companies, generally, are in the business of making and selling products, not licensing their patents, so taking on a large patent portfolio represents a significant financial burden with little, direct, financial upside especially in the short-term.  By partnering with IV, Nvidia saves on bulk, acquiring less than the whole portfolio, offloads a lot of logistical expenses, and leaves open the possibility of sharing future licensing revenue.

Although she would not discuss the details of their arrangement with Nvidia, Yeadon did acknowledge that their licensing program distinguishes their joint acquisition offerings from those of IV’s competitors.  Specifically, she did acknowledge that IV is open to many different structures, including one “where a purchaser enjoys a share in future proceeds to assets we buy.”  Microsoft previously invested in patent acquisitions later off-loaded to licensing company MOSAID, leaving the software company with freedom to operate and a share of any licensing revenue MOSAID generates.  Asked whether this would become a trend, Yeadon agreed, “In this market, its common for companies to realize some benefit long after a transaction closes.”

Even more importantly for Nvidia, however, Intellectual Ventures is most likely the largest patent investment firm in the world (as measured by total investment) and is among the most aggressive.  Consider the message Nvidia sends to the rest of the world when it partners up with the IV to acquire patent rights in a technology space it only entered a year ago.  Imagine, if you will, the proverbial ‘nerd’ walking, chest out, through a school-yard ‘bully’ congregation, with his newly hired bodyguards at his side, daring one of them to try to steal his lunch money.  Qualcomm? Broadcom? Does anyone want to take their shot?

That’s not to say Nvidia is invulnerable. Everyone has weaknesses.  But Nvidia’s moves signals to the market that ‘low-hanging fruit’ hangs elsewhere.

This week, Yahoo’s most recent PR disaster exacerbates its earlier PR disaster.  Its sudden discovery of a patent portfolio, and subsequent mobilization with no discernible strategy (other than to hire lawyers and scream Faster, Pussycat! Kill! Kill!) led nearly every Silicon Valley media outlet to decry the company’s actions.  But now, with the revelations about Thompson’s resume woes (reminiscent of George O’Leary’s 5-day tenure as Notre Dame’s head football coach), Yahoo today is about as vulnerable as ever … the worst possible time to negotiate.

Yahoo negotiating with Facebook today would be like going to the grocery store after a 7-day fast.  If someone at Yahoo hasn’t already placed phone calls to Intellectual Ventures, Acacia, IP Navigation, RPX, AST, ICAP and GPC, then the company really had no business trying to monetize its portfolio in the first place.  Get advice, buy patents, and generally find out what options you have to regain some leverage, because pouring more money into your legal team will not cut it.

Of course, if Facebook is smart, they have forged relationships with many of these companies already, leaving Yahoo out in the cold.  But at least, in that scenario, getting on the phone at least gives Yahoo an idea of how screwed they really are, in which case they likely settle before things gets any worse!

On its website, Intellectual Ventures explained that the agreement with Cypress “establishes a long-term relationship which allows for further IP transactions and cooperation in the future.”  IV also carried a statement from Cypress’ CFO, touting that the “recently executed agreements will provide both companies with access to an ever-increasing pool of patent assets, which is consistent with our patent strategies.”

Reading between the lines, a possible arrangement may be in the works where Cypress pays below market rates for a global IV license, while offloading patents to an IV-controlled company and potentially participating in generated revenue streams from any resulting licensing programs, similar to the arrangement believed to exist between IV, Micron and Round Rock.

Their counterclaim against Yahoo! asserts 10 patents, 8 of which were acquired from other companies (very recently, in some cases).  According to Janal Kalis of Schwegman Lundberg, the acquired patents come from Right Point (6,288,717); Philips Electronics (6,216,133 and 6,411,949); the University of New York (6,236,978; 7,603,331; and 8,103,611); and Cheah, apparently an inventor-owned IP holding company, (8,005,896 and 8,150,913).

Joff Wild at IAM Magazine published a very righteous (and accurate) commentary on Wilcox’s situation echoing these very sentiments.  (Read Without the will to enforce them patents are worthless – and always have been.)  In it, Wild counters the complaints about UK patent enforcement costs, saying:

It is also worth noting that enforcement costs in the UK have actually been coming down since the creation of the Patents County Court, while there is also litigation insurance available and even the possibility of instructing law firms on a contingency fee basis.

Wild also explains how patent costs are just another of the many costs associated with running a business.  Even businesses that appropriately budget for patent acquisition costs, generally speaking,  fail to plan for the cost of enforcement.  Of course, such costs depend largely on factors beyond the company’s control, and can be extraordinarily difficult, if not impossible, to predict during early stages of conception.  Difficulty, however, is no excuse for lack of proper planning.

