Did anyone feel the ground shake on the Lower East Side today? At Capitale in New York City, a major shift in the patent transactional marketplace may have signaled the beginning of the end of patent litigation as we currently know it.
As reported in an earlier Gametime IP post, results of today’s ICAP Ocean Tomo auction were mixed, with only a handful of traditional lots selling, and only 1 out of the 8 available “covenant not to sue” lots meeting their reserve. But considering the uncertainties and risks involved in what appears to be a genuinely original way to provide access to patented technology, just the fact that these lots received any bids at all is significant.
But these lots didn’t receive just any bids… Consider the Walker Digital patents, which combined represent a tiny fraction of the overall Walker Digital portfolio. Erich Spangenberg previously remarked that “Walker Digital’s innovations are essential to the founding, growth and differentiation of many successful businesses.” Turns out he was right.
The first lot, for Automatically Captured Images contained only a set of patent applications and foreign patents, yet the bidding petered out at $7,000,000. Bidding for a lot described as a Single Use Transaction Code stopped at $3,000,000. The last two lots, for Driving Directions with Visual Cues and a Certified Audio Vault reached $6,000,000 and $4,500,000, respectively. Altogether, that’s $20.5 M in exchange for the freedom for one company each to practice and manufacture the technology described in these patents. Generally, when good technology is adopted by one company, it gets copied by others, so it’s entirely likely that substantial additional value exists, not just for these patents, but Walker Digital as a whole.
But how did the covenants end up being sent to auction in the first place? Earlier this year, Walker Digital announced the hiring of a consulting firm to help create value out of its substantial patent portfolio:
Walker Digital, LLC announced today that it has retained IP Navigation Group, LLC as its strategic patent advisor.
“We are excited to have IPNav on the team. They bring a depth of experience, resolve, understanding and an approach that we have not seen with other advisors.”
via Walker Digital Retains IP Navigation Group for Patent Licensing Program (emphasis added)
Indeed, IP Nav’s decision to pursue an unknown, and untested strategy to ascertain value from the patents seems to have paid off in spades. What today’s auction proved is that operating entities will, under the right conditions, seek out patent owners and submit offers for patents they determine to be relevant to their business.
If this process can be replicated and repeated in future auctions, the “traditional” methods are simply archaic. What are those traditional methods? They included paying attorneys thousands of dollars to track down infringers, and relying on archaic, anachronistic and expensive court procedures to ascertain the value a given patent has to a given company or product.
Whether couched in terms of licensing, freedom to operate, or covenants not to sue, the goal of the monetization driven patent owner is to get compensation from others that want to use the technology in practice. The methods pioneered today allow business people to come together, make a deal, and then quickly get back to doing whatever it is they do best. Innovators are free to innovate, and implementors are free to design and build products, and the legal drama (so much of which is generated by the lawyers in the first place) can be left for those situations where there really is something to fight about.
While comparing a patent auction to earth-changing events might, in itself, seem overly dramatic, consider the amount of money wasted on literally thousands of lawsuits each year that typically end in the same type of agreement that could have been purchased today, in a matter of minutes, not years … and with the cost of a few transactional lawyers, not dozens of high-priced litigators… So, no, I don’t think the significance of today’s events are capable of overstatement.
The only remaining question is, can patent litigators evolve?
* If you need an explanation of the title, I’ll refer you to this wikipedia article.
- Mixed Results For Round Rock Covenant Auction, No Sale For Walker Digital (gametimeip.com)
- Law Firms Compound Cost Of Patent Litigation (gametimeip.com)
- Patent Licensing Firm Acacia Offers Public Equity (gametimeip.com)
- Pivotal Ocean Tomo Patent Auction Tomorrow (gametimeip.com)
- Patent Calls Innovation Reduces Costs of Patent Litigation (patentcalls.com)