Even without knowing the precise costs, companies likely have projections for costs and revenues over following years, which can provide a baseline for how much (if any) the company could afford to set aside if patent enforcement becomes necessary.  Beyond that, institutions exist specifically to finance patent enforcement and licensing based business models. Take a little time to learn about the major and minor players in this space, and develop relationships with them.  The same goes for patent licensing specialists and contingency firms.  Find out what their typical arrangements look like, and get an idea for who you would feel comfortable working with.  Finally, know your competition.  What companies are likely to copy your products, and potentially encroach on your patents, once issued?  A law firm’s preexisting relationship with one or more of these companies potentially eliminates them as a possible enforcement partner.

With all of this information considered, any company can put together a strategy for handling future IP enforcement by knowing where and how to set aside funds, who to ask for additional financing (if necessary), and what patent advisory services or law firms to solicit for assistance.  Without a plan, a company’s IP may end up just sitting in a vault, collecting dust.  Even large companies neglect potentially valuable IP due to lack of prior planning.  Consider, for example, the letter to AOL’s Board of Directors from Starboard Partners (reported at IAM here) blasting the company for failing to develop an IP strategy:

Since our initial public involvement in AOL, we have been approached by multiple parties specializing in intellectual property valuation and monetization, some of whom believe that … AOL’s patent portfolio could produce in excess of $1 billion of licensing income …. Unfortunately, … AOL has been entirely unresponsive to their proposals …. The Company’s inaction is alarming given our understanding that many of the key patents have looming expiration dates over the next several years ….

An Atlantic Wire article posts AOL’s even more troubling response:

We have a valuable patent portfolio and several months ago, prior to Starboard’s first letter, the AOL Board of Directors authorized the start of a process, and hired advisors, to realize the value of these non-­‐strategic assets.
(emphasis added)

For AOL, this “process” should have “started” a long time ago.

Related articles

• Glimpse Of America’s Future From Across The Pond – Are UK ‘SME’ Patents Worth More As Heating Fuel? (gametimeip.com)
• Inventor fury as patents prove too costly to defend (telegraph.co.uk)

After all, Acacia’s new-found growth began in earnest in October 2010, when it passed $20/share for the first time.  The same company also watched hundreds of millions of dollars evaporate from its valuation between August and November of last year. Coincidentally, during the same month Acacia began its meteoric rise, one of its subsidiaries inked a major license agreement with Microsoft–a company the very litigious Acacia tends to neglect in the courtroom.  At the time, suggestions were swirling that Microsoft, intent on licensing its own IP portfolio to adopters of the Android platform, may have simply been arming IP privateer Acacia with the cash it needed to further engage the mobile computing patent space.

Getting back to the ADAPTIX purchase, consider the following events.  Simultaneous with its acquisition, ADAPTIX immediately enforces patents against Alcatel-Lucent–over 4G LTE infrastructure products sold by Alcatel to wireless carriers like AT&T–and smart phone makers LG, HTC and Motorola–over, you guessed it, Android-based mobile phones.  By the end of the week, Acacia filed statements with the SEC disclosing new license agreements with both Samsung and Microsoft over the recently acquired ADAPTIX portfolio.  These deals happened entirely too quickly to be the product of post-closing license negotiations. More than likely, Acacia had these deals in place (at least in part) with Microsoft and Samsung well prior to handing over their $160MM.  The only real question is, how much before, and how much was actually paid for the licenses?

Examining the litigation strategy just reinforces the likelihood that Microsoft and Samsung, at minimum, encouraged these deals.  The Alcatel lawsuit accuses the company’s End-to-End 4G LTE Solution, which competes directly with Samsung’s own telecommunications products.  The remaining lawsuits really have less to do with 4G, and instead involve wireless handsets made by LG, HTC and Motorola, and sold by the major wireless carriers.  Specifically named handsets include the LG Nitro, HTC Jetstream and Vivd, and various Motorola DROID models.  Notably, all happen to be Android-based smartphones.

Some would suggest that Microsoft used this strategy in the past, becoming SCO’s biggest licensee, and helping it obtain financing, just as SCO’s copyright litigation with IBM began.  Even the managing partner of BayStar Capital (one of SCO’s investors) later publicly claimed that “Microsoft had an agenda.”  Whether Microsoft has an agenda this time around–and whether Samsung, coincidentally or not joined them–remains to be seen.  But one thing is clear– both companies will likely benefit from being early licensees, and Acacia will be able to use the licenses and data points in its negotiations, furthering its aggressive monetization effort.

Related articles

• Return Of The Bubble: Patent Sellers Put Acacia Back On Their Christmas Card List (gametimeip.com)

In other words, the most valuable IP represents the biggest slice of the biggest pie.

But with so much energy and investment focused on identifying these high value IP rights, a gap was arguably formed at the “lower end” of the value spectrum, where patents offering rights to relatively minor increments of low-value products often went ignored.  Patent owners strapped for cash often relied on “last resort” buyers offering only token value and empty promises of future returns.  However, over the past year, a monetization model emerged specifically targeted at low-value rights that potentially accrue to significant sums.

In other words, some valuable IP might be represented as hundreds of small slices of small pies.

Two specific entities are currently targeting this particular business model. While it may be too early to draw definitive conclusions about their long-term efficacy and viability, it is important to periodically “check in” and see how these campaigns are faring.  On the patent side, Lodsys kicked off about five months ago with a set of patents targeted at mobile software.  For background, see Guest Post: Targeting App Developers Only Seems “Unfair”.  On the copyright side, Righthaven kicked off back in 2010 with an effort to license copying of content owned by a conglomerate of publishers in several markets. For background see Righthaven Business Model Exposed – End Of An Era, Or Spawning Of A New IP Licensing Industry.

Lodsys initiated its micro-licensing campaign in May of this year by sending letters out to small companies–in many cases, businesses consisting of a single programmer–actively involved in selling software designed for the iOS platform.  A campaign targeting Android and Blackberry developers soon followed.  However, as I pointed out earlier, the economics of this campaign seemed strained.  Lodsys publicly sought only 0.575% of revenue, which amounted to less than $600 per year for the majority of developers. As a result, the success of the campaign would almost certainly rely on the ability to strike licensing deals without resorting to litigation.

Nevertheless, litigation ensued.  While Lodsys may have struck unreported licensing deals, the only confirmed license from its litigation campaign is with a developer/college student, who confirmed the reports last week.  The “free” version of the student’s application boasts over 3 million downloads, and prominently features the ability to upgrade to the “paid” version, which sells for between $0.99 and $1.99.  In addition, the “paid” version of the program features over 7600 reviews, indicating the potential for over one million sales (review-to-purchase ratios can apparently between 1:100 to 1:500).

Assuming Lodsys stuck with its publicly stated 0.575% royalty rate, a million dollars in sales by this college student raised less than $6000 in revenue for Lodsys.  However, looking at some more conservative numbers, consider 3 million to be the total number of “free” downloads, and a  5% “conversion rate” to the “paid” version at $0.99.  This results in just under $150,000 total revenue, of which about $45,000 goes to Apple, and about $860 goes to Lodsys, leaving the developer with slightly over $100,000.   Other reports claim that Lodsys is asking for 2.5% in royalties, which bumps its share up to $3750, leaving the developer still with more than $100,000.

The 2.5% figure is far more realistic, since collecting less than $600 for every $100,000 earned makes for a very slow road to profitability.  Either way, if Lodsys set out to demonstrate a viable licensing market at the “micro” level, it has a long way to go.

However, the current snapshot of Righthaven’s campaign presents a fair uglier picture.  Righthaven initiated its micro-licensing campaign targeting small web publishers, in some cases including individual bloggers, found to be copying content from Righthaven’s partner network of media companies.  In at least one case, Righthaven pursued Matt Drudge for running a copy of a copyrighted photograph owned by the Denver Post.  By and large, however, its campaign focused on news aggregators, watchdog organizations and bloggers.

While a website tracking Righthaven estimates that it has collected over $350,000, it’s campaign has hit a stand-still. Part of the reason is simply prudence.  Finding itself on the wrong end of some court decisions, Righthaven chose to put its campaign temporarily on hold to appeal those decisions.  Presumably, if Righthaven is successful, the licensing activity will resume.

However, recent court activity leads me to question the $350,000 figure in the first place. A recent Businessweek report claims that Righthaven is unable to post a $34,000 bond.  The amount stems from a court order that to pay the legal fees of one of the entities Righthaven previously accused of copying its content.  The central issue surrounding this particular appeal is whether Righthaven’s agreement with the original rights-holders properly actually gave Righthaven sufficient ownership.  Righthaven’s inability to muster $34,000 to appeal an issue so critical to their entire operation speaks volumes about its long-term prospects.

While it may be too early to call these micro-licensing business models a failure, the outlook does not appear to be very lucrative.  Some argue this is as it should be; that small entities get a “free pass” until they become well established in their respective businesses.  Certainly, this argument has some appeal, especially because the amount of revenue available severely limits access to competent legal services on an economically sensible budget.  Many naturally believe that meritless cases go un-detected due to lack of incentive for an adequate investigation. However, involvement by Apple and Google in the Lodsys cases demonstrates that patent rights impacting significant revenue, whether distributed or not, attracts the attention of those with something to lose.

Similarly, the Righthaven cases attracted involvement of media watchdog groups.  Arguably, these organizations hold a stake in ensuring that Righthaven and its financial backing can’t unduly influence the scales of justice to impact free speech concerns.  Given the overall state of events, I’d say they little to worry about.

Instead of, for example, one lawsuit with 20 defendants, this bill should likely result in 20 lawsuits with one defendant in each case.

This week, German outfit Beacon Navigation Gmbh filed the first major case(s) since enactment of the AIA. Specifically, Beacon simultaneously filed 37 different lawsuits in Delaware’s Federal court.  The patented technology relates to GPS navigation, allegedly practiced by the entire automotive industry.  For example, one of the older patents appears to be 5,878,368–dating back to the mid 1990′s–covering a navigation system that factors in the a user-definable “cost” of a road trip.  From Claim 1 of the ’368:

A navigation system comprising:
a database of road segments to be travelled by a user, said database including a cost associated with each said road segment;
a system for selecting a beginning point relative to said database of roads;
a user input device for selecting a desired destination relative to said database of roads, said user input device manually selecting at least one of said road segments and adjusting said cost of said at least one selected road segment; and
a system for determining a route from said database of roads between said beginning point and said desired destination based upon said adjusted cost of said selected at least one road segment.

The Beacon portfolio originated with the GPS company Magellan, which was acquired in for almost $100M by Mitac.  In 2011, Mitac assigned the patents to Beacon Navigation, Inc., which then transferred them to the German limited liability entity at the end of September.  Some of the patents date back to Magellan’s 1997 acquisition of Rockwell Collins‘ navigation division.  Beacon brought all of its lawsuits in the same district, so keeping everything organized and consistent should be a little easier.  For the court’s part, consolidating as much of the pre-trial proceedings as possible should be expected

Also filed this week was a new series of patent cases by Patent Harbor, owners of US Patent 5,684,514. In total, 8 separate lawsuits were filed against film producers like Warner Brothers, Lions Gate and Disney Enterprises as a result of information Patent Harbor learned in a previous lawsuit.  While the logical thing might have been to add all of these parties to that existing case, the new law presumably prevents that as well.

Getting back to Beacon, I am curious about Beacon’s overall litigation strategy.  In large multi-party lawsuits, the patent owner typically wants to rapidly narrow the case down to only a few defendants.  The companies that respond quickly, are able to resolve the dispute quickly and on more favorable terms than those lagging behind.  While this prevents the patent owner from maximizing individual value as to each infringing company, the speed and efficiency of the multi-party process typically presents a beneficial trade-off.

However, after prohibition of the multi-party case, I wonder if patent owners will return to more of a in seriatim process, where patent owners pursue litigation one company at a time, perhaps in different parts of the country.  This strategy takes more patience, but offers the chance at a higher total return, not to mention the opinions of various courts and judges as to the patent’s scope and value.  Obviously, Beacon has chosen the former strategy, but given the changes to litigation procedure under the AIA, I wonder if it’s the right one.

Believing that his patented techniques may have been used to create some of Disney’s recent animated films, Alter contacted Stuart Langley in Disney’s corporate patent group.  From an email chain provided by Alter, the two likely engaged in some conversation, but not to Alter’s satisfaction.  After not receiving substantive feedback after a week, Alter provided Disney with four specific questions.  Depending on the answers, Alter suggested that he could be convinced that Disney had not used his patented method. Unfortunately for all sides, the written questions appear to have gone unanswered for about three more weeks.

From the emails (part of the document embedded below), Alter’s use of quotes that don’t appear in the rest of the email chain suggest that he’s referring to a phone conversation.  Reading between the lines, it sounds as if Disney representatives called Alter up, advised him their systems and Alter’s patent had “nothing in common but their goal,” but refused to discuss any specifics.  This kind of response is all too common.  When a company such as Disney believes that a patent owner lacks the capacity to aggressively enforce a patent, they often claim the company’s product is not even close, and insist that the patent owner essentially take their word for it.

For Alter’s part, he’s not taking Disney’s word for it, but he is still going it alone. Paperwork Alter submitted to the Central District of California on October 5 (embedded below) is being treated as a pro se complaint for patent infringement. It’s likely a step Alter didn’t want to take, and it should be unnecessary.  Alter appears to have done a significant amount of research–both to obtain the patent, and to investigate Disney’s possible usage of his invention.  Inventors won’t simply “walk away” because a company insists, without support, that it’s not using the invention. So if Disney doesn’t want to deal with Alter, it can now deal with the courts.